Wednesday Word: ACV
Around the industry, the term ACV is used frequently and is often used as a shorthand that can lead to some confusion about what it really means.
Literally speaking, it stands for All Commodity Volume. In more direct language, it’s a retailer’s total revenue.
When used in conversation in the grocery business, though, we often talk about an item’s Percent ACV Distribution. This is a measure of how many stores carry an item, weighted for the size of the stores. There are a number of derivative measures as well, but let’s focus on just Percent ACV Distribution.
Let’s take a simple example. Imagine a retailer has 4 stores. Revenue breaks down as follows:
Store A: $1,000
Store B: $2,000
Store C: $4,000
Store D: $3,000
Total Chain: $10,000
Let’s say the item is carried in stores A and B. That’s 50% of the stores. But when measuring Percent ACV Distribution, it’s only 30% — take the $1,000 and $2,000 in sales for those two stores, divided by the retailer’s total revenue.
Big difference — stores C and D also make up 50% of the stores in the chain but 70% of ACV. You absolutely want to make sure your items are carried there.
Some people equate Percent ACV Distribution to percent of stores, and that can be a serious error — especially if you’re missing a lot of larger stores in your measurement.
What other industry words do you hear? Leave ideas in the comments for next week.