Corn Agra

In January 1999, managers at Corn Agra Grocery Products Company (CAGP) revamped their system of allocating and controlling trade-marketing spending. CAGP annually spent over $400 million on trade marketing expenditure – expenditures aimed at helping grocery retailers promote CAGP’s products. Because of the size of the expenditures and the impact they had on the success of the business, CAGP managers were understandably concerned as to whether that money was allocated wisely. They were also concerned about their controls over trade spending because the company had recently overspent its trade-spending budget. Among the major changes in the new system were the giving of increased responsibility for allocating trade spending dollars to the sales organizations, the assignment of volume-variable budgets called “case rates” (rather than fixed dollar budgets), a lengthening of the budget period (to semiannual rather than quarterly periods), the creation of a new customer marketing manager role to improve communications between the marketing and sales organizations, and modifications to the incentive systems that were designed to induce sales personnel to pay more attention to cost control. In late 1999, Ken Sobaski, president of CAGP’s Grocery Products Brand Company, reflected on the system changes:

At its highest level, this change is all about trade marketing managers giving up some control and empowering field sales managers, giving them more flexibility and responsiveness in meeting the needs of their customers. Our assumption is that by pushing funding control out closer to the customer, with greater lead time and better planning and strategic direction from headquarters, we will be more effective and efficient with our spending.

COMPANY HISTORY AND BACKGROUND
CAGP was a subsidiary of Corn Agra, Inc. Corn Agra, headquartered in Omaha, Nebraska, was one of the largest food conglomerates in the world (fiscal year 1999 sales of almost $25 billion; 85,000