To: ABI Distributors
From: Channel development team
Date: 23rd April, 2018
Subject: Change in ABI distributors’ payment structure
I’m writing to provide the distributors with a progressive report about the change in their payment structure, which is supposed to commence on the 1st of May, 2018.
The company has decided to embark on a cost-cutting program as a result of several strategic acquisitions that have involved small competitors. Despite these acquisitions increasing the company’s market coverage, they have also added to its operating costs, thus the decision to work on this program.
According to a recent report, one of the key cutting cost focus for ABI Beer Company is its distributors. Normally, ABI distributors receive $1.00 for every beer case distributed to a retail channel.
In comparison to the MC brewery control, which has been paying their distributors $0.85, upon elimination of the 15-cent margin, ABI estimates that it will save around $200 million per year. These savings will be channeled into something else that will benefit the ABI beer company.
The marketing logistics goal is to deliver targeted customer service at the lowest cost possible. This is what we are working towards as a company. With these being put in place, the distributors will also be in a position to serve a larger market, which will help the company grow.
If these estimates are applied, this is going to be a conservative measure for ABI, and it will, therefore, enable us to continue distributing beer to our consumers effectively. According to extensive discussions, implementing this strategy will help to beat the company’s current high costs.
Though this change will initially seem like an extra step and a headache for our distributors, it is necessary. We, of course, don’t want you to view the ABI beer company as a place of drudgery with pay being cut off.
I encourage a competitive environment and recognize that we certainly won’t be profitable if we fail to place cost-cutting programs as early as now.
Best regards,
Channel Development Team
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