The National Restaurant Association reported restaurant industry sales of nearly $799 billion in 2017, which represents nearly 48 percent of total food dollars spent in the United States. Since foodservice operators see a big portion of total industry spend, it’s critical that your products are part of the operator’s inventory and the overall revenue opportunity.
You have the products that operators want [and need]. Are they buying it? Are they a core buyer or only buying your product seasonally? Are you collaborating with the operators to discover more effective trade deals?
As a manufacturer, collaborating with operators creates unique value for your business; it encourages brand loyalty, opens communication on specific needs in product development, gives a chance to celebrate ‘wins’ and promotional events with the operators serviced, and provides base in planning a pull strategy, or operator-focused strategy. The three key ingredients to increase collaboration with operators include: strong relationship management, transparency and data-sharing.
Manufacturers that market value-adding messages to the operator think about more efficient packaging options and processing solutions. Manufacturers building relationships with their operator customers have more visibility into the purchase history and will improve the demand planning and production timeline. Connect the data collected to see which customers receive promotions and rebates and what products have been purchased. Looking through historical data lets manufacturers see who they’ve been giving deviated pricing too and where they can improve price-based resources.
Control your relationships with the operators. First, tell the operator that you have a discount for their business. Then, create an agreement where format and POD are defined. For larger volume deviations, hold the operator accountable for engaging in discrepancy resolutions.
Bill McClellan, Vice President – Foodservice at Dawn Foods, believes that we need to “break barriers regarding communication obstacles and provide a common language for improve business dialog.” He says to drive innovation; new communication should be developed between trading partners.
Manufacturers and operators have different viewpoints, and operators could gain a lot with shared information and collaboration from manufacturers.
For one, operators need supply chain visibility. “Restaurant chains need to better understand how volatility increases commodity costs and total landed costs,” Todd Bernitt of CH Robinson Worldwide says. “For example, the transportation costs for shipping beef from Omaha to New England may be higher than the commodity costs. But unless restaurant chains have visibility to that information, how do they know if they are paying the right freight costs, or if they have the right origin point for their commodities?”
“The whole industry is faced with margin suppression and cost containment. Facing those challenges starts with understanding the necessary and added costs in every leg of the supply chain,” says Pat Brown, Director of Transportation for UFPC, the purchasing and supply chain management organization for Yum! Brands Inc.
Be open with operator customers about the process. With communication about the supply chain, your customers will be able to make better decisions about inventory needs and ease any inefficiencies in the manufacturer’s production and sales forecasting.
Get Back to the Data
For most manufacturing companies, data is disconnected and it’s been a struggle to improve the effectiveness of trade promotion spending. There’s multiple data views, multiple sources. You have to do something with the information to enable better spending decisions. Mark Forbes, CIO of D&W Fine Pack says, “Turn the data into information; we want our insights to be directional and predictive.”
To turn your data into directional insights, use a trade promotion management (TPM) application as a system of record, a central repository of historical and pricing data and trade programs. Break down channels, review rebates and analyze promotions. Capture performance data and use it to plan for future events. Since finding the details can be tough, take the time to collect, format, organize, match number schemes and trailing spaces. With data in hand, the sales team can be objective in their negotiations, the marketing team can drum up specific campaigns, and the finance group can analyze customers in terms of spend and volume. Trade spending continues to play a complex role for CPGs, but making visibility a top priority can improve the bottom line.
To be successful in a pull-strategy and operator collaboration, manufacturers can’t only rely on the premium its brands command, they must gain more understanding of the industry – from kitchen prepping and operations to menu trends and overall needs.