Then there are only a few powerful businesses ruling the supply chain, like there are in the fresh produce industry, the balance of power can become uneven, with the top dogs using that to their advantage. And why wouldn’t they? To squeeze those margins, businesses have to have the right individuals in place to make the deals that will gain results. Supermarket buyers are fast- tracked through prolonged negotiation courses so when they get out into the field they can get the best possible price. “The Redfox team has constantly felt that there are significant disparages between the high level training and development that the likes of the key retailers give their buying teams compared to the supply sector,” says recruitment specialist Max MacGillivray at Redfox. “Why are the retailers so successful? They gain the right people and develop them for the long term.”
But as food availability becomes more important amid predictions of a population boom, will the power in the supply chain move along to those who grow the food? Some believe the shift is inevitable. “The 1970s saw a shortage of food and it was a good time to be a food producer; the 1980s and 1990s were exciting with lots of new opportunities with the advent of the supermarkets; and the noughties were depressing with too much product and too many producers,” says Freshgro’s managing director Martin Evans.
“This is a new decade. In some ways, the supermarkets have become more powerful than the government. How has that happened? There is an imbalance of power and the whole world works on supply and demand. There has been a slight overproduction and therefore the power has gone straight to the retailers.”
But fresh produce growers and suppliers have to become fighting fit to use this possible new phase to their advantage, says one ex-retail buyer.
“There is an interesting psychological interaction when individuals negotiate, and understanding the nuances of this can be very powerful,” he reveals. “Major blue chips, such as Coca-Cola, Mars, GSK and Unilever, have been putting their national account managers (NAMs) on [negotiation] courses for years, recognising the need to ‘out manoeuvre’ their retail customers. In fact it is not uncommon for some of these larger customers to align ‘best fit’ NAMs with their respective retail buyer based upon social similarities, like age, sex, schooling, interests and so on.
“Within fresh produce, the relationship between buyer and supplier has historically been reasonably co-operative and empathetic with a long-term approach. This has fundamentally changed, with young and inexperienced buyers not prepared to understand the challenges of produce supply, operating in an aggressive and uncompromising style, as well as having undergone negotiation training. It therefore makes complete sense for a produce supplier to try to counter this style and approach by ensuring their NAM is appropriately armed with the tools and skills to enter the bear pit and come out alive.”-
NEGOTIATION: TOP TEN TIPS
1Don’t be afraid to ask for what you want.
2Shut up and listen.
3Do your homework.
4Always be willing to walk away. Never negotiate without options.
5Don’t be in a hurry. Be patient.
6Aim high and expect the best.
7Focus on the other side’s pressure, not yours. Don’t focus on why you need to make the deal.
8 Show the other person how their needs will be met.
9Don’t give anything away without getting something back in return.
Don’t take the issues or the other person’s behaviour personally.
SCENARIO 1: THE GROWER
I am worried that the supply base has lost sight of quality over price. How can I make sure value and quality is prioritised?
The Master Negotiator answers: Customers shop with their eyes and they don’t forget! Above any other category in the retailers, fresh produce needs a consistent delivery of quality. In order to deliver consistent quality, growers need investment. If the supply chain is forced to “trade” to maintain retail margin aspirations, produce quality, consistency, availability, freshness and integrity will be forgotten. If a retailer wants the best variety, grown in the best location under the best regimes and controls, they must understand this comes at a cost. They need to have a long-term view.
SCENARIO 2: THE SUPPLIER
My main retail customer has asked for a “marketing contribution” of £50,000. How can I say no?
The Master Negotiator answers: If a supplier is already paying a three to five per cent “overridder” or “rebate”, in the eyes of the Competition Commission this is for “marketing” purposes. I think it is bordering on illegal to ask for another payment over and above this. As a supplier I would simply hold my ground and refuse on this basis or I would offer an increased margin to the value of £50,000 over the course of the next season. Do not buckle.
SCENARIO 3: THE PACKER
Supermarkets give very little warning before they change a line’s packaging because of the reactive nature of promotions. This causes wastage and panic. How can I make this situation more manageable?
The Master Negotiator says: NAMs should be very close to the buyer and stock controller. Daily communication with the retailer will enable you to understand when and what promotions could affect packaging changes that are likely to occur. I would suggest leading the category with promotional planning. You should cross-communicate with shared suppliers and focus communication on nominated packaging suppliers, as the main company will have permanent implants at the retailer. You should also keep packaging orders to a maximum of 12 weeks’ stock. In addition, you could look at alternatives to full redesigns; for example, will a flash-label suffice?
ARE YOU A MASTER NEGOTIATOR? TEST YOUR SKILLS
Q1: You receive a cold call about a product you have no interest in. Do you:
a) Put the phone down; b) Listen but then let them know politely that you have no interest; or c) Ask them to send through the information by email.
Q2: You had a meeting with a customer on Friday, but now it’s been moved to Monday. This cuts your preparation time. What do you do?
a) Agree straight away and start your day early to prepare; b) Agree, but ask for an evening appointment; or
c) Ask for the meeting to be rearranged for the following week, when you’ll be fully prepared.
Q3: One of your employees comes to you and says that they cannot make a customer visit. Do you:
a) Find someone else to do it, but consider re-evaluating their roles and position; b) Ask them why they can’t carry out the task and try to solve the problem; or
c) Tell them that if they don’t do it you will reconsider their position.
Q4: Quality of product has been low from a supplier for the last couple of weeks. How do you handle this?
a) Start looking elsewhere; b) Have a strong word with them and make sure they know they are close to the wrong side of the specifications; or c) Visit the supplier and try to help them sort out what’s going wrong.
Q5: There is a problem with the cool chain and you’re at fault. What happens next?
a) Rack your brains for someone else who could be to blame. It can’t be all your fault; b) Call a meeting with your colleagues and explain, then formulate a plan; or c) Call the wronged party and talk about turning the situation around.
Results:
To add up your points: Q1: a=2 b=1 c=3; Q2: a=3 b=2 c=1; Q3: a=1 b=3 c=2; Q4: a=1 b=2 c=3; Q5: a=2 b=1 c=3.
11-15 points: You believe in a win-win environment, where negotiation can get everyone what they want. By understanding the people around you, you get what you want.
7-10 points: Being assertive doesn’t mean you have to be aggressive. Sometimes ‘putting your foot down’ can make potentially easily solved problems a disaster area.
0-6 points: You definitely need to stick your head above the parapet and engage. If you let people walk all over you then they will continue to do so. -
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