Focusing on commercial excellence can lead paper and packaging firms to boost their EBITDA by a significant 25% to 40% / Credit: Dusit via Shutterstock

Paper and packaging companies consistently underperform when it comes to commercial excellence compared to their counterparts in the industrial goods and services sector.

Commercial excellence refers to the ability to implement and optimise commercial best practices that maximise profitable revenue.

These practices encompass various aspects, including enhancing salesforce effectiveness, analysing market opportunities, refining customer segmentation, designing efficient routes to market, improving customer experiences, streamlining commercial operations, and fine-tuning pricing strategies.

Traditionally, many companies focused on reducing production costs due to capacity limitations. However, leading companies have shifted their focus to a tailored set of business-to-business commercial excellence best practices as a means to foster growth and gain a competitive edge.

In fact, prioritising commercial excellence can boost EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) by a substantial 25% to 40%.

Key questions for paper and packaging leaders

Achieving commercial excellence begins with a comprehensive understanding of profitability concerning customers and products, as well as identifying growth opportunities.

Companies that excel in this regard prioritise transparency to discern value creation and destruction within their organisation. They can answer crucial questions such as which customers to prioritise, which products yield the most profit, and which to deprioritise.

For instance, a leading European paper and packaging company collaborated with Bain to gain insights into product and customer profitability, enabling them to streamline their portfolio and develop strategies for quick wins.

Tapping into market opportunities

Many paper and packaging firms lack insights into their potential market share with existing customers and often lack a comprehensive list of prospects.

Successful companies focus on detailed customer potential analysis, enabling sales teams to pinpoint specific growth opportunities. Once identified, they can tailor their value propositions for optimal results.

For instance, a plastic packaging company identified areas for growth with its top 20 customers by seeking customer feedback and implementing strategies for better service and competitive pricing.

The traditional approach of infrequent price adjustments and outdated discount structures no longer suffices in today’s volatile business landscape. Companies must invest in pricing agility to adapt to changing factors like supply chain disruptions and fluctuating input costs.

Effective pricing involves setting prices based on customer value and willingness to pay, with price floors to cover costs and price ceilings aligning with market dynamics.

Leading companies establish dedicated pricing teams and employ digital pricing tools to guide pricing decisions and manage discounts effectively. They also target underperforming customers by adjusting pricing, reducing service costs, or revising product offerings.

Streamlined sales and operations planning (S&OP)

After identifying profitable customers and products, leading companies ensure their S&OP processes prioritise these aspects, aligning capacity allocation accordingly.

An efficient S&OP process not only reduces logistics costs but also enhances operational efficiency and working capital management. It leads to higher customer profitability by optimising customer mixes.

Companies should focus on data quality, standard reporting, shortfall identification, and structured S&OP meetings. Some companies leverage additional tools, such as pricing insights, to enhance S&OP discussions.