Bud Hilton

Foodservice and the Snowman

Answers Systems — Wed, 23 Dec 2009 14:30:10 GMT

I recently watched a television show featuring a Snowman. My mind’s eye began to conjure up our foodservice industry in relation to the 3 parts of the Snowman. Go ahead and say it . . . I don’t have a real life!!! Maybe so, but let me tell you more about my vision.

As the Snowman becomes progressively larger from his head to the bottom portion, so does our foodservice industry in number of locations ranging from very large national chain operators such as Sodexo, Aramark, Compass, etc., through the balance of other multi-unit chains and finally down to street business.

Please allow this author the leeway to use the term “approximate” as we examine the information above. Exactness of interpretation of data in these categories would depend on who you push up or down into either of these categories. Studies show that our industry is made up of close to 1 million purchasing locations and if you follow the associated legends, in my graphs, you will see that the large national chains account for somewhere around 7% or so of the locations. Coupled with the remaining chain accounts, this multi-unit grouping makes up a little over one-third of the industry locations and account for almost three quarters of all purchases. This collective group holds power of purchase and thus the leverage to demand special pricing which generally lowers profitability for both manufacturers and distributors serving them.

Sales Deployment	1 (Low) to 5 (High) Cost to Reach/ Sell	Approximate % Profitability	Approximate % $ Purchases	Approximate % Units
Corp. National Account Personnel	2	10%	45%	7%
National Account Field Group	3	15%	30%	28%
Regional Managers
Regional Managers Brokers DSRs Direct Sales	5	75%	25%	65%

As we address sales and reach possibilities, we note that the chain group is relatively accessible and offer huge potential with limited sales call activity. Depending on the size of your company, manufacturers service this group with specialized sales personnel ranging from top corporate people, for the large accounts, to national account reps for the remaining multi-units. This group is generally a lower cost to reach and potentially to sell . . . in relation to the “street” business which is serviced by multiple personnel, generally harder to identify, have marginal value versus call expense and require considerable funds and campaigns to reach and maintain connectivity.

Fortunately, spending on street business can be somewhat justified by the continuity and profitability of such business. In many cases, there are certain purchasing agencies that have become specialists in grouping street accounts to form a “near resemblance” to a chain channel of business. These buying entities could be instrumental in aggregating the largest and maybe most profitable group of operators in our industry.

Without a doubt, and from some of these volume and profit metrics we have observed, there is strong reason for a balanced mix of sales in manufacturer portfolios. The trick becomes reaching and measuring these different pieces of business. To learn more about how you can reach and measures your ultimate position in the market place, contact us at sales@answers-sys.com or call 800-225-6127 to arrange for this valuable consultation.

Technorati tags: snowman, reach, relative market position, marketing, national accounts, foodservice, street business

Greg Hilton Named President of Answers Systems

Answers Systems — Mon, 07 Dec 2009 13:32:39 GMT

Bud Hilton, Chairman and Chief Executive Officer of Genesis Group, Inc., dba Answers Systems, the leading provider of foodservice trade promotion management solutions, announced the promotion of Greg Hilton to President of Genesis Group, Inc., dba Answers Systems. Bud Hilton, founder of Answers Systems in 1986 and whose career spans over 46 years in the foodservice industry, will continue in his role as Chairman of the Board and CEO. Bud will become even more involved in foodservice industry initiatives and new visionary concepts for Genesis Group and Answers Systems.

Greg Hilton has been with Answers Systems since 1995 and has served the company in various capacities including the role of Vice President and CIO. Greg developed the Answers Systems' Information Technology department and the team responsible for the best-in-class software and systems applications available to manufacturers and operators in our industry. Prior to Answers Systems, Greg had deep experience in the financial industry, serving in several information and financial roles in the Mortgage Servicing segment for leaders such as ERA/Chase Manhattan Bank, Amsouth Bank, and Carteret Mortgage. Greg holds a Bachelor of Science Degree in Business Management from the University of Tampa.

"Greg spent most of his life preparing for this role and his strength in information systems, technology, his financial background and his overall foodservice experience places him in a unique position to lead and enhance our company's future," said Bud Hilton.

Additional executive staff promotions announcements:

Tom Tipps has been promoted from VP Sales & Marketing to VP & Chief Marketing Officer
Rhonda Harms has been promoted from VP Finance to VP & Chief Financial Officer
Brian Maloney has been promoted from VP Business Development to VP & Chief Development Officer
Roth Block will continue as the Senior VP& Chief Operating Officer
Kevin Hart has been promoted from Product Manager to Chief Information Officer

Since 1986, Answers Systems has been meeting the unique trade promotion management needs of the Foodservice industry. We stay on the leading edge of software development and service delivery with our ContractPro® solution for Foodservice manufacturers and ValuTrak® solution for multi-unit Foodservice operators. Our solutions provide real-time visibility into the performance of trading partner agreements and support quantifiable ROI improvements for our client base.

The Status Quo Safety Button

Answers Systems — Mon, 02 Nov 2009 21:52:03 GMT

Posted by Bud Hilton

I recently complimented one of our managers at Answers Systems for stepping out on the edge and challenging a client on changing some of the practices they were doing in favor of a proven “best practice” way of accomplishing a task within their contract management system. After covering relentless arguing points and hovering in the “no change-safe zone”, the client agreed to make certain concessions and change their position and practice. I can’t express strongly enough how rare this seemingly risky attitude is in today’s foodservice world. Many managers in the foodservice industry have an internal “Status Quo Safety Button.”

This safety position is fairly understandable because it is generally easier to make “no decision” than “a decision” . . . even on a widely proven best practice that has been successful for others. Most sales people want to deal with the buyer that makes the decision. The sales person usually needs to search and find the person in the organization who is saying NO! Let’s look at the difference in the two mentalities:

Remain Status Quo	Change Practice
I can dismiss this sales person	I need to understand this presentation
This may not work for our company	It has been proven successful with other companies
I can’t lose anything (maybe)	I might gain something
This won’t cost the company money (maybe)	This might save the company money
My boss will agree with “no change” (maybe	My boss will love the new process
I can retain ALL my current staff (Island Guard)	I could possibly reduce my personnel
Change might make me have to work harder	I might become more effective

So, again it is sometimes easier to say NO than to operate on the edge and take the challenge, even when success is predictable.

I told our account manager that they should be very proud; that they were out on the edge with their sales approach; challenging their client with proven facts and big ROI opportunities; and that they are helping to carve new paths of success in our company and our industry. Foremost, I let our account manager know that the real hero in this scenario will be their client . . . so help make them realize that their decision was right.

The reason that very few are willing to operate on the edge is that there is not much room out there!

DATELINE: Salesville, USA, somewhere in the 60s or 70’s

Answers Systems — Fri, 02 Oct 2009 20:59:04 GMT

Posted by Bud Hilton

Some of you may have been there calling on foodservice distributors and operators. If you were, you probably pulled on more “screen doors” than fancy glass or wood corporate doors. The business was basically in the streets. Chain accounts represented less than 30% of manufacturers and distributors volume. Most were even sensitive to that percent growing, out of concern that the potential loss of a big customer may harm their overall volume/profit structure. Distributors, with their blanket DSR coverage, owned the street and held the street operator cards close to their chest. Manufacturers were doing everything to reach and sell operators and create pull-through leverage with the distributor. Some of the methods we all explored were DSR ride-with, direct mail campaigns, coupon rebate programs, growth/loyalty incentives, and other tactics; most of which have diminished compared to today’s reach efforts.

Chain growth exploded and Manufacturers turned to large volume customers to grow their business; and why not? One could call on large entities (with fancy wood or glass doors) that could guarantee (be careful here) multiple unit usage, with far less selling effort and measurably less marketing and sales support money. Big volume . . . Big money . . . Less expense - right??? WRONG! It seemed that every other manufacturer also wanted this new volume therefore, competition for the business, coupled with chain operators’ understanding their leverage, created low margins for the distributor and the manufacturer. It is estimated, by industry experts, that multi-unit contracted business today may account for as high as 65-70% of total foodservice operator purchases but represent less than 15% of the profits. Just about a 180 degree turnaround from our earlier “Salesville” days.

What to do, Oh, What to do? Lace up your boots and hit the streets! Easier said than done! Manufacturers are finding it very difficult, especially with today’s challenging economic conditions, to put enough assets in place to compete for this low margin/high profit business. On the other hand, street operators have found that, in order to compete against large chains across the street from them, they must “unionize” so to speak and become more like the large chains. . . become part of some “buying group” to achieve better pricing; act like a chain themselves. A lot of other profit seekers also got the message. Many formed GPOs (Group Purchasing Organizations) whose business, among other things, is to act as a chain headquarter purchasing agent for masses of operators. The concept started in healthcare and other non-commercial segments that combined smaller multi-unit groups together for leverage. This seems to have worked pretty well. Now these groups are simply another big “chain” demanding special attention and pricing.

The latest purchasing move appears to be in a handful of entrepreneurs that are putting together large purchasing organizations catering to the “less-than-multi-unit” independent operators (the street). Before - the “sacred cow” of the distributor . . . but now the operators are demanding pricing that the distributor does not want to give up from their margins; thus, manufacturers are asked to step up and support pricing concessions to gain this profitable business.

My company, Answers Systems, provides the tracking and administrative execution for manufacturer allowances to both chains and street business. We receive, verify and settle claims for manufacturers and operators on both sides of the equation; therefore, this unique position gives us the opportunity to speak with some authority because we see ALL the programs out there. If we move away from the rather large GPOs discussed earlier and concentrate on the ones aiming at the street operators, then we see that there are basically two kinds of purchasing groups; One type GPO will use rebates, that manufacturers provide, on basically ANY participating distributors’ operators that are not part of another contracted program. Many times the identity of these operators may be held by the GPO. It even gets “ugly” when some of the operator participants are also members of yet another purchasing entity and thus the purchase payments may become subject to “at least” double dipping, because the manufacturer has little or no way to track the units multiple-participation.

A second, and certainly more “palatable” organization actually makes the operator enroll, thus utilizing some leverage to create single purchase allegiance from the signing operator. They also identify these unit purchasers to their supporting manufacturers, along with new SKU gains, increase/ loss of business, etc. This progressive handful of entrepreneurs has become marketers for their manufacturer partners, who otherwise have difficulty reaching street operators themselves. The group usually has a very structured manner in which they disperse rebate funds of their participating manufacturers. Incentives are generally aimed at a combination of: The distributor house, Sales Managers, DSRs and the operator. This formula of less-profits for the purchasing group, in lieu of spreading funds to the participants that create the sell, is appealing to the manufacturers and seems to have cemented some strong relationships with the local distributors. The last fitting piece identifiable with this group is that they make some strong efforts to work with their manufacturer partners in the “after-sell” arena of reporting necessary analytics and helping to identify opportunities for additional growth.

Reading between the lines, one would surmise that these type organizations might be on the cusp of creating collective street operators that will become the next “chain” buyers . . . and you are probably right. This is probably more the reason for the manufacturer to align themselves with the purchasing organization that is applying some of the more progressive marketing techniques to their proposition.

Answers Systems is simply the administrator for all of this type purchase business. It is not our business to point out WHO you should work with but rather to help participants to identify certain practices that are being used in the marketplace that might help you to identify WHO to align with.

Technorati tags: foodservice operators, restaurants, chain accounts, marketing, sales, foodservice distributors, double dipping, Answers Systems, GPO, group purchasing organization

New Customers Versus Organic Growth

Answers Systems — Tue, 08 Sep 2009 12:42:10 GMT

When should Manufacturers best exercise each strategy?

Posted by Bud Hilton

The easy answer is “both strategies, all the time”, and most manufacturers will say that they do this religiously. However, if you peel back the onion one will find that certain times are more favorable for choosing one or the other as a primary 80/20 strategy and putting appropriate resources behind it.

There really are only a few tactical applications that fit each of these strategies. Gaining new customers is sometimes the most costly way to expand business. The manufacturer must allocate sizeable dollars and resources to “potentially” achieve success. Manufacturers can gain new customers if they:

Reach and sell new customers
Replace competitors

On the other hand, organic growth can be achieved via several options:

Promote and sell more current product to existing customers
Develop new menu items/usage with operators
Expand categories and/or SKUS with current customers
Expand location usage of “Non-Complying” multi-unit operators

In today’s economically depressed economy, it is advisable for manufacturers to err to the side of spending more resources on organic growth. Not only advisable . . . but because of cutback of people and promotional dollars, manufacturers simply don’t have the assets to employ for “potential” gain. The really progressive manufacturers are using some combination of tactics to achieve most of the bullets under the “organic growth” area. However, now is the perfect time to “take the low-hanging fruit” and the lowest common denominator may very well be to the last bolded bullet point above - GO AFTER “NON-COMPLYING” MULTI-UNIT LOCATIONS. After all, the purchasing director for the operator approved your product . . . supposedly, he or she provided you with units/purchase expectations in relation to your special pricing. So, basically, you deserve to identify that each unit is buying your product! And OH, by the way, this is probably the least-costly means to growing ones business.

Herein lays the problems! Because of the manner in which operators submit data for rebate funding is generally not presented at a “unit level” format so one can identify the non-complying units. Unless the manufacturer has a standard application or an outside company that is collecting, reconciling and settling their multi-unit claims for them, it is highly unlikely that they have the means to identify non-compliance with any regularity. It is time to put “teeth” in your contracts with multi-unit operators . . . and for some manufacturers this simply means attempting to get operators to comply with the “teeth” that are already in their contracts.

Answers Systems’ ContractPro® solution is the only “Total Trade Promotion System” that provides manufacturers with a standard application allows contract creation and communication, then provides total data acquisition, reconciliation and settlement of ALL manufacturer claims with their distributors and operators; then presents the data that enhances “visibility” into contract activity. The added bonus is that our system will help you to identify and sell more products to your already approved customers. So, if you are one of those manufacturers that may be stumbling with your internal contract management system and you are unsure of your chain account compliance and need some help in identifying and filling the gaps . . . take some time to find out how industry leaders are approaching this subject. Contact us today!

Answers Systems

1-800-225-6127