Relationships Between Food Manufacturers and Retailers and Possible Implications for Training

DOCUMENT RESUME

ED 398 433 CE 072 310

AUTHOR King, Richard; Kruse, Wilfried TITLE Relationships between Food Manufacturers and Retailers and Possible Implications for Training. INSTITUTION European Centre for the Development of Vocational Training, Thessaloniki (Greece). REPORT NO ISBN-92-827-6429-X PUB DATE 96 NOTE 43p. AVAILABLE FROMUNIPUB, 4611-F Assembly Drive, Lanham, MD 20706-4391; 800-274-4888; fax: 301-459-0056 (Catalogue No. HX-93-96-572-EN-C: 5.50 European Currency Units). PUB TYPE Reports Research/Technical (143)

EDRS PRICE MF01/PCO2 Plus Postage. DESCRIPTORS Adult Education; *Food Processing Occupations; Food Service; *Food Standards; Foreign Countries; *Institutional Cooperation; Postsecondary Education; *Quality Control; *Retailing; Secondary Education; Vocational Education IDENTIFIERS *Germany; Netherlands; Spain; *United Kingdom

ABSTRACT A pilot study examined the relationship between the retail sector and food and beverages industries and their implications for training. A range of case studies were undertaken in food manufacturing and retailing enterprises in the United Kingdom (UK) and Germany. The UKcase studies examined the problems of manufacturers, both small and large, supplying large retailers; the perspective of a large retailer; and the franchiser-franchisee relationship and problems of supplying the catering sector. Participants in the UK case studies were a meat processor, fast food restaurant, supermarket, and liquid milk producer. Even without long term commitments between retailers and manufacturers, the system worked to give some degree of stability. Pressure was placedon the manufacturer to be innovative and responsive. The other vital ingredient was the commitment to quality. Participants in the German case studies were a delicatessen, health food cooperative, and large manufacturers of fresh milk products. Quality standards were set by the retailers; there was no regular communication on products, product innovation and quality, or prices. Findings from these studies and other sources indicated the dynamic and competitive nature of the food supply chain had resulted in quality beinga dominant issue in the interrelationships between the sectors. Common training activities were proposed to help all employees understand their specific role in the quality chain. (YLB)

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2. RELATIONSHIPS BETWEEN FOOD MANUFACTURERSAND RETAILERS AND POSSIBLE IMPLICATIONS FOR TRAINING

Richard King Department of Food Science & Technology The University of Reading Whiteknights, Reading RG5 2AP UK

Wilfried Kruse Sozialforschungsstelle Dortmund Landesinstitut. Sfs Rheinlanddamm 19 D-44135 Dortmund

November 1994

First edition, Thessalonica 1996

Published by:

CEDEFOP European Centre for the Development of Vocational Training Marinou Antypa 12 GR-57001 Thessalonica (Thermi) Tel.: 30-31 + 49 01 11 Fax: 30-31 + 49 01 02

The Centre was established by Regulation (EEC) No 337/75 of theCouncil of the European Communities, last amended by Council Regulation (EC) No 25-1/95of 6 February 1995 and Council Regulation (EC) No 354/95 of 20 February 1995.

BEST COPY AVAILABLE 3 Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 1996

ISBN 92-827-6429-X

Reproduction is authorized, except for commercial purposes, provided the source is acknowledged.

Printed in Germany FOREWORD

FOREWORD rity, safety and high standards of quality. This could have meant intensive collaborationin This publication isa pilot study of the relation- training issues not only for each sectorsepa- ships between the retail sector and food and rately as is the case now, but for both jointly. beverages industries and their implications for training. Our findings, despite the limited number of seven case studies analysed in only two Both sectors have already been analyzed in Member States, seem to coincide with those of other CEDEFOP work, particularly in the FORCE major research, that is to say that collaboration sectoral surveys on in training. The knowledge in training matters between retailers andmanu- thus gained has permittedus to initiate this facturers is very limited and that relationships empirical study on a subject of which there is between them range from systematicto occa- insufficient knowledge. sional, from short to long term, fromtrust to total control. The reader will find at the end of the studya presentation of other recent studies from the inter- Finally it seems that the size of the firm, eitherin national bibliographyon the interactions retail or in manufacturing, and itspositioning in between Food Retailers and Manufacturers, the market are the decisive factors shaping the which confirm and reinforceour own findings. relationships between parties.

The sectors, one upstream and the other down- But recent developments inconsumer demand stream, have always had contacts and some for fresher and better quality food,in the form of collaboration but it is only inrecent European legislation on health andconsumer years that European food manufacturing has protection, in management and in information been influenced by the purchasing allianceson technology give support to the adoption of the one hand and the food retail by the increas- reciprocal trainingmeasures. ing concentration of the food industry, on the other. The reader will findsome proposals in the conclusions. Effort has been made to analyseas Another reason for having chosen foodmanu- many types of relationships, subsectors and facturing and food retailing is thenature of food organizational structures as possible within the itself which is perishable and requiresproper time and budget limits we had. handling in production and sales tosecure integ-

5 FOREWORD

Findings on United Kingdom and Germany We would also like to thank the two researchers have been supplemented by information on the Dr. Richard King of the Department of Food Netherlands and Spain and data of the FORCE Science and Technology of the University of surveys. Reading and Dr. Wilfried Kruse of the Sozial- forschungsstelle Dortmund for their commitment. We would like to thank the seven enterprises which were kind enough to take part in the Finally we would like to thank in particular the research, even though we decided not to pub- European Social Partners of both sectors and lish their names. their representatives with whomwe have infor- mally discussed the findings of the study.

Enrique Retuerto Tina Bertzeletou Deputy director Project Coordinator

2 RELATIONSHIPS BETWEEN FOOD MANUFACTURERS AND RETAILERS AND POSSIBLE IMPLICATIONS FOR TRAINING

Richard King Wilfried Kruse

Department of Food Science and Sozialforschungsstelle Dortmund Technology Landesinstitut. sfs The University of Reading Rheinlanddamm 19 Whiteknights Dortmund Reading D 44135 UK RG6 2AP

November 1994

7 3 1 BACKGROUND TO THE STUDY

1.1 INTRODUCTION retailers in the food sectorare trying to offer better quality of service and fresher productsat Two surveys have been undertaken by the Task more competitive prices. Company image is Force Human Resources and CEDEFOPon com- considered an important factor in marketing, pany training policy, one in the retail' and the often directed at developing customer loyalty.

other in the food and beverage sector2. From A further factor specific to the food retailersis these it was clear that therewere strong links the increasing customerawareness and political between the two sectors. The nature of these importance of hygiene and food safety, which links was usually poorly described, and insome is manifested in the EU Food Hygiene Direc- country reports there was the implication that the tive3. These issues often bringa desire or need relations between the sectorswere poor. It was for a change in sales strategies and behaviour, clear that the retailers were having to respond to introducing newpressures and topics to a their customers aswere the manufacturers to company's training policy. Reaction to the theirs. That the manufacturerswere having to situation was seen more in the larger retail respond suggests that links exist that could have companies. a direct influence on training in the manufacturing enterprise. This project aims to examine in All employees, including part-timers,are the more detail the relationship between the sectors target for this new emphasis on training. A and how the business requirements of one might widespread trend among retail firms is to inter- affect the other. nalize training, a practice which isconsistent with the conception of trainingas part of a com- 1.2 RESULTS OF THE EUROPEAN RETAIL pany's strategy for developinga specific image, SECTOR TRAINING POLICY SURVEY or company signature. Access to training is usually voluntary, some reluctance to participate The retail trade sector is undergoingan impor- was observed. The way training is organized tant process of change. The market is becoming varies according to each company's circum- saturated, a situation recently aggravated by the stances. Larger companies are establishing train- economic recession across the EU. To compete, ing departments and training centres operating

1 Training in the Retail SectorA survey for the FORCE Programme, W Kruse, 0 Bertrand, 0 Horns, M Mendez-Vigo andH van den Tillaart. Task Force Human Resources, Brussels, 1993.

2 Training in the Agrofood SectorA survey of the FORCE Programme, J Burns, R D King, F Delay, I. Mallet, Task ForceHuman Resources, Brussels, 1993. 3 Council Directive 93/43/EEC on the hygiene of foodstuffs, 14 June 1993

8 4 BEST COPY AVAILABLE BACKGROUND TO THE STUDY

to a policy based on the identificationof train- are very similar to the retail sector, although per- ing needs. haps rather more intense. The output of the Food and Beverage sector is fairly stable, in recent The situation of small enterprises in the retail years showing only a slight growth. It ishow- sector can be rather different. Untilrecently ever a far from static sector, inthat companies these companies made no provision for training. are competingfor market share. The pressure is According to the sector survey the situation is therefore on profit margins while producing to a changing with training becoming a key element specified standard. Quality issues are not surpris- for future development for the enterprise. This is ingly dominant in most of the case studies. especially relevant when these firms participate in voluntary chains or alliances. Many of the enterprises studied, both small and large, are looking for ISO 9001 or 9002 accreditation. Small companies, which might be 1.3 RESULTS OF THE EUROPEAN more vulnerable in the eventof loosing a large AGROFOOD TRAINING POLICY customer are perhaps more committed to this SURVEY path. The large companies have greater industrial muscle and are more capable of defending Food manufacturing enterprises present a hetero- the effectiveness of their quality assurance and genous picture across the EU.The vast majority so are less worried about ISO9000. It is more are small or mediumsized, and their numerical common to see a total quality approach inthe predominance is especially apparent in the larger companies and as they are increasingly Southern Member States. By contrast the large concerned about customer satisfaction and firms and giant multinationals dominate the costs. output and employment of countrieslike UK, France and Denmark. Cooperatives have been Overall it is a sector undergoing considerable important in the food industry's development in change with training policy more determined by many countries. There is ageneral trend restructuring human resource management, with towards increasing industrial concentration as the introduction of team working, development large firms strengthen their grip across more mar- of a more versatile workforce where good kets and as small firms continue to leave the social or interpersonal skills are often just as industry. The current pressures on the industry important as good technical skills.

5 1 BACKGROUND TO THE STUDY

1.4 CHANGES IN THE FOOD MARKET EU, including Germany, France, Italy, Spain and STRUCTURE Netherlands5. This is a factor that could have a significant impact on food producers if the trend The European Synthesis and the National is observed across the EU. Consumer aware- reports of the FORCE survey of company train- ness of health issues andfood safety has ing policy looked in detail at thechanging mar- increased. So changes in eating patterns can kets for food across the EU. Population and be seen, e.g., the trend to consume less milk demographic changes were identified as impor- fat, and the increase in sales of wholemeal tant areas in most reports. Thepopulation of the bread. The concern about food additives has EU members is expected to grow on average at had a significant impact on food production less than 0.2% per year, with slower growth and distribution, with greater control now neces- rates in some of the more northern countries. sary to ensure foodsafety. Environmental issues The increasing percentage of people of retire- do not seem to have had a significant affect on ment age, the decline in household sizeand the the food manufacturing and retail sectors yet. trend to childbearing at an older age are all fac- However, the average EU consumer is better tors that might be expected toshape the market educated than twenty years ago so these issues for foods. could be become increasingly important.

Social and health issues Changing tastes of the consumer There are many social changes that are affect- The Agrofood survey reported on the growing ing the retail market for food. The increasing consumer interest inforeign cuisine in some employment of women, more often in part-time countries. Whether this is the result of a lack of employment, is perhaps one of the most impor- a strong regional cuisine in someregions or, tant pressures towards the increasingsales of due to increased foreign travel or the influence prepared foods. The trend to eating away from of ethnic minorities, it is not clear. This change is home is increasing. In the UK about one-thirdof manifested in the increasing range of products the total food budget was spent on eating out in offered in the supermarket. Mascarpone and 19914; compared to less than one-fifth in feta cheeses are almost as likely to be found in 1983. The UK consumer now eats out morefre- Germany and UK as in Italy or Greece. This quently compared to those in other parts of the trend is perhaps most obvious in the chilled pre-

4 Household Food Consumption and Expenditure, 1992,HMSO, London 5 Nielsen European Passport, 1992

0 6 1 BACKGROUND TO THE STUDY

pared foods, where the diversity continues to prepared meals for use in restaurants is also an widen. The range of dishes and regional cui- expanding market. sines featured continues to grow, asthe supermarket tests the boundaries of the consumers With these new products the supply side is highly fragmented. Some suppliers can be very interest. small companies, delivering to restaurants and specialist shops. Distribution requires an effective Changing habits of the consumer cold chain, as the food safety risks are very foods in the The availability of ready prepared high for these products. An increasing propor- supermarkets is continuing to increase. At one tion of CPMs are either ethnic foods or from a level this could be simply ready washed and regional cuisine. In the UK where this market is prepared vegetables or salads, or at another developing very quickly the supply structure is extreme chilled preparedmeals. This change in retail led, with the major retailers dominating the lifestyle of the consumer is readily serviced by market. Marks and Spencer plc had about 46% the supermarket, and made possible by an of the UK market in 19926, however their increasing sophistication of thetechnology market share is declining to the benefit of other employed by the food industry. Twodevelop- large groups. The total UK sales in 1992 was ments have fuelled thisdevelopment more than worth about 13O8 million. Retailers are keen to most, the establishment of acold chain in distri- respond to their customer's wishes, this ultimately bution system, and the ownership of a micro- translates to the need for a skilled flexible work- wave oven. force so manufacturers can respond to their customers. Preparation of these foodstends to be Chilled prepared meals highly labour intensive. The sale of chilled prepared meals (CPM), which includes all types of chilled recipedishes, Changes in distribution either as a complete meal or for partof a meal The economies of scale in food distribution i.e. a meat or vegetable dish, is an important using bigger lorries with temperaturecontrol development area. Meat dishes accountfor the have been significant, which together with the majority of the sales, although the proportionis use of electronicdata interchange and deliver- expected to diminish. CPMs may requirecook- ing to regional depots has benefitedthe retailer. ing or simply reheating before serving.Ready There is some confusion for manufacturers

6 1992 (Mintel)

7 1 BACKGROUND TO THE STUDY

because of the failure to adopt standards,e.g. 1.5 FOOD QUALITY in article numbering codes. Quality awareness and safety issuesare major Structural changes concerns within the food industry across the Across the EU the shopper is increasingly turning Community. As already discussed, the business to a supermarket or hypermarket at the expense pressures in this sector are considerable. One of the specialist shops. The specialistpurveyors significant aspect of gaininga competitive edge of fruit and vegetables, fresh meat, fresh fish, has been a greaterawareness of quality and bread and cut flowers account forover 50% of the introduction of qualityprogrammes. In turn the sales of these goods. The preponderance of these quality awarenessprogrammes and qual- sales between these groupings varies signifi- ity improvement plans are leading to the imple- cantly between EU states. The specialist bakers mentation of quality management systems. This still maintain their dominant position in France, can mean companies working towards the ISO Belgium and Germany, and the importance of 9000 series standard for their qualityassurance specialist shops for wet fish sales in the Nether- system, or may be a commitment to a total qual- lands is notable. The distribution betweenspe- ity programme. The importance of the ISO cialist and supermarket is much less marked for 9000 series standard and qualitymanagement fresh meat and fresh fruit and vegetables. This in the food and beverage sector for all Commu- concentration of supermarkets is most apparent nity countries is evident from thecase studies in Ireland and the UK where the market share of undertaken for the FORCE sectorsurvey for the the top five food retailers is highest in the EU sector. Quality management systemsare often (76 and 61 %). In some of the prospectivenew an important driving force for a company to member states, suchas Finland and Austria the develop a comprehensive training policy'. concentration is even greater (95 and 82%).

Spain and Italy have the least concentrated Other pressures leading to developmentsin retail sector where the market share of thetop quality assurance arise from legislationon food five retailers is 10 and 15% respectively7. safety. A particularly important exampleorigi- nates from the Community directiveon food hygiene, that recommends theuse of Hazard

7 ISSO 1990, Food Retailing in Europe, International Self-Service Organization, 1992. 8 Quality management systems and training policy in the Food and Beverage Industry A report for the Task Force Human Resources, R D King, J A Burns. Food Technology Centre, University of Reading, 1994.

12 BEST COPYAVAILABLE BACKGROUND TO THE STUDY

Analysis Critical Control Point(HAC-CP)9 pro- commercial interests of the enterprises, which cedures should be used to assurethe microbio- restricted the range of possible interviews. logical quality of foods. These procedures can also be applied to assure the chemicalsafety This study has involved only two of the EU of foods. It is possible that a duediligence states, UK and Germany. A crude testof the defence to prosecutions under the foodsafety representativeness of the results to the wider EU laws will be introduced in to EU legislation.If scene wasundertaken by seeking the views of this was the case the interest in quality manage- the Social Partners in the two sectors in the ment could be expected to continue toincrease. Netherlands and Spain. Other recent and related studies on this subject were examined, 1.6 METHODOLOGY as were the casestudies of the FORCE/ CEDEFOP sector surveys. The approach adopted was similar to thatof the European studies on the Food and Beverage, and Retail sectors. A range of casestudies have been undertaken in food manufacturingand retailing enterprises. This has involved interview- ing mainly the factory management.In this study apart from looking for a commitmentto training the position of the enterprise in theindustry was important. It was hoped to include enterprises that would illustrate a variety of possiblerelation- ships, large retailerlarge manufacturer; small retailer large manufacturer etc. As this is very much a pilot study the complete spectrumof manufacturersupplier relations in the EU could not be examined. A furthercomplication in this study was the closeness of the subject tothe

safe food. It was originally developed as 9 HACCP is a quality assurance schemespecifically concerned with the production of microbiological safety system for the US manned space programme.The HACCP principles have international acceptance, Alimentarius Commission: Codex Committee on Food Hygiene(1993) details of this approach are published by the Codex II. Guidelines for the Application of the Hazard AnalysisCritical Control Point (HACCP) system, WHO/FNU/FOS/93.3

9 1Q 2 UK CASE STUDIES

2.1 INTRODUCTION 2.2 CASE STUDY 1: MEAT PROCESSOR

The UK case studies were selected to examine This is a private, family-ownedcompany, with a the problems of manufacturers, both small and number of the family involved in the day-to-day large, supplying large retailers, and theperspec- management of the company, as well as on the tive of a large retailer. Board of Directors. They purchase and slaughter nearly 4000 live pigsper week, producing a The franchiser franchisee relationship and range of cured meat products, sausages, savory problems of supplying the catering sectorwere bakery products, delicatessen goods, traditional also included in this study. Franchising isa cooked meats, haggis andan increasing range growing form of business relationship, it can be of value added products, usually in the form of between a manufacturer and retailer,or one that ready prepared meals. Most of the productspro- concerns a product concept and a marketing duced present considerable potential for food system. Franchising arrangements are likely to safety problems, the cooked meat department increase, at present about 4% of retail sales in being a prime example. the UK is through a franchise outlet. Thispropor- tion is much higher in the USA, possibly as high Historically the major proportion of the sales as 60%, suggesting that there is considerable was of their own brand label produce, and dis- scope for growth in the EU. The hospitality or tributed to small retail units. Nowover 50% of leisure industry has a considerable number of the production is sold directly to large UK retail- franchise operations. Franchiseesrange from in- ers such as Marks and Spencer, Tesco, Co-op, dividuals to large corporate organizations, they Asda, and Safeway. Distributing to small retail are generally small units, employing relatively outlets through theirown van sales network con- small numbers of people. Many, typically the tinues as a minor part of the business. Thepro- fast food restaurants, operateon a high volume, portion of the business directed to the large low margin basis. So uniformity of service and retailers continues togrow. They are now con- quality across the outlets is required. This implies sidering using a different brandname for prod- the need for the implementation ofa good train- uce destined for discount stores. ing policy. In the UK there are few examples of franchising in food retail, rathermore exist in the The company hasgrown substantially over the catering industry. One area, the door step deliv- last few years and future significantexpansion is ery of milk, although a declining market, is often envisaged. It currently employs about 1400 through small franchised operators. people and is situated inan area where there is

14 10 UK CASE STUDIES

a good supply of labour to draw on, albeit with Relationship with farmers a generally low level of initial education. Good quality pigmeat is an essentialraw ma- Wages are consideredto be slightly above terial, thecompany therefore go to considerable average for the area, mainly tocompensate for trouble to developa good relationship with the the unpleasantenvironment of a meatproces- farmers who supplythem. Thecore of this rela- sing factory. tionship is the feedback ofinformation to the farmers so theycan produce the high quality The training departmentis an established part carcasses required. It is to the advantageof the of the factory, withtraining policies developed farmer toensure all their animals meet thecri- for most parts of thecompany. The general feria for the highest grade, theythen receive the approach was, and stillis, very much directed highest prices. A regularand reliable supply of towards trainingto nationally recognized stand- high quality meatis important toa manufacturer ards, throughon the job training with assess- supplying highly demandingretailers. ment of competencies in the workplace.Some of the early difficulties of using a trainer operator Relationship with retailers system, when supervisorswere sometimes reluc- This is a complex and sensitive area whichpre- tant to allow the traineroperator to train, have sents many problems. Themain interface with been resolved by establishinga new position of the retailers, the salesdepartment, has been training officer, who is responsibleto the training structured to reflect the changeto producing manager. The responsibility for thetraining offic- retailer_own label goods-bybringing the sales er's wages, and linemanagement have been team and production closer together.Each transferred to the training department. Thissegre- national accountmanager is now teamed with gation makes training costs muchmore visible, it a food technologist so the technologicaland could have beneficial effects on the effective- commercial questionsare bridged and ness and cost efficiency of training. Training answered. officers are trained andassessed. Increasing the competence of all the work force isvery much Dealing with highly perishablefoods witha an objective, as this isseen as a way of improv- short shelf-life,customers have negotiatedcon- ing efficiency, or reducingwastage i.e. improv- tracts where orders for producemay be placed ing business performance. Verticallyorientated on a daily basis, this is to allow forsome fluc- relationships exist for thiscompany with their tuation in demand due to externalfactors such major suppliers, the farmers, and withtheir as changing weather conditions. Dailyorders major customers the retailers. are usually placed by FAX,or increasingly by

11 .15 2 UK CASE STUDIES

E-mail, e.g. using the "Tradernet" system, for next They have been asked for details of how the day delivery. This situation requires good plan- staff are trained and thesystems of training and ning skills to ensure that production is sufficient, assessment in place, and whether the training and not excessive and therefore wasteful. Pro- and assessment of competenciesis against a duction managers have to anticipate what the national standard. So records and the establish- demand for their produce is likely to be from the ment of an audit trail are important. retailers. There appears to be little communication as regards the decision-making process the Development of ideas fornew products is a two retailers follow. This situation will bemore resolv- way process, manufacturers need to instill confi- able by the manufacturer if the workforce is dence in their customers regarding their ability flexible and well-trained. There isan increasing to solve technical problems. In developingnew demand for production supervisors with greater products the manufacturersare left to interpret IT skills. The increasing use of IT will decrease the objective outlined by the retailer, andare the work load of the administration staffas they guided rather more bya reactive approach cease to be a conduit for the sales information. than by a proactive approach.

This company have systems that enable themto Relation with small retailers. demonstrate to their retail customers that they There is little interaction with small retailercus- can work to a required standard, a standard tomers. A fleet of vans sells directly to small that is likely to bemore implicit, rather than enterprises of various types, restaurants,corner explicitly defined. The retailer will usually make shops etc. Instigatinga clearer and stronger inspection visits, feedback which is likely to training policy for the van sale team isa strat- define the necessary operational standards. The egy the training department feel should be fol- standard sought is not justa physical standard lowed. Van salesare not currently a high busi- for the equipment etc., butconcerns the way the ness priority. It is also felt that training in these factory is managed. Retailersare demanding a small outlets could be usedas a marketing tool. more rigorous approach to factory and human All this is outweighed by the belief thatany resource management. It is increasingly likely market loyalty that might be gained would be that the systems for training and the training lost as soon as better discountswere offered by policy will be considered. A well-documented a competitor. strategy has been established that demonstrates clearly the human resource managementsystems in place, such as the training actions taken.

BEST COPY AVAILABLE 12 16 UK CASE STUDIES 2

2.3 CASE STUDY 2: ance records for staff is recommended. Training FAST FOOD RESTAURANT material for the initial training of a new employee is available, and a required compe- This is an American-based chain of fast food tence level required at the end of the training restaurants who are increasingly franchising the before progression to staff member status. operation. The training policies of both the fran- Further development to a "Service Expert" is via chiser and a franchisee have been examined. on the job training, but again a specific level of competency is required. Progression to the "Ser- Franchiser vice Supervisor" level is by on, and off, the job The headquarters of this enterprise are in the training. Work books have been produced for USA. Interpolating information supplied it has Supervisory and Basic Restaurant Management about 475 restaurants in the EU (all countries Development. These outline the training that except Belgium, Luxembourg and Greece) needs to be completed, a reviewing manager employing between 14,000 and 17,000 would provide feedback and coaching as people in the system. The proportion of restau- necessary. A further programme has been estab- rants, outside the US, operated under a fran- lished for the whole of the restaurant manage- chise arrangement is 72% compared to 88% in ment team. the USA. A highly focused staff and management devel- The franchiser's approach to staff development: opment programmes are thus available to rela- The franchiser has developed a training strategy tively small enterprises, which they not be able for use in their own restaurants, which is also to offer if operating on their own. The franchiser offered to the franchisees. The objective is to operates a large number of its restaurants, maximize profits, by maximizing sales, whilst which might have influenced them to develop controlling costs and developing teamwork. The an effective training policy. legal requirements e.g. Health and Safety are also covered as are various aspects of manage- Franchisee ment development. Restaurant operations are This restaurant is one of several operated by a divided into work stations, which cover one spe- franchisee whose main business is the operation cific operation, e.g. frying or sales. The of a number of car dealerships. The number of approach is surprisingly Taylorist in structure. employees in the restaurant investigated varies Each work station is supported by appropriate between 60 and 90, of which 20 are full-time. training material. Keeping training and perform- The staff stay for a reasonable length of time,

13 2 UK CASE STUDIES

with the staff turnover in the region .ofi 00%, The franchisee felt that they received goodsup- which is low for a fast foods outlet. Many of the port for training from franchiser, including a com- staff come from the local University, whichpro- prehensive training manual. Havingscope to vides a ready pool of part-time labour. They deliver this training in their own stylewas consid- operate using a management structure recom- ered important. Training the full-time staff forpro- mended by the franchiser; manager, assistant gression to supervisor and manager required a manager, shift manager, supervisor, etc. greater level of input from the franchisee.

Training was an important priority for the restau- 2.4 CASE STUDY 3: A SUPERMARKET rant as they saw it as an important factor in meeting legal obligations of the hygiene regula- This company is one of the largest retailers in tions and other public liability requirements. The the UK, with a vigorous growthprogramme in training policy recommended by the franchiser recent years. It operates a number of depart- has been adopted by the restaurant for both ment stores employing in the region of 21,000 staff induction and continuing vocational train- people, and over 100 supermarkets which ing. The company however has developed its employ a further 18,000. An active dialogue is own style and format for the delivery of the train-encouraged between all the employees and the ing, using groups of about 6 operatives, cover- senior management, thus many aspects of this ing 3 of the work stations in one session. enterprise's business policy is openly discussed within the organization. Assessing competencies of the staff was important, and a requirement for progression within In 1992 this supermarket chain had about 2% the restaurant. Individualsare tested and their of the UK retail food market, which makes itone performance evaluated, failures are required to of the 10 largest supermarkets in the UK. Its repeat the test and training if necessary. Results supermarkets are found in the more residential of the evaluation are discussed individually with areas of the South-East of England. Its sales the employees. There is a requirement of the appears to be focused rather more at those at franchiser that the operatives are testedonce a the more affluent end of the socio-economic year for basic competencies. Training records scale. The shops tend to be of medium size, are kept, which are likely to be examined stocking a slightly greater preponderance of during quality inspections by the franchiser. luxury goods compared to some of the larger supermarket groups. As with the rest of the retail sector in the UK their profit margins are under

18 14 UK CASE STUDIES 2

pressure due to the high level of retail competi- ably using a programme developed byan tion. They strongly promote their own label, link- appropriate external body. If an internally devel- ing it closely with their image for quality. oped training programmewas used they would want to evaluated its appropriateness. In other To make their "own label" concept work they areas, training to a nationally recognized stand- see a strong need to collaborate with suppliers, ard would be considered to bea useful indica- i.e. to work together on such things as product tor of a company's commitment to quality, but it development, use and appropriateness of ingre- would not be usedas the sole means of demon- dients etc. Standards are set that the manufac- strating the competence of the workforce. turer has to meet and demonstrate that they have been met. This is done in cooperation with In developing a relationship witha supplier, the the manufacturer. It is important for thesupermar- supermarket would look carefully at thestructure ket to develop products that have their "signa- of the company, with particular emphasison ture" in terms of standard and quality. The extent human resources. They would like tosee not just of the relationship between it and its suppliers the appropriateness ofany human resource depends to some degree on the size of the policy, but their commitment to it and whetherit manufacturer, and the fraction of the suppliers is a paper policy or ifit is imbedded into the output they take. Overall the smaller manufac- culture of the company. For instance, if the turer tends to need more guidance in achieving manufacturer's qualityassurance system is ISO this supermarket's standard. 9001/2 accredited, the interest is in who made the decision to work to the ISO standard This company prides itself on working to high and why it was introduced. Other questions that ethical standards in its business and has clear might be assessed include; how do theyrate codes of practice to which they must operate. In their own people; do they havea training plan this context it is the commitment of the supplier and do they continuously try to upgrade their to quality and their attitude to customer com- systems; can the quality assurance systems be plaints that is important. They would expect to overruled by production, especially inmatters agree the quality assurance systems used, as that could affect food safety. This supermarket well as the product standards, together with would when possible like toassess if the manu- methods by which these might be assessed. facturer's production operativesare aware of the Hygiene and safety are important issues, so it is mission of their own company, particularlyas it expected that the manufacturer will give their relates to human resource and qualityassurance employees appropriate hygiene training, prefer- systems. It was felt that the trend towards quality

15 19 2 UK CASE STUDIES

management systems outlined in the F-ORCE change of attitude was required by those report on training in the agrofood sector was managing the franchisees, where different skills not particularly apparent in the smallermanufac- and attitudes need to be developed. To help turing companies. franchisees make this transition from employed to self-employed status, and build their business 2.5 CASE STUDY 4: in a challenging marketplace, a new training LIQUID MILK PRODUCER programme for franchisee managers was developed. This started with an assessment, so the This dairy is a subsidiary of a large public com- trainees could understand the competencies pany with substantial interests inthe dairy sector, required and how they rate against them. The with creameries producing cheese as well as programme then covered the legal and adminis- other products such as yoghurt and desserts. It is trative aspects of franchising and the company also a major supplier of liquid milk for the retail standards expected, focusing on how to assist market. They have traditionally been involved franchisees in their new role. with the doorstep delivery of milk to retail customers. With changing lifestyles and the trend The franchise managers now hold regular towards a weekly shopping regime doorstep monthly reviews with each franchisee to monitor delivery was being questioned by the consumer. results and plan for the future, also to give spe- This situation was exacerbated as the supermar- cial help with accounts and accounting prac- kets reduced the price of milk. Also with the tice. In the region of 2000 franchises have increasing tendency for both partners in a house- been established. The scheme has been success- hold to be out working all day, milk was being ful as sales performance has significantly left for long periods on the door step at ambient improved over traditionally managed milk deliv- temperature, reducing its shelf life considerably. ery rounds. By the end of the 1980s doorstep sales of milk started to fall. So in an attempt to halt this 2.6 CONCLUSIONS decline it was decided to franchise individual rounds for the home delivery of milk. They The relationship between UK retailers and manu- started by offering the existing retail sales force, facturers, is complex. Even with no formal part- the "milkmen" franchises. Changing from being nership, alliance, or agreement between trading employed to self-employed franchisees requires partners the system works to give some degree a change in approachfrom the individual. If this of stability without there being a long term com- venture was to be a success a corresponding mitment between them. This places pressure on

20 16 UK CASE STUDIES 2

the manufacturer to be innovative andrespon- ticularly useful for smaller companies. Personnel sive. The other vital ingredient is quality, or are appraised and their competence assessed rather the commitment to quality. That is both according to the fast food franchiser's standards. product quality and quality of the systems in They therefore havea pan-European standard place. The manufacturer therefore needs to look for their training, this could potentially make the carefully at its human resources management use of national training structures difficult. Within policy as well as the quality of the technology. the UK the competence based NVQsare seen Production operatives need to understand the as too broad and the system unable to respond mission of the retailer as much as they do the quickly enough to meet changing business mission of their employer. needs.

The small retailer is driven almost completely by The desire of the franchiser to delivera uniform the need to maintain profit margins ina competi- level of service irrespective of location of the tive market. Any perceived advantages of train- franchisee could have implications forinterna- ing are usually completely overshadowed by tionally recognized qualifications, especially if this pressure. They are therefore,a group largely,franchising develops to thesame extent as in the ignored by the manufacturer. USA. If as in the case of the fast food business the franchisee sources theirown raw material In view of the likely increase in the numbers of directly from manufacturers, accordingpre- franchise operations and increasing importance scribed specifications, there could betraining of the catering market for the food producers,a implications for the manufacturer. Small manufac- fast food franchise operation has beenexam- turers, especially in less developed countries, ined. The pan-European approach of the fast might have to raise their operational standards food franchiser is a clear feature of their training to meet these specifications. policy. Customers queuing for service is to be avoided, so high levels of service need to be delivered, and it is recognized that thiscan only be achieved by developing a highly trained workforce. A structured and specifically developed training policy with a supporting training programme is provided by the franchiser and available to franchisees both large and small. This arrangement would be expected to bepar-

17 21 3 GERMAN CASE STUDIES

3.1 INTRODUCTION the sphere of responsibility of the head of department working in close harmonizationwith 3.2 CASE STUDY 1: DELICATESSEN the regional purchasing department for foodstuffs. The foodstuff/delicatessen department of this store belongs to one of the major department How does a producer becomeone of the store groups in Germany and is located in the department's suppliers? In principle by offering pedestrian precinct of a large city. Some years his products to the purchasing department.As ago the food department was re-designed far as we cansee, there are two approaches, according to the concept ofan "experience one option is to submit an offer to the depart- market" for the premium and quality end of the ment's purchasers. Yet,it is not the head of market. It addresses a critical big-city group of department's individual and only decisionto customers, with a relatively high purchasing accept a new supplier, as any suppliermust be power. So a fish restaurant and a juice counter, "listed" regionally with the main purchasing which are run by the department, have been department to be eligibleas a supplier for this integrated into this store's operation. Theaim is store. The "listing" takes place after testing the to be one of the best providers in the city andto product against variouscompany specifications. achieve specific market advantages by offering The product is tested by both thecompany's an especially well-assorted range of products. laboratory and an independent laboratory.The Thus, the assortment of this department, which is product's possible ranking and the overallassort- located in the basement of thestore, comprises ment is determined and, last but not least, the of 15,000 articles, that is about threeto five cost of the product is considered. On the basis times as much as that of a normal supermarket. of our present research,some details of this test- Only 3,000 of these 15,000 articlesare ing procedure remain unclear. Inany case, for ordered and delivered from the group's central every "type of product" different potential suppli- stock, mainly packaged articlesor tinned food ers are "listed" and the head of the department with a long durability. All the other articles who is in question herecan choose among the are delivered directly from the producer, espe- listed supplierson the basis of the criteria of his cially the wide variety of freshfood articles such own department. Thus, a general testing of qual- as meat and sausage, cheese, all types of ity has already taken placeso that in the shop perishable dairy products, fish, salads,vegeta- only the freshness of the productsmust be bles and fruit, breads and pastries. Anyexten- checked. It goes without saying thatnot all sup- sion of or change in product profile lies within pliers are also producers,some are, for

22 18 GERMAN CASE STUDIES 3

instance, wholesale market salesmen for fish or context is the fish counter: the fish is sold bya fruit and vegetables. skilled fish cook whocan give a competent answer to the customers' frequent questions on Once the relationship to suppliers has been how to prepare the less well-knownspecies of established in this way, the fresh food depart- fish. There are different forms andmeasures of ment orders the goods by fax for the next day. continuing training for sales staff, especiallyas The determination of scope and structure of the to the products, their treatment, and presentation order is based on information about the devel- and their approach to thecustomers. In this con- opment of the weather as well as on experience text, senior sales staff pay contact visits tocer- of the customer trends. In the interest of the best- tain producers and suppliers, again this form of possible supply, the head of department also cooperation is not systematized. Close and has knowledge of the respective supplier's flex- direct cooperationcan only be found in the pre- ibility of production and delivery. Basically,a paration and realization of special campaigns. policy of supplier fidelity is pursued which So, for instance, the senior sales assistant of the means that the relationships with the suppliers salad bar paid a visit toone of the major pro- have been established overmany years which ducers of fresh salad when thecomposition of a generates an understanding of each others new salad creation was on the agenda. requirements. Another example is the preparation ofa wine campaign for which the staff in charge travelled Producer or supplier representatives often seek to the Bodegas to acquire product knowledge talks withthe head of departmentor the senior and to agree upon this special campaign. staff of the various freshfood sections. Such talks also address questions of product qualityor According toour research, serious quality prob- product development and allow the supplier to lems leading to conflicts with suppliers andin seek feedback on their products from the sellers' the end even toa possible deletion from the list point of view. However, these talks are not held have beenvery few and far between. The well- systematically and are far from being organized established relations ofmany years which are by the group, they just result from the suppliers' referred to by the term "supplier fidelity" rather interest in the continuity of business relations. seem to have led to a situation in which both sides know what to expect fromone another. The department's customer-oriented qualitycon- This means in the absence ofa systematic form cept extends to the sales staff, who should be of preventive co-operation that producers/sup- skilled in their area. A special example in this pliers who want tosecure this market segment

19 4- 23 GERMAN CASE STUDIES

for themselves have touse their internal mechan- to inspect the premises to assure themselves that isms to adapt to their buyers' changing wishes all the details givenare correct. and options. Thus, there is abstract approval of the statement that joint continuing training activ- 3.3 CASE STUDY 2: HEALTH FOOD ities among producers and retailers might make sense especially for quality issues, so far there This example is a cooperative: i.e. theassocia- have been no approaches in this respect. tion of German health food houses in the tradition of the life reform movement of the 19thcen- A good example of this enterprises' quality tury, which emerged as a counterweight of the approach concerns fresh meat sales. Aftera massive industrialization with its side effects comprehensive public debateon meat safety impairing people's health. The cooperative itself issues, the department recorded a dramatic maintains two central institutions: a testing institu- slump in turnover in the fresh meat section. The tion including a laboratory which awards its only alternatives were to giveup the meat coun- "logo" as a confirmation thata certain product ter or offer meat that is acceptable to their criti- meets the quality standards set and an academy cal clientele. The decisionwas taken to "list" a which is primarily used to provide vocational new producer and to further test his products. It training and continuing training for its members was a medium-sized slaughterhouse company and employees. to which a number of meatproducers were associated, all of them located within 50 kilo- The cooperative works witha broad quality con- metres of the slaughterhouse. This association cept which has developed historically and the guarantees certain standards in the husbandry concretization of which is effected bya decision of the animals on the farm, including;use of taken in its committees, i.e. ina process of con- straw for the animals, the breeding policy, not sultation including the producers. The relation to use antibiotics for fattening, no contamination between producers and buyers is basically of ground water by liquidmanure, only farm defined in form of a partnership: the producers, feed for fattening. These husbandry details and at present about 75 in number, signcoopera- information on conditions in the slaughterhouse tion agreements which stipulate their acceptance are available at the point of sale for the custom- of quality criteria. Each productto be awarded er. In front of the meat counter there is an album the "logo" has togo through a strict testing pro- on display which portrays all the farms in ques- cedure in cooperative-ownedor independent tion, addresses and phone numbers of the farm- laboratories. The cooperation contractis not suf- ers are provided, and the customers are invited ficient to guarantee the producer he will supply

24 20 BEST COPY AVAILABLE GERMAN CASE STUDIES 3

members of the association, this is done product a)Assortment. The basic assortment of the by product. health-food stores consists of (1) "whole food" for health and nutrition, (2)nutritive The stores buy directly, or through independent complements to avoid symptoms of defi- regional wholesalers, from producers whoare ciency and in times of special needs,e.g. cooperative partners. Thus, there is no central after an illness, (3) dietetic foodstuffs, (4) purchasing but only a central product evaluation natural toilet articles and cosmeticsas an with the award of the "logo". For thisreason, alternative to synthetic products and (5)natu- the person in charge of this intermediate evalua- ral remedies for self-medication and foran tion process does not call himself "purchaser" application in different naturopathtreatments. but "product mediator". b)Raw materials. Exclusively high-qualityraw The cooperative's logo is the proof of the quality materials from organic cultivation according standard the cooperative demands and which it to the cooperative's guidelines and the frame- guarantees to its customers. Producers must pay work conditions of the IOFAM, theinterna- a licence fee to use the "logo", this generates tional parent association of organizations revenue which primarily serves to finance the practising ecological cultivation. Here,an cooperative's central institutions, as well as the important criterion is the check of the product central marketing and central training depart- from "the field to the shelf". ments. c)Processing. The processing standardsconcen- The quality standards set by the cooperative trate on mild procedures (e.g. the coldpress- relate to (a) assortment, or the productrange, ing of oils), on procedures which do not (b) the raw materials, (c) the processing and (d) impair the raw material's value andon the quality control. For the different product lines, limitation of additives to quantities and e.g. cereal, breads and pastries, vegetable oil, amounts which are far below the limits which etc., their combination forms the quality guide- the legislator has declared admissible. lines which are promulgated to the customer via trade journals and customer magazines. d)Quality control. There isa chain of quality controls of which the cooperative's laboratory For the four above-mentioned criteria, the follow- is the centrepiece. All productsare checked ing general standards have been set: at least once a year, perishable products even more frequently.

21 25 3 GERMAN CASE STUDIES

In this case of advanced quality policy which is health-food stores make itvery difficult to win oriented to ecological and health standards,a new groups of customers who do not belong to check only takes place on the product. Also in the traditional clientele of healthfoodstores. In this case a certain supplier fidelity (secured by addition, healthfood storescan only profit to a cooperation contracts including quality clauses) limited extent from the crisis in the traditional is to guarantee that producers organize their food supply. own enterprises according to these criteria. On the part of the cooperative, there isno system- 3.4 CASE STUDY 3: atic control of the real conditions of production LARGE MANUFACTURER OF FRESH in the producers' enterprises. Procedures to ISO MILK PRODUCTS 9000 standard are gaining ground: yet, this is not a systematic component of the cooperative's The manufacturer is part ofone of Europe's larg- policy. It is acknowledged, in theory, that labour est food multi-national companies. The products quality may be an important factor to achieve of this companyare known for their high-quality, product quality; this, however, is left to thepro- the entire advertising and marketingstrategy is ducers. There are few approaches to joint dis- concentrated on "quality". The brand-nameis cussions between cooperatives and producers well-known Europe-wide and stands for fresh- on the translation of quality standards, or to con- ness, superior quality and taste. This is very inter- tinuing training activities, which would also esting in so far as the interlocutor,a leading include employees at the producers'. personality within the distribution department of the company, did notsee any serious problem Some producers offer well-known branded with regard to freshness and qualityin relation products which are not exclusively produced for between manufacturer and retail trade. Accord- the cooperative andas member stores can take ing to his statement, it is justified tosay that all up to 25 per cent of products without the quality persons involved in the production and distribu- "logo", in reality a situation arises in which the tion chain focus special attentionon the fresh- potent producers have a relatively strong posi- ness of the products out of self-interest. If the tion and in which you would rather have to claim for freshness was not met their market speak of "quality bargaining". position might be lost.

Moreover, the traditional orientation of the In this connection, a special role is attributedto health food movement and the well-established the imprint "best before" and its observance. relations between producers, cooperative and First of all it should be emphasised that in this

26 22 GERMAN CASE STUDIES 3

company the "best before" date is not exclu- produce central warehouses of the sales chains sively linked with product safety. The decision and the central warehouse of thecompany. The concerning the "best before" date rather reflects fresh produce warehouses of the sales chains a more complex understanding of product qual- order with the central warehouse and distribute ity. The criteria for the "best before" date are the goods to the retailers. In this connectionwe deterioration, taste and appearance. This are again confronted with the problem of "list- means that the manufacturer guarantees the ing". Every product offered by thecompany has quality of the product as designed until this to be "listed" in order to be available for the date. In this company, there are 15-20 days members of the sales chains. So, thecompany between supply and the "best before" date. The presents all new products to the decision-makers shelf-life has to be fixed much later than the of the sales chains with the aim of having them "best before" date. According to the interlocutor, listed. Here, special conditions like fees, prices there is hardly any other sector, in which the cus-and preferential terms are being negotiated. As tomers pay special attention to the "best before" far as this company is concerned, thepartners date compared to the fresh milk and milk prod- do not carry out any special controls because ucts sector. The retail trade has laid down a the name itself guarantees quality. rule for itself, saying that the goods are to be labelled especially and sold at reduced prices The third distribution channel is theone of the three days before the "best before" date or are self-service department stores. The majority of removed from sale in good time. these self-service stores are directly supplied by the company and thecompany is to a great In principle, the company uses three different extent responsible for the management of the types of distribution channels, which are all sup- stocks. This distribution channel playsan impor- _ plied by one central warehouse. The first chan- tant role for the company due to the fact that nel is the one of the fresh produce delivery cen- shelf-place as well as salesare considerably tres which mainly serve the smaller supermarkets above average as compared to other sections and self-service stores. The supermarkets place of the retail trade. With regard to the self-ser- their orders with the fresh produce delivery cen- vice stores two further measures have been tres and these centres place their orders with the taken. The sales staff concentrateon the self-ser- central warehouse. Just-in-time-delivery and vice section; several times a month they come to quality and freshness guarantee have become these stores and help displaying the goods, central criteria for their market position. The carry out special actions and participate also in second channel is the one between the fresh ordering. On the delivery dayswhich are

23 27 3 GERMAN CASE STUDIES

twice a weekthe company engages service 3.5 CONCLUSIONS staff which are only in charge of therange of products of thiscompany, These measures help Two of the cases described deal with large- to a large extent to realise the "freshness" scale retailers who purchase products of high policy. quality from their suppliers/producers. Thequal- ity standards are set by the retailers in the Reflections are being made, whether the other case of the health-food cooperative, this is done sections could be attended more intensively; explicitly in a catalogue which the producers however, in this connection it is notso much a have to agree to by theirsignature under a question of the "freshness", but rather of thepres- cooperation agreement. There isno regular ence of the product range in the stores. Conse- communication on products, product innovation quently, the central problem is whether the and quality or on prices. In thecase of the range of products is available in sufficient quan- cooperative, communication ismore institution- tities and diversity. This aspect as wellas the alized compared to the department store'sdeli- "placement" of the goods represent themain catessen section. In the latter case communica- strategic problems, which could be dealt with tion is, above all, motivated by the suppliers' by means of amore intense cooperation interest in the continuation of business relations. between manufacturer and sales staff. Contacts between sales staff and producercom- panies are rather the exception andnot of a sys- A relatively new phenomenon is the supply tematic nature. This is true also for the thirdcase of own label brands to the retail chains. This study, but thereare efforts to influence more and tendency is increasing and if relevant market more the correct handling of their products in shares are to be maintained the company will the shops. The significance ofcontinuing train- have to accept this. The problemto be faced in ing increases both among retailers andamong this connection is that the purchasers prescribea producers/suppliers. With thequestion of qual- defined quality and price resulting in consider- ity increasingly gaining importance incontinuing able pressure on profit margins. Thisis a tricky training activities. problem if the traditional quality standardsare not to be jeopardized.

24 28 OTHER EXPERIENCES 4

4.1 SPANISH EXPERIENCE ers designed to help staff better understand the attitudes of consumers. This initiativeconcerns It has not been possible in this small study to the cooperation between the supermarketgroup make a profound investigation into the situation Caprabo and the pet food producer Galling in Spain. As in other countries, the relationship Blanca Purina, in the Barcelona region. Both between retailers and food manufacturers is wanted to know how theowners of cats and something which-develops between the various dogs feed their pets. They thought thatmost actors with little public or scientific attention. It often the owners would feed their animals with seems that here the relationships between the home-made food, leftovers from meals andso sectors depend more and more on developing on. The information was required in order to secure quality standards. There is a real lack of convince them to use commercially produced empirical studies, with little interest in the sectors pet food. They placed a questionnaire in the in thinking about these links. Caprabo magazine, which is mailedto clients of the supermarket. The data from theresponses If we look again at the Spanishcase studies in were used to design a campaign for the promo- the FORCE/CEDEFOPsurveys for the two section of pet food, which included re-positioning tors in question for information on the relation- the pet food displays in thestores. An increase ships between the enterprises,we detect, what in pet food sales was achieved. we have already seen in Germany and in Great Britain. Firstly, there is a clear tendency There is also an example of theinitiative coming for the manufacturers to try and get to know,via from a retailer, thisconcerns one of the most tra- the retailers, more about the wishes of thecus- ditional and quality conscious retailerin Spain. tomers. This has been organized in a very tradi- They are extremely client-oriented witha strong tional way up to now. Staff, especially the sales approach to consulting with theircostumers, this staff, are trained to identify what the customer led them to arrange for their shopassistants to wants and to know the retailers better. Generally visit their suppliers and learn as muchas pos- speaking, training activities are strongly divided sible about the characteristics of the products between producers and retailers, with little and how they are made. common activities. The most exciting example of cooperation was found documented in the To resume these few indications,one may find Coca-Cola Study, (Section 5.4) not concerning in Spain the same tendencies to strengthen the training to develop specific skill, but directed at relationship between retailers and producers activities agreed between producers and retail- because of the need to better understand the

25 29 4 OTHER EXPERIENCES

customers' wishes, and to produce and sell competitive and profit margins low. Thepressure higher quality products, but thisup to now has is to reduce the length of the supply chain by not led to common activities in the field of train- selling fresher food. The consumer is seeking ing. more information on product quality and the use of fresh products. Qualityassurance is increas- 4.2 DUTCH EXPERIENCE ingly important to both manufacturers and retailers. However quality assurance skills alone are STOAS' is undertaking researchon the subject not sufficient, they now need to be complement- of the influence of developments in the food ed by commercial skills. There isa similar industry and the retail sectoron qualifications. broadening of qualification with buying and sell- The objective is to identifyways to improve the ing personnel who are expected topossess responsiveness of education and training product-specific knowledge. Thusa greater level towards developments in the labour market. The of skill and knowledge of food technologyis situation in the Dutch food sector is very similar required by retail staff. Thepressure of the cus- to the UK and Germany. The demand is for tomer is transmitted to the food producer by the fresher, better quality foods, while theconsumer retailer, generating needs of good commercial is demanding great integrity and product safety skills as well as qualityassurance and food tech- from those in the food chain. The marketis very nology skills.

10 STOAS, Foundation for the development of agricultural education andtraining, Agro Business Park 91A, Wageningen, The Netherlands.

26 3 0 ADDITIONAL INFORMATION SOURCES

5.1 SOURCES OF ADDITIONAL TARIS S.A. of VOSSINAKIS S.A., the second INFORMATION largest manufacturer of french toast in Greece, and one of the more recent developments was The subject of manufacturer-retail relationships is completed in 1992 when 67% of the share of interest in many states of the EU. It was a capital of HENNINGER HELLAS S.A. (a brew- theme of the case study of John Boutaris and ery) was acquired. Some indicators of the com- Son which was included in the Greek report for pany's profile are: the FORCE/CEDEFOP study on training policy in the food and beverage sector. Two other stud- It is the largest producer of Greek wine, with ies, one by the Food Industry Management a dynamic presence in the beverages sector Group, Wye College, Kent, and the other by and a well-balanced range of strong prod- Coca-Cola, were published earlier this year. ucts. These looked at various aspects of manufacturer It has an extensive distribution and sales net- retailer collaboration and relationships, and work both at home and abroad. gave further insight into the trainingand human It is organized along decentralized lines and resource implications that arise inthe supply exhibits flexibility and an ability to respond chain. quickly to new developments.

The Stenimachos winery was established in 5.2 THE CASE STUDY OF JOHN 1976 as a Societe Anonyme and is located in BOUTARIS AND SON a semi-urban area. Product quality considera- tions are important given the VQPRD status of The description of the main elements of enter- the wines produced at the plant. These wines prise policy of the Boutaris group is taken from are made from xinomavro grapes grown in the Greek FORCE-Sector report on continuing model vineyards located in a legally defined vocational training in the Food and Beverage region following traditional wine making tech- Industry conducted by the INE, The Labour Insti- niques. Technologically, the most advanced sec- tute of the Greek General Workers Confedera- tions of the winery are the quality control unit tion. and the wine laboratory. The most recent technological improvement was the upgrading of This is a group of companies active in the food the bottling facility. Although this did not affect and beverages sector, the formation of which the way work was organized in the winery it started in 1984 with the acquisition by J. BOU- made the staff more conscious of quality issues.

27 31 5 ADDITIONAL INFORMATION SOURCES

Production quality is ensured through-strict adher- region. It is the first interprofessional association ence to specification and quality control carried set up in Greece and its aims are: out by specialist staff. In 1989 the University of Thessaloniki was contracted by thecompany to To introduce general rules governing relations carry out a study on a quality system that could between vine growers, wine-makers and be developed and implemented by thewinery. wine merchants. At the time of this study thecompany with the To elaborate and implement R&D and prod- help of an outside consultancy firmwas at the uct promotion programmes for the region's final procedural stages of obtaining certification quality wines. of its quality assurance system to ISO 9002 To regulate output according to fluctuationsin standard. Moreover, thecompany has success- consumer demand. Growers, wine-makers fully introduced quality circles in allits produc- and traders use the associationas the vehicle tion facilities, including the Naoussa winery. of their collaborative effortsto promote this goal. The Boutaris winery in Stenimachos doesnot plan or carry out vocational trainingpro- Training is seen as a complexprocess which grammes exclusively for its own staff. Rather, the poses the additional challenge of overcoming site manager identifies the training requirements vine-growers' traditional scepticism andinertia of his employees and forwards themto the towards the training activities. group's management whoare responsible for deciding which trainingprogramme the com- The specific aims of the vocationaltraining pany will implement. The training programmes seminars organized by the associationare as are attended by staff from various units of the follows: Boutaris group of companies including employees of the Naoussa winery. a) With regard to vine-growers: i) upgrading of their technical skills, However, the company's Naoussa employees ii)obtaining better knowledge of thewine participate mainly in seminars organized by the market, "Naoussa Quality Wine Interprofessional Asso- iii) increasing theirsense of responsibility ciation" which is the body responsible for towards the final product, research and training related to thevine-grow- iv) strengthening their knowledge of, and ing and wine-making in the Naoussa wine commitment to, high quality and efficient marketing.

32 28

71T IFT rIr T

b) With regard to the winery's staff:_ 5.3 "BREAKING WITH TRADITION" i) updating their knowledge about developments in wine-making and wine testing Horizontal Partnerships and Alliances (with emphasis on technical aspects), In the report on "Breaking with tradition" four ii)getting to know the vineyard better asa major types of horizontal alliance between retail- means of underlining the importance of ers were identified by Hughes and Ray'11 the raw material in the wine makingpro- cess. i) Development-led alliances; wheretwo retailers jointly exploit retail development suchas If one takes into account the association'strain- in a less developed EU stateor central ing programme for 1993 one can see that the Europe. local wine companies' strategic aimswas to raise the quality of the wine produced, and to ii)Purchasing-led alliances; aimedat increas- improve its consumer appeal. This led them to ing the purchasing power by formation of extend the training offered, to includewaiters, large, possibly pan-European, purchasing wine and spirit shop owners andconsumers by groups. organizing a seminar for 20 individuals sched- uled to last 100 hours and witha budgeted iii) Skill-based alliances; alliances involving the cost of DR 6.7 million. Obviously this widening transfer or exchange of information and of the scope of the training programmes offered knowledge, e.g. Leclerc (France)training along the supply chain to include othergroups Polish retail managers while seekingto estab- does not, and could not, affect thepermanent lish retail stores in Poland. integrated character of the training providedto the vine-growers. It does, nevertheless, highlight iv) Multi-function alliances; of which thereis the relevance, dynamism and originality of the one major example, Associated Marketing Association actions and, ultimately, the appropri- Services (AMS), where the aim isto coordi- ateness of the training policies of the winecom- nate various aspects of business with the panies which play a leading role in the associa- overall objective of benefiting and develop- tion. ing business.

11 Breaking with tradition, Edited by David Hughes, Wye CollegePress, 1994.

29 33 5 ADDITIONAL INFORMATION SOURCES

Members of the 9 largest pan-European buying developments in information technology suchas alliances now account for betweenone third electronic data interchange (EDI). Other factors and one half of the total European food market. driving the formation of these relationships There are thus important implications for the include the desire to improve andmaintain qual- food manufacturing sector in these alliances,just ity, and the need of the retailer in the UK toexer- as there might be for the retail sector from the cise "due diligence" with regard to food prod- increasing concentration in the food manufactur- ucts sold as required under the 1990 Food ing sector. While the development of retail alli- Safety Act. Vertical relationshipsat one level can ances may provide manufacturers with the involve the introduction of EDI,or agreed quality opportunity to develop Europe-wide brands, assurance procedures, but with little direct there may be competition issues thatare impor- collaboration between partners. Theycan also tant to manufacturers, consumers and farmers be strategic, basedon a strong understanding alike. of each others business and probably involving an exchange of what would normally be confi- Horizontal alliances between manufacturersare dential sales information. In vertical partnerships less numerous. The majorreason for developing the potential for partners to influence each manufacturing alliances is usually to exploitcom- others human resource structure, particularly that plementary technology, and reduce the time for which relates to labour force qualificationis innovation. However, having an innovatorypro- considerable. cess could be important for keeping other manufacturers out of the market. Two significantexam- In the case studies reported in this study of ples of horizontal alliances between manufac- Hughes and Ray therewere examples of com- turers are the Nestle and General Mills joint panies restructuring their management in venture to form Cereal Partners Worldwide, and response to the relationship developed between that between Unilever and BSN to make and the partners. Thiswas supported by training to market ice cream products. develop skill and encourage loyalty. Itwas recognized that any restructuring would be Vertical Partnerships and Cooperation greatly facilitated if therewas a good level of Manufacturer (or supplier) retail relationships trust between the partners. In partnerships all are aimed at increasing market power and parties need to be fully aware of their interde- improving profitability by increasing sales and/ pendence and how the actions ofone party or reducing costs in the supply chain. The scope can have repercussions for the other. Partner- for supply chain managementcome largely from ships also raise the number of levelsat which

34 30 ADDITIONAL INFORMATION SOURCES 5

interaction between them takes place,which underlines that the social character of collabora- has consequences for efficiency. tion is different if there are equally powerful partners or one partnerwith predominate market 5.4 SUPPLIER RETAIL COLLABORATION power compared tothe other. In the first case collaboration seems more to be a "strategic alli- The Coca-Cola Retailing Research Group ance", while in the second case one could Europe, undertook a study on "Supplier-Retailer speak of a "virtual integration". Collaboration in Supply Chain Management", which was published in May199412. The In any case collaboration begins with a strong results are based on answers to a questionnaire commitment by the top management and is by 127 important European retailers andsuppli- based on trust for long-term relationships. Col- ers and to 11 casestudy descriptions. For our laboration needs employee skills, operational purposes it may besufficient to resume the key mechanisms and changes in personal attitudes. findings of this study. When collaboration is working a reduction in staff can be expected with a general reshaping The aim of supplier-retailer-collaboration (SRC) of skills and responsibilities for those remaining. is defined as "reducing excess costs inthe This means that there will be an important effect supply chain and/or improving profitabilityby on rationalizationaffecting the personnel and increasing sales and gross margins."There are the work organization. two types of collaborationidentified: the first on reducing costs in operations and the second, a Important instruments of collaboration are the more strategic one, ondeveloping synergies in integration of data-systems and also the integra- the marketing mix by means of improved range tion of knowledge, for instance via promotingof of products, joint product innovation and lower new products or throughsuppliers with brand cost promotion. names producing asecond private brand for the supplier, exactly orientated to his wishes. The results show that SRC is normally a retailer- driven process coming from their need toreduce Concerning priorities in Human Resources Man- costs and to be competitive in termsof customer agement the study reports suppliers andretailers orientation and customer service.The study priorities:

12 Supplier Retailer collaboration in supply chain management. A studyconducted for the Coca-Cola Retailing Research Group Europe by GEA Consulenti Associate de gestioneaziendale, May 1994.

31 fIN 5 ADDITIONAL INFORMATION SOURCES

KEY PRIORITIES OF HUMAN RESOURCES MANAGEMENT FOR SUPPLIER RETAIL COOPERATION

SUPPLIERS vote° RETAILERS vote°

Multifunctional experience 8.0 Multifunctional experience 8.7

Climate of trust 7.8 Climate of trust 8.3

Long-term commitment 7.5 Functional skills 7.5

Openness towards change 7.4 Training and education 7.4

Objectives and incentives 6.7 Performance measures 7.0

Training and education 6.7 Cross-industry experience 6.7

Performance measures 6.5 Objectives and incentives 6.0

Functional skills 5.7 Openness towards change 5.7

Cross-industry experience 5.6 long-term commitment 3.8

Source: SupplierRetailer Collaboration in Supply Chain Management.

(a) the relative importance of various factors indicated by a sample suppliers and retailers using a scale 1-10

They both agree on the top two priorities; then This study estimated that there are important cost the retailers emphasise more the skills, while the reducing effects in SRC and observed an impor- suppliers underline long-term orientation, a big tant cross-European trend towards collaboration. need having in mind the tradition of short-term Possible approaches of collaboration in the field profitability. Training is not so highly valued, it is of training of personnel are not mentioned in the considered more important by the retailers than study, and not found in case descriptions, but by the suppliers. appears to be retailer led.

32 36 CONCLUSIONS

The dynamic and competitive nature of the food maintain sales in a shrinking market it required supply chain has resulted in quality, in all its an increased level of customer service and aspects, being a dominant issue in the inter-rela- understanding of this highly perishable product. tionships between the sectors. One important To achieve the levels of motivation andcommit- perspective of quality is quality management, ment concerned a proprietary involvementwas i.e. to ensure efficient, timely and correct prod- thought necessary. Appropriate trainingpro- uction or delivery of a product or service. This is grammes were devised and implemented, result- manifested in the manufacturing sector inmany ing in a group of receiving a higher level of ways, typically by the introduction of team work- training compared to when theywere employing for maximum flexibility, and in the retail ees. Franchise arrangements are increasing ;n sector by the attention to customer care. A many areas, with many in the fast food sector, further element of quality management important forming a significantgroup of customers for the to the sector is quality assurance. Developments food manufacturer. The franchisingorganization in this area are probably the result, at least in sets the specifications for many of the aspects of part, of pressures from retailers for assurances the business, from job qualificationto raw ma- that their specificationsare met. More recently terials. This can createa pan-European standard, the EU hygiene directive requiring.the implemen- which could result in transference of goodprac- tation of HACCP to ensure the production of tice across the EU. Problems for the franchiser safe food has increasedawareness in this area. could result from the wide diversity of institutional The effects of qualityassurance on training have arrangements in place in the various Member been previously discussed. Thus the customer States. When raw materialsare sourced locally, supplier relationship at all stages of the supply quality standards of SME's in less developed chain is important, with qualityassurance likely regions could be raised. It wouldseem that fran- to receive more emphasis if the proposals to chising could have a profoundlypositive effect permit a due diligence style defence in food leg-on training in both small retail and manufactur- islation are accepted in the EU. ing SMEs. It is in the franchiser's interest to ensure a high level of service etc. and the fran- When a formal link existsa reciprocal, from chiser is in a good position to developappro- manufacturer to retailer, influence promoting priate training programmes and to monitor their training can be seen for smaller retailers. One delivery. The effects of franchisingon training in case study examined concerned franchising of the retail and catering sectors isan area that retail sales for the door step delivery of milk. To could be usefully further investigated.

33 A7 CONCLUSIONS

Without a franchise structure there seems to be tion has been made to work organization, but little chance of manufacturer influencinga small from our studies thisnow appears to be chang- retailer.It is a market where a small price reducing, with retailers now being interested in the tion could be sufficient reason to break any partner company's qualification structure. informal relationship between supplier and retailer. Manufacturers are therefore not prepared to With the German health food shops, thecoop- invest in promoting any action. Although training erative society gives the producer written quality could be strongly linked to sale promotion and standards, there must bea commitment and public relation activities. adherence to these standards before they receive a quality mark or logo that identifies The only evidence of formal collaboration their goods as health food. The UKmeat proces- between large manufacturing enterprises and sor (UK Case study 1) was participating in vari- large retailer was found when the retailerwas ous quality systems and so in receipt of a the dominant partner. From the Germancase number of quality marks. This resulted in auditing studies in particular it can be seen that the visits from the various organizations concerned, increased orientation towards customers in the placing pressure on production. The UKsuper- high quality retail segments requires the sales market also gave written quality standards and staff to be familiar with the productson sale. product specifications to their suppliers. The This includes knowledge of their culinaryuse resulting quality markwas now the supermarkets

and preparation. In sensitive areas like meat, "signature".. positive sales result when the customer is informed about the origin of the meat and of the Cooperation in the development ofnew prod- conditions of the livestock breeding. Thereare ucts or the improvement of existing ones is to be many informal contacts between the buyers and found within the sector. This does notappear the suppliers' representatives giving rise to the necessarily to develop joint training activities. opportunity for mutual learning and of voca- Cooperation in electronic data exchangeor in tional training without a systematic pedagogical the use of product numbering schemes would intention. Regarding quality assurance there is seem to be an area for possible joint training strong self-interest embedded in long lasting initiatives. The problems are exacerbated by the cooperation and for partners in the supply chain lack of an industry standard. We haveseen to know and respect each others criteria. These common training activities are the exception criteria are rarely expressed, but are learnt in a between retailers, suppliers and producers in the communicative way. Up to now not much atten- food and drink sector, other sectors,as dis-

38 34 CONCLUSIONS 6

cussed in the FORCE sector study aboutcar- history of the food offered. Thiscan be when repairing, where there has been a strong devel- ethical issues such as those in meat production opment towards "collaboration in training", but are raised, or could relate to quality and whole- as a one-way-street-activity, from the big car someness of food. Training using concrete exam- producers to the repairers and sellers of their ples from a supplier could therefore bean cars. For the small repairers of cars the results advantage. This also works in reciprocalsense are, as shown by the report, ambiguous. as manufacturers need to understand the retailers mission, when concrete examples, perhaps Training along the quality chainsome ideas in the form of videos of the retail operation, Bearing in mind the status quo, development of would be useful. There is thereforea need for a complete training programme for to cover the training department to work with theircom- both sectors is unlikely, but wecan see from this mercial colleagues, bringinga new orientation study that common training activities might be to training. possible for the future. The overall aim of such activities is to help all employees understand 2. Study visits and exchange of experts for their specific role in the quality chain. Training training activities. activities can give the employees a broader An additional step for this new orientation could understanding of their own professionor profes- involve the exchange of personnel for training. sionalism of their work. This could be in the form of study visits, where direct contact with personnel ina different part It is possible to distinguish between three levels of the supply chain could be of considerable of training dealing with the relationship between interest. These visits would need to be wellpre- the two sectors. pared and evaluated afterwards. Thereare a few examples of study visits, butmore research 1. Modules to learn about the supply chain. is needed so guidelines can be developed for running these activities. Another approach 2. Study visits and exchange of experts for would be the exchange of experts, from both training activities. the commercial and training departments. 3. Common training activities. 3. Common training activities. 1. Modules to learn about the supply chain. Common training with employees froma There are an increasing number of areas where number of enterprises is likely to be theexcep- the consumer seeks reassurance regarding the tion. Commercial and technological interactions

35 39 6 CONCLUSIONS

are highly valued, as in product-development. They therefore suggest that there could be bene- fits from some form ofcommon training activity. It is easy to identify common training objectives such as TQ, however thereare many practical difficulties, such as the location ofcompanies.

40 36 CEDEFOP European Centre for the Development of Vocational Training Relationships between food manufacturers and retailers and possible implications for training Richard King, Wilfried Kruse

Luxembourg: Office for Official Publications of the European Communities 1996 36 pp. 16 x 20 cm ISBN 92-827-6429-X Price (excluding VAT) in Luxembourg: ECU 5.50

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