Think different. Be different. Build B2B brand equity in foodservice and take control.
Brand equity doesn’t have to live only in the retail world. For years, Consumer Products companies deprioritized their focus on sustaining margins because there was minimal fluctuation in raw material costs. However, times have changed and in our current climate, CPs have to face the volatility found in the cost of manufacturing their products. These fluctuations, which are beyond their control, require CP manufacturers to reprioritize and gain control of margin erosion. CP business leaders have deployed various levels of RGM capabilities over the past several years to optimize their supply chain and control margin erosion at the point of planning, by using data analytics.
CP manufacturers and distributors realize this may not be enough. See how Brakes, a leading foodservice wholesaler in the UK, became a margin maker after an unexpected spike in the price of dairy products.
Let’s elaborate on solutions to counteract volatility. CP manufacturers selling goods in foodservice, that are not necessarily end products, have less control over pricing, promotions and other commercial levers. This structure can result in heightened price sensitivity among foodservice companies and a need to isolate the “value.” It might be time to think differently. Quantifying consumer products with metrics that include a percentage of the end-product price and price elasticity will help identify “brand equity”.
“Brand equity! That’s a term used in the retail route to market.” In B2B, end consumers are typically not aware of CP brand names. In foodservice, products are viewed as commodities or bulk generic products. This has been going on for decades. For example, when were you in a restaurant and asked if the “Italian” salad dressing is a particular brand? This is a difficult dynamic to overcome in foodservice but one that has helped to build retail products.
So, how can CP companies create a form of brand equity in the B2B world? They can attempt to differentiate themselves by how they do business or through the uniqueness or breadth of products offered – for example, by creating a B2B product line specific to natural organic products that align with natural organic vendors and operators. In addition, differentiation by optimizing operational performance and customer interaction can create a positive buyer experience for the distributor/operator. For example, a manufacturer who has a positive relationship with a foodservice operator may put the manufacturer’s brand name or logo on their menu.
Establishing controls to prevent margin erosion. The best way to eliminate margin erosion is to tighten controls. CP foodservice manufacturers typically opt for multiyear contracts or menu-based pricing that change infrequently. These companies must be prepared to automate the management of contracts by incorporating factors such as total cost to serve, pay for performance (such as growth tiers) and flexibility. For example, the ability to link commodity pricing demonstrates strategic flexibility. By automating contract input control dynamics with guardrails, you can prevent account managers from going rogue and creating deals that impact margin dead net thresholds and margin erosion.
Ultimately, the best way to begin building foodservice brand equity is to start with communication and collaboration across all of the channels’ trading partners. In a 2019 white paper published by IFMA (International Foodservice Manufacturers Association), president and CEO Larry Oberkfell stated,
The paper identifies 2 phases to get started:
1) Building a foundation with trust and collaboration. By simply starting with creating a best practices list to enable all trading partners to improve communication and employ transparent data sharing.
2) Trust through visibility and accessibility to real-time sharing of standardized, complete and accurate data, is required to manage the end-to-end supply chains with channel partners.
In summary, with so much volatility and loss of control in the current environment, CP manufacturers need to look for ways that are within their control to better manage this uncertainty, such as turning to technology. In addition, CP manufacturers must include communication and collaboration – this is “brand equity,” and it is no longer just a retail term.
Build brand equity by putting controls in place, centralizing your data to address margin erosion and automating your updates and processes.