In our last article, we introduced OPTRADE Active and the concept of Value of Placement (VOP). As a reminder, VOP is a way of determining the average amount of case volume that you expect to sell into a new location over the course of a year in a specific market, geography, Group Purchasing Organization, Foodservice Management Company, or distributor, once you’ve landed a deal.
Let’s dive into the Education segment, showing you how VOP can be used to identify the right opportunity due to (1) labor shortages and (2) unpredictable Covid-19 policy impacting your supply capacity. Find out how you can defend them once you’ve won the sale.
K-12 makes up the majority of the Education segment’s volume during the school year – but does that mean K-12 schools are the best opportunities? Not necessarily. Notice how K-12 case volume roughly equates to the proportion of ship-to locations in the Education market, whereas C&U has approximately double the case volume for half the locations.
We see this reflected in VOP, which is similarly double that of K-12. That means for each deal landed in C&U, you can expect to sell roughly double compared to the average K-12 location over the course of a year.
Find the right opportunities: There are some instances where finding the largest VOP isn’t always the best approach. In fact, recent IFMA interviews with key figures in K-12 and C&U segments have shown us this is precisely one of those instances: Covid-19 related supply chain disruptions have resulted in widespread shortages in numerous food categories, and many manufacturers are finding themselves unable to commit to supplying some of the largest school districts and universities when they ordinarily would be. In cases like this, VOP can be applied in different ways depending on whether a manufacturer has a shortage of supply or ample supply. For those with shortages, it isn’t a good idea to use VOP to identify the largest schools. Instead, it’s better to use VOP to identify the right-sized schools – ones that your supply constraints can accommodate. However, many of the largest school districts and universities have been left in desperate need because shortages have rendered their typical suppliers untappable – presenting an unusual opportunity for manufacturers with ample supply, who can indeed use VOP to identify the largest of these schools.
Your existing business is at risk: Using VOP to size up new targets can be great to prepare for supply shortages, but what if they take you by surprise, after you’ve made the sale or with your existing customers? We also learned from IFMA that school districts with hybrid or remote schooling still have not received guidance from the CDC on restrictions that could impact foodservice operations, like distancing, even though many have just a little over a month before the 2021/2022 school year begins. Further, labor shortages have proved pervasive regardless of schooling type or sub-segment – impacting C&U, K-12, remote, hybrid, and fully in-person schools alike. What if a cafeteria worker decides to quit, or Covid-19 policies suddenly become more rigidly enforced, and your education customer needs to switch brands or demands more prepared meals? Both pose the risk of lost business.
The mitigation plan: To mitigate the risk of permanent loss to a competitor, you need to position yourself to pivot between products – in this case, between bulk and pre-packaged goods, or between multiple viable substitutes. Establishing pivotability starts at the distributor, where you need to make sure you’ve secured slots for the right mix of products that meet a variety of potential market conditions. One way to drive the conversation with your distributors is to compare the volume of products you sold in 2020 to 2019, which would illustrate the difference in product mix under normal conditions vs. conditions encumbered by labor constraints and Covid-19 policies. If you have claims data available, you can perform the same analysis on specific school districts or universities you’ve done business with over the past two years, taking into account differences in approach or political climate. Taking these important steps will win you favor with key customers and distributors, differentiate yourself against competitors, and otherwise prepare you to turn these tumultuous circumstances into grand opportunity.
Interested in using this data yourself? Click here to learn more about OPTRADE Active.