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Grocery Guru Ep 6: It’s CPI Time!
Join Andrew Grant and Darren A. Smith in the sixth episode of Grocery Guru: It’s CPI Time!
You Can Read the Full CPI Time! Episode Transcript Below:
Darren A. Smith:
We’re in week six. Last week, we spoke about the demise of the deli counter and how it was a bit like a turkey at Christmas. Remember?
Andrew Grant:
Remind me of the turkey at Christmas analogy.
Darren A. Smith:
I was trying to say that a counter is a bit… You don’t want to get rid of it. You don’t want to get rid of turkeys at Christmas. No one really likes how they taste, but they are Christmas.
Andrew Grant:
But given what this stage has done, I’d say they are stuffed.
Darren A. Smith:
Yeah. All right. What are we talking about this week? In week six.
Andrew Grant:
Well, I know you like a good riddle at the start of these conversations we have, get you and get your brain matter going during the lockdown. So here, here are our test top three things guaranteed to annoy a buyer, hang on a second now. I’ll give you the first two and you’ve got to guess the third.
Darren A. Smith:
Right? Go.
Andrew Grant:
No. Top three things not to say to your buyer. If you’re an account manager if you don’t want to ruin their day. One, I’m having an affair with your nearest and dearest.
Darren A. Smith:
Fair.
Andrew Grant:
Two. I have just run over your favourite pet cat or dog. Now, obviously, depending on the buyer, those first two could be interchangeable.
Darren A. Smith:
Yeah.
Andrew Grant:
But what was the third one guaranteed to put your buyer into a bad mood?
Darren A. Smith:
I have, we’ve just managed to not deliver the stock that you absolutely need to do for Easter Christmas or a big promotion.
Andrew Grant:
Yeah. A bump in the road. No, the, the number three guaranteed to ruin that day is we’re putting through a cost price increase.
Darren A. Smith:
Yes.
Andrew Grant:
As I said, other than you running over their favourite Pet, or having an affair with their nearest and dearest, it’s probably the worst thing you can say to a buyer.
Darren A. Smith:
So what about when suppliers used to say, but if you put the prices up, You’ll make more money?
Darren A. Smith:
Yeah but. Yeah. I think you see with the buyer. A Couple of things is one, will the market, particularly the current market take a retail price increase. Everybody watches everybody, but it’s actually a lot more personal than that. Cause you’ve been a buyer. I’ve been a buyer. You know, you’ve got to sit in that trading room on a Monday morning and the boss goes through all the figures and everybody gets a bit of a beating because the figures aren’t good enough. And then he, or she turns to everybody and goes, right? What news we got guys and ladies and everybody else has got fantastic news. Like, Oh my new product, number one, I’ve just won a prize for whatever. And then Darren has to put his hand up and go, oh, I’ve just accepted a 10% cost price increase from Fred blogs, grocery company.
Darren A. Smith:
It’s like a hit on my bottom line of X hundred thousand. So the next question comes from He or She manager, how the hell are you going to get that back? Well, you’ve just spent a week negotiating and trying to figure out how to get what was 18% down to 9%. And now you’ve got to figure out how to close the gap?
Andrew Grant:
Yeah. Normally it just ends up not even with a challenge like that. It’s just like you map it.
Darren A. Smith:
Or worse. Yes.
Andrew Grant:
Yeah. Now its the rest of your 8 weeks ruined. So anyway, so come to the point, cost price increases, I think are obviously inevitable. Particularly after this year where so many suppliers have had to spend enormous amounts of money, during lockdown to either be COVID safe or to get extra deliveries out there, et cetera, et cetera.
Andrew Grant:
So costs have been rising and we have the big B word happening in January. Still, nobody knows whether there will be a deal or not, or inevitably anybody importing either raw materials or product into the country will face higher costs.
Andrew Grant:
So why talk about cost price increases now?
Darren A. Smith:
Well, Q1 is coming.
Andrew Grant:
exactly. If you want to get a Q1 price increase through with your retailers now is the time to start thinking about it. There is no set rule. There are no rules, no laws saying how much notice you must give a retailer, but if you want to soften the blow and not send them into orbit, 12 weeks is sort of customer practice. So that’s fair.
Darren A. Smith:
Okay. And if I’m, if I’m an account manager that thinking about this G Scott thing, which I sort of understand and don’t, anything there, I’ve got to be careful.
Andrew Grant:
No, because remember, I know, I don’t know if we already said it in one of these sessions. Maybe we need to have a session on it. Suppliers cannot break G Scott. They have no fear whatsoever.
Darren A. Smith:
That’s true. Of course. They also want to try and steer their buyer not to break juice, go buy them.
Andrew Grant:
Yeah, I guess so, I guess so, but it’s the buyer in that possible reaction that could breach G Scott as opposed to the supplier putting up their prices, and we’ll think about it this way. Retailers, supermarkets put their prices up left, right and centre. You know, I went out yesterday to get myself a chicken tikka masala microwave meal. It had gone up 20 P, where were my 12 weeks notice? Where was mine negotiating with the single market? They didn’t even tell me. Quite rude really.
Darren A. Smith:
Well. Interestingly, when we used to buy produce as a team, a long story short, the buyers used to come to me and say, we’ve got this price increase, that price increase. And I used to talk to the suppliers or the account managers and they’d say, yeah, the crop went, the crop was short this week. Okay. Next week the crop was long. And my question was, has the crop ever been just right? Not expecting Yes. So the price always has a reason to do this.
Darren A. Smith:
Alright.
Andrew Grant:
Yeah. Give him, give him the, for politeness supplies should be giving retailers 12 weeks notice. If you want a 1st of March or a 1st of April price increase, you need to talk to them at either first December or 1st of January.
Darren A. Smith:
Okay. In your experience of dropping that bombshell, how should they do it best?
Andrew Grant:
The other, reason for doing it now as on top of the fact that, because of the perfect storm of Brexit and COVID is obviously hitting people’s cost basis, now is a perfect time, if you’re going to get a cost price increase through, because just about every single of the major supermarkets, the year ends is between 31st of December and 30th of February or 28th of February.
Darren A. Smith:
Yeah.
Andrew Grant:
So you putting in a March or April, a cost price increase that lands in March and April. You’re hitting the very few weeks of that financial year. So if they can’t put the retails up or the market dictates that retails don’t move, they’ve got something like 49, 50 weeks to find a solution to the problem,
Darren A. Smith:
Which they can help them with.
Andrew Grant:
Exactly.
Andrew Grant:
But, put a cost price increase through that lands on the 1st of December or the 15th of December, they could have 14 days to deal with it. It’s going to send them emotionally into orbit.
Darren A. Smith:
Yeah, Very true.
Andrew Grant:
The other benefit. They’re moving into Christmas mode. They’re incredibly busy just with the day-to-day logistics of running their business. And again, even most of more so, more so this year. So that cost price increase, email or letter that lands on their desk. They’ll take notice of it, but they won’t have a lot of time to really put you through the meal on it. So as long as you do it carefully and professionally, and obviously we are, we have a whole program helping suppliers do this in a proper comprehensive and professional way. Do it like that, and your chances of success or your chances of success without major downsides, massively increased.
Darren A. Smith:
That’s very true. The other part I’d add to that is obviously in the game that we’re in around training and understanding behaviours, I’m a big picture thinker. You are too. Other people like the facts. It’s knowing who your buyer is. Meaning if there are blue in human terms, which is a psychometric test, they’re going to want the details, the numbers, you and I are big picture thinkers. So we want to see, okay, how are we going to close the 250,000-pounds gap you’ve just given? Understanding your buyer and communicate in their way. Very important.
Andrew Grant:
Yeah, I agree. I agree. And there is no, there’s almost a manual. It’s almost like a car manual. There is a manual for putting a cost price increase through to the supermarkets. They, in my experience, your experience, 40 odd years between us, they react in a very, very predictable way. As at cost price increase, the third worst thing you can say to them guarantee to ruin their day. Guaranteed to get an outright, no rejection.
Darren A. Smith:
Yes.
Andrew Grant:
Then actually they go through a very specific set of phases to actually than having to enact the cost price increase. And it’s the way you behave, respond and communicate to them during that critical, well, eight to eight to 11 weeks, six days until the price increase happens, as to whether you’ll be successful or whether you end up with a nightmare scenario. Seven o’clock on a Friday night, are you shipping the trucks because I’m not paying a cost price increase? And you have the mother of all standoffs. Which is the last thing you want at seven o’clock on a Friday night, assuming the pubs are open.
Darren A. Smith:
All right, Andrew, thank you. So we’re talking about cost price index, sorry. Cost price increase or CPI. Q1 is coming up. We’ve got to get those in early if we’re going to give the buyer as much notice as possible.
Darren A. Smith:
Understand the type of buyer that you’ve got. The worst thing I ever had was a spreadsheet loose about 6,000 rows by 9,000 columns. I’m not a detailed thinker. And there I am thinking, there’s no way I’m ever going to understand this thing, but that’s what they wanted. Not clever.
Darren A. Smith:
Until next week. Anything else on CPI?
Andrew Grant:
No, I think, I guess if you’re planning to do it and you need to move quickly, it’s the 19th of November. Give us a shout, drop us an email. We’re here to help. As the saying goes.
Darren A. Smith:
Andrew, enjoy a lockdown. I’ll talk to you next week. Bye-bye.
