ACV stands for All Commodity Volume. Bear in mind that ACV is often used synonymously with %ACV, but it is actually not interchangeable. ACV is used in the calculation of %ACV.
WHAT IS ALL COMMODITY VOLUME?
The definition of ACV is simple: It is the total monetary sales of a store. To explain further, ACV includes everything that a retailer sells in his outlet – across products, across categories.
Thus, ACV, All Commodity Volume, is not based on the physical size of an outlet. Rather, the total business of that outlet is the yardstick of ACV.
With that clear, let us understand,
WHY SHOULD SUPPLIERS CARE ABOUT ACV?
A CPG manager can go “Shouldn’t I be concerned about the sales of my product, and how much of my product the store sells, instead of assessing everything that the store sells?”
A fair question, and there is an answer. Assessing the ACV of a retailer helps suppliers
- Know which outlet’s business health is the best
- Which outlet has the maximum growth and sales potential based on its business health trend
Essentially, ACV tells you which outlet to care most about with respect to distribution/presence, so you can optimize your distribution efforts and optimize sales.
Couple of points about ACV calculation done by Nielsen/IRI:
The data collection done by Nielsen and IRI around ACV excludes some departments like pharmacy, gasoline, and lottery because all stores do not contain these departments. This is the reason behind the variance in numbers in annual reports vs Nielsen/IRI data. Your data supplier may be able to provide you with a list of all the included, or excluded, departments during ACV calculation. This will help you reconcile the numbers.
The second point is that ACV figures are usually updated annually.
HOW DOES ACV RELATE TO %ACV?
%ACV is nothing but ‘ACV weighted distribution’. (Read all about %ACV)
ACV is used mostly as an input to calculate %ACV. Let’s see how ACV lets us calculate %ACV:
A market contains 3 stores. As we mentioned in the %ACV blog linked above, we consider only the stores where our product has scanned, and not those stores where our product is not moving off the shelf.
| Store ACV (millions) | Did Product Y scan/sell here? | |
| Store 1 | 20 | Yes |
| Store 2 | 40 | No |
| Store 3 | 80 | Yes |
Total Market ACV:
20 + 40 + 80 = 140 Million
Distribution for Product Y can be measured in two ways: Weighted (%ACV) and Unweighted.
Unweighted distribution for Product Y is the %of stores in which the product is selling/scanned. This would be 2 stores of 3, hence we arrive at a distribution of 67%.
Weighted distribution for Product Y (%ACV) = Total ACV of stores where Product Y is sold/scanned divided by Total ACV across all stores.
(20 + 80) divided by 140.
Converting into percentage, it’s 71.42%.
The aim is to get the product placed in a high ACV store. It happens that the number of outlets of a retail chain is lesser than others, yet its ACV is better. Only the calculation which uses ACV will identify the right retail chain or outlet where one’s product/brand must necessarily scan. Once managers understand the importance of ACV, they begin to use it in other measures such as velocity and promotion measures as well.
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