Are brokers losing significance?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine
Hey, don’t blame me, I’m just the messenger. But a good chunk of respondents to our annual survey about industry issues see the influence of brokers weakening next year. This was spread pretty evenly among both large and small retailers and vendors. The dissatisfaction has different causes depending on whom you ask.
So here’s my gut instinct. Big manufacturers, especially, are wanting to pay only for menu-based services and are putting heat on broker fees. Some of them are threatening to move to direct sales.
Smaller manufacturers complain they are getting lousy service from large brokerages because of their size, and some of them are finding true love with small, specialist niche brokers. As one vendor put it, "I can’t speak for the big dogs, but for a smaller, specialty manufacturer, having strong, engaged, results-focused brokers is critical to our long-term success."
Yet many broker companies have a bad habit of taking on more clients than they can handle in these days of multi-tasking and budget squeezing.
Source: Frozen & Refrigerated Buyer October 2015
Said one manufacturer, "The few brokers have too many accounts and many accounts don’t allow entertainment, where some past relationships were formed. Also, decisions are more data-driven than people-driven than in the past and upper management access seems to be decreasing for brokers."
Another manufacturer vented, "Great brokers are getting older and the industry is not attracting younger broker personnel."
As for retailers? Forget it. Buyers are beyond swamped and can use all the help they can get.
Many assert brokers have more experience and less turnover than CPG sales agents. Said one retailer, "A broker provides ‘normalized’ transitions and has the benefit of sitting with a category manager across multiple categories and fully understands the retailer desires, market strategies, and ‘hot buttons’ not to push."
But another agreed that with consolidation, brokers may also be larger but less effective with many more lines.
"The retail side of the business (resets) is changing models and going to a single-source solution," added another retailer. "Brokers have baked in a lot of profitability in this arena and most of them do not have the highest-quality, single-source solution to provide to the retailer. They will need to adjust their need for this dependency as they continue to see it shift and/or improve their offerings."
Discussion Questions
Do you see the influence of brokers weakening or strengthening for food retailers? How should their role be evolving?
Poll
BrainTrust
The results are interesting and provide some insights into the challenges facing the broker community today. The main challenge for brokers is to remain relevant in an industry which is morphing from brick-and-mortar to omnichannel. How do they do this? By solving the manufacturer’s problems and providing for an efficient and effective way of getting product to retailers (physical as well as online).
Despite the claims otherwise, I do not foresee an increase in the number of CPG companies going direct. As CPG companies seek to cut selling expenses they perceive brokers to be more cost efficient than a direct sales force. However, these manufacturers are going to expect more services per dollar invested (read lower commissions) and greater accountability from their brokers.
Here is how I see it, as I’m from the old days. Brokers and CPG reps swarmed the stores up until the mid-’90s, and then the hammer came down on a ton of jobs. No more P&G, General Mills, General Foods, Best Foods, Campbell Foods and on and on. They lost their jobs, and the few that remained ended up working at the big box store headquarters catering to the big volume companies. Brokers stuck around a little while longer, but they too diminished, and no longer were able to serve any independents unless they were of substantial size.
As margins got squeezed, the brokers that are now left don’t have much to offer anymore to our stores except bringing information on deals that are upcoming in our warehouse that I can get sent to me online, which completely eliminates the need for the reps, thus saving the broker firm even more money. With my connections, I have been able to keep in touch with brokers that will work with me on ad items and in-and-out deals, which is what I love. To be honest, I actually can get through my day without the constant flow of brokers coming in, and this is in no way a knock on them, but electronic communication works just fine and it saves all of us time.
A lot has changed in our business; some good and a lot bad. As the level playing field has shifted so far to the monster stores I have focused my efforts elsewhere, since it serves no purpose to try and chase down a great deal that we won’t get anymore. Brokers can and will help you in situations that they didn’t before, and that is where I spend my time wheeling and dealing. Keep your relationships strong with the regional brokers and the deals will be there, if you are patient.
You didn’t ask me, Warren. Call me and I’ll fill you in! 🙂
As the nature of the retailer-brand interface becomes more technical and automated, a brokerage must adapt its core competencies accordingly. Re-sets and the like are still problematic for retailers and certainly is one of the roles a brokerage can provide, but going forward, agents of the brands and retailers must be able to value-add the supply chain, whether it be with information, technology, or methodologies.
The larger brokerages are attempting to do just that. But smaller brokerages, if they are to survive, must also become efficient in the ways of new supply chain innovations, as even though they may be dealing with smaller brands and retailers. The world is changing quickly and brokerages must also.