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Drinks firms need to collaborate more with suppliers to keep costs down

Published:  15 January, 2015

Ratcheting pressure on drinks firms and suppliers to become more agile and responsive to consumer demands is forcing up costs - meaning the need for collaboration between the two is more important than ever.

Ratcheting pressure on drinks firms and suppliers to become more agile and responsive to consumer demands is forcing up costs - meaning the need for collaboration between the two is more important than ever.

That's the view of supply chain consultancy Crimson & Co, which says drinks companies need to engage more with their suppliers in order to better respond to demands for greater variety.

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Crispin Mair, director at Crimson & Co, said that while historically drinks suppliers have lacked flexibility given the stability of products in their portfolios, that is changing.  

Drinks firms, who have lagged FMCG counterparts when it comes to innovation, Mair said, are now "playing catch-up", with their suppliers having to cope with rapidly expanding portfolios, which drives up costs.

"The drinks industry is starting to catch up with the FMCG sector when it comes to product innovation. Traditionally, drinks companies have tended to offer one set product with the only variance being the size of the bottle you purchase - today, the market is evolving. Drinks infused with different flavours and mixers are having a dramatic impact on product portfolios and this is impacting all levels of the supply chain, from ingredients to packaging. It's vitally important to have your suppliers on board to support this.

"Accommodating wider product diversity drives expense into the drinks supply chain. For example, changing your portfolio will often result in the need to store more materials, which fundamentally alters a company's cost base.

"To address this it is imperative drinks companies are seen to be working with their suppliers to mitigate the costs involved within this process. As an industry, we need to see greater collaboration whereby suppliers and drinks companies work closely to ensure that the necessary changes don't prove to be ridiculously expensive. The two parties must work together to ease the cost burden.  

"Ultimately, the drinks industry needs to understand that it will not be able to optimise costs without working with suppliers. It needs to treat suppliers as a business asset with a huge amount of knowledge.

Crimson & Co is hosting a Drinks Industry Forum in London on January 22 on these issues.  Crimson, a global firm, works across a range supply chain strategy, planning, procurement, manufacturing, logistics and customer channels. Typical clients are blue-chip organisations such as Sony, Diageo, Carlsberg, Tesco and Merck.

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