Beverage deal negotiations can be incredibly complex. By comparison, managing a beverage deal can seem relatively straightforward. By the time you get to contract oversight, you have defined the scope of the project, negotiated the financials, and agreed on all service commitments. It’s a contract, not rocket science, after all. So what should follow a skillfully crafted negotiation is a simple execution of terms and commitments. Right?
When entering a contract with a major beverage company, you need to know that you are dealing with not just a single business, even though your local sales rep may seem personable and down-to-earth.
The reality is that you are now working with a global company focused on innovating and marketing billion dollar beverage brands, a system of dozens of franchised bottlers and distributor networks, financial and legal teams with their own “guard rails,” field sales reps, financial analysts, and more. You are going to be exposed to multiple reporting standards and numerous IT systems. You are relying on communication at many levels—both human and machine—to be synced instantaneously. The best of intentions cannot make all of these disparate systems mesh automatically.
In our nearly fifteen years of monitoring, auditing, and tracking beverage deals, we’ve discovered there’s at least three ways that you will lose money if you are not constantly and methodically monitoring your beverage program.
1. Volume Reporting Errors (Your Payments Will Be Wrong)
A typical beverage volume report contains hundreds to thousands of lines of data. It can include everything from how many cases of water are purchased in a variety of package sizes to the number of gallons of fountain product used in varying unit measures. One of our most recent clients has purchased 1,122 unique items across its portfolio of properties. The dizzying quantity of lines of text can make you assume that every purchase has been meticulously accounted for.
Unfortunately, due to the number of people interacting with the reports, it is common for a box to go unchecked or a filter to be misapplied, resulting in a product line excluded. It is also common for a new analyst to run the report incorrectly or for a new account manager to misunderstand a contract term.
Since many funding items and rebates are tied to volume, any errors in volume reporting will result in an error in how much you get paid.
Last month, a volume report sent to one of our large healthcare clients was missing several thousand gallons of product with multiple locations left off of the account. The data (embedded in the 7th tab of a spreadsheet) had never been reviewed by the sales manager who approved the payment. The error was a $41,000 mistake, and it would have gone uncaught had the contract not been meticulously monitored.
2. Errors in Invoice Pricing (You Will Pay Too Much)
All beverages are not created equal. Bottle and can pricing is often determined by the local bottler. Fountain pricing is often determined by the parent beverage company. Most contracts have detailed explanations to outline pricing for each category of beverages, which can allow for different price increases at different times of the year. Each beverage company also needs to communicate this new pricing to each of its various bottler groups, which would require an override (tied to each specific “outlet” or “asset” number of each of your specific properties and individual pieces of vending equipment) of anything else that was in their system.
The reality is that systems revert to old programs or deals. Price increases are taken at the wrong time. Price caps are forgotten. New equipment placed or new outlets open revert to old, increased pricing. Certain packages or flavors were not included in the original contract and are added with a new, surprising high price to the customer.
Just today, as I’m writing this post, we received a report that a bottler overcharged a group of hospitals by nearly $23,000 for their fountain products in 2019. This past year, after an extensive audit, we recovered $338,155.79 for our client in overcharged products. Multiple bottlers were charging different prices due to lack of internal communication. Two dollars extra here and $1.50 there on high volume products can add up very quickly.
The beverage partner put controls in place to regularly check and ensure pricing is communicated accurately, but errors were still identified. Companies need to establish their own controls to regularly verify for pricing accuracy. Operators do not have time for this. Rightly so, they expect their vendors to charge what was negotiated in the contract – not more.
3. Payments That Never Show Up (You Are Not Getting Paid)
After a beverage deal is inked, there may or may not be a project manager from both sides assigned. If there is no one assigned, or if that person does not know the questions to ask or meticulously review the contract, payments can go unpaid. Even after the deal has been in place for years, new managers assigned to the account from the beverage company may think that someone else is handling the payment.
It is not uncommon for us to hear comments like “I thought I pushed send on that payment authorization,” or “The person who normally approves that payment was out of the office, I think” when we ask the beverage company rep about a late payment. Weekly, we remind beverage companies of upcoming or past due payments. We rarely find malicious intent to underpay or late pay. Rather, we find it’s a symptom of so many people rotating on and off of accounts.
We recently engaged with a new regional healthcare system in the Northwest. When we reviewed their previous beverage deals, we discovered that they had never been paid a particular rebate outlined in their contract, six full years after the deal had been inked. Had the contract never been scrutinized, the system would have never received the $72,000 it was rightfully due.
“What Gets Measured Gets Managed”
As Peter Drucker once said, “What gets measured gets managed.” At Enliven, we pride ourselves on our detailed analytics, payment tracking and auditing, and constant communication with our clients and the beverage companies with which they have partnered. Let us help you navigate your way around these large, multinational corporations. It’s what we do all day, every day. Our goal is to make sure your beverage deal brings you the maximum benefit from the first day to the last.
Interested in learning more?
Check out The Enliven Beverage Deal Audit.