Coronavirus has affected the entire world; it has completely altered the landscape of both consumer and vendor behaviors, and perhaps the most harshly impacted industry has been hospitality. Restaurants have had to pivot their business models catering to mainly delivery and takeout options which directly affects their menu offerings and spending habits in order to preserve as much margin as they can during a time when point-blank, sales are down.
We sat down with Max Strycker and Catherine Reeves from the RASI Restaurant Purchasing Department to discuss the vast amount of changes they, and our vendors, have seen since Covid began in March; where the trends are taking restaurants today; and, what group purchasing programs are in place to help mitigate the damage that Covid has done to the industry.
WHAT ARE RESTAURANTS EXPERIENCING WITH THE EFFECTS OF COVID?
Are restaurant spending habits changing? Are they going to, let’s say, a Restaurant Depot over a Sysco?
One of the biggest trends we’ve seen to date and the biggest change in spending habits has been towards disposables. Because restaurants have focused their menus on the offerings that will best translate into a to-go item, they’re looking more heavily into paper products and packaging that will preserve the integrity of their brand and the quality of their food.
We’ve also seen that the supply and demand of disposables is at an all-time high right now, so restaurants are seeing these huge price surges and some are experiencing a lack of needed product.
“It’s for this reason that we’re in the trenches with restaurants fighting to find every penny we can and put programs in place that will ensure our restaurants are seeing the savings that are critical to their survival.”
– Cat Reeves, Strategic Restaurant Purchasing Analyst
In the first 3 months of the year, RASI clients, globally, were spending about $900,000 per month on Restaurant Disposables, to-go supplies, and similar items. Looking at the data from May – July, those numbers have gone up to around $1.8 million; so the spend on disposable items has nearly doubled for the same time period, and that’s even with many restaurants facing lower sales numbers.
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HOW DOES A PURCHASING PROGRAM HELP FOR DELIVERY & TO-GO ITEMS?
The landscape of delivery services has already been changing for the last year or so, and as we recently discussed, due to Covid we’re now really in the thick of best practices to get the most out of your delivery options so it’s critical to drive the value in the packaging of your to-go products. The challenge here is for restaurants to find that quality while economically saving on the spending side, which is where manufacture rebates come into play.
The margin on any private label product is going to be far greater than it is on a branded product, but the demands of to-go packaging and delivery based packaging are far greater now for quality than they’ve ever been in the past. Restaurants are looking to get their product to the end-user, the consumer, in the best way possible to preserve the integrity of their brand. If you think about the guest experience inside of a restaurant, you, your staff, the kitchen, up to the front of the house and all the way to the table, have control of that product from start to finish; whereas, in the delivery and take out world, you simply don’t have full control of the product. So, using the proper container and product that will give you the best chance of maintaining that brand consistency and giving your guest a quality experience, is at the forefront of every restaurant right now.
Restaurants are feeling uneasy and rightly so. Beyond letting go of valued staff members, they’ve had to turn around and try to figure out how they’re going to extend their outdoor dining, how they’re going to take what was normally inside the four walls as an experience and how to get that experience out to the guest. With a disposable-specific purchasing program in place, like the initiative RASI has with Dart, restaurants can experience manufacture buying rebates that will ultimately help their bottom line while maintaining that guest experience at the highest level.
“We’ve got a restaurant in Chicago that on two disposable items they earned enough last quarter to offset 96% of their approximate accounting fees. Those two items yielded roughly $700.00 a month in savings.”
– Max Stryker, Director of Restaurant Purchasing
HOW DOES A MANUFACTURE REBATE WORK?
With a Manufacture Rebate Program, we normalize the data of all the spending across our client base. Those numbers are then sent up to the large aggregators who then make manufacturer deals. Those deals then are applied directly to the purchased products for our restaurants.
Moving away from disposables into a food product, let’s take for example, chicken wings; let’s say you’re buying Tyson Chicken wings but RASI has a program for Perdue. If you switch to that Perdue Chicken wing, but you’re still using Sysco as your distributor, we’re not forcing you to switch your broadliner; so if you work with Sysco’s local street rep, you can get still the product (Perdue in this example) with the manufacture rebate. 100% of that rebate then goes directly to you.
RASI focuses on keeping the relationship that restaurants have with their reps on the street and we don’t want to interfere with that; we’re simply taking a deeper dive in finding money from the actual origination of that box of chicken wings.
WHAT’S THE DIFFERENCE BETWEEN A MANUFACTURE REBATE PROGRAM AND A GROUP PURCHASING ORGANIZATION (GBO)?
The difference between RASI’s purchasing services for restaurants and a GBO is that GBO’s are hooked into contracts and that contract might require the client to switch a specific vendor or broadliner. RASI, on the other hand, will never tell our clients what they can and cannot buy. At the same time, if a client buying a product that we don’t currently have a setup program item, and there’s a very similarly matched program item, we’ll show them said item so they can see if they make sense for them and if you want to learn more, we can get samples for them. We want the purchasing power to remain in their hands at their disposal, so at the end of the day, if the like-item works for them and they end up receiving meaningful rebates from it, we’re driving as much value for the restaurants as we can.
WHAT ARE THE PROGRAMS THAT RASI CAN OFFER?
Because RASI is not a Group Purchasing Organization, what really sets us apart in that respect, is the fact that we’re not monetizing our program, like so many. There are plenty of buying groups out there but all of them monetize their programs.
Let’s say there’s a $2 case rebate available on a particular item. A typical buying group will keep a dollar for themselves and only give the restaurant a dollar, where at RASI, we’re using this purchasing program purely as a retention tool with the idea that if we can be the best partners for our clients, and help keep them in business and flow more to their bottom line, they’re going to stick with us.
We’ve got about 56 manufacturer rebate programs that cover right around 10,000 items, and the rebates will vary by program.
For instance, on the to-go containers, there are about 1,200 items from Dart under either the Dart or Solo brand, and of those 1,200 items, 900 of them have an average rebate of over $10 per case, with some as high as $16+ per case.
The goal with this program when it began was to take independent purchases from single units that were spread around the country and combine them so that we could see the aggregate spend on like-style items, and then create programs to give the independents more purchasing power.
It’s solely designed to provide options for restaurants and allow them the opportunity to maintain their brands and promote collaboration and flexibility within their street market and help deepen the engagement – especially right now during the Covid crisis when margins are slimmer than ever, and cost-savings are needed on a daily basis.