The power of no could save food firms thousands
Speaking at Food Manufacture’sSME Business Leaders’ Roundtable, hosted by legal specialist Eversheds in Leeds, David Williams md of bakery firm Butt Foods, described the standard of negotiation as “absolutely appalling”.
“Small food firms should say no to their retail customers more often – it can be very powerful,” said Williams. “We discovered just how powerful it was after saying yes too often to fund things like retailers’ cost-reduction programmes.”
Professional negotiator
Williams said the turning point for his firm was the appointment of non-executive director Tim Sutton, of Fresh Growth Solutions. “He trained us in negotiation skills, which really helped us negotiate with retail buyers on more even terms. Before, we just used to send a representative to speak to a professional negotiator. It really pays off when small firms think like big firms.”
SMEs should invest in better negotiation courses than the retailers are sending their staff on, he added.
After some difficult experiences, Williams said he tried to not to let his firm’s trade with big retailers exceed a certain percentage of total business. Also, the firm will no longer support retailers’ cost-reduction programmes.
“One of the challenges for small suppliers is the emphasis on category management. Buyers [employed by retailers] expect suppliers to do everything for them and they feel pressured to do that,” said Williams. “Some supermarkets seem to be trying to get the supplier to take all the risk.”
But he acknowledged that the threat of de-listing by a large-scale retailer is a powerful one for SMEs.
Few big players
“The same thing [undue pressure from customers] happens in the automotive industry where few big players have a lot of power over lots of small suppliers,” said Williams.
Further testimony to the power of saying no came from Tony Gilroy, md of meat protein company Kookaburra. He told Williams: “You are absolutely right. Sometimes, you have to say no.”
Gilroy said that his firm had made significant savings recently by disputing increased energy charges. Rather than agreeing to pay the increased bill without question, Gilroy insisted on negotiating with his energy supplier.
The outcome was a deferral in the date when higher energy charges would be implemented and a cancellation of increased charges for equipment rental.
The Roundtable was chaired by John Walker, chairman of the Federation of Small Businesses.
Watch out for more coverage later from Food Manufacture’s SME Business Leaders’ Roundtable.
SME facts
- 4.5M UK SMEs.
- SMEs account for 99% of all enterprises, 58.8% of private sector employment and 48.8% of private sector turnover.
- SMEs employ 13.8M people and have an estimated annual turnover of £1,500bn.
- The number of sole proprietorships increased by 87,000 in 2010 and the number of firms by 6,000.
- Enterprises are defined as: micro with 0-9 employees, small with 10-50 employees and medium with 50-249 employees.
Source: Federation of Small Businesses
