322. Margins Tightening? It's Not What You Think

0:00Years ago, our largest competitor was the category captain for the largest retailer in the country. at the time. This was before Walmart became dominant. They introduced a completely new product line and leveraged their influence as a category captain to convince the retailer to authorize it across every division. Their proposal required the retailer to discontinue 17 items to make room for our new item. 11 of those items belonged to us. That was nearly half of our business within that retailer. Now let's recap what happened. We were originally projected to lose 11 SKUs across more than 2 ,500 stores.

0:34That would have eliminated nearly half of our business with that retailer. Instead, we gained four additional SKUs in every store. Think about the difference between those two outcomes. One path would have crushed sales, leverage, and profitability. The other accelerated growth dramatically. That's the power of retail clarity. And here's why this matters so much right now. Are you ready to hear more? Welcome to the Bulletproof Your CPG Brand Podcast, the podcast for entrepreneurial founders to protect runway, improve execution, compete smarter with the resources they already have. I'm your host, Dan Loman.

1:10Most brands don't have a spend problem, they have a visibility problem. Their data tells them what happened, but it does not always show why it happened, what influenced it, or what to do next. That's where brands leak profit, margin, execution, cash, and runway. Each episode gives you practical strategies to help your brand find hidden profit leaks, earn stronger retailer trust, and create the unfair competitive advantage your brand deserves. Be sure to follow, subscribe, and share this episode with another founder who needs it. And don't forget, there's a free downloadable guide for you at the end of every episode to help you go deeper.

1:45Now, let's roll up our sleeves and get started. How to protect margin when growth gets expensive. Last week, I talked about hidden execution leaks, the problems that begin after production and quietly drain margin, retailer trust, and runway before the product ever reaches a shopper. Execution is one leak. Promotions are another. Deductions are another. Placement, timing, visibility, decision quality. This week, I want to zoom out because the real opportunity is learning how to see the system behind the leaks. And right now, that matters more than ever. Most CPG founders are feeling pressure from every direction.

2:24Costs are higher, retailers expect more, promotions are harder to predict, shoppers are more cautious, private labels getting stronger, and bigger brands can often absorb margin pressure longer than smaller brands can. That creates a dangerous situation for entrepreneurial brands. Because when margin gets compressed, the natural instinct is to react. Cut spending, run deep promotions, delay investments, push harder for distribution, raise more capital, and move faster. But here's the problem. If you don't know where the pressure is actually coming from, then you can cut the wrong thing, fund the wrong activity, damage retailer trust, and make the leak even worse.

3:06Vac infusion is expensive. Let me explain. Here's why this matters right now. A few years ago when the world shut down, the problem was obvious. Everyone knew it was happening. Retailers knew it, brands knew it, distributors knew it, and shoppers knew it. The uncertainty was real, but the source of distribution was visible. The brands that survived and thrived adapted. This stretched brands to rethink their go-to-market strategy. During normal times when things are predictable, your dashboards, canned reports, and internal systems can predict when forecast velocity with reasonable effectiveness and accuracy, even during promotions.

3:43These are not normal times. Today feels different. Now the pressure is coming from everywhere at once. Ingredients cost rise, freight costs shift, labor costs increase, retailers demand more support, shoppers become more conscious, big brands promote more aggressively, and private label becomes more competitive. Things are extremely volatile, and that compresses smaller brands in the middle. Now consider this, if gas prices doubled in your market, that's not just a consumer problem, that's a CPG margin problem. It costs more to move ingredients, manufacture products, support field execution, deliver inventory, service retailers.

4:22And if your shopper is under financial pressure, they scrutinize every purchase more carefully. Big brands can often absorb that pressure longer. They have scale, they have leverage, they have deeper pockets. They can use pricing, promotion, shelf influence, supply chain efficiencies, and retailer leverage. In many ways, that emerging brands cannot. But that does not mean smaller brands are powerless. It means they need to compete differently. They need clarity. Because clarity creates leverage, and leverage extends runway. The origin of retail clarity. This is why I built everything around the retail clarity framework.

4:58And honestly, this ties directly back to episode 269, The episode where brand secrets and strategies became bulletproof your CPG brand. That shift was not cosmetic. It was strategic. The mission became sharper. Help entrepreneurial brands, extend runway, improve execution, compete smarter, gain more leverage from existing resources, and stop quietly leaking profit. That is the work. And the reason behind so much of this matters right now is because most founders don't need more disconnected tactics. They need a better operating system for making decisions. Early in my career, I saw a traditional category management was often practiced.

5:38A lot of it relied on canned reports, syndicated data, ranking reports, generic shopper data, and the same playbook everyone else was using. The reports were useful, but they were incomplete. They showed what happened, but they did not always explain why it happened, what influenced it, what the shopper was trying to solve, what competitors were changing, how retail or economics shaped the outcome, or what the brand should do next. That created a massive blind spot. And where there's a blind spot, there's usually a leak. You cannot fix what you cannot clearly see. Let me repeat that. You cannot fix what you cannot clearly see.

6:17The question that changed everything, the question that changed how I look at every retail problem was simple. Why did what happened happen? That question forces you to slow down. It forces you to reverse engineer the outcome. It forces you to stop managing your brand in isolation. And it forces you to ask, what did the shopper see? What did they miss? What did the retailer need? What did the competitor do? What changed in the category? What broke in the execution? What decision was made with only part of the picture? That question is the heart of retail clarity because your product does not operate in isolation.

6:54Your promotion does not operate in isolation. Your shelf set does not operate in isolation. Your retail relationship does not operate in isolation. Everything influences everything else. Your competitors, retailers, shoppers, brokers, distributors, pricing, timing, visibility, execution, forecasts, promotions, deductions, all influence the final outcome. The brands that understand that gain an unfair competitive advantage. The Retail Clarity Framework. The Retail Clarity Framework has four pillars. Number one, internal. What happened? This is where most brands live. Sales, shipments, velocity, trade spend, inventory, forecasting, deductions, retail score charts, operational reporting.

7:38This work matters, but here's the trap. Most brands stop here. They look at an internal report and assume they understand the business. They don't. They understand part of the business. Internal data tells you what happened inside your world, but your brand is not the only thing happening in the category. When you manage only from internal data, you manage in isolation, and that is dangerous. This is where brands start leaking margin, retailer trust, execution quality, and decision quality. Not because the data is wrong, because it's incomplete. Number two, shopper. Why did it happen? Before we talk about the shopper, we need to talk about the retailer, because retailers are not simply buying products.

8:22They are trying to track shoppers, grow profitable categories, strengthen loyalty, and create a competitive differentiation. Retailers want more shoppers, a reasonable profit, and a stronger competitive position in their market. If you can help them achieve those goals, the relationship changes. You stop selling products. You start solving category problems. Years ago, when I was in direct store delivery selling salty snacks, I learned this firsthand. I made the retailer's life easy. I solved problems. I supported the store. I helped them succeed. So when the retailer opened a major new location, I was given a huge front lobby display, multiple end caps, and premium visibility, and at no additional cost.

9:04The largest national brand did not get that space. I did. Not because I had the largest budget, but because I had built trust. Retailers reward clarity. They reward brands that help them win. That experience shaped how I think about retail forever. Now, let's bring the shopper into this. Most brands say they know their shopper, but often what they really have is a demographic profile, a syndicated report, a generic focus group summary, or broad category assumptions. That is not the same thing. Your shopper is not a data point. Your shopper is trying to solve a problem. That problem is the need state.

9:41When you understand the need state better than your competitors, you can reverse engineer your merchandising, your pricing, your messaging, your innovation, your retailer story, your placement strategy, and your promotion strategy. This is where smaller brands can beat larger brands. Not by outspending them, but by understanding the shopper better. Here's a real example. I once worked on a situation where a much larger competitor tried to remove our brand from a key retailer. They had the budget, the leverage, the relationship, the category influence. But we had the shopper. I showed the retailer that our shopper was deeply loyal to the parts of the store they cared about most, produce, fresh, premium, and mission-driven departments.

10:23The competitive shopper was more price-driven and promotion-driven. That changed the conversation. The retailer realized that they were not simply choosing between products, they were choosing between shopper relationships. That's retail clarity. Not generic shopper data, strategic understanding. Number three, competitive. What influenced it? This is one of the most overlooked parts of the retail strategy. Most brands compare this quarter versus the last quarter, this promotion versus the last one, this shipment versus the prior shipment. That matters, but it's not enough. You also need to understand what else is happening around you.

11:01Were competitors promoting aggressively, better placed, gaining secondary displays, simplifying their messaging, reducing price, expanding assortment? Did private labels shift the equation? Did the retailer reset the category? Did your product lose visibility? Consider this, a founder sees sales softening and assumes that the issue is pricing, but maybe a competitor a secured secondary placement, the retailer reduced visibility, another item captured shopper attention, the category reset changed traffic flow, or the shopper simply stopped noticing the item. The sales report will not always tell you that, but the shelf will.

11:40This is why canned reports are a great starting point. They are not a strategy. Number four, predictive. What should happen next? This is where the first three pillars come together. Internal tells you what happened. Shopper explains why. Competitive explains what influenced it. Predictive helps you decide what to do next. And this is where many brands struggle most, especially in unpredictable markets, because old assumptions stop working. Promotions stop being less reliable. Forecasts become less stable. Shopper behavior changes faster. Retailers become more selective and then margins tighten and where uncertainty increases decision quality matters this is the opportunity you are not trying to predict the future perfectly you are trying to improve the quality of your decisions what should we fix first what should we stop funding what should we investigate what should we say to the retailer what should we measure differently what protects margin best this is where brands stop reacting and start leading let me give you a real example of what I mean.

12:45And honestly, this is one of those experiences that shaped how I think about retail forever. Let's face it, getting on the shelf is the easy part. The hard part begins once your product actually reaches the shelf. Years ago, our largest competitor was the category captain for the largest retailer in the country at the time. This was before Walmart became dominant. They introduced a completely new product line and leveraged their influence as category captain to convince the retailer to authorize it across every division. Their proposal required the retailer to discontinue 17 items to make room for our new item.

13:1911 of those items belong to us. That was nearly half of our business within that retailer. At the time, I was responsible for only one division. Every other of the 11 divisions simply accepted their recommendations because the category captain's data presentation looked convincing on the surface, but something didn't feel right to me. So instead of blindly accepting the plan, I did a deep dive. And without realizing it at the time, I was using all four pillars of what eventually became the retail clarity framework. First, internal what happened? Our brand was growing steadily. Velocity was strong.

13:54The category was healthy. Retail performance was strong. We had innovation plan. There was no obvious reason we should suddenly lose nearly half of our distribution. That was the first signal. Second, why did it happen? Our product design created a unique advantage shoppers generally loved. So I began studying not only our shoppers, but the competitor shoppers and the retailer shoppers by division. I wanted to understand loyalty, purchase behavior, switching behavior, retailer preference, basket behavior, and what role each item played within the category. Third, competitive. What influenced it?

14:30My experience taught me to watch competitors obsessively. Pricing, promotion, innovation, go-to-market strategy, distributor behavior, retail relationships, shelf movement. That level of due diligence was rare, and it consistently gave us an advantage. The competitor's sudden pivot in this entirely new brand caught almost everyone off guard, so I had to become an expert in the product that had no historical track record. That meant forecasting, shopper adoption, sales transfer, category impact, retailer impact, and competitive impact without historical reference points. Now here's where the fourth pillar changed everything.

15:08Predictive. What should happen next? This is the key. Whenever a retailer adds or removes an item from a category, one of two things happens. The sales either transfer somewhere else inside the category or they leave the category entirely. That second part is critical because when the shopper stops finding what they want, they often buy the category somewhere else. That impacts category sales, shopper loyalty, retailer traffic, and total basket profitability. Most assortment reviews never go deep enough into this, but they should, because every assortment decision changes shopper behavior. Every promotion changes shopper behavior.

15:46Every placement changes shopper behavior. So I built an analysis showing the long-term impact of adding the new brand, removing the 17 items, and how the retailer's competitors would benefit from those shoppers migrating elsewhere. The analysis was eventually adopted by the other divisions. And again, this is not about me being braggadocious. I'm sharing this because I want founders to understand what's possible when you stop relying on canned reports and start thinking strategically. Now, let's recap what happened. We were originally projected to lose 11 SKUs across more than 2 ,500 stores. That would have eliminated nearly half of our business with that retailer.

16:26Instead, we gain four additional SKUs in every store. Think about the difference between those two outcomes. One path would have crushed sales, leverage, and profitability. The other accelerated growth dramatically. That's the power of retail clarity. And here's why this matters so much right now. If this framework can create that kind of outsized advantage during highly competitive, stable markets, imagine the leverage it can create during volatile and unpredictable markets like the one that founders are navigating today. This is how smaller brands outmaneuver larger competitors. This is how you future-proof your brand.

17:01This is how you improve investor confidence. This is how you strengthen retailer relationships. This is how you protect margin while competitors react emotionally. And this is how you build an unfair competitive advantage. Three leaks to check right now. Let's make this practical. Here are three leaks founders should evaluate this week. Leak number one, promotion ROI. Ask yourself, did the promotion create demand or rent sales? What happened before the promotion, during the promotion, after the promotion? Did baseline improve? Did shoppers repeat? Or did existing shoppers simply buy cheaper? A temporary spike is not always growth.

17:41That's expensive. Leak number two, execution. Ask, did the plan actually happen? Did inventory arrive correctly? Did displays get built? Did communication happen clearly? Did replenishment flow properly? Did execution support the retailer's promise? Execution gaps quietly destroy runway, and many deductions begin much earlier than brands realize, not when the invoice gets short paid, earlier in communication, routing, production, compliance, fulfillment, documentation, and execution discipline. Execution is not just an operational issue, it's a margin protection issue. Leak number three, decision quality.

18:21Ask, are we making decisions from reports or from clarity? Do we understand the shopper, understand the retailer economics, understand competitive context, know what to fix first, know what's actually driving the outcome? Because a bad decision made constantly can drain more runway than an obvious mistake. Partial information creates expensive decisions. If this conversation resonates with you, make sure we connect on LinkedIn. That's where I continue many of these deeper conversations around margin protection, retail execution, hidden profit leaks, shopper behavior, retailer expectations, and strategic clarity.

18:59I also publish a weekly LinkedIn newsletter where I break these concepts down further into real-world examples founders can apply immediately because my goal is not simply to teach theory. It's to help founders build stronger businesses. Here's your next step. If you struggle to answer any of those questions quickly and confidently, that's probably the first leak you should investigate. And if you want help identifying those leaks and others, download the free 15-minute CPG runway leak finder. No email required, no friction. Just download it and use it. Go to retailsolve.com forward slash find leaks.

19:35leaks. The guide will help you identify seven of the most common leaks, promotions, timing, placement, deductions, visibility, execution, and decision quality. And if you want to go deeper after that, join me for the free Retail Clarity Workshop because the goal is not to simply spend less. The goal is to stop funding what's not working and start building the margin protection system behind profitable growth. Before you raise more money, find the money already leaking inside your business. And let me leave you with this. Founders are not powerless. Smaller brands can absolutely compete in this environment, but they cannot compete blindly.

20:13The brands that survive and grow over the next several years will not necessarily be the brands with the biggest budgets. They will be the brands that understand the shopper better, execute more consistently, protect margin more intelligently, strengthen retailer trust, and make clear decisions faster. And the best part? learning this now while things are challenging will make these strategies even more impactful in the future. That is the opportunity. If this episode helped you see your business differently, please share it with another founder. The stronger mission-driven brands become, the stronger this industry becomes.

20:48A rising tide really does lift all boats. Make sure you subscribe to the podcast, connect with me on LinkedIn, and I'll see you next time. This is the Bulletproof Your CPG Brand Podcast, and I'm Dan Lohman. Want to get more runway out of your available resources? Start here. Most founders are under pressure. Margins are tight. Cash flow matters. Retailers expect more. Shoppers are hard to predict. And big competitors can absorb mistakes small brands simply cannot. That's why this matters. Most brands don't have a spend problem. They have a visibility problem. The reports tell you what happened, but they don't always tell you why it happened, what influenced it, or whether profits leaking or what to fix first.

21:30That's why I created the free 15-minute CPG Runway Leak Finder. It's a fast founder-first diagnostic that helps you identify hidden leaks in promotions, timing, placement, deductions, execution, visibility gaps, and decision quality. Set a timer for 15 minutes. Answer the questions honestly. If you hesitate, that may be where the leak is. Before you raise more money, cut the wrong thing, or fund another promotion, find the money that's already leaking inside your business. Download the free leak finder at retailsolved.com forward slash find leaks. No friction, no email required. Then join the free Retail Clarity Workshop to learn how to prioritize what to fix first.

22:12Thanks again for joining me today on the Bulletproof Your CPG Brand Podcast. If this episode helped you see your business differently, please follow, subscribe, leave a comment, and share it with another founder who's working hard to protect margin, improve execution, and grow with limited runway. You can also download this episode's free guide in the show notes. And if you want to start with the bigger picture, download the free 15-minute CPG runway leak finder at retailsolve.com forward slash findleaks. No friction, no email required. It will help you quickly identify where your cash margin execution and decision quality may already be leaking inside your business.

22:51Before you raise more money, cut the wrong thing, or fund another promotion, find the money that's already leaking inside your business. Please reach out and share your most pressing question, and I'll do my best to get you the answers that you need on future episodes, including with expert advice and CEOs and industry thought leaders. I look forward to seeing you in the next episode. At RetailSolve.com, Session 322.