Case Study Baked Goods Supplier

Background

Our client, established in 1975, quickly gained a reputation as a beloved local source for delicious baked goods. Since its founding, they have expanded to include a wholesale division offering a wide variety of products like donuts, fritters, scones, cinnamon rolls, and Danish pastries.

Through continued growth and success, they evolved into a leading industry co-packer and manufacturer of private-label bakery products, which remains their core business today.

Challenge

Their long-standing partnership with the national fast-casual food chain since 2008 has hit a rough patch. Despite years of support, including regional program development, product launches (both core and limited-time), and contributions to the packaged food program, they faced significant financial and operational challenges.

Several factors have made the account unprofitable: Key product exits, a major project volume reduction, and a financially unfavorable pricing agreement have pushed them toward insolvency.

Beyond financial strain, trust has eroded. Leadership changes and unclear strategic direction added further uncertainty. This confluence of challenges left them at a critical inflection point. The once-reliable partnership required careful evaluation and strategic decision-making to navigate an uncertain future.

Solution

Jonathan Gardner Group (JGG) came into the picture and explored a wide range of negotiation strategies with the client. After careful consideration, the relationship reset was chosen as the only viable solution. The other options either left the bakery supplier in a financially non-viable position, risked damaging the relationship irreparably, or failed to address the future uncertainty.

The relationship reset strategy was developed to address the issues of the master purchase agreement (MPA) with one-sided terms, RFP, and the cancellation of the key product. This approach recognized the supplier’s position of strength in the buyer’s portfolio and allowed for the development of a sustainable strategy. 

Key elements included:

1. Reinforcing the partnership: Rebuilding trust, transparency, and open communication with the buyer to re-establish a strong foundation for collaboration.
2. Aligning on the contract: Revising the MPA to address concerns such as prohibitions on selling to competitors, financial transparency, year-over-year savings, bureaucracy reduction, cost flexibility, and payment terms.
3. Resetting pricing: Establishing appropriate pricing based on recent volume changes and contract terms to support financial stability.
4. Setting expectations: Preparing for an initial negative or silent response from the buyer and anticipating escalating negotiations to higher levels.

Results

After partnering with JGG, the supplier achieved significant improvements in their relationship with the major buyer through open communication, transparency, and mutual trust.

As a direct result of the restored partnership, they secured a $1.5 million annualized price increase, which was critical for restoring the account to an acceptable margin.

Their approach to the negotiations was completely reframed. JGG prepared a detailed negotiation plan, guided the supplier through financial preparations, and crafted a compelling storyline that highlighted the history and value of the relationship. As a result, they successfully negotiated the price increase, stabilizing their financial health and ensuring a sustainable future.