Case Submission: Verbeek Packaging Worldwide (A)

Each business unit in Verbeek acted as a profit centre, and the performance of SBU
manager was linked to it. Drum is used for storing as well as transportation.
Verbeeks UK counterpart assured them that their relationship was very strong, price
was competitive, and that the Paris counterpart wont be able to impose a supplier
on UK subsidiary
But the France subsidiary was worried as losing Verbeek would result in great loss,
domino effect, as Verbeek is the largest account in France.
So, in a situation like this, when the product differentiation is minimum, how can a
business provide differentiated value proposition to its business customers.

How Verbeek can be categorised into a B2B segment

Market structure and demand : Derived demand, fewer but large buyers, inelastic
and fluctuating demand
Nature of buying unit : Involves more buyers, more professional purchasing effort
Types of decision and decision process : More complex and formalised decision
process, focus on long term relationship

Verbeeks Dilemma
As TotPet decided to pursue global purchasing policy, it wanted every supplier to:
o Offer goods on international scale
o Factor in TotPets international standard requirements
o Keep track of sales volumes and negotiate globally
o Best prices at each location based on a reference price representing total
purchasing volume for group
o Purchasing data and names of local contracts
o All prices to be quotes on a delivered basis
o Multi-year proposal is encouraged, with price increase in years two, three, ..
o Yearly rebate proposal based on various purchase levels
o Information about:
Quality assurance programme
Drum recovery and reconditioning programme
Losing TotPet would result in Domino effect, which would be a serious blow
Problems serving and retaining ever-larger global accounts, which demand
significant global discounts and other benefits

Value Proposition of Verbeek

It held 25% of worlds large steel drum sales in 2012
 Relied on client relationship to set up factories abroad
Only player in steel drum industry to operate on such a worldwide scale, presence in
5 continents, which gives buyers flexibility in carrying operations globally
Highly diversified client base
Supplier for large global clients, and local family owned business
Board members having different background: Operations, Finance, General
Management, Strategic management
Verbeek has assured its customers of quality, proximity and continuity of supply,
while at the same time managing sales relationships locally with global accounts.
Threat/Competition
Viable substitutes like plastic and fibre packaging provides a competition after steel
prices rose high enough and not to be transferred to clients
50% Cost of a steel drum is because of steel, hence, with the increase in price of
steel it is riskier to agree for a fixed quoted price
Product differentiation was difficult
Premium could be charged based on specific needs of clients
The current trends of their global clients like transferring production to cheaper and
emerging economies, strategic partnership, rationalising packaging material, would
result in both lower demand and smaller competitors