With commodity prices soaring and uncertainty infusing our global markets, having a clear strategy in place for negotiating the inevitable round of cost price increases is critical. Read our simple guide to the main watch outs and learn about our calculator which helps you instantly quantify the value of any potential price increase.
Despite a drop in vegetable oils in June, the indices for all major food commodities have risen continuously in the past year, with overall growth nearly 40% higher than the same time last year. This is the biggest increase since 2011.
Crude Oil is showing a similar trend, with consequent impacts on transport, shipping and packaging, all of which will continue to create pressure on suppliers to increase prices.
Sources: UN Food & Agriculture Organization | macrotrends.net
As we start to envisage a future after COVID, we all start to take stock of where we are. Even before the pandemic, we observed a number of years of supplier cost absorption and continued raw material pressure (particularly oil-derivatives) squeezing margins.
Regardless of the socio-economic circumstances, there comes a point when taking a price increase is an irresistible decision; and one which will have long reaching consequences.
In this situation, the decision can create angst, particularly in organizations in which annual CPIs is not the norm and especially where it has been a number of years since a CPI has been delivered.
What are the watch outs? First, confidence. The team needs to understand and BUY INTO the strategy. They need to understand the consequences of slippage and it helps if they are personally invested in the planning and the result. Second, trade back, i.e. getting the headline result and then conceding all that was gained as the agreement progresses. Third, having an unsegmented strategy ‘one-size-fits-all’ approach, which has the potential to fail everywhere or lose the biggest percentage of the goal.
We have developed a calculator which helps you to quantify, in simple terms, the value of any potential price increase or the cost in margin absorption of missing your target. It makes compelling reading!
We have a huge amount of experience in supporting the successful negotiation and execution of price increases. We have developed a proven tools and methodology with which we can support you regardless of your goals, counterparty or circumstances and we can guide you to the optimal result, whilst challenging your thinking and enabling your teams to plan all the way through to the execution of the deal, with live coaching if required.
All of which will put you and your teams at the top of the podium!
To find out more about how we can support you with cost price increase negotiations, please get in touch. We'd be delighted to help.