September 12, 2018
Analyzing product portfolios’ impact on internal costs and profitability in Consumer Packaged Goods (CPG) companies
By: Cherie Oswald

The bottom line on your product portfolio

Consumer goods companies operate in a competitive environment, continually monitoring their bottom line and fine-tuning their marketing strategies. Frequently, management pays significant attention to sales revenue, paying only secondary attention to the profitability of their product categories, let alone a particular product.

However, to be a strong and successful market player, consumer goods companies must also measure the internal costs and profitability of individual portfolio product categories and specific stock-keeping units (SKUs). Management must consider how each product in the company’s portfolio utilizes resources consumed in manufacturing, distributing, selling, and marketing, as well as general infrastructure costs. Through examining these costs, managers can capture opportunities to maximize profitability.

Consider coffee manufacturers or roasters. Their industry is highly competitive, with small boutique coffee roasters emerging throughout the world and new coffee consumption habits forcing changes in their packaging operations. Their investments in plant, distribution logistics, marketing, and consumer research continually challenge their profit margins and market share. However, to remain competitive, they must have complete knowledge about how each product type within their portfolio drives individual costs and overall return on their considerable investments.

You can recognize the true cost of each product category and even individual SKUs in your company’s portfolio, identifying key opportunities to improve your bottom line by:

  • Spotting potential profitability changes in the company’s product portfolio.

  • Assigning specific costs of manufacturing to individual products, going beyond the accounting systems of your company.

  • Allocating product-driven costs within sales and marketing to the products causing the largest expenditures.

  • Analyzing infrastructure costs that become variable as a direct result of issues associated with specific products.

Do you want to avoid the historical mistakes of the auto industry? Learn how appropriate cost allocation, key discussions with cost center managers, and full analysis and calculation of true product costs can direct the priorities of your management and reveal real bottom line opportunities. The Accenture Academy courses Impact of a Consumer Packaged Goods (CPG) Company’s Product Portfolio on Profitability, Impact of a Consumer Packaged Goods (CPG) Company’s Product Portfolio on Cost of Goods Sold and Profitability, Impact of a Consumer Packaged Goods (CPG) Company’s Product Portfolio on Sales and Marketing Costs and Profitability, and Impact of a Consumer Packaged Goods (CPG) Company’s Product Portfolio on Infrastructure Costs and Profitability will help you discover new opportunities for your company’s product portfolio.

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