I distinctly recall that early on in my first year as a produce manager – I was 19 years old at the time – it was abundantly clear to me that where I bought fresh produce from made a difference in our sales and in the customer experience.
We were a small operator with three locations in 1983. Each store was allowed to source from the warehouse, local wholesalers or other purveyors of fresh produce, including dozens of local farmers. I credit to this early experience my understanding of the difference between a good deal and good value … and, believe me, there is a difference.
A grape is not just a grape
How many times have we in the produce department heard “A grape is a grape” or a similar statement? In fact, all grapes are not created equal – and the same goes for all other fresh fruits and vegetables.
But often the top-level retail leaders are not the produce experts, so they prioritize price over quality and variety. They look upon produce as an add-on department rather than the profit and image center for the company that it is.
A strategy built around price only can be a detriment to growth, profitability and certainly to the customer experience.
A better way
By the time I became a buyer in the late 1980s, our company had tripled in size – nine locations. However, our produce department struggled to keep pace with the growth of the total store. Why? Because we had no consistency. The strategy of allowing each store to source from where they preferred led to major swings in product availability, grades, standards and of course overall success.
We realized that we had to build relationships and year-round programs, but first we had to get to know our suppliers better to know with whom we wanted those long-term partnerships.
It started with phone calls and having suppliers come to our office to present, which was the first time we had ever leveraged our volume to create a new strategy for fresh produce.
What makes you different
Meeting with suppliers – many of whom we only knew as the label on the box – was an eye-opening experience. We learned that some had nothing to offer but price while others were embarking on building a brand and full-service experience for their retail partners. The latter was exactly what we needed to improve and build out our fresh produce image.
But there was much to learn, and, I might add, we would have to convince our leadership that it was the right thing to do for our customers. Still, that first step of getting to know the suppliers on a personal level changed everything for our company.
Uphill climb
It’s often said that change is hard, and indeed it is. For us, it was a paradigm shift. Moving from a strategy where securing the cheapest price was the primary objective to one where we wanted the “Best Quality for the Best Price” seems simple in theory, but it was a true leap of faith and one where we were at great risk if we were wrong.
We knew that to be successful it would be critically important to build trust and transparency between our company and each of our supply partners. It also included having to make difficult decisions as we improved our standards for grade, quality and service. Some of our suppliers could not rise to the level of performance we were expecting from them and ourselves, quite frankly.
Some relationships ended, but many more flourished and endured for decades.
Earning support from leadership
Winning over leadership is easier said than done because the P&L always is top of mind – and understandably so. Proving a shift from price-only strategy to overall value is the right move can be daunting, but it can be done.
Start with a category or two. We used potatoes, switching from random suppliers with mixed labels to a year-round program with a well-known label. Over the course of several months, we were able to validate increased tonnage, sales and profit as well as improved service levels, and we built trust with the customer by having consistency on the shelf day in and day out.
The positive outcome of the early transition was that store operations could see the difference in what they were receiving, and they were confident and ordered more product to sell. The benefits were greater consistency, value over price and increased demand, which led to improved profitability.
The proof that we made the right strategic decision for our fresh produce department was when the president of our company came to me and asked when we were going to add another premium supplier and product to our offerings.
We had proven through great planning, strong communication with suppliers and execution throughout our operation that price – while important – was not alone going to make us successful. It was all about the customer experience … It always was.
Building momentum
By the late 1990s, it was apparent that we were set for more expansion into new markets. It was then that we took our supply relationships to the next level. Our company invested in business travel annually that took us to California, Washington, Florida, Texas, New Mexico, Wisconsin, Michigan and other producing states – and to other countries like Mexico, New Zealand, Canada and Chile.
The purpose of these trips was to build out boots-on-the-ground knowledge that we could then leverage with marketing, advertising and merchandising strategy.
At that time, our competition was not making the connection between supplier and the customer, something that is commonplace in today’s retail sector. We were setting a standard which benefited us greatly and continued to solidify our supplier relationships.
Commitment by both parties is part of any strong relationship. A comprehensive and strategic alignment of year-round or seasonal agreements – supported by forecasting from the retailer – benefits the supplier from a planning perspective. When a supplier has confidence in the demand being provided to them, they are much more willing to bring more to the table.
When price is the primary driver in negotiations, other benefits a supplier can bring to the table are often overlooked. Approaching the conversation from the side of what can a supplier offer besides price opens all sorts of doors to added value.
Do what you say you will do
Over the course of my retail career, one principle we would not compromise on was “Do what you said you would do.” In over 30 years of negotiating with suppliers, building our company brand as well as that of our partners, standing by our word was paramount, even when doing otherwise would have been financially beneficial in the moment.
The result of that approach and the commitment to working with suppliers through many ups and downs far outweighed any relationship that could have been built on price alone.
Top-tier suppliers
What makes a top-tier supplier? The answers are many, but in my experience it starts with trust and a clear vision from the retailer that is openly shared with the supplier. A supplier cannot deliver on an objective if the objective is not clear.
Suppliers inherently want to satisfy their retail customers. They will recreate, redesign, rebrand, reformulate, reship … or resign if they cannot achieve the goal of the retailer and remain profitable doing so. This is a conversation which is often overlooked by suppliers who are concerned about losing business.
Retailers have a responsibility to ensure their business model is solid, profitable, and set for growth. Suppliers have the same goal, and they will do so with retail partners who value their brand and purpose as much as the retailer values their own.
This column is part of a series by Joe Watson, who spent 30-plus years as the director of produce for Rouses Markets and was named Produce Retailer of the Year and to The Packer 25 in 2014. Joe now serves as a vice president of member engagement and as the retail and foodservice subject matter expert for PMA.