Issue link: https://www.e-digitaleditions.com/i/117069
Building a House Made of Straw & Other Questionable Practices in Chain Pricing that the Big Bad Wolf doesn���t come huffing and puffing and blow the house down.The strength of our relationships and our communications will ultimately determine if we live in a house of straw or if we live in house of brick. For the record, please don���t misinterpret this analogy.We love our chain customers and we only refer to them as ���bad��� in the context of this analogy. Similarly, we don���t think our dealer and rep partners are ���pigs.��� The reference here is in jest and used to help illustrate this story. By Mike Wh iteley, VP of Sales & Mar ketin g, Hatco Cor p. m w h iteley@ atcocor p.com h he foodservice industry is full of familiar stories. One common story is about the large multiunit operator who comes to their supplier looking for a better deal. Often they will approach the original manufacturer and ask to buy direct, or at least, the opportunity to negotiate pricing direct. Although their dealer partner has supported them well for many years, the chain will attempt to buy direct in order to better their purchase price. (In T Editor's Note: One of the highlights of the FEDA Box Lunch Seminar was the following presentation by Mike Whiteley of Hatco Corp, our program sponsor. Mike's talk of open communication and partnership is one that FEDA firmly stands behind and bears repeating, says Association President Brad Wasserstrom. 26 FEDA New s & View s their defense, their margins are pressured just like everyone else���s.) The outcome of this story is familiar to many of us. The manufacturer acquiesces to the chain���s request, cutting the dealer out of the picture and possibly doing permanent damage to their dealer relationship. Or, not much better, the manufacturer negotiates pricing directly with the chain without talking to the dealer first. Ultimately, this ends up reducing the manufacturer���s margin, the dealer���s margin (and possibly their rebates) and the rep will probably get their commissions cut as well. And, worst of all, this doesn���t necessarily guarantee the manufacturer will continue to enjoy the chain���s business. I liken this experience to a familiar childhood story���The Three Little Pigs & the Big Bad Wolf. The chain is like the Big Bad Wolf and the three little pigs are the manufacturer, the dealer and the rep.The effort to preserve margins, relationships and business in the existing channel is analogous to the three little pigs trying to build a house of brick so Blowing Down the House So how do the three little pigs build a house of brick? It���s not so easy ��� but it���s not impossible either. Over the last few months, this little piggy went to speak with FEDA���s brightest and best in a search for answers. What I found was a clear consensus on what I will call best and worst practices. Let���s start with the worst practices. Obviously, the worst of all is the ���straw house.��� That���s when a manufacturer acquiesces and agrees to both sell AND ship the chain direct. In this case, the manufacturer may or may not win and it���s questionable if it will keep the chain���s business for the longterm. But, without a doubt, the manufacturer has deeply eroded the existing relationship with its ���dealer partner.��� The dealer is motivated to avoid doing any future business with this particular manufacturer because of the complete erosion of trust.While the manufacturer truly wants to serve their chain customer���they also need to recognize all of the services and support the dealer provides them relative to many cuscontinued on page 28