Upfield: profitable RGM strategies through a holistic approach

With Kantar XTEL Revenue Growth Management solutions and consultancy support, profitable growth strategies and Win-Win conversations with retailers were made possible.

November 17, 2023

cooking with food and frying pan

Challenge

Upfield products were significantly impacted by the cost price increase because major ingredients in Upfield products, such as sunflower oil, come from Russia and Ukraine, pushing costs to levels unseen before. As a result, pricing became even more of a key commercial lever, and rather than just using it as a blunt tool, it was important to identify how to deal with the changing consumer behavior and review pricing and promo strategy to answer some key business questions. How is it possible to optimise for profitable growth?

As a relatively new company that is growing fast, there was a lot of work to done to be able to answer this question quickly. Different areas of the business were at different stages of maturity and there was a Net Revenue Management approach, rather than a Revenue Growth Management approach, using fragmented methods and ways of working across the markets and in some instances nothing at all.

With a desire to accelerate profitable growth through a consistent and coordinated approach in processes and systems, as well as a desire to use insights for retailer negotiations and business planning cycles – a fundamental shift was needed.

Capability building would be key in this, with local, and cross-functional teams developing an RGM mindset to empower them to clearly understand their role in terms of taking insights and using them in actions and decisions to drive growth.

Approach

Starting with a focus on data quality and useability, the aim was to increase it from around 50% to over 85% fit for use, which is crucial in an RGM growth strategy development. This data was processed into a dashboard using Kantar XTEL data modelling techniques, with RGM recommendations. The recommendations could then be used to explain and understand the RGM logic.

To achieve a holistic approach, capability building and an RGM mindset was needed, plus data modelling and concrete fact-based outputs. Working brand by brand to see individual price elasticity, building a view of promotion performance and looking at where there was net incrementality gave visibility on how pricing and promotion strategies can answer key strategic opportunities.

Specifically, to inform finding the “sweet spot” when negotiating with retailers;

  1. First a landscape assessment was carried out– highlighting what trade decisions were being made and the impact this was having on the bottom line.
  2. This then illustrated the opportunities for improvements, and growth opportunities.
  3. Confirming where pricing and promo was having net incremental impact.

As too much dependency on promo has detrimental effects on long term profitable growth, the approach was to integrate pricing and promo holistically to build a strategic framework that can enable decisions to be made quickly, and with confidence, to ensure maximum profitable outcomes.

Insight

Upfield decided that the company wanted one consistent way of working across markets, led and governed by the Global RGM team. Additionally, the company wanted TPM to be used consistently across markets, with a higher adoption to improve data quality and usability.

In the first year project pilots were set up in key countries, to assess the profit growth possibilities and to jumpstart capability building. A global roll out plan would follow after completion of pilots and development of tools, KPIs, processes and dashboards.

Fact based learnings from the pilots confirmed commercial plans and fed into RGM playbooks, guidelines and processes. An integrated view on commercial drivers is built into the tooling, to identify what’s coming from pricing, and what’s coming from promo, and what is driven by the mix enabling a new fact-based story to be told to retailers around pricing changes being made. It was crucial to implement this to increase the number of negotiations ending in agreement, since previously 40% of pricing negotiations with retailers were not ending in agreement.

Impact

Tools that give greater visibility on retailer, and company margin on promotions enabled a higher transparency on where the win: win opportunities can be found. Trade spend ROI went from 84% up to 97%. Plus, by aiming to balance profitability and market share, iGP erosion (the erosion that happens behind unprofitable trade spend) was reduced by 80%, and as a result sales value went up 17%.

*Figures were changed to maintain the confidentiality of financial data.

**Case study has been taken from the presentation made at EPP Global Pricing and Revenue Growth Management Forum in Barcelona, May 2023. Download the slides here and watch the recorded presentation below.