Client Overview

Arnott’s is one of Australia’s most iconic food manufacturers, best known for household biscuit brands such as Tim Tam, Shapes, Monte Carlo, and Tiny Teddy. With origins dating back to 1865, Arnott’s has built deep brand trust and strong retail partnerships across Australian grocery channels.

At the time of the engagement, Arnott’s was owned by the Campbell Soup Company (US-listed), which had acquired full ownership in 1997. As part of a broader international strategy, Campbell’s leadership had identified pricing and margin management as a key area for performance uplift across its portfolio. The Arnott’s division was seen as having strong sales momentum, but uneven profit outcomes due to inconsistent pricing, reactive discounting, and overreliance on promotions. Pricing Insight was engaged to help build sustainable pricing capability, improve promotional ROI, and align Arnott’s commercial model with Campbell’s global margin expectations.

Challenge / Problem

Arnott’s was experiencing steady margin erosion driven by inconsistent pricing decisions, excessive promotional spend, and a lack of commercial discipline across account teams. Over 40 account managers were making pricing and promotional commitments with limited oversight, resulting in volume-led deals that diluted margin and created operational inefficiencies. Channel conflict penalties, overlapping campaigns, and a reactive planning culture further eroded value.

Symptoms Observed

• Promotional spend lacked financial governance or expected return on investment.
• Pricing tactics were inconsistent across major grocery accounts, leading to channel conflict.
• Deep discounting cycles undermined brand equity and baseline pricing power.
• Channel fines and deduction penalties (e.g. Coles/Woolworths) cost an estimated $200K annually.
• Inventory swings and supply instability were tied to uncoordinated promotional calendars.
• Revenue growth was masking gross margin leakage and structural pricing issues.

Strategic Impact

Without intervention, Arnott’s faced continued erosion of pricing power and profit dilution. Brands built over decades were being traded away for short-term volume targets. Promotional investments lacked transparency and frequently failed to deliver margin-positive outcomes. Poor governance and decentralised pricing decision-making made it difficult to scale best practices or drive commercial accountability. The business was exposed to earnings volatility in an increasingly margin-focused global parent structure.

Internal Viewpoint

Sales, marketing, category, and finance leaders were aligned in their view that promotions were being overused, under-analysed, and inconsistently managed.
There was no central commercial review of trade investment effectiveness.
Campaigns were often rolled out in response to competitor activity or retail pressure, rather than in support of planned category roles or margin priorities. Executives wanted a clear, evidence-based plan to transition toward pricing discipline, supported by improved tools, training, and oversight.

Objectives of the Engagement

• Recover $5 million in EBIT on a $100 million revenue base through improved promotional and pricing effectiveness
• Establish central pricing governance and margin accountability
• Optimise promotional allowances based on ROI, not tradition or buyer pressure
• Eliminate costly channel fines and improve campaign coordination
• Build internal pricing analytics capability to support long-term decision-making

Our Approach

Phase 1: Situation Diagnostic

We began with a commercial diagnostic across trade terms, pricing architecture, promotional calendars, and deal execution. A detailed review of historical promotional performance was undertaken, highlighting margin leakage, volume volatility, and inconsistent ROI. Particular attention was paid to promotions executed across Coles and Woolworths, where overlapping offers had triggered compliance breaches and eroded brand positioning. SKU-level profitability was mapped across the portfolio to isolate which products were carrying or destroying value.

Phase 2: Promotion & Price Optimisation

Promotional ROI was modelled for 100+ SKUs using scan data, lift curves, and financial performance analysis. A promotional simulator was introduced to pre-test the economics of upcoming campaigns under different discount levels, deal structures, and timing windows. Low-yield promotions were discontinued or restructured with stricter discount thresholds.

A key innovation in this phase was the introduction of a price elasticity modelling framework. Each promoted SKU was classified based on its own-price elasticity:

• Elastic SKUs (e.g. Shapes multipacks, family biscuit ranges): strong volume response to price changes but prone to diminishing returns
• Inelastic SKUs (e.g. novelty, seasonal, gift lines): stable volume with minimal discount sensitivity—often over-promoted

Elasticity insights were used to:

• Reduce depth and frequency of discounting on elastic SKUs while maintaining volume efficiency
• Lift baseline prices and minimise promotions on inelastic lines to restore margin
• Shift promotional spend towards campaigns with proven commercial upside

This analysis directly improved price realisation, simplified forecasting, and helped Arnott’s avoid volume-chasing promotions that sacrificed profitability. Promotional triggers and pricing tiers were restructured to link economic value with execution approvals.

Phase 3: Governance and Capability Building

To sustain change, we helped establish a formal centralised Pricing and Promotional Analytics Team. This cross-functional unit brought together sales finance, category management, and commercial planning to drive three priorities:

1. Commercial Oversight – Reviewing and validating promotional and pricing initiatives through structured simulation and profitability modelling
2. Insights & Reporting – Delivering dashboards that tracked promotional ROI, price realisation, contribution margin by SKU and banner
3. Capability Development – Training sales teams to interpret elasticity data, build value-based arguments, and negotiate based on contribution margin rather than unit cost

This team became the engine room for commercial discipline. Templates, review processes, and approval controls were introduced to embed governance into account planning and customer negotiations. By aligning commercial teams with a central data capability, Arnott’s gained consistency, agility, and strategic clarity around pricing decisions.

Key Actions Taken

1. Conducted commercial diagnostic of pricing, promotions, and trade terms across all major accounts
2. Modelled promotional ROI and price elasticity for 100+ SKUs
3. Introduced promotional simulator to pre-approve campaign performance
4. Rationalised and reprioritised promotional calendar based on financial contribution
5. Established Pricing and Promotional Analytics Team to provide governance and insights
6. Delivered training on elasticity, margin impact, and commercial planning to sales and finance staff
7. Built dashboards and deal templates to improve cross-functional decision-making

Results Achieved (Within 12 Weeks)

1. Recovered over $5 million in EBIT within 12 months
2. Eliminated ~$200K in annual channel fines through better campaign coordination
3. Improved pricing discipline and price realisation across promoted and baseline SKUs
4. Reduced low-return promotional activity by more than 30%
5. Increased campaign contribution margin by aligning promotions with elasticity insights
6. Embedded structured pricing review and deal evaluation processes across the business
7. Built in-house capability to manage price-volume trade-offs at scale

Client Feedback

“This project helped us unlock over $5 million in EBIT in just 12 months by bringing pricing and promotional discipline back into focus. We now have stronger commercial alignment, smarter planning tools, and greater confidence in every promotion we run.”
— Sales Director, Arnott's Biscuits

What This Means for Similar Companies

For FMCG manufacturers, promotions are often treated as volume levers rather than economic investments. But without structured evaluation, brands risk trading away margin under pressure from buyers and competitors. As Arnott's demonstrated, investing in elasticity modelling, promotional ROI analysis, and centralised pricing capability can rapidly reverse margin erosion and restore control. The combination of analytical insight and governance structure is critical for any consumer business looking to shift from reactive price-taking to confident, strategic price-making.