WASHINGTON - Packaged goods makers are likely to increase their reliance on outside sales agents and brokers, though they are mixed on whether outside agents are better equipped than their in-house sales staff to handle certain tasks, a new study showed.
The Grocery Manufacturers Association study was expected to be released at the GMA's annual Executive Conference at the Greenbrier, White Sulphur Springs, W.Va., which ends today.
Outsourcing is prevalent today: Sales and marketing agencies represent about 54% of all consumer packaged goods companies' retail sales revenues in the United States, stated the report, "Value of Outsourcing Sales and Marketing: A Study of the Prevalence and Use of Sales and Marketing Agencies by Consumer Packaged Goods Companies."
And as CPGs increasingly outsource their sales to agencies and brokers, the level of sales those firms represent is expected to expand 15% per year for the next three years, with growth tapering off to 10% per year until 2010.
Most of this projected increase will come from shifts from direct sales to sales agencies and growth of new product categories and alternative food channels.
SMAs, with their local market presence, are seen as better positioned to serve supermarkets than are direct sales teams. Their knowledge of a wide array of manufacturers' products positions them well to develop solutions for retailers, the report's executive summary stated.
"By providing their insight into consistency at the shelf and broad category knowledge, agencies and brokers are helping retailers move their product off the shelf into the consumer's basket," said Stephanie Childs, GMA spokeswoman.
The summary estimated that outsourcing saved CPGs $4 billion last year, after adjusting for the perception that SMAs are less effective than in-house sales teams.
SMAs are valued for their local market savvy and customer insights. CPGs consider agents effective in handling in-store support tasks like cutting in new items, preventing stockouts and managing promotions. They also see SMAs as better at creating planograms and getting good placement for products.
For their part, retailers consider them good at marrying manufacturers' plans with their own goals, and appreciate brokers' knowledge of retailer processes.
Yet, CPGs rate their own staffs better at monitoring retail promotions, forecasting product sales, and tracking deliveries. They also think they do a better job themselves of analyzing category data and developing category and brand plans.
CPGs believe SMAs could be more efficient by upgrading their technology; creating shared service centers; outsourcing certain sales administration and category analysis tasks; and improving staff training.
For their part, CPGs may have to share more sales and planning data with their sales agents, the summary concluded. "Often, retailers are aware that SMAs do not have full visibility of the promotional budget; hence they tend to defer the trade negotiations to senior executives from CPG companies when they visit their market," the summary read.
Conducting the study were the Institute for Customer Relationship Marketing and Center for Business and Industrial Marketing at Georgia State University, which surveyed more than 60 senior retail and manufacturing executives for the report. The ASMC Foundation sponsored the study for the GMA.