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Zero-based budgeting in consumer goods

Portrait of Alexander Belderok
Senior Partner
Amsterdam Office, Western Europe
+31 20 7960-600
13. Juni 2017

With the consumer goods industry in a cautious recovery, companies would do well to keep an eye on their selling, general and administrative expenses, or SG&A costs, which in times of growth can easily increase out of proportion to revenues and eat into company margins.

The right balance between growth and cost control will come from actively monitoring the cost base and managing profitability through strategic structural changes in SG&A activities and spend. Unlike traditional budgeting, which operates on a last year's value-plus-delta logic, ZBB starts at a budget of zero, clusters relevant activities, and prioritizes these groups based on their contribution to the company'success. This differentiates ZBB from other cost savings approaches such as budget cuts, restructuring, transformation programs and continuous improvement.

Potential savings if the entire consumer goods sector used zero-based budgeting.

ZBB has appeared – or reappeared – on the agendas of many consumer goods companies in recent years, including Unilever, Coca-Cola, Kellogg's and Mondelez. Private equity firms like 3G Capital, which is involved in Anheuser- Busch InBev, Kraft Heinz and Burger King, are also heavily pushing for ZBB across their investments.

Our recent study suggests companies that do not apply ZBB leave a significant SG&A cost reduction potential of 17% untapped. Taken across the entire global consumer goods industry, savings could exceed USD 100 bn annually.

The Accelerated Zero-Based Budgeting (AZBB) methodology designed by Roland Berger takes ZBB to the next level. Our approach quickly captures the potential that lies dormant within a company's cost base, and it supports both implementation and sustainable realization of cost reductions. AZBB, proven successful in a multitude of projects, is superior to traditional ZBB in several ways. Our AZBB approach can be done within three months and in just a few steps. With uncertainty and volatility on the rise, now is a good time for consumer goods companies to explore what AZBB has to offer.

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Zero-based budgeting in consumer goods

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Veröffentlicht June 2017. Vorhanden in
Portrait of Erwin Douma
Partner
Amsterdam Office, Western Europe
+31 2 0796-0600