An ongoing acquisition strategy that’s already pushed Hain Celestial Foods past the $900 million annual sales mark has made business more complex for the marketer of 34 brands of natural and organic foods, snacks and personal care products.

What’s more, senior management has made more profitable sales a priority. To achieve that goal, it implemented a closed-loop trade promotion management system to provide “one version of the truth” throughout the company.

The system, along with Hain’s refined TPM processes, aims to make sales managers more accountable for improving event profitability, and also to align the sales, marketing, production, logistics, finance and deduction teams on trade planning, execution and clearance. What have been the results so far?

The company’s trade promotion manager, Matt Bennett, outlined the progress in a presentation at the recent Trade Promotion Management Associates Annual Conference in Chicago.

“We have a lot of pre-matching now that we hadn’t had before,” said Bennett, in explaining why a unified view was essential as the backbone of Hain’s trade promotion practice

Distributors such as Haddenhouse and Tree of Life drive nearly half of the company’s volume. They provide their sell-in and scan reports to a Hain team of 13 deduction managers who reconcile and apply deductions properly ($35 million in trade deductions).

For Hain, whose brands include Health Valley, Terra Chips, Celestial Seasonings, Garden of Eatin’, WestSoy and Spectrum Naturals, the closed-loop TPM solution has helped “turn sales managers into retail business managers. I urge them every day to manage their business like they manage their personal checkbook,” said Bennett. “We don’t want to reduce trade spending. We want to take the money we have and be more efficient.”

One way that Hain gained their compliance was to base bonuses on profitable sales rather than on volume.

According to early figures, Hain has made trade spend two to three percentage points more efficient companywide, noted Bennett, who added it is “easy to mainstream newly acquired brands” into the TPM solution. “We want to keep customers happy and exploit opportunities to improve P&Ls, identify and eliminate poor-performing events and replicate high profit-building plans.”

Moreover, Hain has become better able to “change the landscape on forward buying. We let retailers know that we knew what was going
on. We came up with great work here and forced the issue,” said Bennett. “Retailers still want the volume, and we tell distributors they’ll get better commissions. It has become a win-win for everyone. We’ve just had one of the best quarters we’ve ever had, and that profitability is motivational.”

With sales and spending visibility within the closed-loop TPM system, departmental silos and organizational confusion have been reduced, and workflow and category leadership status have been improved, he added. “‘The system provides one home for all your information, so please use it,’ I tell them….Now we can sit with a sales rep for two to three hours and see what’s ahead for the next nine to 12 months.”

To reach this point, Hain began a process to improve trade promotions in summer of 2005. Back then, the company planned manually and relied on spreadsheet data, which led to fragmented visibility and incomplete communication. Hain hired an outside consultant to assess the company’s business processes, measure against industry best practices, help it adopt process recommendations to close gaps, and prepare a 60-page RFP for TPM vendors that reflected the distinct complexities of Hain.

In Bennett’s presentation, he named neither the consultant nor the TPM solution selected, but spoke of the process of change. He emphasized the importance of:

• Getting managers in place who think the same as you. (“They understand the basics of trade promotion, and question why we’re wasting money on some events and not spending enough on others.”)
• Training. (“It’s critical. Teaching is the hardest part. We’re training 125 people in different sessions. We also continue to train via webcasts brokers, store managers, and anyone internally who wants to get involved. We’re training the trainers. Every day is a challenge. It’s kind of fun to break through barriers and make your own path.”)
• Thinking about business differently to focus on profitable sales.

One sample screen in the presentation gives Hain the ability to compare profit-and-loss performance by customer, with details that include sales, trade promotion discounts, cost of goods, freight and non-promotional expenses such as warehouse and brokerage charges. Another enables the company to view budget vs. projected variance through the end of a quarter, broken out by category and customer.

Al Heller is co-author of Consumer-Centric Category Management (Nielsen/Wiley 2006) and president, Distinct Communications, LLC.

Synectics Group is proud to have been the selected TPM vendor for Hain Celestial Group.