Trade Spend Management: Challenges & How to Avoid Them

However, you can think of FMCG as a subset of CPG, as a group of products that just sell a bit faster than most. FMCG, or Fast-moving Consumer Goods, refers to products that you can sell quickly at relatively low cost. They are considered moving because retailers need to restock the shelves regularly due to high turnover rate. Pandemic-induced disruption has pushed CPG companies deeper into reactionary mode, when they should be setting their own agenda to lead. Going forward, they need to balance long- and short-term perspectives while leading with strategy.

Next, establish clear communication channels between your accounting and procurement teams to ensure that everyone is on the same page regarding budgets and spending. When it comes to streamlining your CPG accounting and procurement processes, there are a few key steps that can help make the process more efficient. First, consider implementing automation tools for repetitive tasks like data entry or invoice processing.

Use accrual accounting, not cash-basis accounting

In addition, CPG companies must account for any indirect costs, such as packaging and shipping, that are included in the cost of goods sold. When establishing an inventory reserve for the first time, you will debit the inventory reserve related account within the Cost of Goods Sold (COGS) section of the P&L and credit cpg accounting your inventory reserve account on the Balance Sheet. This reserve is an estimate and should be recorded based on historical trends, industry trends, or other substantiated data. Every year since 2014, McKinsey has conducted in-depth research on the financial performance of consumer-goods companies around the world.

• This will enable your company to make informed decisions that drive growth and profitability.
• The sector contributes approximately $2 trillion to the United States gross domestic product (GDP).
• PwC analysis over the past decade has found that companies with a distinctive corporate culture engendering a sense of purpose are twice as likely to outperform industry peers on revenue and profitability.
• You’ll have multiple partners  —  each with their own promotions, spend calendars, order volumes, and deductions.
• One of the most important differences between CPG and FMCG is the way we talk about sales.
• As cost pressures in the consumer packaged goods (CPG) industry rise, CFOs and other executives are seeking to extract more efficiencies from central functions.
• To address the growing sophistication of retailers — and get closer to consumers—CPG companies need to combine the data they collect directly from consumers with third-party data to help drive privileged insights and personalization.

In fact, PwC analysis of Capital IQ and World Bank data estimates CPG revenue will likely grow by 4.8% between 2020 and 2022, the highest rate in 20 years. Direct-to-consumer (D2C) businesses are commercially viable for only select CPG propositions—namely, those with an average basket and purchase frequency high enough to justify customer acquisition costs and make per-order economics viable. Categories like pet care and non-OTC consumer health offer abundant opportunities.

Rethink commercial operating models to help meet omnichannel consumer needs

Omnichannel, data-driven engagement will only continue to grow in the years ahead. Once you assess your current state, you can use these four dimensions to help reposition your business for lasting growth. As you fill gaps in your overall portfolio with strategic acquisitions, continue assessing your overall portfolio for products—or participation in certain categories—that don’t support your core capabilities.

• For many, this means investing in resources that can assist with and improve CPG data analytics.
• By assessing market trends, consumer behavior, and historical data, we help brands anticipate future challenges and opportunities.
• Rather, make well-thought-out choices about which five or six capabilities represent your particular strengths—those that set you apart from competitors—then reinforce those strengths to scale up.
• Additionally, companies will also need to adapt the ways they reach and advertise to customers.
• There is significant variance across industries, with IT firms spending
  11 percent, healthcare companies spending 14 percent, and energy providers spending 4 percent on SG&A expenses.
• 2022 has already been a year with a lot of ups and downs for the CPG industry.
• For example, a sales change affects accounts receivable and cash flow performance.

With these improvements, CPG businesses will be able to personalize messaging for different consumers, reach customers at the right time and respond to consumer needs with greater speed. For over 20 years, Emerge Natural Sales Solutions has been helping natural product brands like yours thrive in the marketplace. We understand that strong financial management is the backbone of any successful CPG brand, which is why we offer comprehensive accounting services tailored specifically to your needs. If your revenue gets cut in half overnight, so do your product sold and shipping costs, and you can pull down your marketing expense with relative ease – all proportionally.