By Guest Contributor Tom Lock, British Snack Co.
When you are negotiating a contract, whether it is with a manufacturer who will make your product or a supermarket or other retail outlet that is considering stocking your brand, you need to get prepared.
Let’s look at some of the stages and steps you need to take for a successful negotiation.
Know the jargon
Read books, and trade publications to brush up on relevant law and industry jargon.
Using the wrong phrase, for example, will signal your ignorance. This could lead you to a situation where you may be taken advantage of!
This applies to contacts with manufacturers. It’s essential you have a clear contract with detailed product specifications from the outset, otherwise, the manufacturer may alter the product or modify the terms later on. Similarly, you need to know the jargon when dealing with the Buyer for a supermarket or smaller retail chain. Psychologically it is important that they feel you are someone who knows, not just your product and brand, but the industry as well.
Knowing your jargon will give you the best possible chance of getting the best deal, as the person you’re negotiating with will take you seriously and you will give them the impression that you’ve been around the block.
Do your research on the company
Find out as much as possible about the manufacturers before you go to a meeting. Have they got experience with your type of product? Have they had successes with any innovations in production methods? You never know when the information you have gleaned will come in useful; either to help build the relationship or to press a point in the negotiation.
For supermarkets, you’ll want to find out as much as you can about what they sell in your category and which brands are where on the shelves. It’s also very important to find out when the supermarket’s buying window is for each of your key sales periods. You may be surprised by how early supermarkets plan their seasonal product ranges. Summer sales are often planned the previous autumn, for example. You need to approach them and start your negotiation at the right time.
And do your research on the negotiator/ buyers
Next, turn your attention to the individual you’ll be meeting. Try to get as much information in advance: How long have they been in the role? Do they have any particular product expertise? What previous experience do they have? LinkedIn can be invaluable for this research and will help you develop a clear idea of who you’ll be negotiating and what they’ll need/want to hear.
Break up the negotiation with manufacturers into stages.
Once you’ve done some research you want to convince a manufacturer that they NEED to work with you. You want to make your project seem simple (don’t introduce complexity at this stage) and easy to handle.
The next stage is more technical – use this stage to introduce complexity and make sure the manufacturer can handle absolutely everything you want them to.
The final stage is commercial. This is the point when you negotiate hard. You’ve already hooked them in the first stage, now use that to make sure you get the best possible deal.
Most manufacturers understand building brands is difficult, but if you can get them to “believe” in your growth plan, it’ll be easier to convince them to start with smaller volumes, helping you grow sustainably.
Have a detailed strategy and share as much as possible with your potential manufacturing partners. Critically the mission and vision need to be clear, practical and exciting.
A supermarket buyer also needs to believe in the potential of your product and brand to grow. They will need convincing that you will have found the right manufacturing partner and have the flexibility to meet demand when your product starts flying off their shelves.
Forecasts and commercials
Manufacturing partners like to see a detailed forecast. Having invested in the setup and production methods for your products, they want to know the order volumes, profits, and range are likely to grow. Giving a manufacturer a detailed “indicative” forecast (meaning it’s not guaranteed) is a great tool to get a better commercial deal.
When negotiating with a retailer the important to have your commercials clearly in your mind. It will be difficult to negotiate a good deal without all the key financial and logistics information in your head.
For example, you need to know your exact cost price, including delivery to the supermarket’s warehouse ‒ and remember, they may have more than one warehouse. You need to know the average margin the buyer would expect on the type of product you sell, and what impact this will have on the potential retail price.
If you get this stuff wrong, even a little, you could hamper your growth forecasts with a cost that’s too low, or price yourself out of consideration with a cost that’s too high. Pricing needs to reflect your sales strategy while taking into account the various demands and requirements each supermarket will place on you.
Negotiating with manufacturers and retailers can be daunting when you start the process of getting your new brand to market. However, by doing your homework and preparing you will put yourself in the best position to succeed. Good luck!
ABOUT THE AUTHOR
Thomas Lock is the founder and Managing Director of British Snack Co. (previously Awfully Posh (AP) Brands), a FMCG snacks company. Referred to by the Daily Telegraph as “the man who made pork scratchings posh”, Tom launched his pork scratching brand, Awfully Posh, in 2013. He soon launched a further three snacks brands, The British Crisp Co., The British Popcorn Co., and Create A Crisp, selling a total of over 5 million bags to date. British Snack Co. products are now stocked in supermarket giants such as ASDA, Tesco, Waitrose, Amazon & Wholefoods Market.
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