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Growing In A Flat Market: A Manufacturer's Dilemma
So, your budget for 2025 has been set, and your final sales targets were just handed down to you. You lobbied for a +2% target increase in sales, but your management wants a +7% top-line revenue growth and 9% gross margin dollars growth! Your thoughts wander through a range of emotions: fear, disbelief, and panic set in. Don't they understand that our industry is flat? Personally, I used to call these targets "GGQs," short for "God-given quotas!”
So, after the dust settles, it's time to get to work—Identifying your best sources for growth in the new year. But what are they, and how do you go about activating that growth in a flat market?
At Kinetic 12, we're asked this question often. Below, we share with you four proven strategies to accelerate your growth in a flat market and exceed industry performance to help you meet your aggressive sales goals.
1. Sell More to Current Customers.
Leverage your best customers' love of your brand to sell more stuff to existing customers. Many companies are underpenetrated with their current customers. Why? Because they don't have the data to truly understand the business they really do have with them. Many companies do not drill into the actual data and instead settle for the "we already have their business" smoke screen. Take the time to develop a strategy to increase the penetration of your current customers, and "drill baby drill!" —into the data, that is!
2. Target Adjacent Segments for New Sales.
Many companies focus on a few select operator segments. Why? Because "that's what we know." But narrowing your scope too much can limit your opportunity for growth. Instead, look at adjacent segments to target those that may have interest in your products, and resource your team to blitz a new segment for 90 to 120 days. If the blitz is successful, keep going deeper into the segment. If not, move to the next segment. Don't just throw stuff against the wall—do your homework when building the strategy, including getting operator input and understanding the key competitors in that new segment. For example—if you don't sell to club stores, why not? Everything should be on the table—remember, you have a big target to hit in 2025, so it's time to get creative!
3. Segment Your Customers to Margin Up.
Your most popular products are likely the ones with the least production capacity available. Yet, operating in a capacity-constrained environment provides an opportunity to think more strategically about your customers— protecting your strategic customers while margining up more transactional customers is a great way to leverage existing resources and bandwidth while improving sales and margin overall. However, many companies do not develop a method to prioritize their customers; rather, they prioritize based on how aggressively a sales manager argues for each one. Instead, build a method to identify which customers are truly strategic to your company and which customers are transactional. If all your strategic customers are the lowest-margin customers, something is not working! A strategic customer is a customer that returns the most to your business when you invest in them, someone with an aligned mission and vision for mutual growth— which isn't always the largest customer. The entire organization needs to understand your customer segmentation methodology and which customers fit into each tier. After all, you will be most successful in margining up your business if your fellow leaders understand and are aligned with your strategy and priorities.
4. Acquire New.
In a flat market, many companies grow by acquisition. If you're not looking into acquisition, you can be sure your competitors are: 2025 will be a very active year for company acquisitions. But where do you start? Our suggestion is to build a target matrix of products, customers, and go-to-market segments, then overlay potential acquisition targets to see where there are synergies. Think about leveraging your co-manufacturing relationships to build the market side of the opportunity. Then, you can decide to build or buy once the volume is established. This process takes some research and time before moving to action—so being proactive is the best offense. Plus, even if your company never makes an acquisition, this exercise will help you identify growth opportunities by isolating voids in your customer segments, your product categories, and your go-to-market strategies, so either way, it's a win.
If you want to succeed in 2025, you need to take action now. In today's market, you can no longer rely on market growth to meet your goals. But the industry is large and diverse, and with a well-thought-out action plan, you can make it happen!
To learn more about how you can level up your strategic planning and set yourself up for growth, contact us to learn more about our consulting opportunities.
About Kinetic12: Larry Oberkfell is a partner with Kinetic12 Consulting, a Chicago-based Foodservice and general management consulting firm. The firm guides multiple best practice projects and forums, and consults with leading Foodservice suppliers, operators, PE firms and associations on strategic initiatives. Their previous leadership roles at Foodservice manufacturers and restaurant chain operations provides a balanced perspective and insight into how the industry is evolving and what must be done to stay relevant.
Contact us to learn more about how we can help your organization understand your market position, unleash growth, and connect with Emerging and Growth Chains defining the future of foodservice.
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