Substantial cost reductions delivered at pace

With a significant cost reduction program already in place, our client, a large coffee shop chain, engaged us to support a key global project to identify and deliver savings across their beverage ingredients category. This was business-critical due to the direct impact on consumers. However, our client lacked the capacity to review internally. The beverage category accounted for £25m spend and 250 stock-keeping units (SKUs), including syrups, hot chocolate, flavors, and ingredients as the three key sub-categories of our review.

In addition, requirements were managed on an in-country basis, leading to buyers not leveraging their collective volume and operating in isolation of the global company view, both by region and business unit. The markets in scope included the UK and the new international markets targeted for growth and expansion – China, Europe, and the Middle East and North Africa (MENA).

Approach

We utilized our experience and expertise and drew upon our access to critical market insights to identify potential suppliers in the market to engage in a competitive process. The initial focus of our team was to develop a global strategy for the category, utilizing our experience with global sourcing programs to collate the cross-region requirements.

The products in scope have a direct impact on customer offering, so specifications are highly technical (e.g., precise component quantities and product viscosity). As such, any product changes would need rigorous flavor profiling and testing against consumer approval. 

To address this, the team worked closely with cross-region, and cross-business unit stakeholders, holding regular meetings to co-develop a tender pack with robust specifications and improved forecast data. Our team split the SKUs into appropriate lots to take to market. 

Our delivery team was supported by Proxima’s expert market insight capabilities, allowing the team to determine appropriate suppliers. Following a thorough RFP to establish global capability, innovation potential, and value opportunities, we identified key suppliers and through an extensive e-auction process, drove optimal pricing across all core ingredients.,

Results

Implementing optimal pricing resulted in cost savings that exceeded the initial target by 50% and aligned SKUs and suppliers across regions to drive efficiencies. In addition, we put robust contracts in place to improve commercial terms and increased payment terms to improve cash flow. Although the value levers varied across sub-categories, all necessitated a high level of supplier management.