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Mergers can mean big business for supermarket giants, but often leave FMCG suppliers defenceless and vulnerable. We believe that by getting absolute clarity of your current pricing position you can take the necessary steps to build a sound defence against mergers and acquisitions between customers. So how can manufacturers best defend themselves?
Get clarity of your pricing structure
With a number of brands, operating across many markets and customers, it’s easy to create complexity that will hinder your visibility of pricing.
It is critical to have absolute clarity of your pricing structure, particularly areas of potential exposure across customers. It is critical to understand your position, as once made public mergers and acquisitions can happen relatively quickly so it’s important to have visibility at your fingertips.
Gain a better understanding of trade terms
If a significant risk is detected, the next step is to develop an understanding of what lies behind the pricing structure. You will need to review and understand your trade terms across customers and assess whether conditions are consistent. Essentially, you want to establish whether the differences are defensible. If this is not the case, we would recommend making changes to your customer agreements imminently to build a defensible position.
Defend your position
You’ll now be equipped to build a sound defence, and acting early will put you on a strong footing with the customer. Here’s how you can defend your position:
Hold your customers to agreements - It is key at this stage to enforce agreements that have been made surrounding trade terms, so ensure they are tangible enough to hold your customer accountable.
Renegotiate legacy agreements - If terms inherited by previous account managers have continued unchallenged, then this may be the time to renegotiate. Identify conditions that will drive a return for your business and build these into your agreement.
Realign discounts across customers - As you assess terms across your customers, now is the time to negotiate consistency in order to remove any further risk for the future.
So, hopefully you are now in a better position to defend your position against mergers and acquisitions. Taking proactive steps should turn this into an opportunity to grow your business, rather than become a risk to your P&L. Why not establish a process to review your pricing and terms on an ongoing basis across all of your channels and customers? This means that next time a round of negotiations takes place, you know you have defensible structures in place and have minimised risk to your business.
At Acumen, we have been helping our clients for over 14 years navigate their way through customer mergers to come out the other side more profitably. We quantify and evaluate the pricing and terms risk, and work with clients to develop their customer investment strategy, whether that’s around profit protection or unlocking future growth.
Talk to us about your revenue management priorities
If you would like to know more about navigating customer mergers with Acumen, contact us and one of our consultants will be in touch.