Dysfunctional Discounts

Once upon a time in a land far, far away, there lived the enchanted Queen of the Foodservice Rebates.  One day, a plan was hatched to reward all of the brave knights of the realm (AKA dealer principals) for swearing their fealty to her - and to the factories that were part of her Buying Group Empire.  If the knights would exclusively (well, most of the time)  be pure of heart and not wander away from these factories for purchase and sale of equipment and supplies, they would, in addition to the plunder that they were accumulating during the year, be paid handsomely (rebated) at year end. They all lived happily ever after.

This, of course, is a fractured fairy tale.  In the E&S business, group purchasing has created a culture that relies almost solely on sheltered income for profits.  We have, in fact, wandered far into the enchanted forest of less than exclusive deals. Back in the mists of time, the various buying groups once touted mutual benefits for producers and distributors alike.  The producers got guaranteed payments in exchange for allegiance to the brand offerings within the construct.  The distributors got limited distribution in exchange for their fiscal prudence.

The enchanted Queen used her charms to convince all of the Cinderella dealers that they could compete at the ball with their larger and better capitalized ugly step-sisters.  This self-fulfilling prophecy came true, much to the dismay of all involved.  Be careful when you wish upon a star – you just might get what you wished for.  Artificially leveling the playing field has spawned many incongruities.

Many believe that if they don’t sell at (or below) cost, that someone else will. Specifications are written based upon BG affiliations which ill-serve the end-user. 

Slaying the E-commerce dragon also became a cause célèbre.  “Fill the moat with MAP (minimum advertised pricing) and MPP (minimum purchase pricing) dictates so that no-one can undercut us” cried the townsfolk. If only they knew what Pogo did: “We have met the enemy and he is us.”

We, in the foodservice equipment and supplies biz live in a fantasy world where demons and ogres are lurking around every corner. The true enemy is not our trading partner; it is a lack of fiscal discipline.  This is the same force that causes countless folks to rely on tax refunds as a forced savings plan – without accruing any interest or benefit!

Most business people would never give an interest free one year loan to anyone.  Yet that is what our dealers and distributors do every day.  They unsustainably sell at or close to net in order to drive volume, hoping that profits will eventually be realized at year-end in the form of a rebate. Unless all conditions are met, the payout is not even guaranteed.  

We’ve all created this situation where sheltered income is the only profits that we see.  Now we all need some magic to solve it together.

·        Factories must not absorb the freight costs on single unit shipments. 

·        Drop shipments from factories should be handled at a different discount rate than stock orders. 

·        Dealers must commit to training their sales staffs to compete on value rather than strictly on price. 

·        Local stock of E&S has to be encouraged. 

·        Prohibit reps and regional managers from facilitating the poaching of business outside of their marketing areas. 

·        MAP and MPP should be strictly enforced where they are in place. 

We can turn the tide on profit erosion, and in turn better serve our ultimate customers.  

The truth is that there are no villains here.  No monsters, no ogres, no wicked queens, just a legendary industry trying to survive and emerge stronger.

Making Succesful Concessions

Is it an impulse or a compulsion that makes you want to eat that soft pretzel? Or is it simply the tangy mustard pumped onto it? Displayed food must look its best when laid out for speed and convenience, even for captive audiences at arenas, stadiums and outdoor entertainment venues.

No matter whether concession fare is pretzels, hot dogs, popcorn or other fun foods, items must be held at the proper temperatures and the point of sale lighting should accentuate rather than detract from them. We’d rather look at the food than see the equipment that is holding it. People eat with their eyes first.

Menu board photos can only go so far to whet customers’ appetites and drive demand. An interesting exception to this exists in subway stations in South Korea. There, whole grocery stores are represented graphically and commuters can shop virtually via QR code readers on their cell phones. Here in the States, however, we prefer a less virtual experience during our grazing rituals.

Specialized equipment, such as roller grills, popcorn makers, cotton candy machines, hot food display cabinets and cup and condiment dispensers, along with its selection and layout, plays a key role in maximizing the limited space available in most concession environments.

Panini presses have made the leap “across the pond,” along with gyro machines, orange juice squeezers, cappuccino makers and gelato cases, adding an ethnic flair to even the tiniest of service points.

Hot fudge pumps can push out that tantalizing hot chocolaty goo through heated spouts; cup dispensers can speed service at busy stations. Heated merchandising cabinets, designed to keep foods warm, moist and appealing throughout service periods, help to cut down on waste and drive sales. Grills, fryers, equipment stands, soft serve machines and re-thermalizers all function to speed up the service of concession stands’ tasty treats to waiting (hopefully not too long) fans, concert goers and fair attendees. Napkin, straw and PC organizers function to keep counters neat and clean (able). Although the business opportunities are typically short and/or seasonal, concession stand snack bars can be a lucrative endeavor for owners and operators, and provide convenient pit stops for consumers.

With the possible exception of parkland venues, healthful and sustainable meal options have not been the norm at these grab ‘n go venues. However, salad bar selections, cup and/or frozen yogurt, soups and stews can often all be easily added to the offerings to please today’s more discriminating consumers. Savvy operators will also look to offer whole grain products to satisfy their more health-conscious customers.

Foodservice operators have come to expect big profits from small concession stands. Foodservice equipment and supplies professionals should work to create a seasonal bump in their sales when such stands open up each year.

Appeared in TSRMag

Joe Ferri

Posted by Joe Ferri on February 12, 2012 at 8:00am

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