Growth contribution defines the share of growth (in sales value, volume, margin…) of a defined group (category, sub-category, format, supplier) compared to the total growth of the total group. It is expressed in %
🧪 Example of Growth Contribution
Let's say that the total sales in the Sports Drink Category increased by $100,000 over the last quarter. Brand A, which had sales of $30,000 in the previous quarter, saw its sales increase to $40,000 in the current quarter. Meanwhile, Brand B, which had sales of $20,000 in the previous quarter, saw its sales increase to $25,000 in the current quarter.
To calculate the Growth Contribution for each brand, we would calculate the growth for each brand, which is $10,000 for Brand A ($40,000 - $30,000) and $5,000 for Brand B ($25,000 - $20,000). Finally, we would divide the growth for each brand by the total growth in the category to get the Growth Contribution:
Growth Contribution for Brand A = ($10,000 / $100,000) x 100% = 10%
Growth Contribution for Brand B = ($5,000 / $100,000) x 100% = 5%
In this example, Brand A has a higher Growth Contribution than Brand B, indicating that it is performing relatively better within the sports drink category.
❓What is used for
Some ways that Growth Contribution can be used include:
- By analyzing growth contribution relative to their competitors or the market, Retailers can identify in which Category or Sub-category where they may be falling behind or where they have room for growth.
- Help Retailer to assess the effectiveness of the Manufacturers and determine whether they are contributing to their overall growth.
- Growth contribution analysis can help Retailers to understand the impact of external factors such as changes in the economy, consumer trends, or competitor behavior. Tracking the trend over time can support Retailers in how to respond to changes in the market.
- Analysis growth contribution can help Manufacturers to identify which Categories, Brands, or SKUs are growing the fastest within their portfolio.
- Understanding growth contribution relative to the market as a whole, can help Manufacturers gain insights into broader market trends and shopper behavior.
- By identifying Categories or Sub-categories growing faster than they are, Manufacturers can explore potential opportunities with Retailers.