Getting your product onto the shelves of Woolworths and Coles is a goal many FMCG brands in Australia aspire to achieve. Success in these major retail chains requires careful planning, a solid strategy, and disciplined execution. It is a process that involves more than just having a great product.
Preparation is key to securing a place in these competitive markets and sustaining long-term growth.
Developing a Minimum Viable Product (MVP)
A Minimum Viable Product (MVP) is the foundational version of a product, designed with minimal features to address a key problem while delivering tangible value to consumers. It goes beyond being a prototype; it serves as a validated step to confirm the feasibility and consumer interest before scaling production.
(Source: https://clevertap.com/blog/minimum-viable-product/)
The focus of an MVP is on solving the primary problem the product is meant to address. Avoiding unnecessary complexity during development keeps the process efficient and streamlined. Early adopters provide real feedback by testing the product’s value proposition, helping to identify potential improvements or adjustments that better align with market needs.
Market demands and price expectations play a significant role in shaping a successful MVP. Competitive pricing and scalability are critical for positioning the product for long-term success. Production costs can often be reduced through favourable terms for raw materials and stable supply chains, which support consistent manufacturing and market entry.
An MVP also measures consumer willingness to pay for the product, demonstrating whether it addresses a genuine need. Financial commitment from users validates the solution and provides the foundation for refining the product or expanding its features. As a practical approach, it minimises risk while offering valuable insights into the product’s market viability.
CO-OP, Trade and Promotional Spend
CO-OP, short for Cost of Promotion Participation, refers to the funds you allocate to market your product through retail channels. It’s a shared investment that helps boost brand awareness, but it’s not without its challenges. While these funds can open doors to greater reach, they inevitably chip away at your margins.
So, is CO-OP just another word for promotional spending? Yes, and no.
While it’s true that CO-OP involves funding marketing efforts, it’s more strategic than simply throwing money at ads. It’s about creating a balanced plan that maximises your product’s potential while keeping profitability in sight.
Trade spending, on the other hand, operates on two fronts: above-the-line and below-the-line marketing. Above-the-line focuses on large-scale efforts outside of the retailer like billboards, bus wraps – often referred to as OOH (out of home marketing). Below-the-line refers to marketing activations inside the retailer utilising their marketing mechanics, such as aisle fins, floor decals, in-store screens. Promotional spend refers to discounts and sales promotions, these are more direct and volume-driven, but they come with their own risks. Lean too heavily on discounts, and you might find your margins shrinking faster than anticipated.
The key isn’t about spending more—it’s about spending smart. Aligning your promotional activities with long-term profitability is what makes the difference. Over-investing in quick wins without a broader strategy could leave you struggling to sustain your growth.
Path to Profitability
Achieving profitability requires more than relying on promotions to drive sales. Discounts and sales events may boost volume temporarily, but overdependence on them reduces margins and makes business practices unsustainable. A profitable product strikes a balance between managing costs and generating steady revenue without relying heavily on promotional tactics.
Margins are the foundation of profitability. Pricing structures should cover production costs, trade spend, and COOP contributions while leaving room for growth. For example, a niche organic snack brand initially leaned on aggressive discounts to attract customers but struggled with narrow margins. They revised their pricing model, negotiated better supplier terms, and limited discounts to seasonal events. These changes improved profitability and retained customer interest, proving the product’s value beyond promotions.
If sales depend solely on promotions, sustainability becomes a challenge. Promotions should enhance your strategy, not define it. A pricing model that supports profitability across different market conditions provides stability against fluctuating trends.
Effective cost management plays an equally important role. Controlling production expenses, distribution, and trade spend safeguards margins. Evaluating the value chain and exploring opportunities to scale production efficiently can significantly reduce costs. Profitability stems from disciplined planning and a focus on long-term value.
Value Chain and Margins
Managing the value chain effectively is a cornerstone of cost control and profitability. Every stage, from sourcing raw materials to delivering the final product, plays a role in determining the financial viability of your business. A streamlined value chain not only reduces waste but also enhances competitiveness, which is vital when pitching to major retailers.
One key concept within the value chain is the relationship between the Cost of Goods Sold (COGS) and Economic Order Quantities (EOQs). Simply put, scaling production can significantly impact pricing. Producing larger quantities often unlocks price breaks on raw materials and manufacturing costs, lowering the per-unit cost.
For example, a small beverage brand transitioning from producing 1,000 units to 10,000 units found that its ingredient supplier offered a 15% discount for bulk orders. This reduction in costs allowed the brand to increase its margins without raising retail prices, making its product more attractive to wholesalers, distributors, retailers and customers.
Price breaks are not just limited to ingredients. Packaging, logistics, and even storage can benefit from scaled operations. Bulk orders of packaging materials, for instance, can cut costs considerably, while optimising freight loads can lower transportation expenses.
Efficient value chain management does more than save money—it builds trust with buyers. Retailers like Woolworths and Coles expect suppliers to meet demand consistently without sudden shortages or quality compromises. A well-organised value chain demonstrates reliability, which can make all the difference when negotiating shelf space.
Real-world application highlights the importance of this approach. A well-known frozen food company faced declining profitability due to rising COGS. Through detailed analysis, they identified inefficiencies in their supply chain, including high transport costs for smaller shipments.
By consolidating orders and renegotiating terms with suppliers, they reduced overheads and improved margins, enabling them to invest more in marketing and promotions.
The value chain is a critical lever in achieving profitability. When managed effectively, it not only reduces costs but also strengthens your position in a competitive retail environment.
Competitive Analysis
How do you stand out in a market filled with similar offerings? The key lies in carefully evaluating your competitors and identifying gaps in the market. A strong competitive analysis helps you refine your product positioning and tailor your pitch to what retailers are looking for.
Start with clear questions: What products are your competitors selling, and how are they positioned? Are they meeting customer expectations, or are there areas where they fall short? For example, are they focusing on premium pricing but neglecting value-conscious shoppers? Answering these questions helps identify where your product can carve out its own space.
Consider a small bakery brand that wanted to break into the gluten-free snack market. After analysing competitors, they found that most options prioritised shelf life over taste, leaving a gap for freshly baked, flavour-focused alternatives. They used this insight to position their product as a fresher, tastier option, appealing to a niche audience willing to pay for quality.
Beyond product features, think about how competitors market themselves. Are they primarily online-focused, or do they rely heavily on in-store promotions? A health beverage company found their competitors weren’t targeting office workers directly, so they distributed samples in co-working spaces, creating a buzz among a previously untapped demographic.
Branding and packaging also play a vital role. Does your product’s design stand out on a crowded shelf? A company entering the pet food industry noticed that competitors used similar neutral-toned packaging. They opted for bold, vibrant colours to grab attention and signal innovation, which significantly improved their shelf presence.
A successful competitive analysis is ongoing. Retail trends and consumer preferences shift constantly, so regular evaluation keeps you ahead. Knowing where competitors excel and where they falter enables you to refine your approach, strengthen your product’s appeal, and confidently pitch to retailers.
So, what gaps exist in your market, and how will you fill them? The answers to these questions shape the path to your product’s success.
Managing Warehousing and Logistics
Managing warehousing and logistics effectively is critical to meeting retailer demands and maintaining consistent supply. A well-structured logistics plan prevents stockouts, reduces costs, and ensures your product remains on shelves. Key points to focus on include:
- Multi-state warehousing: Establish facilities in strategic locations to reduce delivery times and meet the needs of retailers across different regions.
- Freight optimisation: Consolidate shipments to lower transportation costs and maximise freight efficiency.
- Inventory management: Monitor stock levels closely to avoid overstocking or shortages that could disrupt supply.
- Pallet efficiency: Use tools such as pallet calculators to optimise space and reduce warehousing costs.
- Supplier coordination: Work closely with suppliers to ensure timely delivery of raw materials and avoid bottlenecks.
- Retailer requirements: Align your logistics strategy with the specific demands of major retailers, including delivery schedules and packaging specifications.
These steps create a streamlined supply chain, making it easier to maintain strong relationships with retailers while controlling costs.
Optimising Warehousing and Logistics
Efficient warehousing and logistics are critical for meeting supply chain demands and maintaining a steady product flow. Key actions include:
- Strategic locations for warehouses: Position facilities to reduce transport times and minimise overall distribution costs across multiple regions.
- Freight efficiency: Consolidate shipments to optimise transportation capacity and reduce costs.
- Inventory management systems: Use real-time tracking tools to monitor stock levels and prevent disruptions caused by shortages or excess inventory.
- Effective pallet usage: Leverage tools such as pallet calculators to maximise storage space and lower warehousing expenses.
- Supplier coordination: Maintain consistent schedules with suppliers to keep raw material deliveries timely and predictable.
- Retailer compliance: Tailor logistics processes to align with specific delivery schedules, packaging standards, and retailer expectations.
These practices help streamline operations, maintain retailer confidence, and support cost-effective supply chain management.
Know Your Numbers
A clear grasp of financial metrics is key to long-term success. Working capital, cash flow, and profitability projections provide insights into your business’s ability to sustain operations and support growth. Regular tracking of these numbers allows for better resource allocation and prevents shortfalls during critical periods.
A financial litmus test evaluates the feasibility of your business model in covering production, marketing, and operational expenses. It identifies gaps that could pose risks and offers a foundation for informed decision-making. Strong financial planning ensures stability and positions your business to grow steadily without overextending resources.
Ready to take control of your financial strategy? FMCG Consulting can assist in creating a financial strategy tailored to your goals. Get in touch today and explore how we can support your journey to sustained profitability.
