Pricing and distribution of consumer goods: Hardly any traditional industry is subject to the same dynamics

The consumer goods industry is facing major changes, as the speed and the pressure on brand manufacturers and retailers have multiplied. A wide variety of consumer expectations, touch points in the consumer decision journey, product categories, and distribution channels – the possibilities have exploded due to the triumph of digital technologies. We help companies to find the best solution for them by means of individual sales, pricing and marketing strategies.

The old world of the consumer goods industry – and what was so good about it

Just 10 to 15 years ago, brand companies thought they had a sustainable business model. Where did this certainty come from?

Pricing strategies for supermarkets. Roll & Pastuch will be happy to advise you.1. Easily understandable target group

Especially in the fast-moving categories of daily needs, such as the classic supermarket assortment, demand was high and easy to plan. The drivers and hurdles of the categories were well understood and the target group could be defined on the basis of a few criteria. Consumer attitudes were reliable enough to build long-term business on.

2. Easily understandable markets

Limited offer

The competitive situation in most categories was clear in the literal sense of the word: a manageable number of competitors vied for the favor of the same target group. The entry of new brands was an exception.

Simple trade structure

The trade was characterized by different formats and companies – but basically goods changed hands on the territory of the trade – the possibilities of online trade or marketplaces did not yet exist.

High barriers to entry

The entire value creation process was characterized by high initial investments. Starting in upstream marketing with market data and product development, through production on the company’s own machines to listing costs and mostly costly agreements with retail partners. In marketing, neither the repertoire of performance channels nor the necessary data were available, so that high scattering losses had to be accepted. Variable launch costs thus quickly amounted to mid-millions.

Consumer goods today – change at all five market levels

In the meantime, much has changed in the consumer goods industry. The new challenges in the market and in the industry can be summarized using the five forces model of world-renowned economist Michael E. Porter:

Supply bottlenecks for consumer goods lead to pressure on margins. Roll & Pastuch will be happy to advise you.1. Suppliers

The bad news from the procurement markets is piling up: the shortage of chips is leading to supply bottlenecks, the prices for wood are rising abruptly, and the paper industry is also struggling with procurement difficulties. For procuring companies, these crises can threaten their very existence, as they lead to higher costs and thus to pressure on margins. In the worst case, deliveries can no longer be made, and sales are completely lost.

2. New competitors

We see three reasons why new competitors threaten traditional brands:

  • Globalization and digital media: Where once there was intransparency or high transfer costs ensured regional demarcation, innovative, digital business models are now possible. The competitors of brand companies do not have to be on the same physical shelf to pose an acute threat. Digital direct-to-consumer brands have long become serious competitors to traditional brands.
  • New marketing opportunities: The classic marketing paradigms no longer apply. Where there used to be high barriers to market entry (listing, high advertising costs, etc.), today the entire consumer decision journey is addressed by Amazon, for example: Pay-per-click models make it possible to generate revenue from the first euro of marketing investment. YouTube, Instagram, Facebook and others are also setting new standards in marketing through social commerce offers and influencers.
  • The niche is the “new normal”: This can be exemplified by shopping in the supermarket: where until a few years ago, for example, there was only fresh milk and UHT milk, today there is an extensive selection of milk variations or substitutes. The categories are becoming more and more differentiated, which increases growth opportunities for non-legacy brands.

The growth opportunities for new milk varieties such as oat or almond milk are increasing.3. Substitute products

The differentiation of categories also leads to consumers turning away. For example, it will be an option for all people with lactose intolerance to buy lactose-free milk. Vegan or vegetarian products are also the absolute norm on supermarket shelves.

R&D and lean production
In most consumer goods categories, R&D is a lower cost item than marketing. The trend toward lean production led early on to outsourcing the very heart of value creation – creating superior products. Contract manufacturing of products of market-standard quality has thus become possible and has contributed to the success of private labels such as Balea. R&D or in-house production know-how or capacity are no longer barriers to entry.

4. Target group (customers/ buyers)

The differentiation of product categories is generally demand-driven and due to the increasingly specific expectations of customers. Consumer exchange is easier, cheaper and faster than ever. The (mega-)trends are not only gaining momentum, but in recent years have been much more consumer-critical (sustainability, microplastics, …). A challenge for the marketing of consumer goods groups: credible sustainability is easier to convey with a specifically created brand than with older brands.
This has a direct impact on the entire marketing process: the consumer decision journey has become significantly more complex and consumer goods manufacturers must respond.

Long development cycles

Nevertheless, we still hear about development cycles of two to three years in the consumer goods sector. This is an increasingly large, existence-threatening disadvantage in direct comparison to providers who know how to identify trends and needs in a data-driven manner and address them precisely with new products or completely new brands – often within just a few weeks.

5. Existing competition

The observations described above affect all companies in the market. Price-adjusted consumer spending on daily necessities has been in an approximate lateral movement for years. The pressure on the traditional players in the consumer goods industry is growing. Added to this is the high availability of capital, which is accelerating the victory of new brands.

Meeting the new challenges in the consumer goods market

Prof. Roll & Pastuch – Management Consultants has extensive project experience in diverse consumer goods categories, such as food, cosmetics, sporting goods, wearables, writing instruments, furniture, consumer electronics, domestic appliances and kitchen accessories.

We know the structures, challenges, sales channels and have extensive strategic and operational experience in the areas of pricing, marketing as well as sales.

It is clear from the challenges described that change must be mastered. Roll & Pastuch helps companies to adapt their sales structures to these challenges and thus be there for consumers at the relevant touch points.

Roll & Pastuch helps to take off in the consumer goods market

We have extensive experience with multi-channel sales in an international context and successfully support companies in this:

  • Sharpen their pricing and sales strategy and align it with the new framework conditions,
  • Identify value creation potential in the context of revenue growth management,
  • Identify the relevant sales channels (traditional retail, wholesale, Amazon and other marketplaces, direct-to-consumer),
  • Agree on target systems and minimize conflicts between channels,
  • International structures (subsidiaries as well as distributors), even if there are grown differences on country level,
  • To set up a pricing and conditions system that is in line with the strategic framework and is future-oriented.

Project examples

Roll & Pastuch has many years of experience in the consumer goods industry. Among others, we were able to realize the following projects with our customers in the past:

  • International pricing for a market-leading cosmetics supplier
  • Sales Excellence Assessment in eight countries in the furniture industry
  • Retail pricing e-commerce for a multi-channel market leader Pet Food
  • Change Management Sales Structure Domestic Appliances

Learn more

We will be happy to answer your questions and provide you with further information on pricing and marketing in the consumer goods market.