Revenue Managers are at the forefront of every consumer packaged goods (CPG) business. They need to understand what shoppers and retailers want, consider cost changes, assess innovations, and anticipate competitor moves to optimize their own product offer – all in accordance with the overall company objectives.
What makes this task both difficult and interesting is the increasing complexity of the playing field on which decisions must be made. Shoppers are becoming more informed and demanding, competition is becoming fiercer, and retailers are increasing the pressure on margins.
To adapt to these changes, the role of a Revenue Manager is evolving from a siloed, operational role to a strategic, integrated one. In this post, we will outline the key challenges that are fuelling these changes and provide you with tools to adapt and thrive when implementing them.
Our recent webinar led by Buynomics' co-founder, Ingo Reinhardt, and ex-Head of PRGM and Commercial Strategy at Danone, Ivan Tretyakov, covered some of today's most pressing CPG industry challenges for RGM teams.
Beyond identifying these challenges, the experts shared actionable strategies for revenue growth management (RGM) teams to stay ahead, ensuring they can still achieve their revenue and growth goals despite the industry's increasing complexity. We will share these actions later in the article.
Commodity price volatility
Over 51% of webinar poll respondents voted commodity price volatility as the most significant challenge faced by their organizations.
The issue of commodity price volatility impacts everything, particularly the cost of production due to fluctuating prices of raw and packaging materials. This cost then needs to be mitigated.
“We take prices of the raw materials, packaging materials, and this impacts the cost of production, and RGM is the function that has to juggle those costs somehow and smartly pass them on to consumers, or find a smart solution within the portfolio.”
Ivan Tretyakov, Buynomics, ex-Danone
The Revenue Manager of Tomorrow
Fragmented consumer preferences are a current challenge for the CPG industry.
Consumer preferences are inherently diverse, leading to a demand for varied packaging options. However, this challenges CPG companies, which must streamline production and supply chains to manage costs effectively while catering to these diverse consumer demands.
Another challenge is the increasing complexity of retailer consolidation into global alliances, particularly in Europe. Retailers are putting pressure on manufacturers by cherry picking and comparing prices across different countries.
“ In country A, you can buy a product for one euro, in country B, you can buy it for two euros.”
Ivan Tretyakov, Buynomics, ex-Danone
The Revenue Manager of Tomorrow
In this scenario, global retailers can question this price difference and demand to pay the lowest price. This complicates pricing strategies since retailers aim to demand the lowest prices based on their comparisons, creating a complex dynamic where companies must navigate these comparisons and justify price differences to maintain market competitiveness.
Growing private label competition presents a significant challenge for consumer packaged goods (CPG) companies. This particularly stands out for essential products now offered by retailers.
“For end consumer, it's great news, I would say, because if I'm an end consumer, I could go and buy basic products at a very affordable price.”
Ivan Tretyakov, Buynomics, ex-Danone
The Revenue Manager of Tomorrow
However, CPG companies face a challenge here as this trend forces them to innovate and develop smarter pricing and PPA strategies to stay competitive against private labels, which are often able to offer products at lower prices.
26% of webinar poll respondents found "import tariffs and trade restrictions" challenging. This topic has always existed but is becoming increasingly prominent with trade barriers raising costs and adding to already tricky RGM strategies.
To address these challenges, many CPGs have started to transform their revenue management in the past years by establishing dedicated Revenue Growth Management (RGM) departments that take over responsibilities like pricing, PPA, promotions, mix, and trade terms management previously dispersed across different teams.
Further, companies are starting to use more powerful tools to integrate and analyze a broad range of data sources.
Figure 1
This change is split into two waves, shown in Figure 1. A brief overview of these waves is provided below.
Wave 1 of the RGM transformation involves organizational change, where one main focus is on integrating previously siloed functions into a cohesive RGM function.
“Many of those pillars and the individual processes have always been present in companies. Promotions were typically run by sales teams, trade terms were either defined by sales, maybe sometimes marketing, and finance were involved. Pricing was either set up by marketing or finance. All those pillars existed, and they were isolated or in silos.”
Ivan Tretyakov, Buynomics, ex-Danone
The Revenue Manager of Tomorrow
Figure 2
During wave 1 of this transformation, these previously siloed pillars will move into a specific RGM function as shown in Figure 2. The necessity of this change, and the benefits reaped by creating this department are discussed in our whitepaper, The Revenue Manager of Tomorrow.
While neither setup is ‘correct’ or ‘incorrect,’ the modern RGM setup allows you to move from limited collaboration to a cross-functional, proactive approach, as shown in Figure 3. It also allows for a proactive, rather than reactive approach to RGM, meaning that your business can thrive rather than scramble to keep up with market changes.
Figure 3
Although a lot has already been achieved in the first wave, the key step towards a true orchestration of the RGM levers is still missing. In our view, this is an RGM native technology, that is built around the core challenges of coordinating the different levers and understanding the combined effects of all offer changes on full portfolio sales, revenue, and profits.
Traditionally, different RGM levers like pricing, PPA, trade terms, mix, and promotions were addressed using separate methods. Traditional methods mostly focus on individual levers and do not properly address interactions – both between levers and product sales.
Our article Revenue Growth Management Redefined states that traditional RGM tools often fail because they rely heavily on historical data and generic market models, limiting their effectiveness. They might offer hypothesis testing based on historical consumer habits that help assume the correct strategy. In addition to this, integrating different data sources is not possible with traditional tools and methods.
“We want to move from a world where we have low integration of different data sources. For example, you have sellout data, you have survey data, a conjoint study, you have these different data sources, and it is traditionally very difficult to integrate these different insights.”
Ingo Reinhardt, Buynomics
The Revenue Manager of Tomorrow Webinar
To successfully navigate the challenges mentioned in this article, companies need advanced RGM technology that enables a holistic approach rather than focusing on individual levers. By adopting such a solution, businesses can integrate multiple data sources, predict the full impact of offer changes, and make proactive, data-driven decisions that drive sustainable growth. Therefore, we believe that the second phase of the RGM evolution will be about moving to an RGM native technology that will be all about integrating across these three dimensions:
Such a solution requires modern, AI-driven technology. However, many RGM AI solutions still rely on traditional RGM methods, such as price elasticity models, and simply layer AI suggestions on top.
While these approaches may provide faster and more efficient recommendations, they often lack accuracy due to their reliance on static assumptions. Some software providers enhance existing methodologies with AI-driven features, but this is not the same as a fully AI-powered solution designed to optimize decisions holistically. More information on this distinction can be found in our article Understanding Why Not All GenAI Is Suited for Revenue Growth Management.
This is a very exciting time for revenue managers, as the role is shifting and becoming more important within organizations. If you’re ready to begin navigating this evolution and become the Revenue Manager of tomorrow, using the right tool is a great way to get started.
Buynomics' goal is to enable companies to make data-driven, transparent, and customer-centric commercial decisions. For that, we built an operating system that provides companies with a single source of truth to answer all their market-facing questions, including pricing, PPA, promotions, mix, and trade terms. To find out more about this, check out our Buynomics' product page.
Request a demo today to see how Buynomics can support your RGM team and help you make data-driven decisions!