Key Accounting Considerations for Consumer Packaged Goods CPG Companies CFOx

If you don’t manage your inventory properly, it can lead to inaccurate financial data. For instance, you are overstocked one month, and you are in low inventory the next. Ongoing advances in digital marketing, data analytics, and supply chain efficiency will likely shape the next era of innovation for CPG companies. Faced with shifting consumer preferences, brands must continue adapting to the times to stay competitive.

• For instance, Dollar Shave Club upended razors through viral marketing and subscription models.
• During periodic controversies like food recalls or misleading claims, sincere brand outreach prevents isolated incidents from permanently sinking reputation.
• Consumer packaged goods are sometimes known as fast-moving consumer goods (FMCGs) because they sell quickly and are consumed quickly.
• The name originates in their packaging, which traditionally is easily recognizable wrapping that consumers can quickly identify on store shelves.
• Below are profit margins for the eight largest CPGs in the S&P 100 as of March 2020.

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• A good partner can help optimize inventory levels, manage accounts receivable and accounts payable, and also assist with cash flow forecasting for your CPG.
• At CJBS we partner with you to determine best practices for your business.
• Any productivity program needs to pair automation efforts with the classic levers of demand management, spans and layers, and low-cost locations.
• CPG brands also give retail partners greater decision authority over inventory quantities and placement to optimize based on local buying patterns and store format constraints.
• And representing 30% of total US retail sales, CPG brands are the lifeblood of grocers, pharmacies, convenience stores, and other retailers nationwide.
• Now, CPGs need to embrace the potential of digital and generative AI (gen AI) to open up fundamental new levels of cost reduction while rightsizing costs to serve in lower-potential markets.

Several crops are in an acute position, in which they face both substantially increasing drought risk and highly concentrated footprints, including almonds, olives, hops, and cocoa. These changes in climate are expected to increase volatility in supply and price, necessitating cpg accounting shifts in where crops are grown and the need for further climate-resilient growing practices. Before the pandemic, large brands’ loss of market share was a big story. From 2016–19, US small brands (those with less than $150 million in revenue) generated 50 percent of value growth despite representing only 11 percent of 2016 revenues, mostly at premium price points. Now, the cost-of-living crisis has caused 80 percent of consumers to pull back on spend, and the rise in interest rates has led many privately funded small brands to reduce their marketing budgets. Trade spend involves managing relationships of investments with retailers.

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If you’re looking for support with your company’s chargeback management then grab some time on our calendar to start the conversation. As you get more retail partners for your brand, managing trade spend becomes more critical in your daily operations. You’ll have multiple partners  —  each with their own promotions, spend calendars, order volumes, and deductions. Customer lifetime value measures the strength of the relationship between a brand and a consumer. The stronger the relationship, the higher the lifetime sales and the lower the attrition or churn.

• To do so requires a change in strategy from compiling brand and consumer segment insights to compiling privileged individual consumer insights that provide true differentiation.
• They are also partnering with predictive analytics firms to gauge a consumer’s lifetime value even before that consumer buys a product from the company.
• Examples are food, beverages, personal care items, and cleaning supplies.
• Tide cleaned up with the first heavy duty laundry detergent fortifying it against minerals in hard water.
• Next-generation consumer engagement also allows brands to personalize products, as L’Oréal has demonstrated.
• Changing consumer preferences and behaviors, accelerated by the pandemic, continue to render current operating models obsolete in an omnichannel consumer environment.
• Most CPGs need to relook at their capabilities on each of these topics and determine what they need to do differently to consistently win the battle for market share, and propel market expansion.

Next in consumer packaged goods

Real-time data exchange with partners increases inventory visibility enabling quicker reactions. Centralized distribution centers equipped with automated pick and pack systems help brands scale. Seasonal items require temporary outlet expansion and storage flexibility while exclusive products for wholesalers necessitate tailored inventory allocation. Consumer packaged goods (CPG) play a pivotal yet often overlooked role in our daily lives.

CPG companies also cater to the specific needs of children from infancy assets = liabilities + equity into their early years. Diapers, baby food and formula, wipes, and baby toiletries make up one subcategory. Child safety products like cabinet locks or safety gates enable parents to babyproof homes. Essential for household maintenance, and home care CPG products include surface cleaners, laundry detergents, disinfectants, paper goods, and more niche offerings like beard oil and shoe polish. Ingredients and scent profiles aim to convey efficacy claims and appeal to consumer preferences. As the consciousness of ingredients and ethics rises, brands respond with natural formulas and cruelty-free positioning.