Going back to the early nineties, we remember numerous discussions with consumer packaged goods executives regarding the wisdom of sales strategies that concentrated on a handful of big accounts while essentially walking away from smaller merchants.
We were told over and over (we're a slow learner, you know) that it made perfect sense because costs were reduced by having to deliver to fewer points of distribution and sales increased because more product was sold in one (name a big chain) rather than in 30 independent outlets.
"But," we asked, "what happens when all those little guys go away and you only have (name a big chain) to sell your products? Won't they own you then?"
You'd be amazed at how many top folks told us back then that by the time that happened they'd be hitting tee shots somewhere near Hilton Head or off on some other retirement adventure. The problem would be someone else's.
The reason for bringing this up now is not because we're looking to make big chains out to be villains or to excoriate CPG executives for short-term thinking based solely on getting theirs. The spark was the news this week that Wal-Mart, the world's largest retailer, had ended its exclusive deal to have Cott Corp. supply its private label soft drinks.
Cott, which happens to be the largest supplier of store brand soft drinks on the planet, "is unclear at this time" how it will be affected when its deal with Wal-Mart ends in 2012. Revenues from the Wal-Mart account are in the "the high 30-percentage range," according to Cott CEO Dave Gibbons.
According to a statement from Cott, it and Wal-Mart "continue to discuss a redefinition of their ongoing business relationship."
Discussion Questions: Can suppliers avoid over-reliance on a handful of big accounts? Where is the balance of power in the relationships between suppliers and retailers today? What does this mean for consumers?