With rising food prices having become the principal driver of inflationary pressures, and causing disagreements between retailers and suppliers, one industry specialist says the ability for each to negotiate with the other in a constructive, mutually beneficial way is now more essential than ever.
Gina Overton, Director at Bridgethorne, an FMCG and retail consultancy, says that all parties need to ensure that those involved in negotiations are appropriately skilled to achieve effective outcomes that bring benefit to all suppliers, retailers and shoppers.
“Suppliers have found themselves faced with potential delistings, range reviews, the introduction of new fulfilment fees and the aggressive promotion of own brand products at the expense of branded equivalents,” said Overton. “A few months ago, Kantar reported sales of the cheapest own-label products had risen 47% over the previous twelve months.”
She noted that sometimes these spats have become very public.
“Earlier in the year, Heinz raised its prices for the second time in less than a year, following a very public dispute in 2022 with Tesco over passing increased production costs onto customers. That situation was resolved through negotiation and the full range of Heinz products returned to Tesco.
“Similarly, Greencore CEO Dalton Phillips was recently quoted as saying that price negotiations with supermarkets had become ‘so strained’ amid soaring inflation that sometimes walking away was the only option.”
But Overton stressed that the ability to negotiate constructively is critical. “There is currently a world-weariness around negotiations,” she said. “Retailers and suppliers have been going through intense cost price negotiations and, undoubtedly, for the personnel involved in those, it can be exhausting. Ultimately, both parties want to build effective working partnerships, but the reality is that inflation and now possibly deflation is continuing to upturn that partnership applecart.
“The key is for both parties to recognise the need to collaborate and accommodate the needs of the other and, as with any negotiation, that is going to require compromise. To achieve this, you’re going to have to be well prepared, to have considered what your variables or tradeables are and, crucially, not to be afraid to step out, take a pause, reflect, and ask for a follow up meeting. Not everything may be resolved in the first meeting and that’s okay too.
“We continue to hear stories of how work pressures and a lack of training can lead to either party placing unreasonable demands on the other. This may lead to an outcome where shoppers are impacted either through pricing, availability or ranging. In the ideal world, a more value-added approach is to navigate a road of empathy and understanding whilst continuing to build the combined agenda for the mutual benefit of all.”
Looking at what that might involve, Overton said: “It’s important that everything presented in a negotiation is evidence-based. It’s essential to know what your tradeables are – those other items you may be able to put on the table at some point – as much as it is to know what your red lines are. These anchors are important as they can help you take the initiative as the negotiations get underway. Your first offer will set the tone for the rest of the negotiation and will help you try to anchor discussions in your preferred direction.
“We advise presenting multiple equivalent offers simultaneously, bearing in mind that none of them may transpire to be the final outcome. Consider also not only what you can negotiate but also what you can bring to the implementation of the ultimate agreement. If you emerge feeling like you have lost out during the talks – you can still find other wins during the implementation of the deal.”
And, if you don’t find yourself in your preferred position, Overton suggests focusing on the best alternatives to a negotiated agreement to reach the most profitable resolution possible: “Try to build rapport; listen as much as you speak; ask open questions that encourage discussion and search for smart trade-offs. Ultimately, though, be open minded. A successful negotiation isn’t necessarily a win for either side; it’s both parties coming out satisfied.”
