FRESH FOOD: Fresh Food Category Management: Playing nice

How well do retailers and suppliers really collaborate? The answer to that question, based on observations of interactions between retailers and their supplier counterparts, is "not very well." Indeed, in some cases, the animosity has been so prevalent that it got me thinking about the need to take a closer look at what's at play.

On the one hand, maybe the two sides don't get along because they shouldn't. If a retailer and a supplier become too chummy, doesn't it dull the edge of the negotiation process, which is supposed to produce the best deal possible? Adversarial relationships, by their nature, tend to keep everyone on their toes.

On the other hand, it's human nature to spend time with people we like, often with people who are similar to us. Aren't we more inclined to do things for the people we like? If we assume for the moment that two parties striving to get along would make for a better business relationship, then what barriers stand in the way?

We asked retailers to share their most common complaints about suppliers. Here's what we heard:

--"They don't understand my business."

--"They can't be trusted."

--"If I give a supplier too much of my business, I'll lose my leverage to negotiate."

--"They bring me too many items that don't belong."

--"They don't care about my business; they only want to move cases."

Suppliers, meanwhile, have this to say about retailers:

--"If they worked half as hard at selling products as they do collecting fees from me, we'd all be rich."

--"They don't care about my business."

--"They barely understand their own business."

--"They can't be trusted."

--"There's no give -- it's all take, take, take."

To explore the issues further, and determine whether cooperation and execution affect business results, PMG fielded two research studies focusing specific attention on meat departments, with the two-part goal of determining a) which characteristics retailers are looking for in suppliers, and how supplier companies perform against those measures, and b) which characteristics suppliers appreciate in a retailer, and how the retailers perform against them.

We were primarily looking for correlations between business success and achievement against the key measures, as defined by each group. We initially asked a sampling of retailers which factors they think help establish the foundation of a successful supplier/retailer relationship.

The retailers' wish list included:

--"Well-trained sales members."

--"Sales members who are respectful of my time [and] well prepared."

--"Is willing to share useful consumer information and insights."

--''Understands my market; understands my competition."

--"Understands and implements category management."

--"Customizes their programs to fit my needs."

We're not sure what to make of it, but none of the retailers we surveyed mentioned anything about price.

We decided to look closely into the meat business, to enhance our learnings. We had 28 retailer respondents rate a sample of 15 meat department suppliers by the same measures as above, plus the following two: "Is someone I consider as being strategic to my business success" and "Understands my business and is interested in my success."

One specific supplier emerged as best in class by quite a margin. This particular supplier has a strong branded presence and competes across multiple categories, not only in the meat department, but also throughout the supermarket.

Interestingly, however, factors such as company size or ownership weren't predictors of results. To the contrary, one of the highest-ranking suppliers also happened to be among the smallest in the bunch.

A handful of other companies performed well across a couple of measures, but for the most part, among the majority there appears to be significant room for improvement in the retailers' eyes.

One of the key learnings from this research is that a supplier can't just worry about the competitors directly in their space; it must strive to be as good as or better than every other supplier who wants a piece of a retailer's attention.

To be sure, while you might be the best provider of fresh sausage or turkey parts, in an environment where buyers have limited time, you need to be better than anyone else who wants an appointment.

Not surprisingly, the retailer respondents provided a wealth of feedback on the skills and qualities they desire in a salesperson. "Knowledge" is a common asset. "Listening skills" and "honesty" are also popular attributes.

We followed this initial retailer-centric probe with a similar investigation of what meat department suppliers thought of their counterparts across the negotiating table. At the outset we asked a sampling of suppliers which qualities on the part of retailers contribute to a successful supplier/retailer relationship.

Among the items on the suppliers' wish list:

--"Uses my consumer and market-level information to improve category performance."

--"Willingness to share internal data (sales, consumer, market- place)."

--"Well-trained buyers; experienced, with good category knowledge."

--"Clear and consistent merchandising strategy."

--"Buys on the total value of my product, sales, and service support, and not just price."

--"Performs well for my ad dollars."

--"Provides product support I need to be successful (quick to shelf, planogram adherence, low out- of-stocks)."

From there, we asked a group of 72 sales and management supplier executives to rate their meat department counterparts across these measures, plus a few others, such as:

--"Is interested in the success of my business."

--"Treats me like a valued strategic partner."

Four retailers emerged as best in class, two of which are privately held regional players. The other two are both publicly traded and national in scope. (One is in the warehouse club channel, and the other is big into supercenters.)

The retailers who rated best in class consistently scored high across almost every measure, while the scores of the retailers who fell into the middle and bottom rankings were also fairly consistent.

As we summarized the findings of the retailer research, we had an "a-ha" moment: Do all suppliers treat retailers equally, or do they put their best people with their best deals against the retailers that perform best.

Although I don't believe either side would readily admit it, suppliers are, for the most part, going to assign their best salespeople, give them first crack at the newest products, and supply a fair share of trade dollars to retailers that score well across the myriad of attributes listed above.

Prescriptive remedies

To improve relationships, I would like to submit recommendations for both suppliers and retailers to consider. For suppliers: you need to think about the business from the retailer's perspective. If the retailer isn't winning with your products, you're in trouble. You also need to understand how the retailer keeps score, and make sure your products are contributing to the scorecard.

More words of wisdom for suppliers: Make your appointment mean something. Come armed with knowledge and facts. Make your retailer counterparts smarter every time you show up. Consumer and market insights are a great focus.

Think about the impact you have on the category, not just your brand. And understand that your retailer counterpart is managing one or more categories. Find a way to be strategic to the retailer's business. If you were gone tomorrow, would it matter to the retailer? Make sure your programs are tailored to the retailer's needs.

For retailers: Be respectful of the supplier's time. You don't like it when you have to wait 30 minutes for an appointment, and neither do your suppliers.

Share your knowledge of the category and department. Talk about what's working, what's not, and why. Share data. Share your merchandising strategies.

Realize that value-added services and lowest price aren't synonymous. If you want extra services, expect to pay for them. Strive to be operationally sound.

I would also challenge retailers to help raise the bar by following a basic rule: Expect the same from everyone. Don't expect any less effort or preparation from one supplier to another. The value of your time doesn't vary. The size of the supplier company doesn't dictate its ability to be best in class or worst; smaller companies have proved they can excel.

Set the correct level of expectation: It's not your job to train suppliers' sales organizations, but you can have an impact on how they perform inside your business. Let them know you expect:

--Well-prepared and timely presentations.

--A depth of product, consumer, retailer, and market knowledge.

--Listening skills.

--Category business-planning skills.

--A category perspective, as opposed to just its brand.

--Results measurement.

--Well-thought-out new item presentations, including where the space for the new item will come from.

For a complete copy of our research findings, send an e-mail with "Retailer/Supplier Research" in the subject line to [email protected].

Mark A. Boyer is president of PMG, LLC, which specializes in fresh food category management strategies.
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