Shopper Marketing - February 2018 - 12

12

SHOPPER MARKETING FEBRUARY 2018

ZERO-BASED BUDGETING
Our roundtable experts offer explanations and advice as
CPG companies are increasingly facing the challenge of
implementing and sustaining ZBB processes.
By April Miller

F

aced with disruption from the digital world, private label, big data and customers' demands, some
CPG companies have turned to zero-based budgeting (ZBB) in order to maintain their margins
and drive ROI.
The practice was introduced in the 1970s by Texas
Instruments accounting manager Pete Pyhrr. It recently
gained traction when 3G Capital bought Kraft Foods in
2015, merged it with Heinz and implemented a ZBB system.
With ZBB, one starts its budget from zero, rather than
the previous year's spend, and defends each expense based
on anticipated growth.
A January 2017 study by Deloitte reported that 22%
of CPG companies had adopted the method. In addition

to Kraft Heinz, other CPG companies that have been reported to use ZBB include Campbell Soup Co., Coca-Cola
Co., Kellogg Co., Mondelez International and Unilever.
Some see the practice as simply cutting costs, but supporters point to its many benefits. "I view it as much more
than budgeting from zero," says Kyle Hawke, associate
principal at McKinsey & Co. "It's aligning resources with
the business and strategy and putting in a structure and
resource allocation process to get the money to where it
matters most - as well as putting in place the governance
and culture shift to sustain it over time."
We talked with several consultants to dive further into
ZBB. (None of the multiple brand executives contacted for
this article responded to interview requests). Here is an edited virtual roundtable discussion based on our interviews.

Q

What are some possible drawbacks of ZBB?
HAWKE: More time-consuming than a normal financial planning and monitoring process. It does require managers to think about not just growth, but profitable growth.
JAMES CIOBAN: It can be difficult to get team members on
board when they are resistant to change or fear ZBB will be
counterproductive.
ANNE CHAMBERS: Management knows that budgets will
be scrutinized or reduced and start with an inflated number when they propose the budget.
MIKE ANTHONY: It's seen as short-termist. ZBB focuses on
the short-term financial goals rather than longer-term "investments" such as equity-building, which are hard to measure. A promotion today might benefit from brand-building
activity over the last decade: ZBB might kill off the brandbuilding activity since it doesn't deliver a measurable ROI.

Q

And how about those who see it as an
attempt to simply cut costs?
HAWKE: There are a lot of myths out there on ZBB, and
a lot of that is perpetuated by a limited number of horror
stories exacerbated by the media. This is myth No. 1.
ANTHONY: The reality is, if a company wants to cut costs,
they can just do it. At least this way they are likely to cut
the right costs.

Q

So why ZBB; what are the positives?
PATRICK FITZMAURICE: It forces new thinking into
the marketing planning process. What are the shifts in
what media/tools/tactics that consumers and shoppers are

OUR VIRTUAL ROUNDTABLE

MIKE ANTHONY
CEO, Engage

ANNE CHAMBERS
CEO and founder,
Capre Group

JAMES CIOBAN
chief technology
officer & chairman,
Cierant Corp.



Table of Contents for the Digital Edition of Shopper Marketing - February 2018

Contents
Shopper Marketing - February 2018 - Intro
Shopper Marketing - February 2018 - 1
Shopper Marketing - February 2018 - 2
Shopper Marketing - February 2018 - Contents
Shopper Marketing - February 2018 - 4
Shopper Marketing - February 2018 - 5
Shopper Marketing - February 2018 - 6
Shopper Marketing - February 2018 - 7
Shopper Marketing - February 2018 - 8
Shopper Marketing - February 2018 - 9
Shopper Marketing - February 2018 - 10
Shopper Marketing - February 2018 - 11
Shopper Marketing - February 2018 - 12
Shopper Marketing - February 2018 - 13
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Shopper Marketing - February 2018 - 18
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