How do you strike a balance between getting a good price and pleasing your customers?

Jason Coyle, UK business development director, Mr. Crumb

Realistically, there is limited scope for small suppliers negotiating! At Mr. Crumb we have two perspectives, first from being well established in Ireland and second being a new entrant to the UK with fresh stuffing, breadcrumb, speciality breads and party food.

For a new supplier, the multiple has the power and tells you what margin they require. There are standard category margins that a manufacturer must be able to meet and it is important to be aware of these going in. However, multiples do realise there is a balance to be struck between meeting their own margin requirements (and its knock on effect on RSP) and allowing the manufacturer enough margin to operate and develop.

Negotiation comes into play once a product is more established. As sales grow, the multiple will look for an increased investment (whether through extra margin, promo's, LTA's etc) and you usually have to give something. This can only be recouped by creating efficiencies and cutting costs. Eventually there can only be one of two outcomes. Either the manufacturer will not have enough margin left and close or they will continue through innovation (via new products or re positioning existing products).

Susie Willis, MD Plum Baby

The ability to negotiate with suppliers comes down to an honest approach to base costs. There is always the belief that a multiple grocer will never give anything away, but if there is genuine perceived value to their category, then there is room to negotiate. It is important for a small supplier to absolutely stand by their guns when it comes to price, margin and price promotions. Never be bullied, your cost base is what it is, and there is very little flexibility for a start-up business when you are trying to build relationships with suppliers yourself. It is also important however, to demonstrate the desire to constantly work together as partners, and reach a compromise on marketing costs to get the brand recognized. In other words, get the best price you can, and don't undersell yourself early on.

Once the buyer has trust in your brand and its ability to perform, or even outperform existing brand lines, then you are in a stronger position to negotiate extra distribution and further shelf space.

Relationships DO matter, keeping close to the buyers DOES make a difference, and keeps it real. Once the buyer genuinely understands that the marketing budget is in fact the owners mortgage repayments, they then tend to be more understanding.