Over three years ago ZO fruit & vegetables decided to extend its clock function. Since then time has moved on. The sales system has been modernised, tightened and the organisation now believes in the model so strongly that they want to allow third parties access to their sales instrument. "Our clock could be for everyone. But only according to clear and stringent rules. Not the technique, but the rules determine the success of the clock."
Advantages and disadvantages
Michiel F. van Ginkel is very clear. The clock isn't a holy grail - a perfect sales system. "No instrument is. Each model has advantages and disadvantages. Based on the results, however, we are convinced that the clock can be a good long term alternative." ZON's general director has been working intensively since his appointment in December 2014 on the sales method of the southern growers organisation. A year before his arrival a new strategy was set in which two sales instruments were opted for: the clock and account sales. "Looking at our organisation and our growers we believe that our growers, our supports, weren't getting enough out of the sales," the commercial director Leon Litjens explains. "This is why we were looking for improved sales instruments. Demand and supply varies constantly in the fruit and vegetables market. The product also has a limited shelf life, so matching supply and demand every day is a challenge for every player in the chain. We see that the clock, with a good commercial policy, can be a very strong instrument in this. It is an efficient way of trading - when you look at both the transaction costs and the logistics. Buyers and sellers believe the transparency is important. The clock doesn't always give good prices, but it is always an honest price." He continues: "You can see that with a good commercial policy this gives a better result in the long term than mediation. On the other side, the clock isn't suitable for all products. The sales power is often too limited for niche and speciality products in particular."
Michiel van Ginkel and Leon Litjens of ZON
Chain management
Now, a year and a half later, 60% of ZON's supply leaves through the clock. This is the product of around 230 grower. Besides this there are also around twenty producers who opt to go into the chain with ZON and use account sales. Together they are responsible for around 40% of the supply at ZON. Their product is sold with a focus on demand with professional account management and category management. "Those growers need contact with the customer to further extend and develop their defining proposition. They want to enter the chain themselves and don't want to supply an anonymous product," continues Van Ginkel. "We have also made professional steps in the service towards this group of growers. We go onto the market together. It is about focused sales and customer contact." At ZON they also notice that these things are becoming more important. "We see the chains closing more in the future and growing further. But we believe that there will always be space for daily trade in the fruit and vegetable industry."
Modernising
The clock was tackled heavily before its reintroduction. Not just the shape - in which sales are more virtual than before - but also the rules have been adjusted. "We looked closely at the Belgians," Van Ginkel sums up. A system in which pre-loading (press the day after or pay the maximum price) was immediately chosen, the day mediation was stopped and after a while buyers numbers were reintroduced. "Our customers believe this transparency is important." As of this year ZON has definitely and completely stopped buying more from the clock. And finally, one of the the most striking developments: the supply. The supply from ZON hasn't just been quickly expanded, other parties have also been allowed on the clock. Van Ginkel says a wide and extensive supply is an important part of a successful clock. He talks about the supermarket model. "On the clock you realise the best price with a maximum concentration on the sales power. To attract buyers to the clock you have to realise a continuous, year round and total supply - just like a supermarket."
Growth isn't a goal in itself for ZON. Realising a completely year round supply with constant volume is. This is why there were Spanish greenhouse vegetables in front of the Limburg clock for the first time last year. Originally as a pilot, then as a regular. "We can further widen the supply with Spanish product and keep a hold of buyers in the winter. And by selling on our clock the suppliers can offer a fresher product, for an honest price. This is done to mutual satisfaction," says Litjens. And as far as Van Ginkel is concerned this isn't the end of the Limburg clock's assortment growth. He also sees the clock opening to other, Dutch, parties. "Our clock could be everyone's." He says space for open ground products and eventually even for other greenhouse vegetables- competitors of the ZON products. "It depends on the product, it depends on the overlap. Just like in a supermarket the shelf division has to be in balance."
No fragmentation
ZON wants to work on one strong clock instead of country wide fragmentation with multiple clocks. "And with it the competing daily trade, which eventually has a negative effect on the day to day price and with it the price of the contracts," Litjens clarifies. "This could be negative for the price formation - it is about the concentration of the purchasing power. This doesn't have to be our clock - it could be a national model with other share holders. But we are opening our clock. With the rules we agreed with our supporters." The latter means it isn't a matter of speculating or dumping the leftovers in Venlo. "If parties who are in the day to day trade are also suppliers on the clock, this could have a negative effect on the price. And you can't join in with the clock one day and skip the next. We want an honest, transparent system and everyone knows the rules. You're in or you're out." There is certainly interest in his offer. "It's not like our phones are ringing off the hook," says Van Ginkel. "But we are seeing that the instrument is being recognised more and more and we have pay out prices that speak in our favour."
The hard figures
Since the introduction of the clock the number of buyers has grown (more than 2 million Euro purchasing power increase per year over the last two years) and an extension in the winter thanks to Spanish supply. However, the ZON area has decreased in recent years. Last year four strawberry growers decided to leave. According to Litjens their departure isn't tied to the clock, this is only substantial in the spring. This is because this approach leads to the best price formation for our members." This year two more pepper companies joined, which has caused the area of vegetable to grow slightly. And in the future? Can ZON offer an alternative to Belorta? In recent years more Dutch growers have opted to supply on the Belgian clock. "We are only on our third year with this. Growers don't pick that quickly, they wait. But if we continue this trend, we expect to be an alternative to our very valued colleague," according to Van Ginkel.
And how are the sales figures? "By turning our strategy we have been in the top as far as pay out prices go over the last three years," says Litjens. "There is always a few days of unbalance. Look at cucumbers: we were behind in price all year - but a few good days in August fixed that. The clock does better on the day to day trade." But wasn't last year an easy year to start? With disappointing harvests in Europe the Netherlands had a good year. With ZON keep this up this year, or can it only disappoint after 2015? Van Ginkel says it doesn't work this way. "But it will definitely disappoint at some point. The market situation has been less favourable in recent years - everyone knows that. The prices on the clock are also lower. We can't hedge ourselves for that. But growers know the game: you win some, you lose some. It is about winning in the end, what supplies the best turnover over the years."
For more information:
ZON Fruit and Vegetables
Venrayseweg 104
5928 RH VENLO
T: +31 (0)77 3239999
F: +31 (0)77 3239719
E. [email protected]
http://www.zon-business.com/
