8 Cherry Street, Danvers, MA 01923 800.229.4253 www.halegroup.com

OPERATOR PANEL

Challenges Solutions Implications for Manufacturers

CO

MPE

TITI

ON

• The competition for the consumers’ away from home occasions and spending has never been greater – from both within foodservice industry, as well as from the outside, i.e. supermarkets.

• Clearly the positioning of your brand is critical so consumers know what the brand stands for and the one or two things the brand does better than any other offering.

• Take the time to understand the strategic positioning and priorities of your operator’s customer’s brand and align your focus and knowledge with that positioning and priorities.

CO

NS

UM

ER

S

• Given the competition for the consumers’ away from home occasions, operators are conducting rigorous research programs to better understand and anticipate their customers’ needs.

• With consumer insights in hand, micro segmentation allows operators to refine menu, tie into existing and target consumers with social media, and build loyalty and communities.

• Leverage your consumer insights and application with operator and consumer knowledge.

• Leverage your social media connections and cross-promote specific news items and events that have mutual benefits.

CO

MM

OD

ITIE

S

• Operators are quite anxious about rising commodity cost, particularly proteins; therefore, looking for ways to mitigate the high costs and still offer value to customers.

• Menu engineering as a tool will be used to a greater extent to take pressure off higher cost proteins, i.e., turkey versus beef.

• New product introductions consistent with the brand, but bite size and less protein intense.

• Utilize new products and product innovation to help operators offer new value and interest to their customers.

• Use your global knowledge reach and supply chain to help the operator’s customers deal with commodity volatility.

WH

ITE

SPAC

E • Fully utilizing the strength as an operator

brand and find white space that allows operators to find new venue and revenue sources.

• Exploit the brand reach by going into white space - supermarket shelves, new venues - school lunch and new product platforms.

• Understand the operators’ pursuit of white space is a new revenue source, and where appropriate use your knowledge of the new venue and channels and partners on these new opportunities.

INC

OM

E • Trade income is under pressure. The demand for these promotional dollars at all levels is impacting margins.

• Trade menu is “baked into” business models in the foodservice model so the income is part of the relationships.

• Trade income must flow to the customers and activities that result in the best returns.

• Non-performing trade dollars will be a thing of the past; the demand for trade dollars will increase.

DISTRIBUTOR PANEL

Challenges Solutions Implications for Manufacturers

RO

LE-

DIS

TIBU

TOR

• Distributors find it difficult to gain an understanding by manufacturers and operators of the value of foodservice distributors provides day-in and day-out.

• Distributors must take the time and effort to explain to their trading partners the role and value they provide and generate for both trading partners – manufacturers and operators.

• Manufacturers should understand the distributor role, focus and interest in a collaborative approach.

• Build a distributor strategy that is part of your integrated value chain and for those distributors that have consistent strength, focus and interests you should double down.

RO

LE O

F VA

LUE-

AD

DED

SER

VIC

ES

• Several of the distributors mentioned they offer value-added services to their operator customers, but there was a real question whether the distributor was capturing an ROI for these services.

• Going forward distributors will be measuring the operator’s willingness to pay for these services. This might lead to a more segmented approach to their customer portfolio –those that want product and logistics only and those looking for more assistance in building their business with distributor’s help.

• Manufacturers are in a position to assist their distributors with operator customers looking for assistance in business building advice and services – manufacturers should look for an opportunity to brand the service bundle they provide.

Red

unda

ncy

of S

ales

Ac

tiviti

es

• There are multiple sales representatives in a market – direct sales of manufacturers, broker reps, distributor DSRs – all attempting to sell and/or service operators in the market with little to no coordination across efforts. Also, distributors wonder - what is the role of brokers in this new landscape?

• With key distributors, manufacturers could be well served to create collaborative plans with these distributors. The plan would express mutually beneficial objectives, activities, and expected outcomes for both parties. Plans, if done right, are a great coordinating mechanism.

• Foodservice manufacturers to be effective in penetrating accounts – operator or distributor – they must assure alignment of existing resources and a directed and focused effort. Planning at the distributor and account level in a collaborative fashion will be one of the strategic tools to accomplish this task of distributor and account penetration.

Prod

uct O

ptim

izat

ion • There has been an explosion in the

number of SKUs a broadline distributor must carry to satisfy their diverse customer portfolio. Economics are driving distributors to look at ways to improve the productivity of their inventory (turns). One approach distributors are using is category management to pursue product inventory optimization.

• Foodservice manufacturers must be in a strong position to create operator pull through on products to maintain their slots. If the product is unable to maintain sufficient volume to hold a distributor slot, alternatives should be considered – redistribution, removal from manufacturer’s product offering or alternative distributor as a route to market.

• As distributors undertake product optimization strategies, foodservice manufacturers should be at the table and engaged in the process to ensure they have a voice in the process. Secondarily, consider distributor options so you maintain market access for important, but slow movers.

Dia

logu

e &

Und

erst

andi

ng

• The distributor finds itself between the operator and the manufacturer, and yet the communication, coordination and engagement frequently circumvent the distributors. The distributor has much to offer in this trading partnership and yet, it is not fully engaged until after the decisions are made and thus distributor input and insight is lost.

• For key and strategic customers, manufacturers should understand and help to facilitate greater dialogue with the operators’ distributor network. There is a common benefit to manufacturers and distributors and ultimately, the operator in seeking supply-chain efficiencies, removing redundancies and reducing complexity. The approach to addressing these issues is a coordinated and systematic process. Supply-chain efficiencies can drop real dollars to all the trading partners’ bottom line.

• Foodservice manufacturers operating in an environment of big customers who greatly value building supply-chains that are efficient and accommodate their concept requirements should increasingly be an area of focus for manufacturers. To address supply-chain, manufacturers, distributors and operators need to be at the table and fully engaged in the improvement process.

MANUFACTURER PANEL

Challenges Solutions Implications for Manufacturers

Portf

olio

Man

agem

ent

• The foodservice manufacturer understands that there are hundreds of customers in their portfolio, yet in the future there will be a few customers – 25 to 50 that represent over 75% of their sales. The issues are how to select, develop, and retain these customers to assure growth, profitability and stability.

• In the new world, understanding who the key strategic customers are, how they are resourced and developed is a key process of a successful manufacturer. The concept of constant and active customer portfolio management will move higher on the manufacturers’ strategic agendas. The other aspect of portfolio management is “who is missing from the portfolio that is a natural fit?”

• Manufacturers should have in place a customer portfolio management process to constantly review and plan for customer acquisition (on a directed and planned basis), development (growth and strengthening), and retaining (improving the value proposition and increasing the switching costs.) The resource allocation is also a major part of the portfolio management process.

RO

I on

Res

ourc

e Ex

pend

iture

• The offerings of a foodservice manufacturer of the future will go well beyond the “product”. Increasingly, the operators expect their trading partners to bring a set of value-added services the operator can draw on to create new products and new consumer demand. The Return on Investment (ROI) value-added services has historically not been closely measured; however, given the margin squeeze, manufacturers are now beginning to focus on the ROI of these services and use the ROI as a way to allocate their resources.

• The concept of cost to service and ROI are critical pieces of information manufacturers require to assure best use of resources – highest return – and effectiveness of resources. In a world of margin pressure, each dollar in resource investment must be productive; therefore, the manufacturers must develop P&Ls on strategic and key customers/segments. These are the first steps in ROI analysis.

• Each manufacturer should have a manager that is responsible and accountable for the deployment of resources on customer-generated projects/initiatives and the ability to measure the results of resource uses. Frequently, these resources are allocated by the “loudest voice”, “favorite customers”, “seniority”, etc. Manufacturers need to move to objective, measured results, and an understanding of the results generated by these services to realize improved allocation /deployment decisions.

RFP

Cha

lleng

es R

elat

ions

hips

• The use of RFPs by operators and distributors is viewed as a direct challenge to building mutually-beneficial relationships and making investments on building the business. Manufacturers expend resources and intellectual property with their customers to achieve mutually attractive results. Yet every one or three years, the business is up for bid and price is the primary determinant of who wins.

• The total solution for this situation is unclear, but considerations include:

– Choose customers based on their appreciation of your total value not just product/price

– Gain deeper relationship and constant communication of the value you deliver / don’t assume everyone in customer organization understands your value

– Be proactive responding to customer’s objectives and priorities

– Fully understand who and how the decision vis a vis RFP was made in the targeted customer organization.

• This situation is a real conundrum – customers want your full value, but will frequently choose the winner based on price. In this situation, the manufacturer must find ways to sell full value and constantly communicate their value within the customer organization as well as produce and communicate the results.