Episode 322 — 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 the 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 leak.
And right now, that matters more than ever.

Most CPG founders are feeling pressure from every direction.
Costs are higher.
Retailers expect more.
Promotions are harder to predict.
Shoppers are more cautious.
Private label is 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 margins get compressed, the natural instinct is to react.
Cut spending.
Run deeper promotions.
Delay investments.
Push harder for distribution.
Raise more capital.
Move faster.

But here’s the problem.
If you don’t know where the pressure is actually coming from…
You can cut the wrong thing.
Fund the wrong activity.
Damage retailer trust.
And make the leak even worse.

That confusion is expensive.
Let me explain.

WHY THIS MATTERS RIGHT NOW
A few years ago, when the world shut down, the problem was obvious.
Everyone knew what was happening.
Retailers knew it.
Brands knew it.
Distributors knew it.
Shoppers knew it.

The uncertainty was real, but the source of disruption 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 preditctabble, your dashboards, canned reports and internal systems can predict and forecast velocity with reasonable effectively and accuracy, even during promotions.

These are not normal times.

Today feels different.
Now the pressure is coming from everywhere at once.
Ingredient costs rise.
Freight costs shift.
Labor costs increase.
Retailers demand more support.
Shoppers become more value conscious.
Big brands promote aggressively.
Private label becomes more competitive.

Things are extremely volatile.

And all of that compresses the smaller brand in the middle.

Now consider this:
If gas prices double in your market, that is not just a consumer problem.
That is a CPG margin problem.

It costs more to:
• move ingredients
• manufacture products
• support field execution
• deliver inventory
• service retailers

And 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 ways many 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 rebuilt everything around the Retail Clarity Framework™.
And 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 this matters so much right now is because most founders do not need more disconnected tactics.

They need a better operating system for making decisions.

Early in my career, I saw how traditional category management was often practiced.

A 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 retailer economics shaped the outcome
• or what the brand should do next
That created a massive blind spot.

And where there is a blind spot…
There is usually a leak.

You cannot fix what you cannot clearly see.
Let me repeat that, You cannot fix what you cannot clearly see.

THE QUESTION THAT CHANGED EVERYTHING
The question that changed how I looked 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 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.
Your promotion does not operate in isolation.
Your shelf set does not operate in isolation.
Your retailer relationships do 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.

1. Internal — What happened?
This is where most brands live.
• Sales.
• Shipments.
• Velocity.
• Trade spend.
• Inventory.
• Forecasting.
• Deductions.
• Retail scorecards.
• Operational reporting.

This work matters.
But here is 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 is incomplete.

2. 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.

They are trying to:
• attract shoppers
• grow profitable categories
• strengthen loyalty
• and create 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 easier.
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 endcaps
• and premium visibility

At no additional cost.

The largest national brand did not get that space.
I did.

Not because I had the largest budget.
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.

When you understand the need state better than competitors, you can reverse engineer:
• your merchandising
• your pricing
• your messaging
• your innovation
• your retailer story
• your placement strategy
• your promotion strategy

This is where smaller brands can beat larger brands.

Not by outspending them.
By understanding the shopper better.

A REAL EXAMPLE
I once worked on a situation where a much larger competitor tried to remove a 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 most about:
• produce
• fresh
• premium
• mission-driven departments

The competitor’s shopper was more price-driven and promotion-driven.

That changed the conversation.

The retailer realized they were not simply choosing between products.

They were choosing between shopper relationships.

That is Retail Clarity.

Not generic shopper data.
Strategic understanding.

3. Competitive — What influenced it?

This is one of the most overlooked parts of retail strategy.

Most brands compare:
• this quarter versus last quarter
• this promotion versus the last one
• this shipment versus the prior shipment

That matters.
But it is not enough.

You also need to understand what else was happening around you.

Were competitors:
• promoting more aggressively?
• better placed?
• gaining secondary displays?
• simplifying their message?
• reducing price?
• expanding assortment?

Did private label shift the equation?
Did the retailer reset the category?
Did your product lose visibility?

Consider this.
A founder sees sales softening and assumes the issue is pricing.

But maybe:
• a competitor 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.

This is why canned reports are a starting point.
They are not a strategy.

4. 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 become less reliable.
Forecasts become less stable.
Shopper behavior changes faster.
Retailers become more selective.
Margins tighten.

And when uncertainty increases, decision quality matters more.

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.
And honestly, this is one of the experiences that shaped how I think about retail strategy forever.

Let’s face it.
Getting on the shelf is the easy part.
The hard work begins once your product actually reaches that shelf.

Years ago, our largest competitor was the category captain for the largest retailer in the country at that 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 the new brand.

Eleven of those items belonged to us.

That was nearly half our business with that retailer.

At the time, I was responsible for only one division.

Every other division simply accepted the recommendation because the category captain’s data and 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.
The category was healthy.
Retailer performance was strong.
We had innovation planned.

There was no obvious reason we should suddenly lose nearly half our distribution.
That was the first signal.

Second:
Shopper — Why did it happen?
Our product design created a unique advantage shoppers genuinely loved.

So I began studying not only our shoppers…
…but the competitor’s shoppers and the retailer’s shoppers by division.

I wanted to understand:
• loyalty
• purchase behavior
• switching behavior
• retailer preference
• basket behavior
• and what role each item played inside the category

Third:
Competitive — What influenced it?

My experience taught me to watch competitors obsessively:
• pricing
• promotions
• innovation
• go-to-market strategy
• distribution behavior
• retailer relationships
• shelf movement

That level of due diligence was rare.
And it consistently gave us an advantage.

The competitor’s sudden pivot into this entirely new brand caught almost everyone off guard.
So I had to become an expert in a 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.
Predictive — What should happen next?

This is the key.

Whenever a retailer adds or removes items from a category, one of two things happens.
The sales either:
• transfer somewhere else inside the category
or
• leave the category entirely

That second part is critical.
Because when shoppers stop 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.
Every placement change changes shopper behavior.

So I built an analysis showing the long-term impact of:
• adding the new brand
• removing the proposed 17 items
• and how the retailer’s competitors would benefit if those shoppers migrated elsewhere
The analysis was eventually adopted by the other divisions.

And again — this is not about being braggadocious.

I’m sharing this because I want founders to understand what’s possible when you stop relying only 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 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 is 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 ones founders are navigating today.

This is how smaller brands outmaneuver larger competitors.
This is how you future-proof your brand.
This 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 1 — 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.
That’s expensive.

Leak 2 — Execution
Ask:
Did the plan actually happen?

Did:
• inventory arrive correctly?
• displays get built?
• communication happen clearly?
• replenishment flow properly?
• execution support the retailer 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
• execution discipline

Execution is not just an operational issue.
It is a margin protection issue.

Leak 3 — Decision Quality
Ask:
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 is actually driving the outcome?

Because a bad decision made confidently 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

I also publish a weekly LinkedIn newsletter where I break these concepts down further using 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 these questions quickly and confidently…

That is probably the first leak you should investigate.

And if you want help identifying those leaks, download the free 15-Minute CPG Runway Leak Finder™.
No email required.
No friction.
Just download it and use it.

Go to:
RetailSolved.com/findleaks

The guide will help you identify seven common leaks:
promotions
timing
placement
deductions
execution
visibility gaps
decision quality

And if you want to go deeper after that, join me for the free Retail Clarity Workshop.

Because the goal is not simply to spend less.
The goal is to stop funding what is 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 absolutely can compete in this environment.
But they cannot compete blindly.

The 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 clearer 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.
A 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 am Dan Lohman