Cash Flow Productivity at PepsiCo: Communicating Value to Retailers
Posted: 28 Feb 2012
Date Written: March 28, 2011
PepsiCo developed a new metric that better measured the value added by Pepsi products than did gross margin, the traditional metric used by retailers to determine shelf space and promotional activity. The new metric, cash flow productivity, captured the value of Pepsi's Direct-Store-Distribution (DSD) service and the strong attraction of its nationally advertised brands. Pepsi managers believed that their full service distribution service saved customers money and their strong brands generated more traffic and sales, but that most retailers, looking only at gross margins, missed this added value. Pepsi managers struggled to craft a strategy that would convince retailers to adopt cash flow productivity as a metric for making merchandising decisions in their stores.
Learning Objective: Examine how various metrics can affect distribution systems and the relationships between suppliers and customers.
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