Should procurement have a say in terms of its organization’s sales strategy? by Jon Hansen

Posted on December 9, 2014

0


Dating back to my post on July 9th 2007 titled Public Sector Procurement and the Walmart Effect I have, throughout the years, made many references to the Vlasic Pickles – Walmart story

While I viewed the now famous case from the perspective of the old adversarial you get what you negotiate not what you deserve approach to procurement, I read a post this morning that added a new dimension to the discussion.

In her LinkedIn post What a pickle of a story taught me about brand integrity, a Generation Y CEO by the name of Julie Lyons-Wolfe wrote about Vlasic’s decision to sell a gallon jar of it’s premium pickles through Walmart, at the same price it sold a much smaller jar through its existing retail chains.  Specifically, Lyons-Wolfe questioned why anyone would sacrifice their premium brand’s name in an attempt to increase sales and market share.

Julie Banner

Julie Lyons-Wolfe

 

She raises an obvious yet excellent point.

Lyons-Wolfe then suggested that the manufacturer should have “created a white label or branded product using a name other than Vlasic.”

This according to the young CEO would have enabled Vlasic to pursue “the new low-margin, high volume business,” while still “preserving both the integrity and price point of their premium brand.”

Once again, it is hard to argue with her logic.

However, she then adds an interesting twist by suggesting that perhaps Walmart was not interested in selling the premium pickles so much as capitalizing on the Vlasic name.  In other words, a pickle is just a pickle to Walmart, but being able to showcase a premium brand at a significantly reduced price would speak to the clout of the retailer.  This would send a message to the market that they will always offer consumers the lowest price – even for a premium product.  In essence, Walmart sacrificed the Vlasic name for its own gain.

The veracity of this latter point was reflected in the following excerpt from the 2007 post:

“Finally, Walmart let Vlasic up for air. “The Walmart guy’s response was classic,” Young recalls. “He said, ‘Well, we’ve done to pickles what we did to orange juice. We’ve killed it. We can back off.’ “Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy.”

This being the case, it is no wonder that Lyons-Wolfe questioned why Vlasic would want to partner with Walmart in the first place.

All of this of course leads to a number of very interesting questions including what, if any role, did procurement play in this sad story?

For example, did Vlasic senior management ever approach their purchasing people asking for their input on the Walmart deal?  Even if they had, what insights would procurement have brought to the table that might have changed things for the company?

In terms of Walmart’s procurement people, a recent presentation by Kate Vitasek at this year’s Virginia 2014 Forum echos a similar reality pertaining to her days in purchasing with Microsoft.  During the session, Kate referred to herself as being one small person with a great deal of negotiating clout, and that a win for her usually meant a loss for the supplier.  She then added that she was rewarded for these types of wins.

No doubt, Walmart’s procurement people were also on the receiving end of similar “benefits” for negotiating the Vlasic deal.  However, and here is the thing . . . would Walmart’s procurement people use the same tactics today as they did back then?

Regardless of which side of the transaction you were on, one thing is certain . . . in today’s world, procurement needs to take a more active and expansive role in its organization’s business – including sales and marketing.

You need not look any further than the Heinz ketchup bottle story that was shared during a panel discussion in May by Spend Matters UK’s Peter Smith, to underline the importance of this last statement.

30

Posted in: Commentary