Foodservice packaging supplier: A$2m EBIT realised from pricing quick wins

Client: Foodservice packaging supplier, Australia and New Zealand (name withheld)

Service: Strategic pricing diagnostic, quick wins and pricing capability building

Led by: Ron Wood, Founder and Managing Director, Pricing Insight

In brief

A foodservice packaging supplier engaged Pricing Insight for a strategic pricing diagnostic and quick wins program, with a parallel focus on building the team’s pricing capability. We combined sales and rebate history, a staff capability survey with written comments, learner feedback and leadership interviews into one diagnostic, then acted on it.

The work realised A$2m of EBIT from pricing quick wins. It delivered a complete national price list architecture, a customised discount matrix that replaces tens of thousands of individually negotiated prices with a few hundred rules, and a four-wave plan to move every customer onto it. It identified a further A$6m–9m of margin opportunities, including about A$6m of pricing upside over two years and about A$3m of additional gross margin from range growth. The commercial team received key account management tools, a Customer Value Discovery and AI value-selling program, and Pricing University training, which produced its own set of margin expansion and revenue improvement initiatives.

Key facts

• Client: Supplier of foodservice packaging in Australia and New Zealand, investor-backed, with no manufacturing of its own
• Scope: Several business units and channels, including distributors, direct customers, retail and quick service restaurant (QSR) chains, all measured after rebates
• Evidence: Sales and rebate history across two financial years, a staff capability survey with written comments, learner feedback and leadership interviews
• EBIT realised from quick wins: A$2m
• Further margin opportunities identified: A$6m–9m, including about A$6m of pricing upside over two years and about A$3m of range gross margin
• Price structure built: A national price list architecture across the product hierarchy and a customised customer discount matrix
• Rollout: Four migration waves inside the annual price cycle, with a review point before each release
• Capability built: A mandated pricing team and Pricing Council, key account management tools, Customer Value Discovery with AI value selling, and Pricing University
• Action plan: Twenty-seven initiatives, three for each of the nine pricing elements, across immediate, mid-term and longer-term horizons
• Outputs: A CEO and CFO decision pack, a detailed diagnostic report with a traceable evidence workbook, and a two-year pricing strategy with a board summary
• Outcomes for leadership: A$2m of EBIT in the results, a clear view of net price after rebates for every customer group, a price list and discount structure the sales team can apply, and a staged program for the remaining upside

Client overview

The client designs, sources and distributes takeaway packaging, including cups, lids, containers, bowls, plates, cutlery and bags, made by manufacturing partners. It sells through foodservice distributors, QSR chains, retailers and direct to many thousands of cafés, restaurants and venues. Its owners include a listed parent company and a private equity investor.

That model places pricing at the centre of profit. With product cost set by suppliers and freight, the business’s margin depends on the price it sets, the discounts it grants and the rebates it pays across thousands of accounts and products. With both a listed parent and an investor on the register, the board also needed a pricing case that both could test: sized after rebates, traceable to source data and clear about what is opportunity and what is assumption.

What pricing challenge did the business face?

Packaging suppliers to foodservice share a familiar set of pressures. Large buyers negotiate hard and often hold fixed price contracts. Distributors earn rebates for volume. Thousands of small venues buy on a published price, and sales teams discount to win or keep business. Over time, each decision is reasonable on its own, and the combined result is a price structure that nobody designed.

Six forces made the issue urgent:

• Buyers. Procurement teams scrutinise every price harder than before.
• Transparency. Prices are more visible online, so inconsistency is found faster.
• Competition. More competitors are entering the market and pricing to win share.
• Execution. Inconsistent prices follow from unclear delegation of authority and an incomplete price architecture.
• Costs. Producer prices had risen in every quarter for three years, and there was no agreed way to pass cost increases into prices.
• AI. The business’s own data could support a pricing intelligence capability that optimises every channel, category, customer and product.

Leadership wanted to know three things:

• Where is margin being lost between list price and net price? Measured after rebates, customer by customer and product by product, on evidence the CFO could test.
• How capable is the business at setting and holding prices? Not as an opinion, but measured across the nine elements of pricing capability, with staff evidence compared to sales evidence.
• What should change first, and in what order? Quick wins that could be delivered early, then a practical program with owners, rules and decisions, rather than a list of observations.

The data available was typical of a growing distributor. Sales history covered customers, products, channels and gross sales. Rebates were recorded at buying-group level rather than against each sale. Invoice dates, order numbers, freight and credit notes were not in the extract, which limited how far some questions could be answered. The work had to be clear about which conclusions rested on data and which rested on stated assumptions.

Objectives of the engagement

• Measure net price after rebates for every buying group, channel and product family.
• Size the margin opportunity from pricing and from range growth, with explicit exclusions and caps.
• Score pricing capability across nine elements and compare staff views with what the sales data shows.
• Identify where rebates, discounts and contract terms are not earning their cost.
• Deliver early quick wins while the longer program was set up.
• Build a national price list architecture and a discount matrix that the sales team can apply and explain.
• Strengthen the team’s pricing capability through a clear pricing mandate, key account management tools and training.

How did Pricing Insight approach the diagnostic?

Eight workstreams. Each answered a specific question leadership would ask, and each fed the same reconciled model, so that every figure in the final pack traced back to a source and a stated rule.

1. True net price: what does each customer pay after rebates?

Revenue in the sales file was gross, before rebates. Rebates were paid to buying groups, not recorded on each invoice. We grouped every account into its buying group, apportioned each group’s rebate to its members and then to products by share of gross sales, and converted all sales to one currency, so that every customer and product carried a net price and a margin after rebates.

This step changed the picture. Some accounts that looked well priced on gross sales were among the lowest-margin accounts once their rebate was applied. A diagnostic that stopped at gross sales would have pointed the work at the wrong customers.

2. Customer types: where is the margin made?

We placed every buying group in one of five revenue bands, from walk-up venues to key accounts, and measured each band’s revenue, margin and buying breadth. Two patterns shaped everything that followed.

Margin fell as accounts grew. Walk-up venues earned the highest margin percentage and key accounts the lowest, while key accounts carried most of the revenue and most of the margin dollars. Buying breadth rose with size: a typical walk-up bought from two or three categories, while a key account bought across most categories and dozens of product families.

The implication was direct. The largest accounts need pricing detail by category and product family, set and governed by a pricing team. Thousands of walk-up venues need one standard, published price.

3. Concentration: where does the money sit?

A business with thousands of buying groups cannot review every price by hand. A small share of groups accounted for almost all gross sales, and a small share of products carried most of the range’s sales, while the long tail of products contributed little. Rules could therefore be set by category rather than by product, with the tail reviewed for range and minimum-order rules.

4. Price integrity: do similar customers pay similar prices?

We priced every customer and product line against the typical price for that product, weighted by sales. A long tail of sales sat well below the typical price, and far fewer sales sat above it. We also measured price spread within each revenue band, so that a large buyer legitimately paying less did not distort the result. Small accounts showed the widest spread, because reps priced them one at a time.

Across the largest products, the highest-paying customers paid well over the price paid by the lowest-paying customers for the same carton. In one case, a customer buying a few dozen cartons a year paid less than a distributor buying thousands. Either the small buyer’s price was too low or the large buyer received no volume reward; both pointed to missing rules rather than market forces.

5. Price list coverage: how much revenue does the published price govern?

We built a bridge from total revenue to the revenue that the published column price list could govern. QSR contracts, the New Zealand units, and custom and branded products with no list price all sat outside it. Within the revenue the list did cover, a large share was priced below the lowest published column, across hundreds of buying groups, with no published price behind it. Custom and branded products formed, in effect, a second price list that was priced account by account and needed its own rules.

6. Peer benchmark and fair value: how much margin is missing, account by account?

For each buying group we compared margin after rebates, on that group’s own product mix, with similar groups in the same channel and revenue band. Where a group sat below its peers, the opportunity was the difference, set at a fair-value target for each cell of the discount matrix. Each move was limited by a customer pricing power ranking and by an annual cap on price rises. Customers already above their peers kept their prices; their surplus was not used to offset others.

QSR fixed price contracts were excluded from the pricing opportunity, because contract prices are fixed for the term and their results come from negotiation and contract design. We cross-checked the result against Pricing Insight’s Blackbird price optimisation engine and a pricing power analysis that plotted every group’s margin against its revenue. That analysis identified the clearest first cases: groups with strong pricing power that sat well below the typical margin for their size.

7. Range growth: what are customers not yet buying?

Many customers bought cups but not lids, or containers but not bags. We compared each buying group’s range with similar groups, after combining sites that buy under one head office and treating independent members of buying groups separately. Comparing customers who bought the full range with similar customers who did not identified about A$3m of additional gross margin, before any extra freight, selling and service costs. This was sized separately from pricing so that the two were not counted twice.

8. Margin walk and capability: why does the opportunity exist, and can the business hold the gains?

A margin walk from one year to the next, on the same buying group and product lines, showed that margin had grown because unit costs fell, while like-for-like prices slipped. Without the cost gain, margin would have fallen. With producer prices rising steadily, price rises needed their own measure, their own schedule and their own owner.

Staff across sales, finance, operations and leadership completed Pricing Insight’s nine-element capability survey across Value, People and Structures, and their written comments were coded by theme. All nine elements scored in the amber band: practices existed but were not managed. The lowest-scoring statements were all machinery: competitor price data, master data, override tracking, regular pricing review, reliance on discounts and the price-rise process. The highest were beliefs about quality and readiness to change.

We placed an evidence-based estimate beside the survey score, drawn from the sales file and interviews, and never blended the two. Staff rated capability well above what the sales file showed. The sales team also rated itself above the executive team’s view on every element, most of all on sales and negotiation. Staff identified product quality and sustainability as the main reasons customers buy, yet no customer problem scored above halfway on proof of value, and turning value into price was the weakest step.

Key issues identified

• Net price was not visible at the point of decision. Rebates sat at group level, so sales teams and managers set prices without seeing margin after rebates.
• Discounts did not follow a rule. Similar customers paid very different prices for the same products, and small buyers sometimes paid less than large ones.
• The published price list governed only part of revenue. Much of the covered revenue sat below the lowest column, and custom and branded products had no list price at all.
• Tens of thousands of prices were negotiated one by one. There was no price floor, no override register and no written approval limits.
• Some rebates were not earning their cost. Rebates were treated as a cost of doing business rather than a reward for performance.
• Margin growth came from costs, not price. Like-for-like prices had slipped, and there was no agreed process for passing future cost increases into prices.
• Value was created but not proved or priced. Customers recognised quality and sustainability, but proposals rarely put a dollar value on them.

What did Pricing Insight deliver?

A$2m of realised EBIT from quick wins

The diagnostic pointed to actions that did not need to wait for the full program: groups with pricing power priced well below their peers, small accounts paying less than key accounts for the same products, discounts with no rule behind them, and rebates without performance hurdles. Acting on these early realised A$2m of EBIT and showed the business that the evidence translated into results.

A national price list architecture

We built a complete national price list architecture, structured on a product hierarchy from category to sub-category, product family and SKU. Every product has one current list price with consistent relationships across sizes, materials and families, every customer carries one customer-type label, and every SKU carries its hierarchy codes, so every price is read from the same source. Custom and branded products receive their own rules instead of being priced account by account.

A customised discount matrix

On top of the price list, we designed a customised discount matrix in which discount detail is earned by size:

• Walk-up venues receive standard published pricing: list price for direct and retail customers, and one flat trade rate for trade customers. No negotiation.
• Small accounts receive one category-level discount for their customer type, with the rep pricing within the cell and the deal desk approving anything below the floor.
• Established and mid-tier accounts add sub-category adjustments by exception, set by the pricing team and executed by the rep.
• Key accounts add product-family terms and a performance rebate with hurdles, governed directly by the pricing team.

Only sub-categories or families whose buying differs materially from the category rule receive their own rule; the rest inherit it. A few hundred rules replace tens of thousands of individually negotiated prices. Each cell carries a floor, a target and an annual rise cap, and the floor is loaded into the business system, so that the system rather than the rep enforces it.

A four-wave migration

One cutover was neither possible for the largest accounts nor needed for the long tail. We tested every customer’s move to its target cell and found that most walk-up venues were already close to it, while the largest price movements, up and down, sat with a small number of key accounts.

The migration therefore runs in four waves inside the annual price cycle, with a review point before each release: standard pricing and the correction of small accounts paying less than key accounts first, then the first price round on the mid-sized bands, then the key accounts category by category at renewal. Guard rails apply throughout: rises are capped, locked contracts and live tenders are excluded, and price cuts are used only to correct inversions, never to match the lowest price in a peer set.

Further margin opportunities identified

Beyond the realised EBIT, the diagnostic identified a further A$6m–9m of margin opportunities. These include about A$6m of pricing upside over two years, as successive annual price cycles move customers toward their target cells under the caps, and about A$3m of additional gross margin from range growth.

A pricing team with a mandate

The pricing team moves from advisor to the owner of pricing strategy, tactics and policy for the key accounts. It sets the list price and its relationships, sets every cell, floor and rise cap for the largest accounts, issues the price position for every renewal and tender, owns the rebate calculator, and reports price realisation, overrides and capture rate to a Pricing Council each month. The Council, chaired by the CEO, works to one margin target. A deal desk answers every exception below the floor within 48 hours, against written approval limits.

The sales team’s role changes as well. Reps quote from published guidance, profile customers with structured evidence, use value-based selling rather than discount-led deals, and work with the pricing team on EBIT results rather than revenue and volume alone.

Key account management tools

We built a key account negotiation pack that every account manager takes into the room. It includes a negotiation summary, rebates and actual gross margin, situation and opportunity dashboards, the customer’s pricing power, results by site and SKU, consistency checks, a scenario calculator, range opportunities and cross-sell targets, a negotiation playbook and value frames for the account. Price conversations now start from evidence rather than from the last deal.

Customer Value Discovery and AI value selling

Reps ask seven value prompts in every key account call, such as what it would cost the customer to run out of stock, fail an audit or change supplier, and log the answers in the customer’s own words. An AI agent reads that log alongside sales, rebates, pricing power and the target cell, and proposes a target, stretch and walk-away price with alternatives and a give-get menu. A person on the pricing team approves every position before the rep makes the offer, and the outcome goes back into the log. A value evidence kit puts a dollar value on supply, quality and certifications for each category.

Pricing University

The commercial team completed Pricing University, Pricing Insight’s training program for sales, finance and leadership teams, including value-based negotiation with give-get rules. Working on their own customers and products, participants developed a range of margin expansion and revenue improvement initiatives, adding to the pipeline built by the diagnostic.

Twenty-seven initiatives in three horizons

The action plan sets three initiatives for each of the nine pricing elements, timed as immediate (the first 45 days), mid-term (days 45 to 90) and longer term (days 90 to 120). The first 45 days hold the Pricing Council, the published pricing strategy, the value drivers, the contract audit, the pricing team’s mandate, floors on quotes and the first price round. Later items build the exception register, the price list in the business system, performance hurdles on rebates, a quoting tool that shows the cell, floor and margin as the quote is built, and monthly data-driven pricing decisions. Prices and terms come before systems.

The documents

• CEO and CFO decision pack. Sets out the answer first, then the financial starting point, the margin walk, root causes and the decisions required across the nine elements.
• Diagnostic report. Explains every test, finding and assumption in plain language, so that managers outside the leadership team can see why each recommendation was made.
• Evidence workbook. Holds the customer, product and rebate analysis behind every number, so finance can trace each figure to its source and rerun it as new data arrives.
• Pricing strategy and board summary. Turns the findings into a governed program covering customers, products, rebates, discount rules, roles and the review rhythm, with a short summary for the board and shareholders.

Why use a pricing specialist for this work?

A finance team can report margin by customer. It rarely has the time to rebuild net price after rebates for every account and product, benchmark each customer against true peers, and turn the result into rules a sales team can use. Pricing specialists bring three things to this kind of work.

Method. Pricing Insight has completed more than 160 engagements since 2007, across building materials, distribution, industrial, healthcare, retail and services. The techniques used here, including rebate apportionment, peer fair-value benchmarking, pricing power ranking, hierarchy-based discount design and staged migration, come from that work and from the firm’s nine-element pricing diagnostic.

Evidence from people as well as data. The diagnostic places staff views beside sales evidence. Where they differ, as they did on discount discipline and negotiation, the difference shapes the program.

Independence. The purpose of a diagnostic is to tell leadership what the evidence supports. In this case, that meant separating realised results from identified opportunities, keeping alternative estimates out of the headline, and naming the data still needed.

What this means for packaging and foodservice suppliers

Six practices from this engagement apply to most suppliers that sell through distributors, chains and independent venues:

• Measure price after rebates. Gross sales can rank customers in the wrong order. Apportion rebates to customers and products before deciding where to act.
• Match pricing detail to account size. Standard published prices for the long tail, category rules for mid-sized accounts and product-family terms only for key accounts.
• Put a floor on every price. A floor in the system, a deal desk for exceptions and written approval limits stop discounts resetting the price for everyone else.
• Decide in advance what happens when costs change. Without a policy, cost reductions are given away in some channels and cost increases are absorbed in others.
• Prove the value before pricing it. Customers may recognise quality and sustainability, but a dollar value in the proposal is what supports the price.
• Deliver quick wins while building capability. Early results build confidence in the program, and training and account tools help the team keep the gains.

For businesses with private equity shareholders, the same evidence serves a second purpose. It gives the board and investors a pricing line in the value-creation plan that is sized to margin after rebates, built customer by customer, and separated from risk, with realised EBIT already in the results.

Frequently asked questions

What is a pricing diagnostic?

A pricing diagnostic measures how much margin a business is losing between list price and net price, and why. It combines sales, rebate and cost data with a capability survey and interviews, then sizes the opportunity and sets out the actions and decisions needed to capture it.

Why measure margin after rebates rather than gross sales?

Rebates often sit outside the invoice and are paid at buying-group level. Until they are allocated back to customers and products, some of the lowest-margin accounts can look like the best. Measuring after rebates shows where price and terms are not earning their cost.

What is a price list architecture?

It is the structure behind every list price: a product hierarchy from category to SKU, consistent relationships between sizes and materials, one current list in the business system, and a customer-type label on every account. It gives the sales team one reference point for every quote.

What is a customised discount matrix?

It is a set of discount rules that becomes more detailed as accounts become larger. Walk-up customers receive standard pricing, small accounts receive a category discount, and larger accounts receive sub-category and product-family terms where their buying differs. It replaces thousands of individually negotiated prices with a few hundred rules.

What is a deal desk?

A deal desk is a small team, usually within pricing, that approves prices below the floor against written limits and answers within an agreed time. It keeps exceptions visible and consistent, and it takes discount negotiation away from the point of sale.

Which results in this case study are realised?

The A$2m of EBIT from quick wins has been realised. The further A$6m–9m of margin opportunities, including about A$6m of pricing upside over two years and about A$3m of range gross margin, were identified in the diagnostic and are being pursued through the program.

What is Pricing University?

Pricing University is Pricing Insight’s training program for commercial teams. Participants learn pricing methods and apply them to their own customers and products, which turns the training into margin and revenue initiatives the business can act on.

What data does a diagnostic need?

Customer and product sales history, rebate payments, product cost, price lists and discount guides, and access to staff and management. Invoice dates, freight and credit notes add further tests. Where data is missing, the effect on the estimate is stated.

About the author

Ron Wood is the Founder and Managing Director of Pricing Insight, an Australian pricing strategy consultancy he established in 2007. He has worked in pricing for around 30 years, first as a pricing and commercial manager in consumer goods, building materials and capital equipment, and since then across more than 160 pricing engagements. He also founded Pricing University.

Talk to us about a pricing diagnostic

If your business sells through distributors, chains and independent customers and you want quick wins as well as a lasting pricing structure, contact Ron Wood at info@pricinginsight.com.au or on +61 410 534 099 to arrange a call. Contact Pricing Insight.