1984: year of fatal decision for Swiss watchmakers

IF you’re one of many retail jewelers ambivalent about carrying watches–especially trouble some Swiss brands–don’t give up quite yet. A top Swiss watch executive, ETA Group president Ernst Thomke, is launching a campaign to regain watch business for his nation. It will involve sharpening of marketing skills, new stress on the “made in Switzerland” message and production of quality time-pieces at all price points from top to bottom.

To accomplish his goals, particularly in the U.S. market, the tough, efficiency-minded “father” of Swatch has launched a program of sweeping reforms. He expects to meet them over the next 24 months. His initial goal: To trim, consolidate, remold and otherwise whip the long-squabbling, fragmented Swiss watch industry into a well-oiled high competition production/marketing machine.

“There still are far too many brands out there without a clear-cut identity whereas there’s tremendous selling power in the ‘Swiss-made’ mystique,” Thomke told JCK during a recent interview in Switzerland. His radical solution: Concentrate resources where they’ll count the most by supporting only a few strong brands and employing generic advertising techniques that promote Swiss craftsmanship and styling. These and other Thomke policies–centralized control, hightech automation and mass marketing–seem strange remedies to fiercely individualistic Swiss watchmakers.

In fact interviews with 20 industry officials in Basel last April reveal that Thomke has no shortage of critics who refer to him as “hatchetman” or “dictator.” Many fear his methods ultimately could bring the entire Swiss watch world–top-end included–tumbling down.

Even so, after years of decline in the low-to-mid priced segments, a major part of Swiss watchdom now pins its comeback hopes on the ETA strongman who has become operational head of the newly-merged ASUAG/SSIH supercombine. Supporters view him as the industry’s “man of the hour,” a would-be savior who is performing a herculean and long-overdue task. “Thomke’s got the capacity and charisma to pull it off,” says Swatch Watch Inc. U.S.A. president Max M. Imgrueth. “He is gluing it all together and building team spirit.”

By most accounts, that had better be soon. The joint ASUAG/SSIH venture, which covers about half of all Swiss watch exports and annual sales of $750 million, is being kept alive by massive money transfusions from major bankers who are clamoring to see their investment bear fruit. Hence the mood of the industry is one of wary expectation counterbalanced by a sense of “do or die” urgency.

Ernst Thomke is well-aware of his time limit. Indeed, ever since ASUAG and SSIH Holding informally merged last December, he’s been focusing all his efforts on restructuring and positioning the huge new supercombine. Some recent actions:

Thomke and top ASUAG/SSIH officials are working toward completion of the merger’s legal formalities. This includes putting the two disparate groups under a single fiscal and management roof.

According to Robert Hussy, public relations “speaker” for the combine, the management of General Watch Co. Ltd. (GWC), SSIH Holding’s finished product division, was dismantled last winter. The majority of capital was taken over by ASUAG’s Ebauches SA movement and components sector. The same shakeup resulted in the ouster of GWC chief executive officer Ulrich Spycher and the appointment of Thomke as director of both sectors (a third division–diversified industrial products–still has no permanent head).

“Now we will have more streamlined, centralized management and financial control for all,” says Hussy. “There will be fewer people and individual companies will operate much closer to the top management level.” This, he adds, consists of a committee of corporate heads chaired by Francois Milliet. Fewer brands

In their relentless pursuit of efficiency ASUAG/SSIH leaders have sold off most of GWC’s weakest brands over the past year. Atlantic, Rotary, Roamer, Technos and Edox already are gone, while Eterna, Mido and Arsa are in the process of being sold.

“We’ve got to economize,” explains Robert Hussy, “avoid duplication and concentrate our resources where they count the most…in the production, management and marketing of a limited number of more profitable brands.”

Currently five powerful world brands–Omega, Longines, Rado, Tissot and Certina–have been designated the “locomotives” that will pull ASUAG/SSIH into profitability. Their top leadership roster includes Dr. Paul Luthi Schlup, Rado; Paul Peter, Omega; Walter Schatz, Tissot; Manfred Laumann, Longines and Jean Claude Vagnieres, Certina.

Though combine planners have desginated Longines, Omega and Rado their “flagship” brands, Thomke expects Certina and Tissot, middle-priced brands already strong in Europe, likewise to become major corporate building blocks. He promises that “over the next 12 months they will become very well known worldwide.” Sharper marketing

According to Pierre K. Glauser, FH director of external relations and markets, one thorny problem still facing the Swiss is setting up qualified marketing teams in the U.S. and elsewhere. “Swiss watchproducers need to be more entrepreneurial,” he says, “…and give more autonomy to their representatives abroad.” Glauser is quick to add that current ASUAG/SSIH plans “do call for more reliance on the individual efforts of subsidiaries abroad.” Rado for one has built a powerful new U.S. organization headed by former Heuer executive vice president/general manager John Hubacher. Thomke also predicts that Rado will “become a big U.S. star by this fall,” but concedes that “Omega needs more time to organize its marketing side.” Omega and another U.S. subsidiary, Hamilton Watch Co., have been placed under a new parent group–SSIH-US–which will conduct strategic planning for each of its brands. Eventually these may include Rado, Longines and Certina, too.

Thomke and ASUAG/SSIH marketing planners have much more than generic advertising up their sleeves. ETA marketing vice president Heinz marketing vice president Heinz Schenkel explains that “the big picture calls for products in every category” except the low-low end. “The Swiss intend to offer a full range of quality Nixon watches , prices and services carefully targeted for each national and consumer market,” Schenkel says. Dr. Jacques Irniger, ETA vice president, marketing-sales, adds that there now will be “something for everybody…especially on the lower end with ETA’s own Swatch” (see sidebar, Swatch sales soar).

The group also has been developing new markets outside traditional European channels. Irniger states that the group’s several-year-old component operation in Hong Kong (ETA Far East) is still expanding. “That’s where business is,” says Irniger. “We’re competitive there, especially on the electronic model side.” He also expressed hope for more business in Japan with Casio. “We have good contacts with Casio people,” he says, “and sold them some movements last year.” Irniger adds that ETA Industries, the firms’s U.S. marketing arm, likewise has enjoyed increasing sales. Also in the planning stage: A joint ETA/Timex project to develop low-priced movements for distribution worldwide. Technological innovation

Quality, high-volume production may, indeed, be ASUAG/SSIH’s ultimate trump card. But the skilled application of robotics and other new technology has reaped another vital benefit: A much quicker reaction time from drawing board to assembly line. For instance, just last year Ebauches developed a high-precision temperature-controlled movement that’s already on the market.

Other patented technical innovations unveiled this year at Basel and scheduled for mid-market debut in 1985 include:

* A Flatline combo movement with a single crown controlling seven digital functions and the analog display.

* A combo “Dichroic” movement that can produce–and erase–digital readouts on a traditional QA dial; operated through the crown, the whole dial surface turns into a microcomputer-controlled electronic screen.

* A combo Delirium movement only 2.98mm thick and operated by caressing a touch-sensitive zone on the dial.

Though the ASUAG/SSIH merger itself should pose no major legal/fiscal hurdles, there’s no guarantee any of the above measures will save the industry. Except for Switzerland’s legendary luxury end, Swiss watchmakers are walking a tightrope between last opportunity and market oblivion. Indeed there are indications aplenty that Thomle’s touted comeback could easily become a case of “too little too late”:

* After a severe world recession, international trade now seems poised for expansion–a factor vital to Swiss matchmakers whose own home market is miniscule. Even so, because of a still-precarious economic climate, industry analysts are only cautiously optimistic. Stresses FH general director Daniel A. Kallerhals: “We have an extraordinary short-term dependency on what happens throughout the rest of the world…So it’s difficult to predict our chances no matter how optimistic we want to be.”

* 1983’s export volume of 30 million watches and movements ran a distant third behind Japan’s 75 million units and Hong Kong’s 300 million units, though Switzerland retained the lead in export value. FH feels that sales this year could exceed 1983 ($1.6 billion) but doesn’t expect them to return to 1981’s $1.8 billion. Some analysts discount any upturn as merely a short-term “technical” revival–the result of inventory rebuilding after a prolonged period of depleted stocks.

* Although the Swiss retain 85% of the super-luxury watch market worldwide, they cannot stay afloat for long on limited top-end sales alone. Over the past decade Switzerland sustained a paralyzing one-two punch from Japan and Hong Kong that nearly knocked it out of the lower end (an area where the Swiss once were well-entrenched with their Roskopf pin-lever mechanical designs). Thomke believes that a loss of lower-end volume also means losing the financial turnover needed to invest in research and development. He insists electronic innovation and competence are a decisive Swiss edge that must be maintained at all costs.

* Aggressive Japanese–mainly Seiko–marketing has sapped Swiss mid-market strength, which also is essential to long-term survival. Mid-segment brands have held more or less steady over the past year. But in many countries–especially the lucrative U.S. market–they’ve not yet been able to m ount a significant comeback. Admits Stuhrling watch Co. president Andrew Tisch: “The Swiss are trying to play mid-market ‘catch-up’ with the Japanese who are tough, tough competitors.” Indeed, even as ASUAG/SSIH plans anew for mid-market breakthroughs, another Japanese powerhouse–Citizen Watch Co.–is launching a major U.S. campaign in 1984. Scathing criticisms

Ironically, the ASUAG/SSIH “rationalization” process is aiming at a Japanese-style vertical integration of myriad technical, production, fiscal and marketing operations which Thomke is convinced “will strengthen the entire group.” He concedes, however, that “strong emotions,” have caused the biggest reorganizational headaches.

“A merger of this cope is hard on the human level,” he says. “SSIH had its methods and we had ours. And let’s not forget that some Swiss firms have been rivals for centuries. So you can’t change this mentality in just a few months. It takes time to build mutual respect and learn to speak the same language.”

But Thomke’s critics insist their “strong emotions” are warranted. They suspect the ETA strongman may be forging an autocratic fiefdom in his group’s own image. “Thomke has publicly stated that Swiss watch policy is that of ETA and maybe a few finished brands like Omega,” notes FH general director Kellerhals. “Lots of small struggling companies, as well as some prestigious Geneva firms, definitely feel threatened by him.”

Small wonder. Only days before Basel’s 12th Annual Watch, Clock and Jewelry Show began April 5, Thomke reportedly called the exhibitors silly and spendthrift in a newspaper interview. “The Swiss have spent foolish sums in (cementing) their relations with retailers,” he proclaimed in the French language weekly L’Hebdo. “This relationship is unbalanced. The Basel Fair represents a classic example of a (huge) expenditure followed by few results….”

Manufacturers and Fair officials felt betrayed by the criticism, which cast a disparaging cloud over Basel’s 1500 exhibitors in general and Swiss watchmaking in particular.

To be sure, on the very eye of the fair Thomke publicly insisted he’d been misquoted. He claimed the interview “had dealt solely with robotics and automation,” and in no way was meant to impugn either the Basel Fair or the Swiss watch industry. “Whether or not the participation of (other) component or semi-finished product vendors is justified, I clearly support the presence of watch and jewelry manufacturers at this exhibition,” Thomke declared.

Still, many industry insiders remained skeptical…especially in view of reports the remarks had been taped. Dismayed officials from the 270-firm Federation of the Swiss Watch Industry (FH) grumbled that Thomke “is a mystery man”…even to them. “We hardly ever communicate with him…and never know what he’ll do next,” shrugged Jean-Jacques De Reynier, FH delegate for Europe, Africa, North and South America.

Objections to Thomke’s actions go much deeper, however. For example, adversaries stress that the ASUAG/SSIH policy of brand attrition–as well as a greater reliance on automation and production of electronic whatches over mechanical ones–have done little to ease industry unemployment, which has risen shaprly. FH general director Kellerhals views unemployment as only “a temporary phenomenon that should flatten out once the rationalization is complete.” He stresses that so far it has largely involved early retirees and laid-off workers retrained for other fields. Nonetheless, recent GWC factory shutdowns in Grenchen and Bienne have thrown scores more out of work, and additional closings are on the way.

Some observers still detect a hard-headed reluctance among Swiss watch executives to learn from past mistakes. Rodolphe M. Schulthess, executive v.p., Heuer Time Corp., believes “Swiss-based corporate heads still don’t always listen to their American importers. That’s why many foreign firms fail there. The U.S. mentality is completely different from Europe.” Stresses IWC/Shaffhausen WatchCo. president Arde A. Burki: “If I were the Swiss, I’d send young managers to the U.S. to learn the ropes. Few people in Switzerland really know the American market.”

Burki and Schulthess nore that the Japanese have long understood how to market their products. “They’re willing to lose money year after year,” Schulthess says, “just to study and capture a market. But more important–they manufacture exactly what consumers want. They don’t impose a product.”

He cautions that it’s dangerous for the Swiss to market so many brands under a single corporate umbrella…especially in the U.S. “The market just won’t accept that,” he says, “since each brand should represent a clearly different strategy, price range and target consumer.” Kellerhals agrees, questioning whether generic advertising alone would workd. “An ad program covering Tissot watches selling from $20-$20,000 might be too vague and imprecise, especially in the U.S.,” he says. “The consumer doesn’t buy a Swiss watch, but rather a brand.” He terms generic advertising only a “partial strategy” that must be combined with brand name identificaion. Schulthess in turn suggests that healthy individualized marketing and competition may still be the best approach.

Kellerhals professes neutrality, but observes: “Many believe it’s up to the individual entrepreneur, not the watch industry or the government, to invest…to get out into the market and take risks…that it’s a free market which actually determines who’s strong enough to prevail.”

Most disturbing to critics, though, is the notion that the merged ASUAG/SSIH is no more than an “artificial” concept dreamed up by underwriting Swiss banks and management consultants who know nothing about watch marketing. “This whole Swiss thing is a bit diseased,” exclaims Harmon Marketing Corp. president Joe Harmon, a long-time American observer in Basel. “It’s obvious the banks are calling the shot…and are suffering from mild hysteria.”

Clearly the Swiss have the technology, product, price structure and marketing potential to succeed. Failure, by most accounts, would be an incalculable tragedy not only for them, but the watch world as a whole. Declares Seiko president Robert Pliskin: “I wish the Swiss well and hope they can find some way to get it together. The marketplace needs them…and wouldn’t be as good without them.”

But Pliskin’s sentiments beg the inevitable question: Are Swiss watch producers at last ready to march to the regimental drum of ASUAG/SSIH and Ernst Thomke in a coordinated crusade against Far Eastern foes, or will they stubbornly remain “Swiss” and divided among themselves? One thing is certain–the ASUAG/SSIH merger and Ernst Thomke are destined to shape the fate of this problem-racked industry for decades.

Bar-code scanning: bringing order to random weights

Foodservice distribution industry members are realizing the benefits that can be obtained from adopting bar-code scanning into their operations. Bar-code scanning can significantly increase the production process of distributors. Prominent companies such as Gordon Food Service and Atlantic Food Service are already using scanning technology in their operations. For distributors to get acquainted with bar-code scanning, they are advised to use the devices first on random-weight item handling.

Bar-code scanning will no doubt become widespread in the food-service distribution industry someday. The only question remaining is when.

While distributors and manufacturers continue wrangling over who is to blame for slow progress, a few distributors are quietly moving ahead and doing something about it. One is Atlantic Food Services, Manassas, Va., recipient of an ID Innovator Merit Award for its new automated warehouse system.

Another is Gordon Food Service, Grand Rapids, Mich., which pioneered bar-code scanning in the industry when it installed its first conveyorized pick system 15 years ago.

With the opening of its new Grand Rapids distribution center which began trial shipments in February, GFS is initiating a comprehensive bar-code-scanning program. The company is taking a gradual approach, but eventually scanning will expedite every phase of its warehouse operations from receiving and put-away to replenishment, order picking, and returns.

The first step in its new warehouse project focuses strictly on random-weight products. This strategy, operations/special projects manager Kirk Mortenson believes, could make sense for other distributors, too. If a company is looking for a pilot project to get its feet wet in scanning, random weights are a good place to start for several reasons, he says.

“Random-weight items represent a limited amount of product, compared with all of the other product categories, making them a manageable place to start.” At Gordon, for example, catch-weights account for fewer than 300 items and about 5 percent of the company’s total case volume.


Despite their small numbers, however, Mortenson points out, “They are an area where a distributor is likely to see immediate results.”

That is because selecting random weights is typically one of the most labor-intensive, time-consuming activities in the warehouse, and replete with opportunities for error.

Gordon’s present system for handling catchweights probably resembles the way most distributors work. The selector writes the weight of the item on a piece of paper or duplicate pick label which must be collected and given to a clerk. The clerk then keys in the information at a computer terminal so it can be incorporated for invoicing. This series of steps disrupts the selector and requires work to transfer bits of paper around, plus labor to enter data. Each time the selector writes a weight and the clerk then reads and keys it is also an opportunity for error.

Bar-code scanning with radio-frequency-based scanners eliminates the whole procedure. It requires placing a bar-coded weight symbol on each product. The selector then uses a portable laser-equipped terminal to scan the bar-coded weight. This immediately sends the information to the computer, enabling it to produce a correct, extended invoice without further labor.

An alternative for handling random weights is to place a unique, bar-coded ID number on each catchweight and create a computer record for that item that includes the weight. Later, when the selector scans the ID, the computer identifies the item and matches its correct weight for invoicing. This is how Atlantic’s system will probably work.


Rather than take a piecemeal approach to the problem, Mortenson notes, Gordon extensively researched the current state of bar coding by foodservice manufacturers and evaluated alternatives before settling on an approach. Finally, it decided to utilize and require vendors to use the UCC-128 Shipping Container Code with Application Identifiers. It is the newest, most complete format developed by the Uniform Code Council, Dayton, Ohio, for handling information beyond that contained in the UPC Shipping Container Code. It was endorsed by a multi-industry Distribution Efficiency Task Force including the National-American Wholesale Grocers Association, Falls Church, Va., in 1990.

Gordon chose it not only because it would supply all the information it needed, Mortenson stresses, but also because it provides numerous internal benefits to manufacturers.

The company found few vendors already using alternatives and the few in place were internal systems that varied from one company to another. Therefore, Gordon came to the conclusion that initiating the implementation of this most comprehensive system would help foster adoption of a workable standard throughout the industry.

UCC-128 is a further development of the Universal Product Code (UPC) system, that incorporates, in addition to item and shipping container codes, methods for bar-coding additional information such as weight, production date, expiration date, lot number, and serialized unit IDs. The ability to easily track these kinds of data through scanning in their own operations holds significant benefits for manufacturers, Mortenson points out. This was a key to its strategy for gaining compliance by vendors in supplying the codes.

Gordon worked closely with vendors through a painstaking process that included distributing its own Bar-Code Requirements handbook spelling out its labeling requirements. It also has strategies in place for dealing with non-compliant product, Mortenson adds, but its first strategy is making clear to vendors that labeling is their responsibility and a normal part of doing business with Gordon.

Other distributors with less clout than the $825-million-a-year leader stand to gain by taking advantage of Gordon’s work by installing systems that use the same standard.

There are alternatives, such as the unit ID approach Atlantic plans, or applying one’s own bar-coded weight labels in-house as product is received. In fact, the former Holleb & Co., Bensenville, Ill. (now Kraft Foodservice, Chicago), installed such a system roughly five years ago. Then vice president, distribution, Neil Holleb said at the time that the system provided huge benefits in speed and accuracy in handling random-weight products.

Joey Pierce of North American Systems, Richmond, Va., which designed Atlantic’s system, notes its approach can also use UCC-128 when vendor codes are in place.


Scanning was still novel when Holleb launched its program. There have since been tremendous improvements in the availability, range, and pricing of equipment needed, which puts scanning truly within reach of many distributors.

A basic starter system might require a few hand-held scanner terminals and a radio-frequency base station for communications between the scanners and host computer. If vendors do not supply bar codes and in-house weight labeling is required, another needed component would be a scale with bar-code capability.

One can also use means other than RF to transfer data from scanners to the host computer, such as wired links. This could reduce start-up costs but eliminates the advantage of instantaneous communications.

One key point, Mortenson notes, is that scanning does not have to be an all-or-nothing type of project. Random weights may be a good place to begin implementing and experimenting with such a project since present methods leave so much room for improvement in accuracy and efficiency.

Many manufacturers still seem unaware or unconvinced of the benefits scanning offers distributors as well as their own operations, and say they are still waiting for indications it really is something distributors will use. A few well-placed pilot projects might convince them.

Sheltered income: the battle continues

Foodservice distributors and manufacturers recognize the role played by sheltered income. Sheltered income contributes 100 to 300% of a distributor’s tax profit, therefore spelling the difference between a distributor’s survival and shutdown. Manufacturers have come to accept the necessity of shelter and view it as the cost of getting involved in the distribution game. Although many believe that sheltered income is here to stay, methods can still be employed to make them more manageable.

Only three statements can be made with certainty about sheltered income. First, it is the single most abrasive component in the food-service distributor-manufacturer relationship. Second, it is a topic of such exquisite sensitivity that, however passionate the commentator, whether distributor or manufacturer, all observations are off the record. Finally, all agree that sheltered income has become a tiger so big that, as one distributor notes, “it is impossible to put a rope around it.”

Even definitions vary. Some manufacturers consider promotional funds allocated to distributors a component of shelter. Others have separate promotional funds. Cash discounts can be considered a form of shelter. So can manufacturer growth programs with distributor customers.

But, there are a seemingly infinite number of other forms of shelter for which distributors reach out to their vendors. They include fees for access to their sales forces, charges for participating in sales meetings, trade shows, and slotting allowances, to name but a few.

Whatever its form, though, shelter has become an all but indispensable component of distributor margins. In many, if not most cases, it is the lifeline to survival. If it were not for the existence of shelter, foodservice distribution would be decimated.

Knowledgeable observers of the scene estimate that sheltered income contributes from 100 to 300 percent of a typical distributor’s pretax profit, with the average contribution falling in the middle of this range.

No distributor questioned on this estimate disagrees. Translated into the simplest language, this means that if it weren’t for the availability of shelter, the average distributor would, at best, break even. Many would sink.

One real-life example points up the reality. Although, for obvious reasons, dollars-and-cents figures cannot be revealed, the story can be told in terms of percentages. At the beginning of his most recent fiscal, a Top-50 distributor projected his company’s pretax profits for the year. Shelter comprised approximately 120 percent of this bottom-line projection.

Year-end came. The bottom line ended up 50 percent under plan, this despite the fact that shelter dollars ended up 125 percent over those that had been projected.

Thus, contrary to what many vendors contend, what may seem like increasingly strident demands for sheltered income are stimulated by much more than an attempt to fatten bottom lines. Like it or not, it has become fact that for the average independent distributor, shelter is the bottom line. It spells survival.


At this point, when so much emotion is connected with the issue, it is difficult to pinpoint exactly when the distributor battle for shelter first began to roil the waters in relationships with vendors. In retrospect, it was probably the early to mid-1980s, when the giant corporate distributors began to exert their purchasing clout and fearful independents sought avenues to match it.

However, this is, at best, a simplification, for there are other factors as well. While the whole subject of shelter is customarily thought of as a manufacturer-distributor issue, it is at least as much a distributor-operator issue.

Put most simply, operators–particularly those in the multiunit sector–have their own margin pressures. With their eyes focused on price and in their quest for the lowest conceivable cost-plus deals, they have put the squeeze on distributors. Distributors, in turn, have inevitably moved this margin pressure one rung further up the ladder to the manufacturer.

In the 1970s, when cost-plus business first began to loom high in the broadline-distributor customer mix, cost plus 12 was a generally accepted standard. True, even then, there were some who were quoting cost plus 10, but this was considered dangerously low unless there were alleviating factors. Today, cost plus eight is common and even cost-plus-seven deals abound.

Such arrangements can be profitable to systems distributors whose total operations have been geared to service operator chains. Customarily, they deliver to a limited number of customers through carefully controlled programs, are not burdened with an excessive number of line items, and can achieve high inventory and money turnover rates. Low cost-plus arrangements make sense for them. For a typical broadliner, they do not.

How, then, does the latter manage to ring up a bottom line with cost-plus-eight or even cost-plus seven programs? The answer is simple. He rarely does. Not really.

As one distributor puts it, “We are not using numbers reflecting our actual margins. Any distributor knows that he needs a 17-percent margin to realize any sort of bottom line. The only conceivable way a distributor could execute cost-plus-seven chain programs and achieve this essential 17 percent would be to realize 27 percent with street customers. We know this isn’t the case.”

What is happening too often takes on the appearance of a game played with smoke and mirrors. It is shelter, which is not generally included as part of “cost,” that makes up the missing margin component. In short, “cost” has lost any meaning it might once have had.

However, while there is undoubtedly much legerdemain involved in defining cost, this largely results from the fact that any distributor who reveals his true costs will find himself wedged between the proverbial rock and hard place. Imagine, for example, this far-from-hypothetical situation.

Distributor A goes to a prospective chain, reveals his true costs, and offers a cost-plus-12 program. His competitor, distributor B, is less candid and says that he can do the job as cost plus seven or eight. Almost inevitably, the contract will go to distributor B, although actual dollar costs to the chain could be less on the plus-12 program where costs are accurately defined.

Nonetheless, operator pressure on margins is far from the only stimulus for the onward march of the shelter concept. It is noteworthy that many of the vendors whose cries about sheltered income are the loudest are frequently the very ones who offer ever-broader financial incentives in their eagerness to obtain additional distribution for their lines.

As one astute observer of the distributor scene notes, “The majority of the responsibility lies on manufacturer shoulders. They look for ways to endear themselves to foodservice distributors. They have aligned themselves with distributors through shelter rather than through systems and marketing goals.

“On new products, for example, they will offer so many dollars off per case even before a price point has been established. Naturally, as they come to the door with such new-product introductory offers, the distributors build them into their profit margins.

“Shelter is the easiest road for a manufacturer to take to capture a distributor’s share of mind.”


It is safe to say that most manufacturers, like it or not, have come to accept the necessity for shelter as a fact of life in working with distributors. It is the relentless pressure for more as well as how the funds are used that concerns them.

As one major manufacturer puts it, “We consider sheltered income as green fees, the cost of getting in and playing the game. What bothers us is the magnitude of the fee we have to pay. If a competitor offers $1.00, do we have to pay $1.50 to play?

“Cash discounts are fine with us,” he continues. “They speed our cash flow, and, not incidentally, also serve as credit checks on customers. We will give rebates on a pay-as-you-go basis, but won’t pay up front. And we will participate in growth programs.”

However, another vendor, who looks at shelters as “insurance programs,” contends that “the industry is in a self-destruct mode. Manufacturers are expected to make up lacking margins resulting from operators putting the squeeze on distributors. Too often, manufacturer-distributor partnerships are relationships where we end up bleeding together.”

Whatever the degree of acceptance of the distributor need for shelter, manufacturer animosity centers on what they see as strong-arming and the mounting demand for what the distributors term unique programs, but the vendors consider run-of-the-mill approaches that fail to expand the market.

“Pounding at the manufacturer doesn’t build volume,” one vendor notes. “A DSR goes to an operator and finds that a competitor is selling a product at $2 a case less. He goes back to his management and gets them to meet the price. This doesn’t build volume. Too many operators are working the distributor. Distributors have to take a stand. We do.”

Many manufacturers recognize the mutual benefits of growth programs. But, they say, distributors in increasing number are demanding guarantees. “They don’t recognize that I have growth objectives, too,” one says.

Still another manufacturer complains that “now instead of talking growth programs, distributors are asking for shelters that begin with case No. 1. During the recession, many of us restructured our growth programs so that the increments which formerly began at 100 percent of goal began to come in at 95 percent. Now it’s forget the 95 percent.”

And as manufacturers, particularly those with strong brands, point out, they have their margin pressures, too. They are locked in on prices. If they raise them, they will no longer be competitive with distributor private labels.


While at least a considerable number of distributors acknowledge that the crying need for shelter is hardly a symptom of industry health, it would be difficult to find any distributors who find the principle itself either illogical or unjustifiable.

One leading independent puts it this way: “As an industry, distributors market and channel the manufacturer’s product to operators. If we weren’t here to perform this function, the manufacturer would have to take on our distribution costs.

“Basically, the manufacturer pays us to market his goods. He does this through promotions, by participating in our food shows and, in cases where our volume is sufficient on his line, by keeping one of his people on our staff to work with our sales force. Basically, he is paying us to perform a marketing function for him.

“These are all forms of shelter which help us bolster our margins. In return, the vendor benefits by getting more business.”

Another distributor, one of the pioneers in developing shelter programs with vendors, says, “All our deals are based on growth programs. We put all our eggs in one basket, consolidating as much as possible with selected suppliers. If we grow, they will.”

“Shelter is not extortion,” says one distributor. “Manufacturers have been playing with the concept for 15 years or more. They have adjusted their prices. The margins of public companies haven’t shrunk.”

Such distributors, of course, endeavor to give vendors a bang for the bucks they provide in the way of shelter. There are others, though, who just take. But, it is pointed out, manufacturers bear at least some of the responsibility for this.

“Manufacturers no longer ask how many of the requests they get for shelter return value to them. They don’t ask themselves how the value they receive can be translated into dollars or who they can afford not to give shelter to,” one distributor observes.

Meanwhile, as they buttress their position, distributors point to the practice by at least some manufacturers of setting up contract pricing directly with operator chains. Such deviated prices put distributors in a squeeze position.

As a major distributor told manufacturers at an industry forum not long ago, “There are two kinds of customers, our customers and your customers, and for your customers, you set special pricing at less than we can buy for.”

Manufacturers are also accused of sharing distributor price lists with multiunit-operator customers. If that is the case, a question of ethics arises, distributors contend. After all, they maintain, they pay for the products and they own them.

Also promising to further intensify the distributor need for shelter is the fact that major multiunit operators are beginning to call for and get it themselves. When chains are beneficiaries of such deals, it is a rare instance when they allow their distributors to raise the “plus” percentage on their cost-plus programs.


It seems unlikely at this juncture that the beast can be tamed completely. Who started the ball rolling is no longer a question. Shelter has become part of the distributor-manufacturer operating cycle.

Also no longer of particular interest is whose fault it all is. Both parties–distributor and vendor–share responsibility. Distributors have abjectly failed to educate operators in the true costs of distribution, choosing to taking the seemingly easier approach of seeing if they can sell for less. Manufacturers, too, shoulder a percentage of the responsibility by offering shelter, sometimes helter-skelter, as an avenue to expanded distribution.

However, while it is doubtful that the tiger can be completely tamed, it could be made more manageable. There are signs of light at the end of the well-known tunnel which offer a glimmer of hope that, even if distributor demands for shelter continue to echo–as they most certainly will–manufacturers will get a better return on their investments.

Consolidation of vendors by both distributor marketing groups and individual companies has become a major trend in distribution. This provides the opportunity for both manufacturer and distributor to develop joint programs to increase market awareness, to provide at least sustained volume for existing products and growth for new ones.

What seems required above all is to call an end to the smoke-and-mirrors.

Distributors should level with their customers and explain to them that the costs of distribution extend beyond that of product.

Manufacturers should stop running scared and concentrate their programs with distributors who return value that can be expressed in dollars. As a former First Lady observed, “You can always say no.”

Positioning is everything

Foodservice distribution representatives should realize the importance of product positioning. A majority of operators are now acquiring food products on the basis of its versatility. To position products effectively, reps should provide customers with more ideas for using center-of-plate items. They should also learn how to reposition items currently in stock. For menu styles, an upscale, midscale and downscale product positioning strategy will work well.

When are flour tortillas not merely Mexican menu staples? When they’re wrapped around deli sandwich fillings…topped with grilled vegetables and shaved parmesan cheese as a gourmet pizza…sliced into strips and baked for a crispy salad topping…baked with layers of cheese, grilled vegetables, tomato sauce, and steamed spinach as a new-wave lasagna.

Versatility is demanded of foodservice products today, and manufacturers go to great lengths to portray their products as chameleons able to meet a variety of menu needs.

In most cases, however, it’s up to the DSR to act as interpreter. The ability to translate a single product into a multitude of menu possibilities is a skill that transports reps from order takers to business consultants. It also guarantees increased order size and maximum account penetration.

The name of the game is positioning. DSRs who hail from culinary or restaurant-operations backgrounds have an edge. They’ve been trained to think like operators and develop creative menu items while keeping inventory and food cost in check.

But, even nonculinary sales reps can become skilled at product positioning. All it takes is a dose of creativity applied with savvy selling techniques. Once you get the hang of it, you’ll find that it works for virtually any product category and extends to a multitude of cross-sales opportunities.


Effective product positioning is especially important with center-of-the-plate items. This category may also be the easiest to begin with because the range of COP is limited but the products are extremely versatile.

Typically the most expensive category of operator purchases, these items hold the most opportunity for success. Reps able to get the center-of-the-plate business often enjoy domino-effect sales in other product categories as well.

When focusing on COP positioning, it’s critical to remember that most operators today aren’t interested in solo products. That is, they’re in search of items that have multiple uses on their menus.

“There’s been a big change in how operators look at product positioning over the past four or five years,” notes Ron Garrett, corporate chef for Thoms Proestler Co., Davenport, Iowa. “They’re no longer interested in bringing on a multitude of new items to expand their menus. The costs are just too high.

“They still need menu-expanding ideas,” Garrett adds. “But, they have to get more mileage out of fewer products. DSRs need to be aware of that and gear their sales efforts accordingly.”

Garrett, who regularly works with reps and customers to develop new menu items, suggests that DSRs carefully analyze customers’ menus before introducing center-of-the-plate products. The more ideas for how to use a particular item that the rep can go in with, the better his or her chances of success.

“We have to be able to suggest COP products that can be used as regular dinner entrees, specials, luncheon entrees, salads, and/or sandwiches. Show the operator creative ideas for extending the use of a product and you’re much more likely to make the sale,” Garrett says.

Ed LeBlanc, corporate chef at Doerle Food Services, New Iberia, La., agrees, adding, that evaluating products from a cross-market standpoint is also effective.

“For instance, we carry a low-end marinated-steak product that we sold primarily to family-style steakhouses. We decided to position the same product for nursing homes, a big segment for us, and have had great success.

“Nursing homes are, of necessity, extremely cost-conscious. We’d never expect to be able to sell a steak product there,” LeBlanc adds. “But because this is a value-priced product, and is pre-marinated to make it especially tender, we introduced it to these operators. They’re always looking for new items to feature as specials, and this fit their cost parameters. Because of effective positioning, we now sell more of this steak product to nursing homes than to steakhouses.”

Conversely, LeBlanc notes that the light-and-healthy boom generates strong opportunities to position what have traditionally been healthcare products to other industry segments.

“Dovetailing on ComSource’s Lite Source program, we’ve been able to market products like oil-free roux, water-packed fruits, and low-sodium/low-fat items outside of the healthcare segment,” he says. “Even white-tablecloth and family-style operators are demanding lighter, more healthful ingredients.”

Another example of successful cross-market product positioning at Doerle involves catfish. Although it is traditionally a low-end product–served fried in family-style restaurants throughout the south–Doerle reps position the product to white-tablecloth customers.

“Competition and general economic conditions have put a tremendous squeeze on these operators,” LeBlanc says. “More than ever, they’re looking for quality products that are low-cost and high-profit. We introduced a frozen catfish fillet and suggested ways to prepare it for upscale presentation. Many of these customers now offer it grilled or sauteed with light signature sauces. And they don’t have to worry about the tremendous fluctuations in quality and pricing on fresh seafood. It’s consistent, easy to prepare, and very profitable.”


New-product introductions aren’t the only time that DSRs should be applying positioning-focused sales techniques. Careful study should also be made of products currently featured on customers’ menus. If sauteed chicken breast appears as an entree option, for example, suggest more ways that the operator can use the same product to expand and enhance the menu.

Grilled and topped with greens, sliced tomato, and condiments, it becomes a lunch or light-dinner sandwich option. Sliced and fanned atop salad greens and fresh-cut vegetables, it becomes an attractive entree salad. Baked with fresh herbs and roasted vegetables, it’s yet another entree selection. Cubed and skewered with vegetables, it becomes a light-and-healthful shish kebab.

Positioning products–COP or otherwise–as such versatile players has benefits beyond menu expansion. By using fewer products in more applications, the operator is able to reduce inventory needs, ordering, receiving, and prep, and turn inventory quicker. The end result is lower labor cost and higher food quality because quicker turns means fresher product.

When considering a specific product, DSRs should make a written or mental list of a number of things that it can be used for, as well as the market segments for which these uses are appropriate.

They also should consider various preparation methods that can be used to prepare the item. Many products, for instance, can be roasted, grilled, braised, sauteed, stir-fried, or broiled. By varying the preparation style and accompanying items, the operator expands the menu while still limiting items stocked.

The dishes made with red potatoes pictured here illustrate how different preparation styles applied to the same product can yield varied results.

Boiled, cubed, and blended with salad dressing, chopped parsley, and onion, red potatoes become a side salad that jazzes up simple sandwiches. Quartered, deep fried, and served with dipping sauces such as sour cream and salsa, they’re a great casual, mid-market finger food. Roasted with garlic and herbs, red potatoes are an attractive and delicious side with meat, poultry, or seafood suitable for white-tablecloth menus.


In developing product-positioning strategies, apply “U.M.D.”–upscale, midscale, downscale–thinking. The average full-line DSR’s account base spans each of these levels, and many products can be targeted to all three.

Truly effective positioning may require breaking habits and changing assumptions about the suitability of various products for various menu styles. It also requires creative brainstorming.

Take shrimp. Often considered an upscale item, shrimp can actually be marketed to a variety of menu styles. Because prices can fluctuate significantly, reasonably priced product is often available.

The photos above illustrate how a single shrimp product (IQF 16/20) can be positioned for three menu styles–as a casual shrimp-salad sandwich, a mid-scale entree with fettuccini and vegetables in Alfredo sauce, and an upscale special with shiitake mushrooms, steamed asparagus, and rice pilaf.

By positioning a COP item such as shrimp–or catfish, steaks, chicken fillets, pork medallions, etc.–to more varied operators, DSRs can increase average order size and boost profitability.

The example of flour tortillas can also be used to illustrate creative positioning. Typically considered simply a Mexican menu item, flour tortillas have far more versatile menu applications and can be positioned to operators outside the Mexican niche.

The photos above show three varied applications suitable for a range of menu styles, from a downscale Mexican quesadilla appetizer, to a deli roll-up sandwich, to an upscale grilled vegetable pizza using the tortilla as a crust.

Each dish offers low food cost, easy preparation, and a number of cross-sales opportunities–cheese, salsa, guacamole, sour cream, black olives, black bean or other prepared side salad, jicama, deli meats, lettuce, grilling vegetables.

Coming up with ideas to present to customers based on creative positioning becomes easier with practice. Once DSRs develop a positioning mindset, product-usage possibilities begin to flow and opportunities can be recognized.

“More and more, DSRs have to make creative positioning part of their sales effort or they’ll be left behind,” notes Doerle’s LeBlanc, formerly a DSR as well as an operator. “Just going in and taking a customer’s order without offering ideas and solutions isn’t what their job is about anymore. Reps have to be able to sell services and demonstrate that they understand customers’ needs and concerns. Inventory control, food cost, and menu development are all key areas that can be impacted through skillful positioning.”

Mission statements: the whys and the hows

Foodservice distributors should realize the importance of establishing corporate mission statements. Such statements echo the company’s values and beliefs and serve as a moral guideline for its management and employees. To ensure the efficient implementation of mission statements, management should meet with officials and employees and explain the significance of the statements. Documents should also be created, recognizing the existence of the statements.

Foodservice distributors who have written mission statements have firmly riveted their corporate cultures in position. Furthermore, they have seized an excellent opportunity for a high-yield investment.

In almost all business situations, the notion of a fair return on an investment holds true. But, what exactly is a fair return? Five percent? Ten percent? Twenty?

If all of the expenditures involved in planning, creating, and implementing a dynamic mission statement were recounted, than it would be clear that it is “fair” to expect a return. And, that return is there. In practical terms, the increase in human productivity alone can be extraordinary.

True, many distributors feel that mission statements are simply the latest version of “snake oil” and are content to skip getting involved in what they regard as a passing fad. However, looking back over the results obtained by distributors who have drawn up mission statements, it appears that they are here to stay. The fad has become the rule.

Every day, distributors send out messages to their workforce, as well as to their customers and other members of the business community. Some of these messages are inadvertently of the wrong kind.

In one instance, DSRs were told, “We buy the best canned corn in the country.”

“But,” one rep responded, “even though it grades Fancy, it only scores 91.”

Is there a difference between “best” and “fancy?”

Or take the case of a day-shift warehouse supervisor who reported receiving three extra cases of drinking cups on an order for 50 cases. “If the vendor made a mistake, that’s his problem,” the warehouse manager said. “We can make a few extra bucks to take care of our shipping mistakes.”

Is this really the kind of message a company’s management wants to send out to its warehouse personnel?

Or take the case of a distributor owner who told a staff meeting that the company had to be more responsive to customer needs. Gently, almost fearfully, a customer-service rep asked, “Then why do we cut off the phones at 4 p.m.?”

These seeming inconsistencies, or misinterpretations based on language, are frequently sources of disruption, chagrin, and loss of profit.


It doesn’t have to be this way. You have the opportunity to make sure that your message is clear, that your particular set of beliefs and values is understood and utilized throughout your organization.

This is the first benefit of mission statements. They are a clear communication of what you believe. It is the owner, president, or top manager saying, “I hold these truths dear and these are conditions of working here.”

However, a second, more compelling benefit emerges as a natural outgrowth of writing a mission statement. All employees become focused since their company is forced to define its market, its individualized niche.

This happens because there is an immediate need to prepare a strategic plan, a course of action which will lead the company forward. Done properly, this means the involvement and empowerment of executives, managers, supervisors, and workers. Everybody in the company begins to move in the same direction.


Six major steps insure a successful journey to understanding and implementation of a mission statement:

  1. Schedule an hour-long meeting for company executives to talk about a mission statement. Have one person lead the discussion. This leader should have a flip chart available and record the answers to these two questions:

First, “What are the values and beliefs of this company?” As the words describing the company flow, they should be noted on the chart.

The second, equally important question is, “What else?”

A sample of words that might come forth as descriptions includes honest, fair, profit-oriented, dedicated to customer service, growth-oriented, customer-driven, value of employees, treat people fairly, strive for perfection, and technology leaders.

The potential list goes on and on. The leader should not limit discussion, but encourage it. Don’t let anything interfere with this all-important step in giving voice to your company’s mission. Just let it roll out.

  1. Similar meetings should be held with groups of sales reps, office people, drivers, and warehouse employees. These groups can be mixed or matched. It doesn’t matter at this point. The important thing is to get these employees talking. There’s no need for the leader to question “Why?” People say what they say. It is only important to make sure that the words you put on the chart are what the person really means.
  2. Surprise, surprise. When you compare the two sets of words or phrases, the similarities will be remarkable. So, when the executives reconvene for a one- or two-hour session, the next task is to group the words in units. For example, “honesty” and “truth” might be considered the same. “Customer-driven” and “service-driven” might be similarly linked.

During this meeting, the team should take the words and state them in simple sentences. This might turn out to be be the most difficult part of the exercise. A sure-fire method to make this step work is to try to limit each sentence to no more than 15 words. By forcing yourself and those on your team to be concise, you will set the stage for understanding.

Several weeks later, there should be still another meeting to re-examine the statements and gain consensus. Letting some time pass before holding this meeting allows those involved an opportunity to get away from the project and return with a fresh perspective. Everyone should agree on the language.

  1. Now it is time for the owner, president, or chief executive to think about these statements. After a two-week gestation period, this person should offer additional comments and/or an agreement that this is what the company stands for. It is always wise for the entire executive team to meet with this person during this process. In fact, the president should sit in on all meetings.
  2. Now that the document exists, preferably on one typed page, it is time to bring it back to the rest of the company. This can be done through a series of meetings, each attended by about 20 people from different departments, until the entire organization has met and discussed the mission statement. Since the statement will have been circulated beforehand, employees will be familiar with it, so these meetings might last just about an hour.
  3. The final series of meetings is scheduled to present the finalized mission statement at department meetings: sales, warehouse, delivery, office, etc. At least two members of the management team should be present at each of these.

The question to pose at this final meeting is, “How do we intend to carry out our mission statement?” It should be repeated over and over so everyone in the company commits to a form of work behavior that is consistent with the beliefs and direction of the company.

It is possible to complete this entire mission-statement process in about two months. There is no rush. After all, the company has probably been around for quite a while. It is in the area of implementation that time is needed.


There are a number of methods to breathe life into your mission statement. For example, copies should be sent to suppliers, customers, community leaders, bankers, and newspapers.

One customer called the president of a company who had just publicized a mission statement and asked, “You really believe this stuff?” Even over the phone, the president’s smile came through, “Believe it? I live it every day of my life.”

Every entrance to the building should have a sizable plaque reproduction of the mission statement. Other plaques should be posted at crucial places around the building.

Business-card-size reproductions of the mission statement should be in the wallet of every employee. A now-classic story tells of a warehouse worker who challenged a manager by whipping out his mission statement and saying, “What you want me to do is not following our mission.”

When a significant number of new employees have been hired, they should attend a meeting to discuss the mission statement. Naturally, it should also be presented in your employee manual and during job interviews.

There should be annual review meetings to make sure that all employees continue to understand and use the mission statement as a guideline for their behavior.


There are occasions in which mission statements can lead in strange directions. A customer-service rep complained to the sales manager one day that a customer was making sexual remarks over the phone. Thinking about it, the manager said, “That is not the way we treat people and it isn’t the way we expect to be treated. I will call this customer and explain that the behavior has to change or we will have to stop doing business together.”

When the sales manager told the story to the company president, the president said, “People who work here expect to be treated with dignity. Thank you for adhering to the mission statement.”

There is something cleansing about engaging in the process. It represents an opportunity to state once and for all exactly how you want the company to be run. It is a clear set of doctrines in which you believe.

Along the way, you transfer significant power and authority to all of the people in your company. This sets them running on the same track, striving to reach the same goals and objectives as management.

A mission statement is not a perfect device. People will still misconstrue and confuse language and meaning. But, it is a definite way to capture the energy and devotion of employees, and convert those precious resources into a high-yield asset.

10 Selling Tips For Savvy DSRs

What do bad breath, yellow waxy buildup, and bathtub scum have in common? Simple: They’re problems we never knew we had until the marketers of packaged products told us we did.

Marketing, you see, is nothing more complicated than solving someone’s problem for them. Trouble is, often you have to put a lot of effort (read: dollars) into creating awareness of the problem before the real solving (read: selling) can begin. Not so with today’s restaurant operator, who hardly knows where to turn in the face of consumer price resistance, unit saturation, and government interference. Now here’s someone who’s got a lot of problems and knows it.

Did a light bulb just go off in your head? It should have, especially if you stopped to consider that many operators depend on DSRs for much of their marketplace information. Add it all up and you’ve got one beautiful selling…er, make that “problem-solving” situation.

Now you’ve got a problem. What can you tell these trusting souls that will genuinely help them?

Following is a list of 10 items that will help you become that good Samaritan, and possibly hone your own sales pitch as well. This is not meant to be a comprehensive list, mind you, just a helpful one. To make it easy to use, it’s divided into five business tips and five food or menu-related tips. Here goes:

* 1. Watch for ideas that help your customers get full or premium price for their goods. Sounds hard to do when more than one-fifth of all restaurant transactions are related to some kind of a deal–a coupon or discounted price. Regardless, there is room to come up with that one extra service, decor, or menu item that will differentiate a restaurant so much from the competition that people will be willing to pay full price, if not a premium one.

This is being done, even by the discounters themselves. Wendy’s, one of the early leaders in value meals, is able to command a price point of $2.99 to $3.49 for its Chicken Cordon Bleu sandwich, in large part because of the inclusion of a premium-brand mustard. The excitement surrounding a limited-time promotion supports the price point as well.

At Salty’s in Seattle, owner Gerry Kingen is pushing the notion of super-premium service a la Nordstrom’s department stores by training waitstaff to think of themselves as personal sales reps who maintain a client list, including logs of customer frequency and preferences, and who write thank-you notes to patrons following visits.

* 2. Help operators increase productivity. Restaurateurs are so used to measuring sales by seat or square foot that they often overlook the sales-to-employee ratio. Maybe it’s on purpose, since the average employee accounts for a paltry $31,000 in annual sales.

Selling customers high-quality, value-added product is one obvious solution. Others include recommending labor-saving smallwares, or adopting a whole-plate sell based on assembly procedures rather than recipe cooking.

* 3. Influence government. Recent and pending legislation is not the sexiest-sounding issue out there for operators–only one of the most nettlesome. And the industry has just now begun to realize the influence it commands as the second-largest employer in the country. Get involved, or at least familiarize yourself with the major issues, such as the FICA/FUTA tax, worker’s comp, blood-alcohol content, and ingredient labeling. Or do you relish the impact on your account’s sales of President Clinton’s proposed 50-percent business-meal deduction?

* 4. Focus on the needs of the line managers. They may or may not make direct purchasing decisions, but restaurant companies are beginning to emphasize the role unit and line managers play in enhancing profit. And for good reason.

With layers of middle management being stripped away, there’s nothing like a competent line manager to impact profits with the decisions he or she makes. If you call on a multiunit company, spend some time picking the brains of unit managers; similarly, chat up the steward, night chef, or dining-room manager at your independent accounts to find out what’s bugging them. You just might have a product that would make their lives easier.

* 5. Sell safety. In the wake of the tragic Jack-In-The-Box poisonings, the benefits of basic sanitation couldn’t be clearer to operators. But, as the memory of this event fades, operators will need reminding. Warewashing and cleaning products should be an important part of your sell now and down the road. It’s time to reread all those boring manuals on proper sanitation. Generate a sanitation audit, a checklist that line managers can use at the beginning or end of each shift, with appropriate recommendations of product.

* 6. Work with operators to lower their food cost. For the past five years, your customers’ customers have decreed that menu prices will rise more slowly than the overall inflation rate. That means that operators have to find food that doesn’t cost as much to sell. Translated to ballpark numbers, that means that operators are more likely to shoot for a 25-percent food cost than the traditional 33 percent.

Fortunately for operators, today’s restaurant guests are hungry for all kinds of inexpensive food, such as baked goods, pasta, salads, grains, root vegetables, and legumes. As a DSR, you can fight the move to lower-cost items or you can realize that it’s a strategy that will help your accounts to keep paying their bills. Give them ideas on how to use these products, and at the same time, try to sell them some of your higher-margin items that they’ll need to jazz up these plainer foods–spices and condiments, for example.

* 7. Sell ethnic by region, not country. Now that Americans consume more salsa than ketchup, it’s safe to say that broad ethnic categories such as “Mexican” have gone mainstream. If you want to help operators capture the same intriguing sense of a culinary world tour that these broad categories used to engender, you can show them how to menu Sonoran dishes instead (or Catalonian or Tuscan).

* 8. Expand your customer’s menu without making it bigger. Say what? Here’s the rub: Patrons who perceive an operator’s menu as not varied enough will veto that restaurant as a place to spend their money. However, larger menus cost money for additional inventory, staff training, and possibly equipment. Instead, think of revolving specials or limited-time promotions that work off of an operator’s existing inventory and equipment.

* 9. Think one pile, not three. The old saw about plating separate piles of protein, starch, and vegetable has fallen. All three are fully integrated in stirfries and paella, or stacked in distinct layers, as in lasagna. In either case, the most expensive stuff–the protein–is an ingredient rather than the star.

* 10. Sell brown food. Close your eyes for a minute and think of all your favorite foods. Chances are that if you’re like most people, many of the foods will be–well, brown. French fries. Crusty bread. Sizzling roasts. Your whole-plate strategy should look for opportunities such as adding a dough element to a chicken dish, or upgrading a bread basket. Patrons are past the point of expecting “performance food” in a rainbow of colors.

Do you believe what distributors are telling you?

Most food store operators affirm that they trust their foodservice distributors. However, they also agree that distributors are also prone to mistakes. They also know that, being in the business of making money, distributors may not give the lowest prices. Nevertheless, operators generally view distributors with trust and believe that the latter works in their best interest.

* Roger Berkowitz CEO Legal Sea Foods Allston, Mass.

Yes, we trust our foodservice distributors. But, we also assume that they can make mistakes. If you assume that, you are more detail-oriented in checking deliveries or anything else you do.

We tell our general managers at each restaurant that mistakes will be made from time to time, and they are responsible for checking things closely and finding any errors. We also distribute some items ourselves and know that mistakes can be made there, too, so managers check our deliveries as well.

We do trust our suppliers. That’s why we’re doing business with them. However, you have to assume that everyone can make mistakes.

There also may be situations where you have a good relationship and complete trust from the outset with the head of the company with which you’ve made your agreement. But, there can be situations where drivers or other people in the distributor’s organization take advantage of that trust. So you always have to go in with your eyes open completely, and assume that mistakes will be made.

* Bo Handy District Manager T-Bones Charleston, S.C.

Overall, I would say we trust our suppliers on issues such as whether they do what they say they are going to, whether they provide us with good-quality product, and whether their trucks are clean.

But, there are some issues on which we don’t trust them. For example, we don’t always know whether they are giving us their lowest price. The answer is that they are not because they are in business to make money and we know it.

However, I generally feel that our distributors look out for our best interests. I usually trust that they do. But, I think I also need to shop around.

We have five restaurants in two states and deal with some large companies, and sometimes the same company will quote different prices to different locations. They may even quote different prices to two places in the same town. So we shop around among a couple of major companies, and if someone has a better price, we may buy an item from them one week instead of from the other company.

Part of our job as managers is to make sure that we get the best product for the best price. However, that doesn’t mean that we always take the lowest price, because that may mean settling for lesser quality. But, we do shop around.

Aside from that, we trust that the distributors we deal with are capable. However, since they’re doing business on a mass scale, some things will slip through the cracks sometimes, and we have to check.

* Dolores Juergens Director, Food Services Northwestern Mutual Life Insurance Co. Milwaukee

I trust them. However, we’re a large operation in a position to employ competitive bidding, and I think that is something we need to keep in the forefront. I think that competition is good, therefore I’m not a believer in one-stop shopping.

Also, when it comes to product quality, I don’t rely on anybody for trust factors. I do a lot of comparative shopping myself. With canned fruits and vegetables, for example, we ask each supplier to submit samples, and we open the cans and compare the products to each other.

It is up to us to be the judge of quality. Certain claims are made by distributors about the quality of products that they carry, but I feel that it’s our responsibility to search out the truth. And I think it’s up to the distributors to understand why they are not getting the business if we try something and aren’t satisfied.

Fall agenda: shine, sex, shape

The 1996 underwear market predicts good sales of baby-doll nightgowns and bras, including full-figure brassieres in shiny high-performance fabrics and lace. Warnaco Group Inc.’s acquisition of GJM, a maker of sleepwear, may spark competition between Calvin Klein and Ralph Lauren licensed brand-name products. Firmware makers such as Bestform Foundations Inc. and Maidenform Inc.’s True Form Foundations plan to show new light-weight, more attractive garments, including a half-slip with a waist cincher.

March is expected to be one of this year’s biggest markets in every innerwear category, say vendors.

A main reason, they say, is the demand for more fashion and newness to continue fueling a business that has consistently been a high-performing category at stores through tough times.

Among the classifications expected to continue as star performers at retail are full-figure bras, control items such as top rated waist trainers and derriere boosters and updated, pretty-looking sleep gowns, especially baby dolls and chemises.

Gearing up for next week’s market, many manufacturers are expanding assortments in various areas to keep fueling the excitement for fall. Ideas range from highly embellished bridal sleepwear looks and allover sheer sexy daywear items, to a cornucopia of shapewear products.

Bras in every classification — from push-up to seamless and sports bras — are expected to continue pushing ahead. Among the important developments will be more performance fabrics such as Tactel nylon and Lycra spandex, as well as a wide variety of special treatments such as cross-dyed laces.

In addition to new product, there will be a lot to talk about regarding several major developments in designer name business that are expected to shake things up a bit. Most notably, many are asking how much of a market share for sleepwear will The Warnaco Group gobble up following its acquisition in February of GJM, a $110 million sleepwear maker. GJM, which is a big supplier to Victoria’s Secret, also will help position the Calvin Klein underwear label — which Warnaco owns — in the sleepwear market.

Industry executives also say they’re bracing for a big rumble expected to take place between Warnaco with its Calvin Klein innerwear label and the licensed Ralph Lauren name in underwear, which Sara Lee says it will launch at retail in early 1997.

Looking back at the market reaction from January, manufacturers say basic looks were generally booked.

Based on orders in January — and strong innerwear sales at stores during Christmas — vendors generally are projecting gains in the single-digit range in fall bookings.

Norman Katz, president of I. Appel Corp., said, “March is a very important market for all of our product lines, especially fashion offerings.”

Katz noted that “a lot of new fabrics and trims in opulent, glamorous looks” will be featured in sleepwear of polyester satin and charmeuse. A key idea will be multi-ribbon trims with embroideries, he said.

Robes, he noted, are expected to be strong in plush-looking cotton and polyester blend velours.

“Anything shiny and rich-looking will be important for fall,” continued Katz. “It just can’t be a dumb-looking robe hanging on a rack.”

Katz said he feels so bullish about the call for newness and fashion looks — especially after good sell-through at stores during Christmas — that he’s projecting sales gains of 6 percent in total fall bookings.

“Basic and opening-price merchandise got good reaction in January, when we previewed early fall,” he said.

Howard Radziminsky, national sales manager for the Cinema Etoile brand of sleepwear and daywear at Movie Star, said, “A leopard print was very strong in satin sleepwear in January. We plan to expand animal prints to include a zebra print in sleepwear, and a snakeskin print in stretch velvet daywear.”

Sex also is a big selling idea, said Radziminsky.

“We discovered there’s a lot of sexy business out there in sheer and lacy sleepwear items like baby dolls,” he said. “It became a year-round business in our daywear line, when we introduced what we call seduction wear 1 1/2 years ago.”

“We finally bit the bullet and will be coming out with an entire collection of woven sleepwear by Carole Hochman,” said Kathy Weir, executive vice president of sales and marketing at Carole Hochman Designs.

“We had been doing some styles in satins for the past few seasons, but we’ll be launching an entire collection of wovens for fall.”

Fabrics will include polyester charmeuse, georgette and printed jacquards. Wholesale prices will be $18 to $28.

In the niche area of special occasion, Flora Nikrooz, designer of upscale sleepwear which bears her name, said she’s planning to give her bridal lingerie a wider palette.

“Color — especially champagne, mint and blue — will play an important role for fall, more so than in the past,” she said.

She noted the demand for more color is apparent throughout the bridal market, in wedding gowns as well as innerwear, and it’s creating an overall enthusiasm.

Nikrooz added there also will be a “tremendous amount of embroideries and netting” in her fall sleepwear.

Chellie Henkin, a vice president of I. Appel and general manager of its Myonne panties division, said, “We’ll have a very big line of panties for fall, and we’ll be showing a lot of texture, as well as more color.”

Textured treatments will include embellished cotton and Lyera spandex and nylon that has a look of cotton pique. New colors. will include “richer, rosiero” skin tones.

Henkin further noted that a group of light control bottoms, called Tummy Tamers, also will be introduced. The panties will include styles that give “very light” tummy panel control styles that offer allover and moderate control. Fabries will be a smooth nylon microdenier and an allover stretch lace of nylon and Lycra.

“Our [panties] designer Kathy Perman also has come up with two great styles that push the tush up,” said Henkin. The two styles will be a full-cut brief and a boy-cut brief. Each style will be merchandised with hangtags that say “Tush Up.”

In the foundations arena, Nancy Brennick director of merchandising for the Bali brand at Bali Co., singled out two “major launches” for fall: an average figure group of seamless, molded, underwire bras called Day 2 Day, and a minimizer called Satin Tracings Minimizer.

“Bali has been specializing in full-figure bras for some 66 years,” said Brennick. “As we look to grow our business, we have to reach categories where we are underdeveloped.”

Sizes in the Day 2 Day group are 32A to 38C. Suggested retail is $19.50. Sizes in the Satin Tracings Minimizer are 34C to 42DDD. Suggested retail is $26.50.

Brennick said the new minimizer will reduce projection of a D cup by 1 1/4 inches; a DD cup by 1 1/2 inches and a DDD cup by 1 3/4 inches.

At Bestform Foundations, Tobie Garfinkle, vice president of sales and merchandising for the Lily of France and licensed Christian Dior, Natori and Josie foundations, said, “Fashion and newness is our overall message for fall. ‘I don’t know what else will excite the customer right now.”

Garfinkle said the firm has ventured into new blends with Tactel nylon in its Lily of France line and will be featuring some nylon micro deniers in its licensed designer lines.

Jay Greenblatt, senior vice president of True Form Foundations, a unit of Maidenform Worldwide, said a “very light, user-friendly” group of control briefs called Firm Advantage by Flexees will be shown this month.

“It will probably be our most important introduction,” said Greenblatt, noting it will be positioned for the contemporary, bridge customer.

“We’ll be introducing more new product than in the past couple of seasons,” said Joyce Baran, vice president of merchandising and design at Strouse, Adler Co.

Among the new shapewear entries will be Shlipps by Smoothie — a group of three control items: a full slip, a strapless full slip and a waist cinching half-slip. “We plan on having a lot of fun with the name,” said Baran.

Buyers can no longer go it alone

Foodservice distributors and suppliers are realizing that they cannot work independently. They understand that the adoption of a total marketing strategy can help boost their operations significantly. They also agree that the driving force in the distributor-supplier partnership is not one or the other but the operator. When customers’ needs are met, then profits begin to rise. A total marketing strategy is the optimal way to meet these needs.

Ask any foodservice distributor executive how important the buying function is to the company’s total marketing strategy and you will likely hear pretty much the same answer: “Very important.”

This is not surprising. Managing landed cost and supplier selection are two of the most critical responsibilities of the purchasing department.

With the price of merchandise arriving at a distributor’s warehouse running, on average, 84 to 86 percent of sales, it is obvious that landed cost is a very significant figure in determining a distributor’s profitability.

However, supplier selection is at least as crucial as cost. It is vital for a distributor to have strong, long-term business partners in the supplier community. I say long term deliberately because the internal and external costs associated with supplier changes are significant.

A scenario in which distributors and suppliers who share values and objectives are moving unitedly in the market is quickly becoming a fundamental element of success rather than merely something nice to chat about at conventions.

The old, battered, and boring argument between distributors and suppliers over “Who is the customer?” is out of date. Distributors need suppliers, and suppliers need distributors. It’s that simple.

Each partner in this relationship is a customer. The distributor is the manufacturer’s customer because he is paying for goods and services based on stated requirements. However, the manufacturer becomes the distributor’s customer when the distributor has to supply receiving information, packaging requirements, sales-training data, and any other information that the manufacturer must have in order to meet the distributor’s needs.

The distributor and manufacturer are now conceptually joined at the hip. Their joint objective is to meet the operator’s needs. This can be accomplished only if the distributor and supplier work together very closely.

At the distributor level, the formation and maintenance of such relationships is usually the responsibility of the procurement function. Thus, the purchasing function is a key element of a total marketing program.

At All Kitchens, we operate under the philosophy that money is made moving product out of the warehouse, not into it. Therefore, we direct most of our resources toward helping our distributor members do just that.

It’s not that we de-emphasize procurement, because that is not the case. However, there are other activities that are also part of a total-marketing approach. Among them are training programs, the reach for operational efficiencies, sound financial management, advertising and promotion, and incentive programs. Coupled with a strong procurement program, these provide distributors with a total marketing package.

Increasingly, operators are coming to understand that getting the lowest price doesn’t necessarily translate into the lowest cost. These operators are getting more sophisticated. They consider value-added programs and services as part of the total price and thus arrive at the best value. If this is the way operators are making purchasing decisions, then it becomes essential for the distributor to provide such value-added services.

Such programs have to be good for the supplier as well as for the distributor. At All Kitchens, we have developed a long-term strategy of market segmentation to provide compound annual growth to our distributors and suppliers alike. Foodservice distributors can not differentiate themselves from their competitors on products alone. They must also offer their customers unique services that will set them apart.

The All Kitchens market-segment program, initiated last year for the healthcare segment and now being expanded to family restaurants, is designed to give our distributors’ sales reps such an edge when they walk through a customer’s door. These programs are built around services distributors can provide to operators in each segment.

As our distributors’ business grows, so does the suppliers. We rely on the procurement managers to work with the suppliers which support our programs. In many instances, the manufacturer rep and the distributor buyer agree on well-defined goals and objectives, which are based on the supplier’s program participation.

This requires the buyer to assume a broader role. He or she is now responsible for the communication and implementation of the goals that have been agreed to with the vendor. The buyer is eager to do this because other negotiations with the supplier–price, packaging, terms, lead times, etc.–will go smoother if these goals and objectives can be met.

If the idea is to have a program that is good for distributors and suppliers alike, broad support from the manufacturer community is essential. Operators rely on their foodservice distributor to get the product how and when they want it. The supplier carries the burden of providing the product quality, consistency, and pricing which meets the requirements of distributor and operator alike.

There is no doubt that purchasing plays a major role in this process. However, finding a customer, selling a customer, delivering to a customer, collecting from a customer, and finally reselling the same customer simply takes more than intelligent procurement decisions. It takes a total marketing approach.

All operators have needs unique to their operations and expect their distributors to help them fulfill these needs. A good buyer will be aware of his or her customer’s specific requirements and keep them in mind when reviewing suppliers and negotiating with them.

For instance, operators demand consistent quality. Therefore, it becomes the responsibility of the distributor buyer to choose the supplier that can provide product consistency and meet other criteria. At All Kitchens, we help our distributors’ procurement managers in this selection process by significantly narrowing the field of choices to approved suppliers.

Operators are also interested in providing training for their staffs, new-product ideas, promotions that can help increase sales, and service that meets the unique requirements of a particular operation.

And, although it rarely comes up in a sales call, operators are also very interested in finding out about the financial well-being of the distributors which supply them.

In order to have satisfied customers, distributors need to perform well in every one of these areas, and buyers must actively attempt to match these needs with the suppliers they select.

This, in essence, is what total marketing is all about.

It goes without saying that foodservice distributors will continue to pay close attention to the buying function. However, they should now recognize the importance of the buying function as part of their companies’ total marketing strategy.

This philosophy of joining procurement to the other spokes of the marketing wheel is opening up a new age of thinking for distributor buyers. No longer can buyers rely only on price and availability alone when their goal is to make enlightened procurement decisions.

Today’s environment demands that buyers factor in the operator’s requirements into their total-marketing-strategy equation.

That is why we are seeing the marketing function assume procurement responsibilities and the procurement function assume those of marketing. It is becoming clear that the two can no longer operate separately and still achieve the goal of satisfying a customer’s requirements.

Meeting customer needs calls for total marketing. Today’s best buyers are the ones who are making the total marketing commitment.

How do you sell related items as part of a package?

Food distribution representatives are advocating the philosophy of cross-merchandising. They believe that it is not enough to demonstrate a center-of-the-plate item, rather other products that may highlight the main product such as sauces and pies should be suggested to give the customer an idea of how to merchandise the product. At the same time, a customer should not be forced into complying with the cross-merchandising concept.

Here’s what the Rep of the Month does with his accounts:

* Joseph J. Skwara Woodhaven Foods Philadelphia

The answer to this question is common sense. You can’t just throw a slab of beef in front of somebody and say, “Okay, this is it.” If you throw down that slab, you also have to go down a list of different ways that it could be served. In the process, of course, you’re utilizing different products.

I try not to get too pushy when seeking to cross-merchandise items. I tease customers a little bit with some ideas and possibilities. If they take the ball, we can both run with it. But, if they’re really not interested, I’ll just leave it at that.

Any center-of-the-plate item creates a base that you can build on. How the item is prepared determines what goes along with it. You can go into whether it’s sauteed or stir-fried with olive oil or peanut oil. Then you talk about possible side dishes: vegetables, starch, salad, and condiments.

And here are three other approaches:

* David Boss C&W Food Service Tallahassee, Fla.

For me, cross-merchandising has become second nature. One must always keep in mind the items that are closely related to the center of the plate. It’s always nice to sell a steak restaurant its boxed beef, but it would be a crime for me to leave without asking for their steak-sauce, potato, or vegetable business.

One of the easiest times to utilize cross-merchandising is around the holidays. Everyone buys turkeys at Thanksgiving, mostly on price and size. Maybe I won’t have the best price on the turkeys, but I might have the stuffing, cranberry sauce, and pies to sell them. I may even be able to sell the account carving utensils or displays if they have a buffet line.

At the same time, I would try to sell a value-added product such as marinated turkey breast. It may help set the account apart from others and gives you an opportunity to sell a less price-sensitive item.

As a result of cross-merchandising, account penetration can be achieved. It all works toward the goal of addressing customers’ true needs.

* Tom Woppler B&B Food Distributors Terre Haute, Ind.

I often cross-merchandise in sampling. It does no good to show a center-of-the-plate item unless you’re going to show a total plate presentation. You tie your center-of-the-plate item to a vegetable item, or maybe a side dish that the customer doesn’t think of. That way, you can tie two or three items together. You try to pick products that the account doesn’t buy from you.

You have to get a customer or prospect to buy you, not so much the product. If they know that I’m bringing them an item that only I know they can use, the next time I bring something I don’t get a quick rejection.

* Bill Crawford Standard Foods Hurricane, W. Va.

It’s invaluable to the operator to tell him how to merchandise the whole plate. Not just the country-style ribs, but how you would prepare them and what would go well with them. This means becoming more of a sales consultant instead of just a salesman.

As order entry becomes more automated, there will be more emphasis on helping the operator much like a dietitian helps nursing homes and hospitals. Reps will be pressured to be more creative on plate presentations and showing operators how to make money. This will happen in an environment of operators being less willing to deal with many distributors. So specialist distributors won’t be as important as they once were.