Smoke Jumpers Magazine
FSIC Inc's Jerry Wilhite [FoodService Insider] guest authored an article about the Gregory Packaging vs FoodBuy decision, the GPO space, and what it means for the industry.
With GPOs, there’s no clarity around participation costs, and location-level integrity poses major problems.
GPOs’ message to manufacturers has always been, “Give us a program and we’ll both make a lot of money.” But manufacturers are the ones required to pay to participate. And, even with a partnership, there’s no clarity around the operation. There’s no way to know how the deals impact business. Did it gain new customers? Did the program have any impact on the operator?
Additionally, GPOs are infamous for double dipping and over-billing. Think of it like this: If a manufacturer gives a $10 rebate and only $2.50 flows through to the customer, it costs them $7.50 to be in that GPO program. Then, the manufacturer is tasked with validating the bill-back on every case, even though they don’t have sufficient data or the resources to manually complete the process.
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This historically lopsided arrangement now seems poised to shift. In November 2018, Gregory Packaging, a juice manufacturer, won a multi-million dollar judgment against Foodbuy, the largest foodservice GPO in the US. At the end of their agreement, Gregory Packaging refused to pay the final four months of invoices, alleging that Foodbuy had over-invoiced them for millions of dollars worth of volume allowances over their five-year contract, which was based on Foodbuy’s template supplier agreement. Foodbuy sued Gregory Packaging for the volume allowances. Gregory Packaging counterclaimed, alleging the over-invoicing was a breach of the Foodbuy Supplier Agreement.
The Court ruled in favor of Gregory Packaging, agreeing they had been over-invoiced and that Foodbuy had wrongfully collected rebates. The court awarded Gregory Packaging $9.265 million.
Call To Action:
Industry Working Group
We are committed to bringing transparency to the GPO space. Our video below is a plan of action to drive billions of dollars of excess costs out of the industry.
Welcome to the Foodservice Insider! I hope you find this website & these videos informational and helpful. I appreciate the opportunity to share my 40 years of industry experience with you. It has been a great journey, and as President & CEO of FSIC, Inc., I will continue to bring opportunities to Restaurant Group Operators . With all the complexity, and lack of clarity in the FoodService Industry, we look to continue the discussion of ways to support you & your business.
Thanks again for the Opportunity, be safe, and until next time I am Jerry Wilhite Your Foodservice Insider.
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