When looking for new routes to market, CPG manufacturers turn to outsourcing

Michael Browne

With more than 90% of CPG manufacturers bringing new products to market over the past year, the demand for sales and in-store support has never been higher.

Whether manufacturers are partnering with some of the largest grocery retailers or expanding their reach into other channels or markets, one thing is certain: They need relationships.

For brands just starting up or others simply considering entering new retail channels, outsourcing certain services can help them reach new customers at less cost and with less stress on their own resources.

“Depending on the size of the CPG or the partner, there may be retailers where they’ve got very strong relationships and other retailers where they need help,” says Nick Patterson, executive vice president of business development at Advantage Solutions, which provides headquarter sales, marketing and in-store support for manufacturers.

“While Advantage services almost all channels and retailers in the U.S., we can also help in specific areas. For example, manufacturers may not have strong connections in the convenience channel or e-commerce. Or they want to expand into more rural areas, more independents. Our ability to make sure that brands are able to service consumers in more parts of the country in a fair and equitable way is something we can offer our clients.”

And for most manufacturers, hiring internal staff to cover and service those downstream accounts adds unwanted complexity, and importantly, doesn’t make financial sense.

That’s when many companies turn to outsourcing sales functions, including headquarter calls, administrative and billing services, analytics, insights and more.

“When companies outsource, they’re expecting to maintain the same level of sales performance, along with ideally an ROI improvement because it’s less costly,” says Patterson.

The retail merchandising side of the business

The other side of the coin is retail merchandising support — the people who scour backrooms for products and merchandise retailers’ shelves. At a store level, most manufacturers have moved to a completely outsourced model for those functions.

For example, in the Advantage Outlook 2023 Q3 survey of manufacturers and retailers, manufacturers said their top strategies to improve the ROI for promotions are to eliminate the least profitable promotions (70%) and increase quality merchandising (60%). That requires in-store labor that those companies may not have. So they turn to partners who can provide staffing on demand.

“There are very few CPG companies left that are handling in-store retail merchandising work with an internal direct team,” says Patterson. “Most of that has been outsourced to enable greater scale of impact with a higher ROI. That’s been a growing part of our business — particularly since COVID — because a lot of retailers, just like everybody else, are having a hard time staffing in-store. That leads to out-of-stocks and missed sales, so the incremental help in-store is much needed.”

Manufacturers surveyed in the August 2023 Advantage Outlook survey overwhelmingly agree that lack of in-store labor has significantly impacted on-shelf availability (69%) and in-store execution (59%).

Increasingly, manufacturers are under pressure to create different routes to market that reduce cost internally but deliver the same results. That bodes well for a company like Advantage, which can help solve that problem.

“The biggest barometer for an outsourced model is that we can perform as well or better than direct teams at similarly sized accounts,” says Patterson. “So, if we can perform in an outsourced model on par with the results that their internal direct teams can do, then we have a good chance at being one of their strongest ROI investments.

“The bottom line for our clients is, if they can get similar results as their internal teams with less resources and less cost with us, that’s a great position for them to be in.”

Brandon Thornell, executive vice president, head of BPO for Advantage, whose team helps to bring manufacturers and brands products to retailers and consumers, adds, “Our unique value proposition is our ability to drive multichannel fulfillment across direct-to-consumer, e-commerce, brick-and-mortar and more. Surrounding all that are support functions that are much needed, which we can provide.”

It may not be as catchy as “The Terminator,” but Thornell likes to think of Advantage as “The Simplifier.”

Once clients know where they’re going and what they want, his team supports them in order management, back-office operations and all supply chain needs to make distribution a reality. Advantage effectively eliminates the complex questions of how to get products into distribution centers, stocked on store shelves and into the carts of consumers — or even delivered directly into their hands via e-commerce — eliminating the need for multiple internal teams and outsourcing partners. 

 “That’s what we do,” Thornell says. “We can be that one partner that does it all, and that’s a simplifier for them.”