We were thrilled when the biggest super pub in the City called us and invited us to pitch for their business – we must be doing something right I thought.
At the time I was the General Manager of Deasy’s, a Guinness subsidiary with depots in Cork and West Cork. We were drinks wholesalers and we delivered beer and soft drinks to the pub and off licence trade in these areas.
We had been doing quite well and this pub was one of those “prize” accounts that all our competitors were chasing. The business they were doing would probably be about 20 times the size of a normal pub.
This was an account we wanted so we put a really competitive price list together. There was enough in the price to win the business but still leave enough for us to make it worth our while.
Not good enough – we had to do better.
I guess this was no surprise as the incumbent wasn’t going to lose this business easily and the buyer (in those days no one had a buyer but this crew had!) was going to quite naturally play us off against each other.
We sharpened the pencils and ate into our margins leaving a little left for us.
Not good enough – we had to do better.
At this stage we cut our margin on products across the board effectively giving them the cheapest prices we were giving anyone – this was crazy but if we wanted this prize account its what we had to do.
The buyer rang our Sales Manager – congratulations, we had won the account and they looked forward to doing business with us. Over time with the introduction of some new products and a few substitute brands we might be able to bring it back to some level profitability.
After our first delivery the buyer rang and told us that he had some breakages left over from his previous supplier that he wanted us to uplift. We would have a look at them and decide what we could do – even with out of date alcoholic products we would be able to reclaim the duty and pass the rebate back to them.
We inspected the breakages and there was a huge quantity of all sorts that he wanted to return – clearly they had done a clear out of their stock room and expected us to take back this rubbish that had been accumulated for years. Many of the products were non-alcoholic and some were brands that we never stocked and would not be able to get credit from anyone.
We carefully assessed the breakages and informed the buyer how much credit we would be able to manage. He informed us in no uncertain terms that he would pull the whole contract if we did not give him a 100% credit at our list prices – he was being totally unreasonable but he was serious.
We reluctantly collected the “rubbish” and processed the credit.
The account continued in this vein – he wanted emergency deliveries at a moments notice whenever he ran short, often at quite unreasonable times.
He pushed us so hard and continued to do so – so much so that there was no win left for us and we were starting to feel quite abused.
All of a sudden it wasn’t our prize account, it was a thorn in our sides. We started to get strict with them – they had to order properly, we cut out emergency deliveries. We maintained a good level of service but now it was on our terms.
From time to time our suppliers would give us beer fridges and promotional events that we could allocate where we chose – needless to say we never passed these onto our “prize” account.
After six months we got a call from their purchasing manager who wanted to do another round of “squeezing” and was inviting us to submit our best prices.
This time we did a full review of our price list, increased the prices across the board and politely let someone else be a busy fool – that was the last time we set foot in the place.
In James Caan’s book “The Real Deal” he spoke about a valuable lesson his dad had taught him from his leather trading days – it was always vital that you made sure there was a “Win-Win” left for both parties in a deal.
In our case there was certainly no win for us and in truth the supplier also lost out – they pushed us to the point where we didn’t actually care about their business any more.
Be careful not to drive “too hard” a bargain and make sure you walk away before the point where the business just isn’t worth it anymore