Conversely, if volumes decline while net sales fall faster, something in the model is weakening. Perhaps the brand needs more discounting to move volume, or the premium part of the portfolio is losing momentum.
If net sales look stable while gross margin falls, another signal is flashing. Costs may be rising faster than prices. Promotions may be doing too much work. The business may be spending heavily on defending itself without improving the quality of demand.
Each metric can look manageable on its own. Together, they reveal the trajectory.
CEO-ready CMOs do not celebrate growth without asking whether it is healthy, repeatable, and profitable.
They know a brand can look busy, culturally relevant, and innovative while the economics weaken in the background.
They look beyond gross margin
Gross margin is not the only way to understand value creation.
Some categories require a lot of capital before they generate a euro or dollar of sales.
In cognac, whisky, and other aged categories, liquid sits in barrels for years before it can be sold. That stock may look desirable in a brand film. In the accounts, it’s capital employed—money that’s been spent but not generating revenue yet.
Take cognac. A VS (Very Special) needs to be aged for at least two years. A VSOP (Very Superior Old Pale) requires four years. An XO (Extra Old) requires much longer. That means a company can have a brand with attractive gross margins and still face a negative return-on-capital equation.
This is the kind of issue CMOs with CEO potential need to understand.
A brand may look profitable at gross margin level, yet still fail to earn enough relative to the capital tied up in aging liquid, inventory, and production assets.
A CEO-ready CMO asks how much capital the strategy requires, how long that capital is tied up, and whether the return justifies the investment.
They understand the operational consequences of growth
Marketing strategy sounds elegant until it meets the factory.
Growth strategies have consequences for operations, supply chain, and service levels.
I saw this very clearly in energy drinks with Lucozade in the UK.
Flavor innovation and SKU expansion can create news, shelf visibility, and trial. In recent years, brands such as Monster and Red Bull have used that playbook very effectively.
But those additions can put pressure on production capacity. If that pressure leads to frequent out-of-stocks, the growth strategy begins to undermine itself.
The best CMOs consider what will grow the brand, and can the organization deliver this growth reliably?
They understand how investors read the company
For CMOs in publicly traded companies, stock market fluency matters.
This does not mean marketers need to become equity analysts. But CMOs should understand the financial signals investors use to judge whether a company’s growth story is credible.
One CEO of a listed energy drinks company once told me his CMO believed the brand marketing was working, while he was less convinced. Why? Because the market was rewarding a successful competitor like Monster Beverage with a much higher valuation multiple than his own company.
P/E ratio is not a perfect measure of marketing effectiveness—after all, markets sometimes behave like toddlers.
But the CEO’s point was that if the brand story truly strengthened the business, investors should see evidence in the quality of growth: stronger pricing power, better margins, more durable demand, and greater confidence in future cash flows.
