How Kraft Heinz is Scaling Their RGM Capabilities

RGM is a key strategic approach that can help brands optimize revenue growth and remain competitive in an increasingly volatile market. From managing pricing promotion, and developing targeted promotions, to optimizing product placement and boosting traceability, RGM tools offer brands a suite of possibilities. However, it takes strategic effort to develop the skills and capabilities needed to put these tools to work. In this edited webinar transcript Kraft Heinz’ global RGM lead, Maksym Roshchyn, Rahul Ubgade, AVP, consumer, retail & logistics, Infosys and Samad Masood, content strategy lead, Infosys Knowledge Institute touch on everything from the skills needed to be an effective RGM leader to the impacts that new technologies – including ChatGPT– might have on this area. Read on to learn how leading brands are leveling up their RGM capabilities. Maia Jenkins: Hello, welcome everyone to the “Grow Revenue, Not Costs: RGM Lessons with Kraft Heinz” webinar, which is hosted by CGT and presented in partnership with Infosys Equinox. My name is Maia Jenkins. I'm an editor at CGT and am glad to have you joining us. Today's consumer goods companies are fighting hard for growth, against intensifying headwinds of a potential recession, fierce discounting, and of course, changing consumer habits. It's an uphill battle to grow profitably in this uncertain and volatile environment. In the fight to stay competitive, revenue growth management tools are increasingly recognized as a must-have weapon. Leading global brands have been investing in RGM capabilities for some time now as a way to better understand customers, reduce costs and losses, and deliver value in times of upheaval. We’ll be looking into this throughout today’s webinar, and invite you to bring questions to the speakers in order to leave here today with a better understanding of how revenue growth management can be a key safety line to pull on in turbulent times. With us today to explore how brands are leveraging RGM are Maksym Roshchyn, Rahul Ubgade, and Samad Masood in the moderator role. I’d like to begin by introducing yourselves briefly and telling us about your roles. Maksym Roshchyn: Hi everyone. My name is Maks. I've been doing revenue growth management for the last 13 years in global FMCGs, such as Kraft Heinz, and Procter & Gamble, but also at McKinsey where I was leading commercial transformations at FMCGs and also retailers. Currently, I'm leading a Global Center of Excellence of Kraft Heinz in Amsterdam, specifically around the revenue growth management function. I'm responsible for transforming this function in three specific areas 1. Playbooks and new ways of working, 2. Academy and masters (building revenue growth management capabilities), 3. Developing digital tools across all key pillars of revenue management. Rahul Ubgade: Good morning, good afternoon, good evening, depending on which part of the world you're joining from. Today, I'm joining you from London. My name is Rahul Ubgade, I work with Infosys and my role is to advise strategic CPG and retail clients on transformation initiatives, particularly in revenue growth management, route to market and supply chain. I've been doing this for the last four years with Infosys. Prior to that, for nearly 25 years, I worked with Unilever on various transformation initiatives. I'm excited about this conversation and look forward to it. Over to you, Samad. Samad Masood: My name is Samad Masood. I work for the Infosys Knowledge Institute, which is a thought leadership group. I oversee research not only on trends and technologies that are effective in retail logistics and consumer goods, but also across other industries. As Rahul and Maksym said, it’s an exciting conversation, so let's jump right in. First things first, RGM (revenue growth management), what is it that made this an issue, now? Why are we talking about it? What's the market context that means businesses in the West are more worried about this? Roshchyn: The past two years have put RGM into the spotlight because we have been facing unprecedented inflation and had to pass multiple rounds of price increases. Even before that, revenue growth management was a huge evolution from 20 years ago, where it was a bunch of brainy kids trying to do some mass spreadsheets. The current state of RGM is in the center of modern consumer goods organizations. RGM is a series of functions that connects different functions of organization to develop one strategy. In a new environment, think of RGM as a conductor for an orchestra across sales, marketing, strategy, and to ensure the orchestra works in sync. Revenue management needs to connect all pieces of the organization together and make sure that all decisions are made, A: based on data, and B: that all parts of the organization work in sync. Masood: During this conversation we’ll get into how best to organize and such, but it's really the economic conditions that are driving this and making this more critical, is that right? Roshchyn: Economic conditions made RGM even more important than it used to be. That being said, it's just accelerated the progress. We would have gotten here anyway, but the last two years have accelerated and really put RGM into the spotlight – made it much more important than it used to be 2-3 years ago. To be honest, the last two years, everyone just bought based on price. Nobody cared about innovation, or things like that. Pricing was the key – the main point of everyone's agenda. Masood: Each of you, as panelists, have experience from the East, if I may. Maksym, marketing from Eastern Europe, and Rahul from East Asia and Southeast Asia, as well. Could you tell us a bit about what Western European companies can learn about that? Particularly as some of those markets have regularly had periods of high inflation and challenging conditions to deal with. Roshchyn: Great question. I started my career at Procter & Gamble in Ukraine, then moved into Western Europe. I still did a lot of projects in Ukraine and Russia with McKinsey. The fundamental difference between – let's call it Western and Eastern ways of doing business – is resilience and speed of decision making. People in the East are much more used to volatile economic situations in the economic environment. For example, the first 20 years in Ukraine right from currency evaluation to double-digit inflation every year to two revolutions, etc. This economic hardship and volatile economic situation have taught businesses to make decisions fast. They found a way to make pragmatic and fast decisions, which people in the West have yet to learn. Although I must say, the last two years have helped considerably to put them in the right direction. Ubgade: It’s a very similar situation for me. The first two decades of my career I spent in Asia. As Maksym said, some of these things are almost built into the environment, as people are on their toes. In markets such as India and Indonesia, higher single-digit inflation has always been present. It's been entrenched. Even in that situation, the CPG companies have innovated the way they do the pricing. For example, in India there is something called a “low unit pack.” This means there is a pack, or a bar, which is rupees 10, and it will remain 10 irrespective of what price changes happen and how they address it, by changing the grammage. They found a different way of doing it because affordability is a huge issue in particular markets like this. The category leaders, as far as disruptors in the market, keep looking for innovations from the bottom of the price ladder to the top. For example, they'll continuously bring new packs and variants, which will be relevant for the underserved population that is looking for branded goods and services. That's where a lot of innovation has happened. At the same time, there is an upwardly mobile population that is looking for more benefits, and therefore, getting offerings from the CPG companies at higher price levels. All these innovations have to happen now, across the globe, for the discipline of RGM, and the data and insights are going to be extremely critical. Masood: I'm going to take us a step back a bit – for some of the audience it may be going back to basics – but can you talk us through what exactly you consider to be the revenue growth management? The key principles that have to be involved in that? Then, maybe we can talk a bit about how that's evolving. Roshchyn: In my view, revenue growth management is about analytics – trying to ingest analytics in decision-making, and commercial decision-making in the company. We can talk about evolution, but now, it's essentially a function that develops a commercial strategy. By that I mean four key pillars: Pricing (which we’ll talk about today), portfolio and mix, promotions, and trade investments. Now, the scope might be different from company to company, and to be honest, it expands all the time. So Kraft-Heinz at some point end up doing marketing, connecting it to promotions and forecasting of different marketing campaigns, and also connecting it to the sales forecast as well. So, in a nutshell, revenue growth management, is the analytical arm of commercial functions, and tries to connect all the pieces together. Masood: What are the benefits that you see from doing this? Obviously, you've described the basics of how that fits together. In analytical terms, what kind of outcomes do businesses look for from it and what do they measure? Roshchyn: In an ideal world, those are the two-time horizons for the long run. The ultimate objective of revenue growth management is to grow business and revenue in a profitable way. Developing a long-term pricing and PPA strategy is critical. Understanding where to play, what it takes to win, and designing pricing from a guideline – new price-pack architecture that fits into the strategy and grows the business in a profitable way. In the short-term, there's some tactical initiatives that the RGM function applies to. For instance, in one organization I worked in, revenue growth management function has a target to find X-million euros of initiatives each year, spread across pricing and promotion optimization (which has been a huge one recently), assortment optimization, downsizing, upsize impacts, optimizing trading investment, etc. Those are tactical optimizations that teams do throughout the year, but that all fits into longer-term commercial strategies that develop and regroup every 2-3 years. Masood: Rahul, from your experience at Infosys and beyond, what are the benefits that you see getting delivered from this approach when it's done well? Ubgade: It is always very contextual to the organization. I can provide a couple of examples to better explain. In price optimization, we have seen situations where brands are able to take the price increases, improve margin, and at the same time protect market share. It becomes sustainable competitive growth. At times, there are cases where you are able to grow market share by increasing the price because you know there is a pricing power in your brand. Those are the insights if you take those decisions in-line with data-driven algorithms, because you are able to derive a straight benefit in market share growth, revenue growth, and margin growth. Another example is that of the price pack. The key objective of the price pack arm is to bring the innovations in pack and variance, which truly brings incremental market share. At times, if you do mindless innovations, it tends to eat into your own portfolio. The idea is to grow category and shares in the category, so that you are able to test it before deciding if you want to bring that innovation, and if it will bring incremental market share. These are the two examples, which we have seen consistently across our clients. Masood: It strikes me that you mentioned brand, market share within the brand, and position in the market. That sounds like a very subjective and ambiguous input. You're talking about being very analytical, how do those elements get brought in? What skills do you need to do this sort of job? Roshchyn: Great question. Essentially, in a modern environment, you can quantify almost anything. There's data available everywhere. For example, we're doing a strategy piece back in my days at McKinsey. It was for a larger FMCG client that was going through a major transformation. We wanted to try to understand which category segments will grow the fastest, and which markets were going to go the fastest in the next five years. We had an in-house AI team that developed a “monster model” with 20,000 different data points for each category from Google search, prices, etc. Getting all the data available and predicting a five-year growth trajectory that was accurate, and I would say, data-based. Now, there are many examples like that. You can quantify almost everything the model wants, the data is available. Now, what skills are required? I always try to think about two aspects: One is scientists, and the second is connector. The scientist's part is being very good at analytics, co-vested, and having the right skillset, but also understanding the right RGM concepts, which are not as basic as it might sound. It's very sophisticated if you need a deep enough understanding of the differences between how elasticities are calculated and how all those things connect to each other. However, also understanding basic finance, and having strong financial acumen to understand PnL impact of all the initiatives. On the other side, there's a bunch of connector skill sets that are required. Revenue growth management, in most organizations, do not make a decision, and do not execute those decisions. They have to influence other parts of the organization from BU presidents to frontline sales, to push strategies through. All skill sets around influencing, communication, presentation skills are very important. Apart from that I would say there's one competency that is a centerpiece, which we call “problem solving of Heinz and McKinsey”. It's skills that allow you to break down a complex problem into meaningful sets as I tackle them one by one. Masood: I think you just listed the hardest people in the world to hire, right now. In terms of analytical mindset, having those data science skills, but also being that connector, that problem solver. I suppose those connectors are salespeople for what you're doing. They've got to try and sell the message or sell the advice, right? Roshchyn: Exactly. For Kraft Heinz, we tried to look for ex-consultants, and that's why I was hired here as well. But to your point, it's a very difficult skill to find. We're trying to position revenue growth management leaders as future leaders of the organization as a whole. We think about the RGM function as a trampoline to future executive roles. We've designed this RGM master’s program with the intent to pick the top 20 people in RGM globally, go through six months of intensive training, and then put them into leadership positions like roles such as BU CFOs, market director, etc. Masood: I'm partly imagining ChatGPT applies, and then has a chance of getting into this role at some point. Roshchyn: It’s a very good point that honestly, somebody could talk about for quite a while. What's the future of revenue growth management and how do ChatGPT-type things fit in? Masood: Before we go down that route, you mentioned it seems like a team that is having to connect, having to sell its proposition. How has that evolved? How have you seen it evolve its position in an organization over the years? You've expressed how it can be seen as a root to executives and to the top. How has that matured within organizations? How does the rest of the organization see it, do you think? Roshchyn: Before I explain this, I probably need to take a step back and explain how RGM has evolved. As mentioned, 20 years ago it was just an analytical arm of a commercial function, in most cases trying to justify the decisions that have already been made using analytics. Basically, it was spreadsheet analytics done by brainy kids, which over the years have proven real business value by doing these spreadsheets and consistently trying to explain, recommend, and do small things one step at a time. That was 20 years ago. Since then, RGM has evolved in two directions. One, which most people call RGM 2.0 is essentially strategic RGM, which connects other pieces of organization. Trying to understand the consumer, shop, and develop your long-term strategy. Many folks have heard of the term “OBPPC,” coined by Coke, which nicely describes RGM 2.0, which means that you have to design your occasion brand package price channel. Basically, your end-to-end chain and commercial strategy. Another direction is so-called precision RGM. All digital tools that have been developed over the years. The first one was probably the promo array tool. Historically, no one could understand which promo spoke and which didn’t because there's so many factors one has to take into account. Apart from that, there's several pricing tools we're working on right now, including assortment tools, trade and investments, forecasting, etc. It's taken analytics to the next level and ingested AI into that. Now, with that being said, a skillset has evolved. Before you had to be very good at analytics. Now, when talking about strategic RGM, you have to be very good at connecting people in the organization, and presenting ideas, aligning people in an organization, and also thinking strategically – not just optimizing and doing something techy on Excel, or analytics – but thinking about how it fits into a bigger picture with what we're trying to achieve. It's a completely different skillset. Then, when we talk about precision RGM, it's a completely different ballgame. For instance, on my team we have several data scientists, product owners, etc. It's a completely new skillset set, a completely new role, that is required within RGM. Masood: I suppose it makes a big impact on the operating model in general, within the organization. Roshchyn: Yes, then you've done well. Masood: Rahul, can you tell us about the digital tools that Maksym was mentioning? We're getting more of that involved in precision RGM, and obviously, Infosys is a technology company. What are the developments that you note? Ubgade: First of all, one must see all of the digital tools for RGM to be both business tools, rather than IT technology tools. There's an explosion in data – volume, velocity, variety – it's exploding. The ability to harness that data, harmonize it, and bring it into one coherent layer to drive meaningful insight is the first foundation for any digital capability in RGM. Then, the second layer is all about advanced algorithms, including the econometric model, which is proven today – we may be talking about one of them as it is getting smarter and smarter. The third layer is the user experience, and that is in a way that it hides the data science from the user. As Maksym spoke about, the actual decisions are going to be taken by the people in sales and marketing in the operating company. The RGM team has to give the tools that fit into the natural user journeys and doesn't look like out of the job work. The last one is that this is a bit of a technology element, these capabilities should be then API-enabled because the recommendations can be consumed by downstream and upstream systems. These are the four important things which we have learned on any digital platform to be scaled and become a real business capability. Masood: During our preparation for this webinar you talked about the difference between tactical pricing and strategic pricing. What are the strategies that are used for pricing? Can you talk us through that? Ubgade: It’s one thing to do tactical pricing and promotion decisions using the standard elasticity model, which is table states today. But it's a different thing to strategically position your brand vs. the competition in terms of relative pricing. Oftentimes, when we talk to marketers, they tend to decide strategic pricing or the relative pricing index based on what the power of the brand or the business desires. In today's world, we are in a highly inflationary environment as well as a highly competitive environment where consumers want more from less. As you keep increasing the price beyond the competitive advantage of the brand, you tend to lose the share. In recent times, some CPG companies have begun to lose volume. The key is for brand marketers to determine what consumers are willing to pay, then use that to drive pricing decisions. The key question is: How do you do that? One way is to understand brand equity through brand equity trackers or surveys. The limitation is that you cannot hard link that to performance outcome and also to the pricing index. The good news is that you can extract the equity and the willingness to pay directly from the consumer of tech data. We have an econometric model that can understand the switching pattern and stickiness of the brand to come out with the consumer's willingness to pay. For instance, if it’s $10 for a bar of chocolate and the actual price is $5, then $10 divided by 2 is what we call the consumer surplus factor (CSF). That’s part of the capability of strategic pricing. CSF enables an informed decision-maker – the pricing headroom has to meet a certain market share ambition. The price keeps increasing as long as the CSF is better than the competition. The moment it drops; you know you are going to lose the share. It's basically a trade-off tool, whether you want to meet the margin expectations or the market share ambition, and the balance between the two. It helps marketers decide how much the price premium is, or the discount they want to place vs. competition with a clear direction on the result in market share over 12 months. It will predict that market share for you, even if you don't change the price and competition doesn't change the price. CSF will inform you what will happen to market share in the next 12 months. That's the power we are bringing. The outcome of this is then fed into the promotion decision as a pricing strategy so that you don't dilute the value of the brand. That's what we are doing differently in strategic pricing. Roshchyn: When I think about pricing, I think about two stages: One is the strategic pricing that Rahul described. It's setting up clear guidelines and rules that you apply for the next three years. Basically, what should be my price index, who are my competitors priced against, what should be my price index vs. them, but also within my portfolio. What should be brand value, building, and PPA. The next step is tactical or precision pricing. Strategic pricing gives you guidelines so it doesn't link to very specific decisions. It's actually price changes on each pack or each level. Once you have guide rails in place, you need to decide how to price the packs. Do you change from a frequency? Increase the price? Downsize the spec? What happens to the mix when you do that? What do I want to achieve in that? If we're talking about digital tools, we're trying to build digital tools for both spots or on digital ads, we are trying to understand who competitors are, what should be the target price index vs. them for each of the sub-segments of our portfolio. Then, when we go to a tactical level, it's also modeling solutions between different PPGs and understanding what pricing decisions means for our market share, margin and mix. Masood: Thank you both, you've done a great job of explaining the state of what it is, where we are now, how it's developing. It seems to be something that's critical and with technology has potential to become so much more powerful and much more usable. How do you see the future of RGM? You're both very experienced in the area, where do you see things developing in the future? Roshchyn: First of all, we already have a lot of digital tools in place. There are different stages of maturity, different organizations, but in the long-term, we would have a full integration of artificial and human intelligence in the so-called OGM suite. We will not replace brainy OGM folks with ChatGPT-type tools, but we will no longer do spreadsheets. We'll have digital tools and much more prescriptive than descriptive analytics, so we’ll be able to simulate different price and problem assortment scenarios with one click of a button. Secondly, RGM would become increasingly important in modern consumer organizations. Even now I see that scope is evolving. Historically, it was about pricing and promo pack price architecture. Recently, we had assortment and scope, now we're talking about sales forecasting and marketing array. In 4-5 years from now, RGM will be in the center of commercial decisions in the organization. Again, it links to a broader trend where companies are making more and more decisions based on data. It used to be based on what our gut feeling was when I started doing this. Masood: It's nice to know that we have so much pressure, so much to talk about data and analytics, tools and such, but this has been going on for a good couple of decades. Now it needs to be pushed through and adopted, which is more of a cultural change than a technology change. Ubgade: I was also about to make that point. A lot of investment has happened in algorithms, data, and digital technologies. One of the biggest advances will be the cultural change on the ground. Maksym explained the entire master's programs, skills, and capability. To run this at scale, the people on the ground executing the sales and marketing team in local markets are completely changing the ways and doing it in a consistent way across the market. There’s huge value to that. Before further investment and tools or technologies, this should be an important element because the impact of doing that consistently across the market at ground-level is huge. Of course, there are other things like integrating with the upstream and downstream, or with the IPP process, which can help you get into predictive PnL at a customer channel-level. Some companies have started looking at those aspects – another dimension that is developing. Masood: The future is endless in terms of where it could be applied, or how it can extend and power the business and future. Thank you both. Jenkins: Thank you everybody for that interesting discussion. We have quite a few questions coming. First, with pricing being one, what are the top three areas that RGM will prioritize in 2023? Roshchyn: Pricing is no longer a priority, to be honest, because we've passed through multiple waves. Obviously, inflation will stick around for quite some time, but it's not going to be a focus of RGM teams in the next couple of years. What will be though? We had some long-term plans in place two years before inflation happened, which are no longer relevant. Consumers have changed, shopping behavior has changed, prices have gone through the roof, price points are no longer there. That's why a key would be to revise pack price architecture for all brands, understand what happened to our promo rise, how promo guidelines should change, and what should the new assortment be by brand and by channel. Jenkins: Many CPGs already have RGM's importance and leadership escalating within the organization. Do you see RGM owning the entire IBP in the future? Roshchyn: It depends on what time horizon we're speaking of, however, in some period of time and space – yes, definitely. We already see the trend where RGM becomes a centerpiece of the IBP process in some markets. Ubgade: It’s not important who in the organization owns IBP. But ensuring the outputs from RGM get integrated into IBP is a very important step that has started to happen. That will give us a more predictive PnL. Roshchyn: When we talk about strategic pricing and develop pricing tools, that's the first input that goes into IBP every year. We understand what the projection is with current prices. How much cost increase do we need to cover prices, and what will happen to sales and market share if they pass those price increases? In most cases, it's already a first input into the IBP process. Jenkins: I'm combining two questions here for you, Maks. It's about learning development and enabling RGM. In regards to the master's program that you mentioned, could you expand on that a bit more? Also, The Playbook Academy in Digitization has an approach to enable RGM, how should we go about building this so-called RGM playbook? Roshchyn: Quite a broad question. Let me start with the academy in general and master’s, specifically. Then, we'll go to the playbook. We've been building academy-like RGM capabilities for the last three years. We think about it as a three stage program. The first two stages are foundational-like RGM foundations – a set of e-models, plus case studies that are applicable for new joiners and RGM, but also broader populations across sales, marketing, and finance, which teach some basic RGM concepts. The goal is to make sure we raise the floor of the organization – the understanding of RGM and how to set prices, how to measure problem efficiency, etc. The second stage is more advanced models for RGM practitioners where we describe ways of working and how to develop a pricing strategy, including what steps to follow, what to think about when you analyze efficiency, etc. The last step is masters. It’s a graduate program for RGM leads in Bus when they get into more senior roles. The goal is to actually raise the ceiling of the organization – it's almost a bespoke program. The initial six months were handpicking top RGM leads, then we close after about six months of following the 70-20-10 approach, which means that 70% of money comes from the job, 20% from working in the group on case studies, and 10% for formal training. I mentioned this competency model that we have with the scientists to connect a bit. We're trying to cover all those pieces of formal training, but also make sure they work as a group, do some case studies, and develop a standard framework that they can apply to the individual projects when doing a long-term roadmap for a specific market or category with support of consultancy, plus some senior mentors. The fun part is that we bring everyone together in the same place – from all over the globe: London, Chicago – and then connect with senior leaders at organizations that present their projects to Global SharePoint Zero. The playbook is a completely different topic. When we started this process we were trying to create an assessment of best practice RGM capabilities: What should you do in pricing? What tools should you have? What data should you have? What routines and processes should you have in place? Based on that, we did an assessment with each of the markets and tried to understand where we are and where we want to get to in each of the markets. That was step one. Step two, evolved from that. We created a How-to Guide, which detailed not only that you need to have price indexes vs. a competitor set, but also how to set them right. It’s a step-by-step guide with explanation of key analyses, how to do them, what data to use, whom to align with your organizations, etc. Finally, step three, is digitizing this playbook. We're creating a suite of RGM analysis in Tableau, so instead of saying, "you need to go and do this analysis, here's an example in PowerPoint, you can copy paste it." We're creating a Tableau report for them and linking it to their specific data, instead of needing someone to spend endless hours recreating it in Excel. We’re able to say, "we've already built an analytical platform and get the answers needed." Jenkins: It all sounds very brilliant, very exciting. Rahul and Maksym may you share any last thoughts you have? Any closing thoughts? Ubgade: It's all about discipline and building that capability in the organization so that it is executed on the ground. Of course, digital has to be seen more as a business capability and the foundation block that is required. There needs to be a very clear understanding of how to position your brand strategically on pricing, how to execute into a specific price pack architecture and assortment, and other decisions. The discipline requires you to follow certain steps and get to a place where you are on top of any changes coming through the market. That's what RGM is all about. Jenkins: Thank you. Maks, any closing thoughts? Roshchyn: I'm biased because there’s definitely a potential in RGM, and evolution of RGM capabilities, in most consumer-facing organizations worldwide. It's a journey – a long journey – but the hardest part is to get started and get all key stakeholders on board. Jenkins: Fantastic, thank you. Thank you everyone for joining today, and thank you to our sponsor Infosys. I hope you all gleaned some insights. I wish you all a great rest of your day ahead, or evening for those of you who are joining us from elsewhere.

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