Applying Pachinko™ to a global food manufacturer

A global food manufacturer was losing share in a declining major category.  Although myriad analyses had been conducted on the various elements of the business, there was no connective framework to tie the results together.  A strong organizational hypothesis existed that they were being “out-innovated,” yet an alternative reading of the situation suggested that innovation could not make up for an unhealthy base.

What is the role of innovation in future growth strategy for the category?

• Deploy the Pachinko™ model and framework, which uses item level POS data to decompose historical performance in a market, segment, or brand into a set of MECE key business drivers.
• We start from Volume vs. Price/Mix and drill down to: category trend, portfolio allocation, core distribution & velocity, and innovation – also broken into distribution/velocity/premium vs the core business, price vs inflation, promotional depth & frequency, and mix.
• We can then use the KPIs from this analysis (e.g. TDP, Velocity, $/KG, amount and sustainability of innovation, etc.) to conduct a competitive benchmarking and feasibility of improvement exercise for each driver, rolling up into a quantified, forward-looking set of priorities, and clear roadmap for how to achieve them
• Finally, incorporate financials, elasticities, and media ROIs to translate the opportunities into a realistic P&L impact.
• Decision-tree analysis to identify the combination of growth drivers most responsible for global share gains

• The #1 driver of share gain in the category was strong velocity of core products, and is also the #1 growth opportunity worldwide
• In order for innovation to be leveraged effectively for growth, the business must maintain a strong core velocity, align its portfolio to growing segments, and sustain its innovations
• Successfully driving growth from innovation requires focusing on the largest, highest equity brands in the portfolio
• Launching fewer, bigger innovations that are sustained over time represents a key gap versus the competition
• Historical pricing lagged inflation rates globally; a main driver of sales losses and a key gap versus competition. Matching projected inflation rates represents a 1.8% growth for global sales
• Client re-evaluated their licensing strategy for new products and refocused innovation towards long-term growth