Trade Spending Analysis

Background:
A Non-Foods Manufacturer engaged Cannondale to rethink their approach to trade spending. The Analytics Group supplied the Consultants with an in-depth review of the Manufacturer's current practices and highlighted targets for improvement. The Group also developed a forecasting model to aid the client in understanding the implications of Cannondale's recommendations.

Analysis:
The analysis for this project included exhaustive analysis of the Manufacturer's product portfolio, including pricing structure and distribution mechanisms. Qualitatively, the Manufacturer's business was benchmarked to its peers and to companies from other CPG and non-CPG companies. Some key learnings were:
1)
Planning process is a significantly more routinized, long lead-time part of the culture at other CPG industry leaders.
2)
Analytical/planning tools are a source of competitive advantage for industry leaders versus the Manufacturer.
3)
Trade structure at benchmark companies skews more to standard CDF rates, reducing field flexibility created by over-reliance on SIF at the Manufacturer.
4)
Customer customization/co-marketing seems strategically sound, but has yet to show a positive ROI.

From a quantitative perspective, the pricing trends and unit velocities were compared to those of major competitors. Some key learnings were:

1)
High promotion rates lead to damaging forward buy trends among retailers.
2)
Forward buying begets declining baseline and brand equity erosion.
3)
Promotion lifts and ROI's are superficial due to baseline erosion.
4)
Continued trade reliance essentially nullifies a national pricing structure.

Supporting Information:
For further explanation of how Cannondale helped institute a new trade spending strategy, please see the Trade Spending Case Study in Consulting section.

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