orfy said:
Nothing wrong with a supplier increasing cost but they don't need to lie about it or blame in on someone else.
Yeah, they kind of
do have to lie about it. If you had 10 suppliers to choose from and one told you they were upping the cost by a buck a bag "because we can", you would immediately go and see what the other 9 suppliers were charging. But if you blame it on the cost of grain, it may buy you enough time to get a few more orders out of the guy. What's more, if he doesn't question it, then his bosses won't be pissed that he's not getting the rock bottom lowest price.
Sales is all about relationships. The buyer isn't going to see your bottom line. You've got some fudge-factor there. If they like you, if you're an honest guy, you can get a few more nickels per bag without raising eye-brows. That's what relationships are all about. Everybody knows you're taking care of your own interests, but if they trust you not to gouge them, then a couple nickels won't raise eyebrows. Now, if you start competing just on price, then my model doesn't work. But when you're talking about microbreweries and anything else that must depend on top quality ingredients, you can't just shop people down to the cheapest dollar amount because, again, you'll get what you pay for. Here's where the relationships come into play. You trust that a guy is giving you a quality product at a competitive price. If you trust he will always do that for you, then you will forgive an minimal up-charge because you know the guy can be trusted.
So yeah, the truth may be that you're trying to make up your margins, but if you tell that to your buyer, you open yourself up to being shopped around. He has loyalty to his company, after all. But just say you are doing your best, absorbing costs as best you can, and you can likely float along with a better profit margin.. at least for a little while.
It's just part of the cycle... every industry has them. Feast and famine. There are times when things are good and a dime is meaningless. There are times when throats must be cut to save a nickel. Capitalism is a precise mechanism, but it isn't instantaneous enough to obscure the natural cycles that occur in any industry.
Personally, I'm betting that you'll see politicians pushing for an increase in alcohol taxes as a result of the barley increase. It'll be less noticed. I bet you'll see better margins all the way down the line. It's a chance to recoup your margins that have been battered in recent times. A few weeks/months/years later, things will go the other way and margins will be cut. This will hurt the salespeople selling the malt, but its just part of the natural cycle. There's an up and down. It happens in every industry.
One industry with which I am very familiar is counter-cyclical to the economy. They make their money by taking old things and helping them last longer. So when the economy is great, people buy new, and when the economy sucks, people restore/rehabilitate what they have. As a result, margins are greater in a bad economy, because people simply won't buy new. When the economy is great, the industry puts a clamp on their margins to try to really compete with new things- and usually fails anyway because, well, who doesn't like new stuff?
We think of economies as being very fluid, but when you dig into them, cycles are pretty undeniable. I think malt has been improperly cheap lately. I think it needs to be rectified by the economy. And it can't be avoided.
Again though, thankfully, we're talking about pennies per pound.
