What was needed
When the competition is your own complexity
How do you respond when intense competition drives down prices, thereby reducing the very resources to defend and extend market share? This was the difficult outlook faced by the new CEO of the North American division of a multi-national food and beverage company seeking to improve portfolio profitability.
Simple at the surface, complex at the core
MOKA understood that the client needed to rationalize its approach to growth, and focus its limited resources on the highest yielding parts of the business. While that sounds simple on the surface, this common challenge can become a conundrum for a large CPG company like our client. That’s because portfolio management happened in silos across individual brand teams while the sales organization was incentivized by overall top line growth. This resulted in each group optimizing marketing resources to drive growth from their own vantage point without taking an enterprise-wide view. In short, the company was competing against itself to the detriment of overall profitability.
The answer is not in the averages
While the bar to clearing such organizational hurdles can be high, the upside is equally significant. In the case of our client’s $4 billion annual business, even marginal improvements could result in ample increases in resources to support marketing. But, managing resources wisely requires clarity about which products, customers and geographies to focus on. That’s the kind of problem that can’t be solved by looking at averages. A detailed accounting of product mix, production locations, and customer targets and preferences was needed. Our client knew intuitively that there was an opportunity to optimize their portfolio mix, but they were hindered by their own siloed organization. Put simply, they didn't have the visibility to identify performance gaps and make practical adjustments.
What we did
Seeing and acting on what counts most
What was required was a reframing of the challenge itself. Where the client had seen an external pricing issue, MOKA saw the problem as one of resource allocation. And by not redirecting resources to grow the most attractive parts of the portfolio, the client was leaving millions on the table.
Prioritizing what should be done over what you've always done
We understand that insight is often buried under layers of precedent and competing priorities. To uncover it, we help clients shift their perspective. In the case of our beverage client, this meant seeing the relationships between granular details and the broader picture of their business. To achieve this, we assembled a team of experts in strategy, finance and design. Together, we identified the relevant data and visualized our analysis in more intuitive and powerful ways. We worked closely with the client’s internal team to co-build the model, which we then shared with the executive team.
This project was foundational in changing the way we look at and think about our business in so many ways. Two years later, the work and tools are still leveraged regularly.
Breaking down the problem
Beginning with the core question of how our client could better use its marketing resources, we de-constructed the issue to get to the underlying factors.
- We quickly realized that the answer had to be anchored in the economics of the portfolio.
- Our analysis revealed that the return on marketing spend varied significantly by both the geography and which part of the portfolio we examined.
- To answer the top line question, we had to look at elements of the portfolio in detail – such as which consumers were drinking what and where – and understand the impact of these factors across the breadth of the portfolio.
- Based on these insights, we constructed a model that matched hyper-local insights to the broader question of resource allocation – and how this could better benefit the total portfolio P&L.
To get the right answers, ask the right questions
As our principal client at the beverage company noted: “A problem well-defined is half solved.” While it’s a truism that you won’t find the right answer by asking the wrong question, many companies wind up trying to do just that – because it is where they have always looked before. One of our strengths at MOKA is to combine years of business experience and sound judgment to practically frame the right strategic question. The answers can reveal simple truths that result in significant strategic adjustments.
In the case of our beverage client, the company wound up reallocating more than 30% of its marketing investment – the equivalent of tens of millions of dollars. We showed them how a more granular understanding of portfolio management – combined with an enterprise-wide perspective – can drive powerful new ways to define and decide on strategic options.
Delivering lasting capabilities
These new ways of examining a strategic challenge can produce ongoing impact for a client, going beyond a one-off answer to a solution with repeatable value. Once we had demonstrated the power of our new granular model for resource allocation in North America, it’s not surprising that other markets around the world began to apply it to their own challenges. The greater significance lay not in solving a single business problem but in providing the client with a more effective way of seeing the business itself. As our client recently notes: “This project was foundational in changing the way we look at and think about our business in so many ways.”