Vol. 127 - NO. 39

Blog Startup CPG

SINCE 2019

Speeding Up Your Success:
Identifying the Right Velocity Goals

In our recent webinar with NIQ, Speeding Up Your Success: Identifying the Right Velocity Goals for Your Brand, Annie DiVenere and Patrick Dougherty dive into how you can leverage velocity in your buyer meetings. To grasp velocity, it’s important to understand three key metrics for measuring distribution:

  1. Store Counts: The number of retail locations where your product is sold.
  2. % ACV (% All Commodity Volume): A metric that employs a weighted distribution methodology, assigning different weights to stores based on their volume. Your % ACV represents the total retail volume of stores where your brand is distributed.
  3. TDP (Total Distribution Points): A reference point indicating the breadth of distribution for a specific brand, calculated by summing up the % ACV for each item.

Once distribution is comprehended, several essential metrics can help measure and comprehend velocity:

  1. $/$MM ACV (Sales Per Million): Measures the portion of revenue, per $1 million, attributed to your product for each location where your product is available. This metric is useful for market comparison.
  2. $/%ACV (Sales Per Point of Distribution – SPPD): Measures the sales attributed to your product for every 1 point of % ACV (distribution).
  3. Units/Store/Week (Units Per Store Per Week): Determines the average number of units sold per week in each store location where your product is distributed.
  4. $/%TDP (Sales Per Point of TDP): Measures the sales attributed to your product for every 1% of TDP. This metric gauges the depth of distribution and considers the number of SKUs on the shelf.

The choice of which metrics to use depends on your brand’s goals and objectives with a retailer. The provided chart offers a clear breakdown of when to use each metric.
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To illustrate, let’s examine a commodity report for Cookies, where you represent Brand K and are preparing for a buyer meeting. Some noteworthy points include:
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  1. Brand K’s revenue has increased by 15.5%, outperforming the category. However, unit growth is down, which could be due to Brand K raising prices before others in the category.
  2. Distribution growth (%ACV) has decreased by 11.7%, but velocity growth/same-store sales ($/%ACV% CHG) has increased by 30.8%. These metrics indicate that although Brand K has the lowest dollar sales in the category, its velocity growth surpasses that of most other brands. Compared to Brand H, which has almost double the sales of Brand K, there is a clear velocity advantage for Brand K.
  3. Considering $/%ACV, Brand K generates $1.7 million for every 1 percent of distribution, while Brand I only brings in $992,000. Despite Brand I having 75% more volume and almost triple the distribution, Brand K’s $/%ACV performance is superior. If Brand K were closer to Brand I’s 75.2% ACV, the incremental sales potential would be $59,960,088!!

Now, you might wonder how to modify velocity. There are various factors that can affect velocity, including:

  1. Promotion: Changes in your promotional strategy or the competitor’s strategy, and the balance between trial and repeat customers.
  2. Distribution: Rapid fluctuations in distribution, entry into new channels or retailers without an established consumer base and attracting consumers away from other brands.
  3. Assortment: Introduction of new items or changes in shelf facings.
  4. Pricing: Inflation, price changes compared to competitors, and competitive pricing dynamics.
  5. Macro Trends: Economic shifts impacting category trends, such as the rise of e-commerce.
  6. Consumer Shifts: Exposure to new demographics, differences in purchasing habits, and loyalty considerations.

Understanding the significance of velocity and utilizing it effectively in buyer meetings emphasizes the importance of data. Data can support your brand in various ways, including equalizing distribution, providing assortment recommendations, identifying hurdle rates, aiding in forecasting, understanding underlying reasons for performance, and advocating for your brand.
Byzzer, a platform by NIQ, grants emerging businesses access to the same data used by major brands. Startup CPG members can avail themselves of free instant access to the Byzzer platform, allowing them to run three reports to uncover opportunities and threats for their brands. With insights from Byzzer, brands can identify optimal product pricing for maximizing profits, optimize ROI for trade spend, compare performance against top competitors, and more.
For further information or to book a one-on-one session with an NIQ expert, visit https://nielseniq.com/global/en/landing-page/startupcpg/

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