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MARKETINGPROCUREMENTPRESENTATIONTOTHE 4A’S ANNETTE C ERAMI NOVEMBER 15 , 2 017 B E S T E L LAR

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Constellation Brands (NYSE: STZ and STZ.B), a Fortune 500® company, is a leading international producer and marketer of beer, wine and spirits. Constellation is the No. 3 beer company in the U.S. with high-end, iconic imported brands such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico. In addition, Constellation is the world leader in premium wine, selling great brands that people love, including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and The Prisoner. The company’s premium spirits brands include SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio; about 40 wineries, breweries and distilleries; and approximately 9,000 talented employees. We express our company vision: to elevate life with every glass raised. To learn more, follow us on Twitter @cbrands and visit www.cbrands.com.

Who is Constellation Brands?

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•  35+ years in procurement

•  20 years in procuring indirect services

•  12 years in marketing procurement

Who is Annette Cerami?

Categories ProcurementType/industry

PaperandresincommodiAesNaturalgasandelectricityCopackingOutsidefinishedgoodsFleetOfficesuppliesTemplaborEquipmentrentalTradeshowexhibitsServices–markeAngprocurement

ConsignmentConsorAumCategoryManagementMarkeAngRetailWarehouseClubDistributorOnlineaucAons

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UNDERSTAND WHO THE PROCUREMENT PERSON IS THAT YOU’RE TALKING TO

Ifyoutakeanythingawayfromtoday’ssession……

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PROCUREMENT 101

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Direct Procurement

•  Direct procurement is the act of acquiring raw materials and goods for production. These purchases are generally done in large quantities, acquired from a pool of suppliers at the best possible cost, quality and reliability. These purchases are made frequently and are necessary for key business practices, such as a baker acquiring flour to produce bread.

•  If direct procurement stops functioning or encounters problems, companies are no longer able to manufacture their products.

•  Historically, direct procurement stems from manufacturing.

Indirect Procurement

•  Indirect procurement is the act of purchasing services or supplies required to keep the day to day business alive. This includes things such as computers, office supplies, furniture, acquiring services, or consultants.

Indirect vs. Direct Procurement

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Direct Purchasing vs. Marketing

Direct MarkeEngServices

• Specsarespecificandfixed

• VendordifferenAaAon:equipmentandtechnology

• Rangeofqualityisnarrow

• Impactofqualityrangeisminimal

• Needandmaterialspecsnotdependentonothermaterials

• Specsnotfixed,vagueandevolveorganically

• VendordifferenAaAon:individualsandprocesses

• Rangeofqualityisgreat

• Impactofqualityrangeisenormous

• TheserviceisoYeninterdependentwithotherrelatedservices

COMPARATIVE PROCUREMENT MODELS Direct Materials Marketing Services

Research

Design

ProducAon

AdAgency

AnalyAcs

Media

PromoAonAgency

DigitalAgency

Discs LabelsCases

DistribuAonProducAonPackaging

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Marketing spend is an investment. When a company invests in marketing activity, the intent is to drive sales, and there is an expected return on marketing investments. As a result, the goal of marketing procurement/strategic sourcing is to deliver the greatest value rather than always driving to the lowest cost. Marketing outputs which are produced for the lowest possible cost but then fail to deliver marketplace impact may negatively affect revenue and/or ROI.

 

Marketing services are unique. Competitive sourcing is different in a marketing context. Often, what is being purchased is one of a kind and does not have reasonable substitutes. Each agency pitch is different and the creative content between agencies is not necessarily comparable. Likewise, a sponsorship opportunity is unique to a given property or event. As a result, there is less competitive leverage when negotiating these services.

 

Marketing decisions are frequently real-time. Marketplace opportunities and challenges are fluid and often immediate. The need to respond to competitive threats or seize emerging business opportunities requires marketing procurement to be nimble and responsive. As a result, those accountable for supporting marketing must be creative in their approach. The procurement process must meet the needs of the business rather than being a static framework.

 

Marketing can be unpredictable. With other types of indirect spend (such as office supplies), it is possible to forecast demand from year to year. This enables a methodical approach to sourcing and minimizes the impact of unknown influences. Marketing, on the other hand, can be highly variable year-over-year. Product modification, organizational changes, industry fluctuation, consumer shifts, economic conditions, and so on create a dynamic environment requiring a high degree of internal connectivity and communication.

Marketing Procurement is Different

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What makes this Procurement Department Tick? Don’t assume every company is the same.

Have the conversation!!

•  How do they calculate savings?

•  Does cost avoidance count?

•  What measurements do they use? How are they reported? Yearly? Monthly?

•  Do they use strictly labor based compensation or performance based?

•  What is the procurement manager reviewed on? What are their goals?

Understand Procurement Goals

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MARKETING PROCUREMENT IS ALL ABOUT VALUE

LET’S DISCUSS PROCUREMENT DRIVERS

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COST SAVINGS

• Cost reduction: The difference between current year actual costs versus costs of a prior period that results from a specific decision or action by procurement related to a business improvement initiative. Cost reduction savings will measure the absolute savings resulting from these initiatives. –  Cost reduction is easy to calculated if you by a tangible item, not for services –  Since marketing work is rarely apples to apples from year to year it is extremely

difficult to capture true savings

• Cost avoidance: The difference between current year actual expense and the expense that would have been incurred from a specific decision or action by procurement related to a business improvement initiative. Getting “more for less.” –  Typical for most agency work –  Often measured by blended rates or variations thereof

Cost Savings

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COST SAVINGS

Contract execution/management (MSA’s and SOW’s)

–  Consistency across contract templates –  Establishes shared database for supplier contracts –  Optimizes reporting routines to support the business planning

and supplier management processes –  Protects company from patent infringement, IP rights, and so

forth –  Establishes ownership of deliverables –  Compliance in regulated industries

A good contract makes things clear to both sides what is expected

Risk Mitigation

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COST SAVINGS

• Consult with and manages stakeholder budgets, stretching marketing dollars

• Avoid scope creep • Evaluates agency staff mix, and compares current fees to baseline

(year-over-year)

Budget Management

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COST SAVINGS

•  Industry trends –  Understands competitive landscape and emerging trends and

technologies to capture market opportunities and spur innovation –  Stays informed to make better decisions, spot trends and

opportunities, and create a framework to respond to a constantly changing world

–  Builds enterprise subject-matter expertise • Benchmarking

–  Builds awareness of best practices and defines opportunities for improvement

–  Gains an independent perspective about your company’s performance against the competition

–  Helps prioritize opportunities and set performance expectations –  Obtains data that sparks discussion on new ideas and practices –  Compares one agency to another; aids in negotiations

Industry Trends and Benchmarking

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COST SAVINGS

•  Identifies cost drivers in collaboration with stakeholders • Participates in benchmarking studies and leverages information from

prominent industry groups/forums related to cost information (e.g., ANA, 4A’s)

• Provide hours by role for the team delivering the scope • Price similar work consistently with the last time • Don’t markup expenses that are supposed to be passed through

Spend Visibility/Transparency

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COST SAVINGS

• Works collaboratively with stakeholders and suppliers to identify process pain points

•  Initiates continuous process improvement focused on increasing efficiency and streamlining business processes

• Focuses effort on improvements that contribute to company profitability and ROI

• Creates a win/win for both the parent and supplier organizations • Standardizes processes which may drive value without changing

suppliers • Elevates the briefing process so the agency gets it right the first time • Standardized, consistent, automated briefing process

Process Improvements

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COST SAVINGS

• Establishes appropriate metrics as part of contracting process • Monitors/improves agency performance based on a holistic agency

relationship management process • Determines how to link agency results to rewards through mid-year

and year-end agency performance reviews: –  Develops/implements appropriate KPIs –  �Ensures two-way dialogue –  �Creates a safe environment for effective problem-solving –  �Implements incentive-based compensation as appropriate –  �Provides access to new opportunities

Agency Management

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COST SAVINGS

• Understand who you’re talking to –  How mature is marketing procurement within your client? Just

starting out? –  Seasoned in marketing procurement or not –  Past roles, some procurement people were marketers, some

came from finance, etc. –  What metrics are they reviewed on? Savings vs. value –  Do they understand what they’re buying from an agency?

• Things to try –  Suggest process improvements, what drives you crazy and is

inefficient? –  Are briefs clear and understandable? –  Do you meet regularly for business reviews? Periodic KPI

reviews? –  Do you know your evaluation metrics for your customers?

Agency/Procurement Relationship

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COST SAVINGS

ANA Education: Advertising Financial Management Committee Meets in New York City four times per year. Meetings feature a mix of member case studies, perspectives from outside experts, networking, and benchmarking/ best practice sharing. Specifically, the Advertising Financial Management Committee explores efficiencies, cost savings, ROI, and bringing better value to members’ organizations. Learn more at ana.net/committees. Procurement Mentoring Program The program helps professionals improve their knowledge of marketing procurement in a unique forum, allowing for development by sharing knowledge, ideas, and resources; learning marketing procurement best practices; sharpening skill sets; and expanding networks. A group of senior-level marketing procurement experts have volunteered to mentor marketing procurement professionals at other organizations. For more information contact Greg Wright (gwright@ana.net). Procurement Webinar Series The ANA designed the Procurement Webinar Series to help enhance the marketing and advertising knowledge of procurement professionals. Also available for playback on demand. For more information, visit ana.net/webinars.

Help is Available for Procurement Teams

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THANK you