6 Strategies for Thriving in a Down Market 

 

Food and beverage corporates are experiencing significant inflation on their cost of goods just as consumers are increasingly restricting purchases to necessities only—and choosing the major brands they’re most comfortable with. Competing brands are being forced to reduce their prices, which in turn squeezes their margins.

To increase top-line sales growth and enhance margins, Pilot Lite recommends six strategies:

 

1. Partner with your competitors

We brought together two of the world’s largest breakfast food companies to co-fund the development of a power blend of nutrients that neither company could have afforded on its own. The collaboration not only saved on R&D, it enabled each company to buy the power blend in bulk. A collaborative buying agreement enables each company to make powerful nutritional claims and market a unique point of difference in different, non-competing sectors.

 

2. Create an agile & enhanced network with co-man

Identify co-manufacturers in specific geographies with underutilized production capability that offer short-term, agile manufacturing solutions. It’s possible to lower your overall manufacturing costs—while maintaining your quality standards— by shifting some of your production capacity to these co-manufacturing facilities at negotiated rates. After a successful trial, these newly identified co-manufacturers can become part of your extended partner network.

 

3. Change up your raw materials

This is an obvious one, but are you routinely assessing opportunities in each product’s ingredient list? Yes, you can consider substituting ingredients with less costly alternatives that allow you to maintain your pricing and enhance your margin, or you can pay slightly more for an ingredient that boosts your nutritional claims and top-line growth. By adding ‘super’ ingredients or other enhanced raw materials to your product formulation, you gain a new point of difference that can catapult your product into another category.

 

4. Look beyond major grocers

Rather than over-committing to top-line grocers, which continue to demand higher margins and co-marketing spend to access shelf space, a better strategy is to expand distribution to second-and third-tier grocery and convenience stores. These retailers are less costly and actively looking for new products. Pilot Lite has helped leading FMCGs increase product sales by identifying and developing non-traditional distribution networks in regions around the world.

 

5. Get creative to access new markets

Pilot Lite was engaged by a US salty snack company to establish the minimum viable product for introduction into a Latin American country with a lower buying demographic but tremendous upside potential in terms of market size. As we explored strategies for lowering the price point or enhancing margins, we identified a foreign company manufacturing a knock-off of the client’s product. We negotiated a contract with the company to produce the snack for the client legally and established a distribution network of 100 second- and third-tier grocery and convenience stores to test the product in the market. The successful trial de-risked the corporate’s entrance into the market and enabled a full-scale launch across the country.

 

6. Review parked projects

Corporates today are focusing the majority of their resources on major core brands because by spending tens of millions of dollars on existing brands promises a much quicker ROI than launching new products and innovation. As a result, about 35 percent of new R&D projects have been paused—and even greenlighted projects aren’t being funded as usual. Rather than parking new innovations and risk falling behind competitors, we recommend looking for co-investment structures among your supply chain partners and elsewhere to reduce capital costs and de-risk new ventures.

 

Pilot Lite has validated and launched more than 100 corporate projects (TRL 1-5), including technologies and businesses, in addition to co-investing millions of dollars. To learn more, contact Mike Anstey, CEO and Co-Founder at mike@pilotliteventures.com.