FEDA News & Views

MRP & MAP continued Surprisingly, or perhaps not, the obvi- ous doesn't sit well with Whiteley either. "I spent most of my career work- ing abroad in international markets and I'm a strong proponent of taking down tariffs and free trade agreements," he says. "I'd like to find another way for free trade to exist without there being any kind of regulation, but until the capaci- ty goes away or the demand increases, I don't see how we get out of this current paradox we're in where, among other things, the intensity of intrabrand com- petition destroys the long-term ability of distributors to effectively promote the products they sell." Judging by the 60 or so Minimum Advertised Price (MAP) policies that have surfaced in the industry within the last few years, there's a hint of consen- sus among the supplier's peers. Still, MAP doesn't wield the same size stick or risks as MRP, which is one of many rea- sons why Hatco is considered the indus- try's Lone Ranger when it comes to aggressively embracing resale pricing. Antitrust issues aside, few manufactur- ers, in any industry, are willing to deal with the backlash awaiting a supplier that substitutes its judgment for the mar- ket, and gets it wrong. Yet, Whiteley insists, the gamble has been good for Hatco's brand and, more importantly, just as beneficial for the distributors who support it. "During a recent business review with What Makes An Effective Policy? 3 Notable Manufacturers Share Their Best Practices one of our largest customers, their pres- ident told me that we had the largest growth in gross margin dollars of all their suppliers," he says. "Essentially, we created more incremental profits for them than any other supplier—on a per- centage basis—which has in turn allowed his company to invest more back into his business, including more into supporting our brands. He con- tributed this success entirely to the implementation of our minimum resale price policy." But roughly four short years after the Dean Landeche, Manitowoc Foodservice Senior Vice President of Marketing We looked at a lot of programs in other industries and spent about 18 months inter- nally debating what our program would be. The programs we liked were not so much about enforcement, they were about delivering the benefit to the end user and the dealer. A good policy is easy to understand, specific on how it's going to be managed and has multiple enforcement steps. You have to give the channel time to adapt to a major change like MAP. Tom Szafranski, Hobart/ITW FEG President One of my main concerns when we were contemplating MRP was enforcement. If Supreme Court deemed MRP worthy of rule of reason treatment, other E&S man- ufacturers are still waiting to see if Hatco makes it through the minefield— despite the success of similar policies in other industries. Though, it is important to note that Illinois Tool Works Inc.'s (ITW) foodser- vice equipment companies also took a similar stance in 2008 when it officially announced its Internet-only MRP policy. The much smaller and privately-held Hatco, however, is the only man- ufacturer to institute MRP across product lines. Under its policy, authorized distributors are not allowed to sell any of its products below 45 percent off published list prices. "We talked a lot about whether we put a policy out, I knew we had to be responsible and consistent across the brand. That's why I was happy to find a third-party firm, Net Enforcers, to monitor the program. Every week I get a report comparing current MRP pricing to the pricing of all of our distributors. When I first ran it, I had a couple of dealers below MRP price by 10 cents and I had to call them. A lot of people just leave it to the dealers to enforce themselves, but I don't think that has a lot of credibility. I think you have to be the one out there driving for consistency. Mike Whiteley, Hatco Corp. Vice President of Sales A good policy is clearly and consistently communicated. We send our policy out several times a year to all of our customers, so it's consistently communicated. When you go to quote a Hatco product on AutoQuotes, there's a statement on every line that says please be aware of Hatco's MRP policy. Contact Hatco if you're not familiar with it. We also print our policy on our order acknowledgements. we should just do it on the prod- ucts that are typically 100 percent spec-driven or whether we should do it on all of the prod- ucts, knowing that some of them are sometimes also stock-type products," explains Whiteley. "In the end, we decided that imple- menting a policy like this was new and confusing enough that we should try to keep it as simple as possible, and that brand educa- tion, not just product-specific edu- cation, was really essential, so we do it on all of our products." That's one way to do it. Some manufacturers' policies only apply continued on page 14 1 2 FEDA News & Views

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