Coop Department Training

May 2, 2011

Presenter: Bobbi Howard

Cooperative Membership & Negotiations

Progress Meter

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Coop Review Financials Show Benefits Maximize Return Takeaways

Agenda

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• Review of Coop

oWhat is Coop

oWhy do we Partner with Coop

oWhat are our Results and Financial Trends

• Coop Buying Show

oWhat is the Objective

oGRASP method for Negotiation

o Takeaways


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• Coop is a nonprofit cooperative that creates buying leverage for independent distributor members across the nation while providing volume and pricing advantages.

Definition

What is Coop?


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Coop, $58

Us, $1

SY, $38

UF, $17

IBA, $13

2009 Sales in Billions

Coop includes 652 Distributor Members


Why Does Partner with Coop?

Coop Earnings

6

Coop Earnings

MDA

BPA

Incentive Programs

Committed Volume

Block Buys

Productivity Enhancer

BroadlineLogistics

Peak Results

Buying Show Allowances

Tour Points

Best Sellers


TIP: refer to

definitions for

more allowance

details

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Incentive Rebates

= MAXIMIZES Earnings

Tour Points

MDABroadlineLogistics


Consistent Rebates

= Coop negotiates rates

BPA

Incentive Programs

Committed Volume

Block Buys

Peak Results

Buying Show

Best Sellers

What Control Do We Have Through Coop?


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2010 % Coop Earnings Compared to Total Coop Income

9Coop Review Financials Show Benefits Maximize Return Takeaways

Logistics40%

MDA33%

BPA13%

Buying Show9%


4%

Tour Points1%

Best Seller0%

Grand Total: $ 15,249,773

Overall Purchases vs.

Coop Purchases

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$354,797,221

$851,723,568

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$900,000,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total UniPro Purchases: Total Labatt Cost of Goods

37%

We are purchasing more product overall, yet we are purchasing less Coop eligible items each year (48% in 1999 vs. 37% currently). There is a diverging trend between both purchase groups.


48%

Exclusions, exclusions, exclusions…

Some of the reasons include: (list is not comprehensive)

Exclusions have increased per vendor

Our % of business has large exclusion potential

(National Accounts, Quick Serve, and Bid equal 80+% of our volume)1. Customer Exclusions

2. Item Exclusion

3. Manufacturer moving guaranteed programs to incentives

4. Programs not indexed to sales (% vs. $/case or lbs)

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It is the Coop Liaison’s role to work with Coop & vendors. We should work together to always capitalize on benefits.


’s Earning are based on Coop’s negotiated items and rates

Coop negotiates each vendor’s program, incentive, and item rates

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Coop Problem

Statement

Root Cause

Goal: Stop Losses, Minimize Missed Opportunity

1. Identify Missed Opportunity2. Negotiate Direct Programs or have Coop negotiate on our behalf

3. Maximize Coop Incentives

Strategies


Even though we are growing, Coop is not rewarding us for our growth.

Takeaways:We are buying less Coop eligible items, and we are earning less rebate

income per Coop Eligible item.

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0.20%

0.70%

1.20%

1.70%

2.20%

$65,000,000

$115,000,000

$165,000,000

$215,000,000

$265,000,000

$315,000,000

$365,000,000

$415,000,000

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Total UniPro Purchases:

Linear (EDA% to UniPro Purchase $)

Linear (Buying Show Income % to UniPro Purchases)

Linear (Data SPA Trendline(2003-2010))

Total Coop Purchases

MDA Trend Line

Buying Show Trend Line

BPA Trend Line


Trends: EDA, SPA, and Buying Show as a % to Coop Purchases

Coop Rebate Income as a % to Coop Purchases

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0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total UniPro Purchases: % to UniPro Purchase $ Data Linear (Data)

$8,734,003Coop Income

Opportunity Loss


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Targeting Results Together

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Increase Buying Show

Income

Build Relationship

to grow future allowances

Increase Rebate &

Lower COGS

Increase profitability

Exploring Opportunities

Buyers Marketing

Legend

MarketingBuyersBoth

Objective

Goals

ResultMaximize

Partnership


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Core Partner Buying Show Example


Other

Distributor’s

portion of budget

Buying Show Income

Vendors Buying Show

Budget

.$ Discretionary

Buying Show

Budget

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Additional Buying Show Deals with Core Partners

Goal: receive a larger base as well as larger discretionary

deals than other distributors.

$ Other

Distributors


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What is GRASP?

• Understanding the Goals of all parties, beyond the immediate deal

• Developing Routes to those goals that will maximize the benefit of all parties

• Promoting fairness, trust, and common understanding through valid Arguments

• Benchmarking your current relationships for possible Substitutes

• Increasing your Persuasion through open and empathetic communication


Billings-Yun, Melanie. Beyond Dealmaking. San Francisco, 2010. Print

Goals: GRASP Method

• YOUR Goals- What do I really want to achieve or avoid?Ex. Buying show: benchmark $ earned last year’s show and build on it

Tips:

-Don’t just make a list of demands; each goal should have a reason

Ex. COGS in item segment is up, long-term partner, new items were just brought in, we are buying more efficiently…

• THEIR Goals:

-Understand enough about their goals to come up with high-value trade offs

Ex. Ask current/past buyer about vendor, talk to bids, freight, and any other department that can help you understand more about the vendor

-Show through your words and efforts, that you recognize and respect their goals

-Tap into their aspirations (may not be initially part of negotiation, but could result in greater results for all)



• Routes- How can I achieve my goal by supporting theirs?

Tips

- Always focus on “Expanding the Pie”

Ex. Focus on “What is in it for the vendor?” is not a one time shopper, we are a long term customer

- Trade off don’t concede

Ex. Their goal is to get in front of our sales reps more often, so educate them on the sales meeting process

- Ask Open Questions to find their true objections & goals

- Have a list of several routes

This controls the discussion and avoids panic-driven concessions (organize by least acceptable to most desirable)

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Routes: GRASP Method



• Arguments – What reasons support my/their routes?

Tips:

- Arguments are not Persuasions

Arguments validate the fairness of your request, and challenge the fairness of the terms proposed by the other party

- Your “Why” Arguments show respect & builds trust

The bigger the request the more respect and trust is needed on other parties side to grant request

- “Because” is powerful

Offering a simple explanation is a good start, and sometimes is all you need to break through

-Ex. is different than any other distributor, how we do business should always be reiterated

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Arguments: GRASP Method



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Arguments = Hard DifferentiatorsContinuously Educating our Vendor Reps

“There is nothing more unequal than the equal treatment of unequal people”

– Thomas Jefferson

NO Private Labels

Long Term Partnerships

Always sell based on Quality, not just Price

Technologically Customized/ Systems built in house

One Buying System

Unique Bid System

Unique Promotions/Food Shows/Specialists

Target consistent EBIT, while growing sales


• Substitutes- How else could I/they accomplish the goal?

Tips:

-You may not have to use your substitute if your routes and arguments are successful

-Without a substitute there is strong temptation to lose sight of your goals and blindly offer anything to get the deal.

-Know your “Walk away Line”- meaning your minimum requirements for a good deal (reveal only as a final warning, as your goal should be higher)

Ex. Buying Show: $ earned in last year’s show

-The other party has substitutes as well

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Substitutes: GRASP Method



• Persuasion- What’s in it for them? Use these techniques throughout negotiation

-Tips:

- Be Positive

- Say yes instead of no. Be less threatening.

“If we don’t get this agreement by Friday, we can no longer guarantee the sale.” OR “ We can guarantee these terms for you until Friday”

- Don’t ask for the Problem, Seek the Solution

Ex. They say, “I won’t agree to this”, DON’T SAY, “What is the problem with it?” INSTEAD SAY, “What would you agree to?”

- Focus on aligned interests rather than where they conflict

Ex. Instead of attacking them for giving allowances on private labels, re-affirm their brand equity and growing knowledge of that brand to our customers.

- Ask about their goals

- Stop talking and start listening

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Persuasion: GRASP Method



ExerciseDiscuss your own example

of GRASP

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Thinking Outside the Box

Coop Review Financials Show Benefits

Maximize ReturnTakeaways

•Current volume has bid/national account-exclusions

Focus on new sales opportunities & educate them on differentiators

Contact decision maker at the show (text, phone, email)

Ask the question back to them/ask for their goal

•No Inventory Booking Opportunity

Only offer Coop Label Allowances

•Key Decision Maker isn’t at show

•Not allowed to give additional deals

•Can’t give allowances without bringing in new items

Ask for future booking opportunities, PO or item level allowances

Backtrack allowance pre-show period

Ask for the branded equivalent since we want to sell their value-added items

Agree to look at new items& ensure product guarantee, get approval and backtrack allowances

BarriersRoutes

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Ex. Paper & Plastics Fall 2009


• Paper and Plastics offered allowances only on Coop labeled itemsSituation

• wants to sell your branded items.

• …..What items are they currently focused on? Will you help us buy your product by offering additional allowances on those items?

Answer

• We received all the branded equivalent allowances, and we received extra allowances on cutlery and napkins. Result

Ex. Bakery Spring 2011


• Bakery appointment, our COGS was flat and trending negative year to dateSituation

• We gave them targeted information

• Showed them the past 4 week history with top 10 customers. We just picked up a new C-store chain, and a few other customers.

Answer

• In the end we were able to enhance the vendor’s focus to strategically grow our sales, and increased allowances on all high moving items.

Result

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Always Ask the Question


Tyson:

Win-Win

• Asked for inventory they are long on as a result we drastically increased buying show income

• Start: 60K, End:100K

Knouse: Peak Performer

• Guaranteed level 3 payout for each product group.

• All other distributors ended up with payout level 1 for pie fillings and puddings

• Start: $4,477, End: $14,700

Seneca: Vendor Partnership

• Created a unique relationship with direct rep

• Vendor is our long term partner

• Start: 10K, End: 162K

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Takeaways

• We are stronger with Coop than without Coop as a collective purchasing group.

• We earned $15,249,773 from Coop in 2010

• Our Coop purchases now make up 37% of our total purchases, but they used to make up more.

• We have lost over 8 million dollars in Coop income due to vendor exclusions, rate changes, and programs not indexed to sales since 2003.

• We must work together to successfully partner with Coop to increase our eligible items and increase our rate received per item.

Coop Review Financials Show Benefits Maximize Return Takeaways33

Takeaways

Use the GRASP method to prepare for negotiations

• Goals - What do I/they want to achieve or avoid?

• Routes - How can I best achieve my goals by supporting theirs?

• Arguments - What reasons support my/their goals?

• Substitutes - How else could I/they accomplish this?

• Persuasion – What’s in it for them?

• Every negotiation is complex; multiple barriers may come up during the conversation. Planning multiple routes will increase your effectiveness of achieving your goal while helping to discover theirs.



Definitions

Peak Results Example

Exercise & Reading

Appendix Menu

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Questions?


Documents

Coop Department Training