Helping a global beverage manufacturer derive $200 million of margin improvement over three years
Operating Strategy & Cost – Success Story 1
Rapid value diagnostic leads to substantial margin enhancement opportunities, in the face of challenging market conditions.
The European region of a global beverage company was struggling to meet its group’s margin growth plans due to a combination of factors affecting the market. Despite strong market positions in a number of higher growth Eastern European countries, consumer consumption (volume) was low at best, with two of the larger markets facing loss of share to competitors. A shift of power to distributors and discounters, combined with difficulty in “premiumizing” products, resulted in downward price pressure. Like many of its competitors, the group had largely grown through acquisitions of local brands, resulting in disparate country silos.
A team of GSG professionals was engaged to run a rapid value diagnostic, identifying significant margin enhancement opportunities and improvements to the operating model.
The review commenced with an outside in view of the potential operational upside, analyzing the organization in the same way that a prospective buyer would in a deal. GSG professionals then prioritized the opportunities with the regional executive before working with the country organizations to develop practical opportunities to help realize the available value.
The team supported the client in creating a margin improvement program delivering US$200 million over three years through the implementation of changes, including:
- re-segmenting the customer base, creating a smarter sales coverage model and utilizing trade marketing investments more effectively
- optimizing and integrating the primary and secondary distribution operations, and delivering manufacturing efficiency initiatives
- improving coordination of marketing across brands and regions to control product innovation and invest more effectively
- improving transparency and control of revenue to reduce margin leakage through discounting
- driving effective governance, using multi-country hubs and setting decision points at more appropriate local / regional levels
- improving the model, decision making, and control in the S&OP process – particularly demand planning – providing a platform for lower working capital and improved pricing behaviors
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