Brokering New Deals

Sales agency group reactivates amid debate over role of sales and marketing agencies.

The food business is an industry in flux, but perhaps no class of trade has absorbed more aftershocks than sales and marketing agencies — once known simply as food brokers — which began primarily as a contract representative of manufacturers to service grocery stores.

In the simplest of terms, the food brokerage firms of yesteryear functioned primarily as third-party sales representatives for hundreds of noncompetitive manufacturers (principals), which called on retail buyers to write orders, cut in and rotate products, tag and reset shelves, collect damaged product, and ensure correct retail pricing. Cities that once supported as many as 20 separate brokerages rapidly merged into geographic market representation, then into regional representation and, in turn, into national representation that followed with rampant industry consolidation commencing in the 1990s.

And so it went for trade association representation, which began in 1904, primarily on behalf of canned goods manufacturers in the emerging grocery channel as the National Food Brokers Association (NFBA), which functioned independently until 1996, when it changed its name to the Association of Sales $ Marketing Companies (ASMC) in a bid to better reflect brokers' evolution into sophisticated sales and marketing agencies that diversified into a wide and varied menu of integrated sales, merchandising, marketing, promotional and category management services, among other functions, for retailers of all shapes and sizes.

In 2001, ASMC merged with the Grocery Manufacturers of America (GMA; now the Grocery Manufacturers Association) — the leading association representing the interests of food, beverage and consumer products manufacturers — with a goal of bringing ASMC's members closer to the manufacturers that employed them, most of which were members of GMA, which created a sales agency council to govern the former ASMC members that remains in effect today.

Amid the sweeping changes across the industry that have subsequently given rise to a drastically different set of needs for the many faces of professional sales and marketing agencies (SMAs), hurdles were bound to emerge. But in spite of the consequential growing pains, the industry remains strong, and the services provided are cost-effective to the manufacturers that employ SMAs as a viable alternative to a direct salesforce.

Fast-forward to the present day, which has given rise to a reactivation of ASMC, which took wing late last year and has set into motion another chapter of the evolution, this round tied to ongoing efforts by large retailers seeking to take a tighter rein over store resets and shelf management functions through the creation of preferred-buyer programs.

A key constituent in the reactivation campaign is industry and association veteran Mark Baum, ASMC president and CEO, who says that in 2010 he was called upon by several executives of a variety of national sales and marketing agencies to function in an advocacy role when it was determined that GMA would no longer take binding positions on behalf of SMAs. Since that time, Baum explains that a number of trading partner initiatives "led to numerous requests to reactivate ASMC to provide a collective voice for the SMA community."

ASMC began working under the auspices of the ASMC Foundation, Baum says, explaining that since reactivating as an independent organization, the group has been funded exclusively by dues paid by its members, whom he would only identify as "several dozen … agencies and their manufacturer clients."

On its website, ASMC lists as its officers Gary Chartrand, executive chairman of Jacksonville, Fla.-based Acosta Sales and Marketing Co., as board chairman (Chartrand also serves on the GMA Industry Affairs Council); directors Baum and Derek Wilson of British-based Andros UK; and Barry Moloney as secretary/ treasurer, CFO and general counsel (Moloney has been a general counsel for GMA and currently serves in that capacity for the Foodservice Sales $ Marketing Association).

Baum says ASMC also encourages its members to belong to GMA, with which he says the reactivated group has been "very transparent" about its activities, while stressing that ASMC members must be agents of sellers, not buyers, per its bylaws and code of ethics.

"The association was reactivated to provide advocacy and related services for all types of sales and marketing agencies — national, regional, local, foodservice, international — in ways that GMA does not," he says. "These are not duplicative services, and we encourage SMAs to join and participate in GMA activities if they find value in the platform."

Ginny Smith, senior director of communications for Washington, D.C.-based GMA, says, "Sales and marketing agencies play a vital role in the mission of manufacturers and retailers to deliver safe, healthy and affordable products to consumers," and notes that GMA "strongly values the membership of sales and marketing agencies, and is an active and vocal industry advocate for all of its member companies."

Changing Realities

Others see the reactivation of the ASMC as irrelevant and a "defender of the status quo" that's out of step with the changing realities of the business.

In a trade advertisement published in the December 2011 issue of Progressive Grocer, Crossmark presented an "open letter to the industry" in which the Plano, Texas-based sales and marketing services company criticized the reactivation of ASMC as "returning to the past." Crossmark, which trumpets its advocacy of manufacturer clients along with its more recent services for retailers, asserts that "collaboration between suppliers, retailers and agencies is critical to driving successful growth in the CPG industry," which can be attained "with a thorough understanding of retailers' and suppliers' key objectives and strategies."

Joe Crafton, president of Crossmark, further explains to PG: "We don't believe it is prudent or productive for the consumer goods industry, and we decided not to join the new ASMC. Unfortunately, several retailers, after receiving communications from the leadership of the ASMC, wrongly assumed that Crossmark is a member and therefore agrees with the ASMC legal statements and positions. … The reason for our open letter to the industry was to make it clear that we are active members of multiple trade associations such as the GMA and FMI, and we will speak for ourselves in all communications with retailers and suppliers."

Crafton observes a trend among retailers in "taking more active ownership in their in-store conditions and shopper experience," including speed to shelf for new items, planogram integrity, product freshness, out-of-stocks, and adherence to merchandising plans, including displays, pricing and point-of sale-material.

Crafton sees Crossmark and other like-minded agents as being valuable partners in this regard. "When a retailer designs a program to organize the process for improving their shopper experience, doesn't it make sense that we, as a sales and marketing agency, should be part of that conversation?" he asserts. "By representing the needs of the suppliers and understanding the objectives of the retailer, we can help interested retailers by creating programs to improve effectiveness, visibility and accountability for all providers without adding cost to the ecosystem. … We strongly encourage retailers to use multiple service providers and not limit their program to one provider."

One example of this trend: Last November, Delhaize America revealed it was implementing a new preferred-broker program aimed at boosting the efficiency of its category management and buying functions. The Salisbury, N.C.-based retailer — parent company of Food Lion, Hannaford and Sweetbay — trimmed its list of 150 sales agencies down to 33 that would be allowed to call on the retailer's buyers. The move primarily stemmed from Delhaize's consolidation of category management functions, completed last summer.

For his part, Baum is gravely concerned about the precedent Delhaize's program sets, and believes the retailer is "attempting to gain an unfair marketplace advantage … by using its economic might." If Delhaize's program were successful, Baum contends, "it would have severe … implications for the CPG and retail industry. … The consequences would be enormous, if sales and marketing agencies could be selected by the retailers as opposed to the manufacturers, based on what concessions the retailer could extract, from buyers' designation of its exclusive sales and marketing agencies."

Common Ground?

In a perfect world, Baum aspires to see the mounting tensions restored to mutually productive alliances with all involved parties. "It is our intent to facilitate constructive and productive dialogue between SMAs, their clients and customers, to address many of the challenging issues facing our industry today." Moreover, he further believes, "It is in our collective best interest to find new, innovative ways to improve shopping experiences and better serve consumers."

As such, the new ASMC and Crossmark would appear to have much common ground, but it's clear they differ dramatically in the means toward a commonly beneficial end.

"These are exciting times in our industry," Crafton says. "The changing media habits of the consumers have led marketers to focus on the Path to Purchase. In-store marketing and the shopper experience are more important than ever, and both retailers and suppliers are looking for ways to communicate their brand promise to shoppers.

"Each retailer has a different strategy and their own philosophy about the store's autonomy versus centralized command and control. Several retailers are becoming more structured about who goes into their store, what activities they perform and how quickly their jointly developed plans are implemented. Some are focused on eliminating waste and repurposing those dollars to improve the shopping experience, while still taking advantage of the expertise of multiple agencies and manufacturers."

As such, Crafton contends: "There is no one-size-fits-all solution. You have to be in active communication with all trading partners to find the win-win-win solutions."

EDITOR's NOTE: As the retail food industry continues to evolve, so too do the delicate relationships between buyers and sellers, which are undergoing transformations of their own as demands across the supply chain become increasingly complex. Many forces are converging that promise to make trading partner affiliations even more intricate in the years ahead, particularly with the hypercompetitive nature of the supermarket business. What follows is the first installment of an occasional PG Buyer-seller insights series, with a closer look at the changing world of sales and marketing agencies.

"It is in our collective best interest to find new, innovative ways to improve shopping experiences and better serve consumers."

—Mark Baum, ASMC