1 Competency Cannabis Producers Need to Be Better At
One of the hallmarks of world-class CPG firms is their focus on Product Line Management (PLM).
Basically, PLM is a formalized discipline for launching, growing, managing and sunsetting (i.e. scrapping) products, based on agreed upon product strategies and goals. In CPG, this activity is normally undertaken by experienced brand managers with support from the product development, finance and product supply functions.
PLM in cannabis firms, however, is another story.
This key activity is not tackled on a regular or systematic basis. When undertaken, it is often led by inexperienced managers.
This gap has serious implications, including:
➡️ The presence of numerous underperforming SKUs and zombie brands.
In many LPs and MSOs, upwards of 80% of all SKUs do not meet revenue or margin targets.
➡️ Excessive inventory levels.
Large inventories arise from ineffective PLM practices such as inaccurate forecasting and failing to scrap obsolete and low velocity products.
➡️ Brand confusion.
A lack of planning can easily lead to overlapping brand positions within the portfolio and a disconnect between SKU counts and revenue per category.
➡️ Reduced speed and responsiveness.
Bloated product lists act as a drag on operational agility and marketing effectiveness.
➡️ Unnecessary expense and complexity.
All the above lead to higher direct and indirect costs and a drain on CapEx.
The root cause of the problem
↪️ Product strategies & plans - the blueprint for what you will do and how - are often incomplete or even non-existent.
↪️ Brand managers may have the title, but they don’t really own the full product life cycle, nor do they have the expertise to fully manage it.
↪️ When PLM is undertaken, it is often performed in a slipshod or ad hoc fashion.
↪️ Brand managers are incentivized for launching products but not for culling them.
↪️ Cleaning up SKUs and brands is often seen as boring, dirty work.
Getting to CPG-level competency…
Fundamentally, you want to integrate PLM thinking and tasks into your corporate OS. Here’s how:
1️⃣ Elevate PLM to a core management activity. The discipline should include competencies such as analytics, strategy development, forecasting and project management.
2️⃣ Empower brand managers to ‘own’ the product life cycle and make the product calls (i.e. be accountable).
3️⃣ Provide the team with the necessary tools and data plus access to key cross functional resources.
4️⃣ Develop and align key stakeholders on product strategies, which include clear metrics and goals.
5️⃣ Train the requisite staff on PLM methodologies; measure through performance evaluation plans.
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