The Role of A Broker

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The Role of A Broker

• Malissa Marsden
• Commodity Division Director
• ACDA 2007

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Role of a Broker

• To be the representative of the manufacturer to
  the school nutrition specialist and to the state
  distribution specialists
• To be the voice of communication between the
  customers, the manufacturers, the distributors
  and the State DAs

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Responsibilities

• To educate the School Nutrition Specialists,
  Superintendents or Business Managers on the
  Overview of the commodity program and its value
  to their district
• To understand the state requirements, order
  deadlines and forms of commodity processing
  allowed as well as all Federal Requirements
• To communicate State and Federal requirements to
  all participating Distributors
• To be a knowledgeable expert for ALL parties (a
  sales style)

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National Overview

• K12 Food purchases exceed 7.2 BILLION
• Account for 15 of Non Commercial Food Purchases
• Serve over 39 million meals per day
• Serve more than McDonald's

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National Commodity

• Purchases in Excess of 800 Million
• Bonus in Excess of 60 Million
• Per meal 0.1852 currently--0.175 07/08
• Bonus
• Lunch only
• Secondary market
• US Agriculture 1

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True Cost of Commodities

• 85 of a schools purchases are commercial
  purchases
• 15 arrive as a commodity value
• REAL
• Real Asset
• Combine the two for total budget
• Not Free
• At first not easy
• Ever Changing, getting better every day

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Revenue Source

• Commodities never should be considered free
  food you are spending real dollars
• SFA need to evaluate using their PAL dollars with
  as much care as they do when they spend from
  the FS fund.
• Merge two accounts into one
• Increased options increased ADP
• Every ADP 0.40

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Hard Costs

• The true cost of a food item includes
• Value of commodity
• Processing fee if any,
• or distributor charge
• Any State Fees
• Delivery charge to your warehouse if any
• Storage costs if any
• Redelivery cost for you to redeliver within the
  district if applicable

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Administrative Costs

• Cost of paying a bill
• Cost of managing multiple suppliers of same or
  similar products
• Inventory Costs

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Soft Costs

• Hardest to calculate
• Storage variable
• State warehouse deliveries more invoices,
  delivery charges, storage charges
• If limited delivery times more storage needs
  (freezer, cooler space)
• Brown Box commodities can vary in acceptability
  due to change in winning bidders sodium, color,
  taste, texture
• Kids do not like changes

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NOI Benefits

• NOI allows seamless distribution-
• Many consider that priceless
• One invoice to check
• One bill to pay
• Multiple deliveries per month vs. limited
  deliveries from normal distributor
• Flexibility in menuing changes
• Branded products
• On Trend products available much quicker

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Accounting

• Stabilize Plate Cost
• Stabilize Food Cost
• Stabilize Menu Cost
• Utilize Asset (PAL ) in same fiscal school year
• Happy Bean Counters

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Menus Drive Commodities!

• Julie Lewis, SFNS, Mesa USD
• jclewis_at_mpsaz.org
• Look at the cycle menu breakfast lunch
• Make a list of most expensive products, normally
  the center-of-the-plate entrees (proteins)
• Make a list of other high volume food items
• Estimate number of servings needed.

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5 week Breakfast Cycle Menu
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5 week Lunch Cycle Menu
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Brown Box - VS - Diversion

• Evaluate the costs associated with using brown
  box commodities and diverting commodities for
  processing to make the determination for the best
  value for your needs, keeping the goal of
  maximizing PAL dollars in the most efficient,
  effective, and applicable manner.

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Brown Box - VS - Diversion

• Greater Entitlement Draw
• Potential delivery issues (at the mercy of the
  SA)
• Inconsistent product quality on processed items
• Quality based on USDA specifications
• Cost Delivery and/or storage fees

• Better Yields Decreased Entitlement Draw.
  (More Bang for your Buck)
• Deliveries more streamlined, better controlled.
• Consistent product quality
• Product specifications are made to your
  preference.
• Cost FFS delivery and/or storage fees

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Brown Box - VS DiversionCheese, RF Sliced
American
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Brown Box - VS DiversionChicken, FC Breaded
8-way Cut
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Brown Box - VS DiversionFC Beef Taco Filling
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Brown Box VS DiversionPotatoes, Oven Fries
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Decisions, Decisions, Decisions When to
utilize PAL s and When NOT to
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Decision Made to Divert Raw CommoditiesEvaluatin
g Bid Responses for the REAL COST Per Serving

• Build relationships. Talk to your industry
  partners (local brokers and manufacturer
  representatives) at food shows or other events
  about your needs. They will bend over backwards
  to be of assistance!
• Request product information such as ingredient
  content, nutritional integrity, approximate price
  point, case pack, and availability.
• Test products with your customers on an on-going
  basis. Be sure to obtain survey results
  responses from kitchen managers and also from the
  kids.
• Build and tailor your bid specifications as a
  result of product testing, that best fits the
  needs of your program and your district.

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Sample Bid Specification
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Sample Bid Response Beef Patties
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Determining the REAL COST Beef Patties

• Calculate the value of the raw commodity per
  case. ( number of lbs. DF needed to produce (1)
  case x November 15th price file.)
• Brand A 17.2 x 1.41 24.25
• Brand B 26.26 x 1.41 37.03
• Brand C 20.1 x 1.41 28.34
• Add the fee for service (FFS). The result is the
  REAL COST/case.
• Brand A 24.25 12.09 36.34
• Brand B 37.03 22.07 59.10
• Brand C 28.34 16.12 44.46
• Divide the real cost per case by the number of
  servings per case. The result is the REAL
  COST/serving.
• Brand A 36.34 / 96 0.3785
• Brand B 59.10 / 200 0.2955
• Brand C 44.46 / 135 0.3293
• Make sure that product nutritional information
  matches the specification and make sure that your
  customers will accept the product.
• The low bid offered at 0.2955 per serving
  contains 8.3 VPP, which exceeds the 5 bid
  specification. In this case, the low bidder
  would have been justified out for not meeting the
  bid specifications.
• 06/07 pricing

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Time Line

• Commodity Sales goes on year round
• It is never out of season
• It starts 10 - 12 weeks prior to any state or
  regional commodity meetings/taste tests
• It ends when the school year for which the
  commodities are booked ends.
• This means that EACH commodity sales cycle lasts
  anywhere from 18 22 MONTHS

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How I go to market

• Start 10 12 weeks prior to first commodity
  taste test by contacting all manufacturers
  participating or looking to participate in
  commodity processing
• Find out about new products or programs available
• Agree upon a line up of products
• Generally do not offer all available choices
• Too many choices poor slot turns
• Get all current copies of SEPDSs of the product
  line up
• Get all current nutritional information, spec and
  handling information from each manufacturer for
  each product
• Order samples of any product you have not
  seen/tested and tasted
• Order POS available to make choice for upcoming
  shows/tests/visits

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Taste Tests/Road Shows

• 1 month prior to shows
• Order samples for all shows
• Order POS for all products featured
• Features each manufacturers lineup offered
• Have ALL the information the SFA wants such as
  Portions, fat, DF per case rebate or discount
  per serving and per case as well as an
  approximate commercial cost for the serving
• Know what forms of processing each manufacturer
  can do and the State allows
• Have knowledgeable Staff to work the booths
• Be clear because misinformation will haunt you!

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Verification

• The first of August we create a letter that
• Explains the requirements of NOI Sales
  Verification
• Explains how to verify
• Reminds them who they processed with and hence
  who they have to verify.
• Provides contact information for all changes in
  email addresses
• Forward all changes to the manufacturers involved

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My Circle of Commodities

• The cycle never ends
• The rewards hit months after work so first couple
  of years tough
• The distributors become true partners and are
  happy with increased sales
• The schools are thrilled with the options and
  ease
• The manufacturer gains new and loyal business
• All parties are winners with Proper and Frequent
  Communication!

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The Future

• What can we expect tomorrow?
• More Changes
• Improvements
• More Challenges
• Economy Labor Food Safety
• More Opportunities
• More children to feed

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Predictions/Prayers

• ADP goes up
• Commodity Reimbursement goes up
• SNA Legislative Action Paper requested 0.10
  commodity value for breakfast
• SNA continues to push for ERP which
  conservatively could bring in 1 million more
  lunches per day and dramatically increase
  breakfast ADP (preliminary studies)
• Education training of all partners continues

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Resources

• Cathie McCullough, Director, Food Distribution
  Division
• USDA
• 1-703-305-2680
• Cathie.mccullough_at_fns.usda.gov
• www.commodityfoods.usda.gov
• www.commodityfoods.org
• SNA has a commodity track for 2nd year
• Attend SNA outside of the Exhibit hall

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Questions?
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Thank You!