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April2015

Foodserviceandthe“MissingLink”forTradeSpendOptimization

JimKlassTracyDelphia,Ph.D.

Flexible&Scalable

WhatDoYouBuy&Sell?

WhoDoYouBuy&SellTo?

HowDoYouPriceWhatYouBuy

&Sell?

HowDoYouDriveRevenue&

ControlSpend?

HowDoYouDriveBehavior?

ProductsServicesRights

CustomersVendors

ChannelPartners

PricingDeals

ContractsPromotionsRoyaltiesMDFs

RebatesIncentivesBrokerage

Commissions

Go-to-Market Suite™

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Agenda

Background

TradeEco-systemisChanging

TechnologySystemsandTrade

FutureofFoodserviceTrade

TradeInvestmentandTradeTeams

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Background

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TradeEco-system ContractedOperators surpassthestreetvolumeformostmanufacturers

GPOproliferationcreatesopportunitiesandchallenges formanufacturers

TradeInvestmentandTrade Teams

34%havededicatedTrade Teams

Tradespend=17%

38%havededicatedTradeTeams

Tradespend=18%

TechnologySystemsandTrade

Lackofsystemsmeanslackofinsight§ 60% unabletoevaluatepast

distributormarketingprogramsforeffectiveness

§ 85%don’tknowwhichTradepromotionsworked

Dataissuescontinuetoinhibitprogress§ Unabletomeasure

performanceduetolackoftechnologysolutiontocollect,aggregate,andanalyze data

Previous Foodservice Trade Survey Highlights

2011Survey2009Survey

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2014 Foodservice Trade Survey

§ResearchwasconductedinNovemberandDecember2014with36NorthAmericanFoodservicemanufacturers.

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Trends affecting Foodservice Industry

§IndustryconsolidationandcommoditiesareexpectedtohavethemostimpactontheFoodserviceindustrythrough2016.

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TradeEco-systemisChanging

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Broker Consolidation Hasn’t Achieved the Results Promised

§ In2009themajorityofManufacturerswereexclusivelyBroker

§ “Mega-brokers”justlookingforanumbertohithavelostlocalknowledge,disintermediatingManufacturersfromtheverygrouptheywanttobecloserto

ImplicationèManufacturersneedtoutilizetheirclaimsdatatodirectsalestothenextbestoperatoropportunities

“Motivatingbrokerstoexecutekeepsmeupatnight.”

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Dedicated Trade Team Now Table Stakes

§MostmanufacturersnowhavededicatedTradeTeams– asignificantchangefromjustafewyearsago.

34% 38% 84%2009 2011 2014

ImplicationèManufacturersareacknowledgingtheimportanceofTrade;respondentsdiscussthe“needfordisciplinetoinsurebalance.”

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Trade Team Organizational Home

§HomingofTradeTeamsinFinancesuggestsa“tacticalmindset.”

HomingofTradeTeamsoutsideFinancereflectsashifttoaStrategicTrademindset asTradeisusedinatargetedapproachtodrivenewbusinessstructureforTrade.

41%

Implicationè Tradeplanningneedstobemorecollaborative,evenwhileFinancemaintainsfiscaloversight

Note:“Other”respondentsindicateasharedreportingstructurethatincludesSalesand/orMarketingwithFinance

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Program Analysis

§AnalysisofprogramsistheBlindSpotinmanufacturerstradepractices:§Lessthan7%alwaysanalyzetradefor:

§ ROI(haveacommonmethodology)§ ImpactofmultipleprogramsonGrossto

Net§ Sharinginsightswitheitherdistributoror

operatorpartnerstodriveimprovedperformance

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Trade Process Evolving as a “Win-Win”

6%Distributor

44%Distributor+Operator

3%Operator

Aboutathird(31%)ofsurveyrespondentsstilluseasiloedapproachtoplanningTradespend.

ButsomenowjointlyplanTradewithdistributors,operatorsorboth.

Implicationè Planningformutualbenefit israpidlybecomingtablestakes.

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Trade Investment Spend: 2013 - 2015

§Athirdofmanufacturersanticipatespendingless onTradein2015.Efficienciesandstrategicinvestmentarethemostprobableexplanation.§ Only16%ofrespondents

increasedTradeinvestmentinboth2014and 2015

§ Manufacturersarealsoutilizing“recapture”toreduceEarnedIncomeforContractedAccounts

Implicationè TheamountspentforTradeinvestmentisstabilizing

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TradeOrganizationandInvestment

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Trade Spend Allocation

§ManufacturersvarygreatlyinhowTradeisallocatedtodistributorsvs.operators.Since2011,TradeisshiftingmoretowardtheoperatortoinfluencethedistributorpurchasesasCategoryManagementtakeshold§ Manufacturerswithstrong

BrandsorcontractedbusinesstendtohavehigherOperatorspend

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Overall Trade Investment

§AverageTradeinvestment§Upslightlyfrom2011paceofincreasehasslackenedandmayreversebasedupon2015projections

19%

RecaptureReduceearnedincomeforcontractedaccounts;thisisupsignificantlyfrom35%in2011.

Implicationè Traderatesneedtobescrutinizedforopportunitiestocapturemarginandredirecttotheoperator

91%

Whatyou spendonTradeshouldbe

determinedbasedon:

1. Competition2. Category3. MarketShare4. Margin

Contribution

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Distributor Trade is at an Inflection Point

§ManufacturersnowhaveadefinedstrategyforbothIndependent&CorporateDistributors

§(CorporateOpCoarereceivinglesslocalprogramsasfundsmovetoHQ)

§BuyinggroupsarereceivingmoreattentionandarebeingaskedtobestrategicpartnerswithmanufacturersduetotheSysco/USFandothercorporatedistributorconsolidation

§CategoryManagementisforcingManufacturerstochangehowtheyallocatetheirtradefunds:

§Lessornotradetothedistributorforrestrictedcategories

§MoretoOperatorsto“pull”casesthrough

88% 53% 60%

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Operator Trade

ImplicationèManufacturersneedbettervisibilitytohowoperatortradeisdrivingbothcomplianceandvelocity

ManufacturerswhoincreasedtheamountofOperatorSpendin2014

Manufacturerswhoincreasedoraddeddeviatedpricingin2014

56%

29%

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Overpayment on Operator Programs and Bids

§OverpaymentonOperatorprogramsisaseriousconcernwith94% ofmanufacturersbelievingthey(may)haveoverpaid!

Implicationè TakecontrolofyourTradeprogramandstopoverpaying!

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Group Purchasing Organizations

§WithsomeincreasesinGPOspend,manufacturersaremorelikelytodevelopchannelguidelinesforGPOs.

Implicationè GPOsarecrucialbutmembershipandchannelmustbemanaged

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DataandSystemsforManagingTrade

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Usable, Formatted Data is a Concern

§Themajorityofdata– 90%fromOperators,84%fromDistributors– requiresatleastsomecleansing.

Implicationè ConvertingClaimsdataabouttheoperator(unitlevel)intoactionableinsightsiscrucialformanufacturerstoengagewiththeoperatoranddrivecomplianceandvelocity

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(Not Much) Satisfaction with Current Systems

§ 40% ofmanufacturersarenot satisfiedwiththeircurrentsystemstomanageTrade.

§ Mostbelievesystemshandletactical contracts,claimsandpaymentswell…

§ Butfailtoprovidestrategicinsightlikeanalyticsanddashboardreporting

ImplicationèManufacturersmustrequiremorefromtheirsolutions;basicblockingandtacklingaren'tenough.Actionableinsightsonmarginandvelocitywilldifferentiatebest-in-classfoodservicemanufacturersfromthecrowd.

35%HomeGrown

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Administrative Cost for Trade

§TechnomicestimatestheadministrativecostforTradeas3.2%ofsalesbutathird(35%)ofmanufacturersreportlowercosts.

ImplicationèManufacturersmuststreamlineprocessandmanageexceptionsinanautomatedsystem

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Manufacturers Lack Critical Insights & Reporting

32% 39% 61% 40%

§Seldomornever…

§Evaluatepastdistributormarketingprogramsforeffectiveness.

§Seldomornever…

§Evaluatetheimpactofmultiplecontractsonadistributor,operator,unit,and/orproductlevel.

§Seldomornever…

§Shareanalyticaldataandinsightswithdistributorsandoperatorsinsupportoftheannualagreementprocess.

§Seldomornever…

§Analyzedistributordeviatedproof-of-performanceinformationattheunitlocationlevel.

%Manufacturersanswering“Always”

32% 10% 6% 7%

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Needed Enhancements to Current Systems

Mostitemsonmanufacturers’“wishlist”toimprovetheirsystemsarefeaturesconsideredtablestakesinotherindustries:§ Integrationwithothersystems§ Reporting,dashboards§ Democratizationofinformation§ Unitlevelvisibility§ Post-programanalysis§ Self-serviceanalytics§ Easeofuse

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FutureofFoodserviceTrade

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Strategic Approach to Foodservice

Concerns RequirementsManufacturersarefocusingontradetodrivemarginandincrementalsales§ Butitmustbemoreefficient

Compatibilitywithcurrentfinancials;numberneedstobeTHE numberforallreportingandanalytics

Resourcesarealreadystretchedthin;howtodomorewithless?Utilizeothers’capabilities

Easeofusebyfieldè CRMintegrationUnitlevelperformance

NeedtoprovidemoreprescriptiveguidanceonbothsellingaswellaspromotionalofferingsAnalyticsthatdriveaction

AbilitytomeasureeffectivenessClean,accurateandtimelydatafeeds

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The Missing Link in Foodservice Trade?

Dataandsystemstogenerateinsightsthatwilltakeyoufrom

tacticalTradeSpendtostrategicTradeinvestment.

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JimKlass,IndustryPrincipal|ConsumerProductsjim.klass@vistex.com704.562.9794