Agri-Food Industry Leader: Price Repositioning in a Matter of Weeks

How, in a few weeks, did BearingPoint help a client to reposition prices of hundreds of products?

In a context of generalised inflation of raw material costs, our client, a French agri-food industrialist, needed to overhaul its prices to secure or even improve its profit margins. After reworking its sales & pricing policy framework, the company asked for our help to recalculate price lists to ensure they are both in line with the market and profitable.

A vicious circle of inadequate prices and discount increases 

With the accumulation of blanket price list increases, most of the time only covering cost increases from suppliers, our clients' price lists have gradually fallen out of step with the market. Customers and sales teams have lost confidence in the price lists, which has led to a proliferation of discounts, sometimes at inappropriate levels. As a result, this has led to additional price list increases in an attempt to compensate for the increased discounts, thus fueling a vicious circle.

A first rapid calculation of the complete price list using Optix, followed by a refinement with our client 

After identifying the right analysis periods considering business activity cycles, and collecting and cleaning price data, we calculated the first sets of prices using Optix.

Optix flexibility allowed us to calculate the most suitable prices given the framework set by the client for its new pricing policy very quickly. Then, iteratively, to propose optimisations, as we conducted overall price consistency reviews with the client’s pricing, product marketing and sales teams.

A particular attention was paid to the most sensitive products

The first challenge was to objectively identify which products amongst the catalog were the most sensitive for both our client and its end customers. To do this, we combined a field information collection approach via the sales teams with a multi-criteria analysis of the sales history. Once the product selection was made, we aligned with our client on a suitable price calculation method before validating each price individually with its teams.

Challenge of the framework: estimation of margin and price impacts, by customer and by sales representative, for clear decision-making 

After each price list calculation, we estimated the impacts on margins according to different scenarios, which were either conservative or ambitious regarding the evolution of the sales teams’ discount practices. Optix impact module allows for an iterative way of working with the possibility of adjusting specific prices before updating the simulations.

We also developed for the occasion a specific algorithm for analysing coverage rates per product to optimize discount funnel sizes and minimise risks.

Fast roll-out and substantial profits

Our deliverables – price lists, lists of the most sensitive items, and impact scenarios - allowed our client to quickly validate and deploy its new pricing policy, resulting in gains of several million euros.