The art of brand management in today’s economic climate presents huge challenges. In Australia, the theory is that we have missed a recession, but we have been left with a hugely cautious consumer and a distinctly two speed economy. Managing the challenges of a ‘value’ conscious consumers and the relentless intensity of hungry competitors, both domestically and overseas is tough. The battlefront has been complicated with the fragmentation of media and the growth of the digital world. There is an awful lot for brand managers to get their head around.
There is little wonder that many food related brand owners are shaking their heads at the moment, when on top of all this they face total abuse, well certainly a lack of love, from their intermediaries. We have read a lot about the market power of the two major supermarket chains, Coles and Woolworths, their push into private label and the leverage of their clout with respect to new line fees, discounts and promotional support. I thought up until recently I had a fix on the extent of it all, so I was blown away to hear the latest iteration of screw the food brand owner from the third player in the category, Metcash.
Metcash is a grocery wholesaler who in the past month has been granted permission to complete a takeover of approximately 80 Franklins supermarkets. The acquisition has been held up by the competitor watch ACCC, but the deal now has the green light. Let’s forget the angst that Metcash had to work through to get the deal across the line, and focus for a moment on the angst it is now causing since succeeding. Metcash has decided to retrospectively invoice suppliers for any differences in trading terms between Metcash and Franklins. In other words if Franklins had been getting better buying terms than Metcash, they have decided to invoice suppliers for the difference, times the quantity of products transacted since July 2010.
Yes, that is exactly what I said. They are saying we want the same trading terms, and we want it applied to all sales, back dated to July 2011, because if the ACCC had not got involved, that is when they ‘would have’ taken over the Franklins business. Surprise, surprise it also works the other way. If Metcash had better terms than Franklins, it wants the difference also paid back.
So how did it communicate its desire for a retrospective rebate. It simply invoiced suppliers without any prior dialogue. But it does not stop there. My understanding is that it has also decided to do away with some of its accounts payable head count and replace them with an online portal that suppliers can track their payments. Enhanced service perhaps? Who knows, all we know at this point is that you have pay an annual subscription to be able to access the portal, and then a per item inquiry fee. Szimple really. If you wish to know when you are going to be paid the money you are owned, you can pay some more money to find out when.
In a world where increasingly we are seeing consumers wishing to associate with companies that match their values, it gets a bit more problematic in a business to business context, if you don’t have a choice. In the food industry brands really do have their backs against the wall. Given the way that Coles and Woolworths mimic each other, there is an opportunity for the third player in the industry to take a different approach. To seek to assume a stronger partnership role with food producers, to build a more trusted relationship and sense of mutual interest. It is disappointing that Metcash has simply opted to follow the other players and assert its muscle, resulting in some rather brutal gouging.