Leverage: How GPOs work

Trip Wheeler, President SB Value

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A group purchasing organization or GPO is a very simple, yet amazingly powerful concept.  A GPO is exactly what is sounds like – a group of companies working together to get better prices and service than any single company could get on their own.

Large companies like Lowe’s, McDonald’s and Ford get better prices because they spend a lot of money and thus have spending leverage.  Lowe’s buys millions of dollars in 2x4s each year so they get a much better price than when I buy some wood to build a deck.  They get a better price because they are buying a lot more lumber than I am.  And the seller of the lumber is willing to take a smaller profit margin because she will make a lot more overall profit because the volume is so large.   

What’s in it for everybody?

Once the GPO has its members, it goes out and negotiates the lower price using the combined spend of all the members.  The GPO simply extends that price discount down to each individual company.  And for getting the member a much better price the GPO asks the seller of the product (not you) to pay them a small fee for bringing the vendor so much business.  The individual company gets a much better price.  The vendor makes more overall profit. And the GPO gets paid by the vendor for bringing it a lot more sales. 

GPOs level the playing field so smaller companies can get the same price discounts as massive companies.

Tomorrow if you woke up and your food spend rose to $5 billion and you called to renegotiate your food prices you’d get way better prices than you do now (and a sales rep that might pass out).

Are all GPO’s created equally?

Yes and no. The buying and selling concept is the same, however, when it comes to product choice, customer service, on-line ordering availability, local representatives assigned to you, strict minimums, long-term contracts, non-competes and flexibility in brands, there is a difference.

In fact, when SB Value was negotiating for our contract, we interviewed many GPOs, brought in seasoned professionals in the field for their expert opinion and researched our options for months. So, in essence, we’ve done all the work for you!

 SB Value’s ‘big 3’ differentiating factors:

1.     Dedicated, personal customer service throughout the on-boarding process and then a smooth transition to a local representative for future support if needed.

2.     No long-term contracts or fees

3.     100% complete flexibility to order what you want – we have the largest selection of negotiated pricing of items from protein to paper products and produce to paprika. We will also suggest products that may be of greater quality at the same price you are paying now.


In conclusion, GPOs are brilliant for caterers. They will help you save money from day one so that you can start putting those savings towards other areas of your business! Contact our VP of Sales, Clint Elkins to see how we can help you.

Tariffs and How They Could Affect your Food Prices

One topic we’ve all been hearing about over the past few months is tariffs.  Everyone seems to be trying to figure out exactly how the changes to American tariffs will impact the price we pay for items important to our business and personal lives. Earlier this year newly announced increases to tariffs on imported goods has sparked talk of trade wars and an exchange of rhetoric from the US and its trade partners.  Although we’re still early in tariff talks there are a number of theories of how they will impact us, many of which are conflicting or the headline doesn’t tell the whole story. 

 

Let’s start with the definition of a tariff.  According to Merriam-Webster, tariff is defined as “a schedule of duties imposed by a government on imported or in some countries exported goods”.  Earlier this summer the USA enacted a 25 percent tariff on imported steel, and a 10 percent tariff on imported aluminum.  As a result major trade partners, such as China, Canada, and the EU, have announced their own taxes on American foods and beverages.

From a number of reports it seems that, at least in the short term, prices of items such as beef, pork, and dairy may be lower in the USA due to less exports leading to more supply.  At the same time, the cost of aluminum based items and items packed in aluminum cans are expected to rise here at home. 

BEEF: Food + Wine reports tariffs on U.S. beef recently reached 10 percent in Canada and 37 percent in China, which means there's a lot of unsold meat sitting in American warehouses right now (more than 2.5 billion pounds, according to the Wall Street Journal).  The abundant supply should mean lower prices in the foreseeable future. 

“It takes about three years for our cows to come to market," Kent Bacus, director of international trade at the National Cattlemen’s Beef Association, recently told CNBC. "So we were basing our production off of the market signals at the time. So we have a lot of product that’s going to come online...There’s a lot of demand for it but trade policies are kind of getting in the way right now." 

Burt Flickinger III, managing director of the Strategic Resource Group, was recently quoted by Food+Wine as saying “With so much meat to move, America consumers could see lower prices, temporarily”, also predicting that prices could fall about five percent initially, and max out at 12 percent. 


PORK: While the pork industry took a hit after Mexico slapped American pig products with a 20 percent tax, China has targeted it especially hard, with multiple rounds of tariffs now totaling over 70 percent, CNBC reports.  China has been a popular destination for US pork exports, but the new tariffs are quickly slowing shipments.  Similar to beef, pork production has been built on demand history and slowing exports will create more supply.  The excess supply should cause a drop in prices in the USA until the markets level with production.


STEEL + ALUMINUM: With the earlier mentioned increases to Steel and Aluminum tariffs we could expect to see increases in prices of everything from canned goods to kitchen equipment.   Prices on aluminum based items such as foil wrap and foil pans could see a rise in prices, impacting every catering kitchen in America.

The long-term impact of the new tariff war is yet to be known, especially if the exchanges of tariff increases are renegotiated.  The short-term reduction of beef and pork prices could spike later if production is cut and tariffs are lowered creating more demand than supply. 


At SB Value, we stay on top of trends and pricing fluctuations to advise you on the best way to optimize your food and kitchen supply spending through uncertain times. 

Sources: Miriam-Webster, Food + Wine, CNBC, The Wall Street Journal

 

No Exceptions.

Blog by Clint Elkins, VP of Sales, SB Value

In my last column I wrote about the importance of thinking outside the box and creating new ways to increase your bottom line. Of course, that is business 101 and always will be, but it isn’t always the most personal aspect of your career. 

 A movie based on a true story that teaches us about branding and business.

A movie based on a true story that teaches us about branding and business.

Your brand is your brand, period. One of my all time favorite movies is American Gangster. If you haven’t seen it, it is solely based on business and building a brand. Denzel Washington delivers a great line, “No exceptions.” ‘No exceptions’ sums up his character and his business in just two short words but they are the core of what he stands for.

Recently, I was fortunate enough to attend a catering workshop held at Lon Lane’s Inspired Occasions in Kansas City, MO. I had spoken to Lon a few times leading up to the event and it was obvious that the workshop was going to be spectacular, even before I laid eyes on his facility. All it took was listening to him share his thoughts and visions of the event to know his brand was ‘regal’. 

 Amir, a team member that embodies Lon’s brand.

Amir, a team member that embodies Lon’s brand.

I arrived a day early and was able to spend some time with Lon. As we toured Kansas City and sampled all the famous BBQ places, I almost felt like a reporter in a way. One thing about me is I love to learn and anyone that has ever spent any time around Lon, knows he is a wealth of knowledge on about any subject. So, as I asked question after question about his business it was very clear that he sticks to his brand and his brand is his business. 

The next day at the workshop I need to run a quick errand. There was a market a few blocks away and I needed to run down to pick up something for a friend. I asked a young man who worked at Lon’s for walking directions to the store. Even though the market was only a few blocks away he insisted on driving me there so I didn’t have to waste any more time that I needed to. Once we arrived he joined me inside to grab the things I needed. While standing line to pay, a young mother with a small child in her buggy dropped a few things. This young man not only picked up her things and handed them to her, he thanked her for doing it.

On the drive back I asked him questions about how long he had worked for Lon, where he was from, just generic questions. It was immediately obvious how much pride he took in working there. He knew how important representing that company was because he wasn’t going to let Lon or his brand down. 

 Lon Lane and son, Stewart, research and development chef

Lon Lane and son, Stewart, research and development chef

Lon’s signature was on everything, all the way down to how his staff treated people at the local grocery store. Not for a second do I think Lon trained this young man to treat people like he did. He found employment with Lon because of how he treats people, it’s his brand.

Sticking to your core business values no matter what is your brand. If a bride insists on something your catering company doesn’t want to do, don’t bend if it isn’t in your best interests.  Stick to your guns, we all live in a world where news travels faster than it ever has and with the Yelps and Facebook’s of the world it makes it a lot easier to spread something negative than something positive.

Clint Elkins, VP of Sales - SB Value

Article will appear in Catersource.com