I am relatively new to the beverage industry, so I don’t mind sharing that there were some surprises and lessons learned when the Federation conducted its latest Can Request for Proposal (RFP). I encourage all our members and non-members to consider an RFP process for larger brewery purchases (i.e., over $5K). It’s a great purchasing tool to have at your disposal and can be utilized by the smallest or largest Brewery/Distillery. For those not aware of the process, an RFP is formally seeking X number of bids or quotes from vendors (a minimum of 3 is a typical starting point). The process can be very detailed and lengthy or short and to the point. Here are 3 takeaways from our last round of RFPs on Cans, specifically BRITE 12 oz. cans for a brewery member of the Federation. If you have any questions, happy to share best practices or our RFP forms, just send me an e-mail at dan@beveragefederation.com
#1 Organizations don’t always make it easy to compare ‘apples to apples’ when you request a quote. This is not new, and I don’t fault suppliers for this practice. I may be only a few years into the beverage industry, but I’ve been a part of many RFPs in the past. The practice of providing a wide range of proposals to make it hard to compare is something that can be found across industries. But I did find that it was definitely the norm for the Can category.
So how do you overcome this when you get a series of responses that don’t easily match up? Well, the process of an RFP is supposed to do just that, normalize the responses to make it easier to compare. But even with this approach, I find you need to be specific in your ask. i.e., I am looking for the cost…broken out the following way, for next year, please include freight, dunnage, MOQ, etc. You get a very different answer when you send out an RFP asking for specific responses than if you just send an e-mail and ask for a quote on 2,859,150 BRITE 12oz Cans.
Also, besides being specific, ask follow-up questions to clarify what one provider might have listed that another did not. i.e., How many layers per pallet, is this 1-year pricing or 2, what’s your lead time? All this additional detail is to make sure you are comparing two similar/identical solutions.
#2 Yes, the price per can will be a big factor in your decision. But it won’t be the only one and in fact, it will most likely come down to one of the other categories besides price. If you send out to multiple manufacturers and distributors an RFP, you will hopefully hear back from many of them. You may find that the pricing line item looks very similar across 4 to 5 of your responses. So, what else factors into awarding your business and seeing which is the better solution if the price is almost identical.
Each supplier should be trying to highlight a differentiator on why you should go with them. If it’s not clear, you can ask about certain elements of the proposal and see if they offer a more competitive advantage. For example, do they have terms for this order, would they do NET 60 for you? Would they warehouse the order, for how long and how much, do they offer a discount if you get lids at the same time, are they able to adjust their MOQ if you did a 2-year contract, is their price tied to the London Medal index and if so, how often is that adjusted for? Etc. etc. Either by asking for these differentiators or identifying them in the response, you are typically highlighting what will be the deciding factor besides price. All of these have measurable value to a beverage producer – it’s just a matter of quantifying how much value it is to your organization.
#3 Don’t underestimate the value of a partnership, even in an RFP. An RFP may feel like a more calculating process than just calling up ‘you guy’ and getting a price. And that’s because, in a lot of ways, it is more calculating. It’s meant to help remove the awkward negotiation and tunnel vision focus on your price. It’s also supposed to help buyers understand that they are getting all the value needed in the solution compared to the market.
What I like about the process is that you can continue to refine the process and make it your own. But it doesn’t have to be cold and calculating from start to finish and relationships can/should still play a role. The process might show that you can get a slightly better deal from switching providers, but some breweries might use this opportunity to talk to their current provider about what they are thinking and figure out if there is a way to stay with them. So, in this case, the RFP process has only strengthened the partnership.
Either way, I always recommend that our members or non-members reach out after a supplier has not won an RFP. Share some insight and let them know that they will reach out again in the future. If they provided a competitive solution, had good response time, or came in a close second, share their information with other breweries. If you treat the whole process as a detached exercise, you won’t find suppliers who want to participate in your next RFP. Remember that suppliers are looking for ways to earn your business, so they are appreciative to be included. But they are also looking for a long-term client they can grow with, so in many ways, they are evaluating you as much as you are evaluating them.