Declaring war on costs
Cyr knew that he had to attack costs, and in a way that would
not simply allow Sunny Delight to weather the immediate crisis,
but that would be sustainable for the long term.
So Cyr became an expert in some critical cost areas, like resin.
Resin is used in plastic bottle production, and its price rose dramatically as crude oil prices spiked.
“I ended up making myself an expert in resin cost tracking,” Cyr
says. “Why is the CEO spending a lot of time tracking the price of
resin and making predictions about where the price of resin is
going to go, based on the cost of natural gas, the cost of ethylene
and all kinds of things?
“The reality was that was an area where we had just been
accepting the prices at the end of the month that were reported by
the industry trackers and not having any foresight. It was always
a look back and next month the cost could go up 12 cents. We
didn’t have any idea what it was going to be, and that was inadequate. So I made myself an expert on resin pricing.”
For Cyr, the self-education accomplished two things: It gave him
an intimate knowledge of the market for a critical commodity and
an insight into how that level of familiarity can be of value in other
areas when it comes to making decisions.
“As a result of that, I set the standard for what I expected from
our purchasing folks in their management and predictions on resin
pricing,” Cyr says. “Once we got to a level of competence that I felt
matched our needs for business decision-making, then I pulled
back, and the purchasing organization completely manages that
process. But we needed a step change there because we were very
vulnerable on resin pricing.”
Cyr hasn’t stopped there. The lessons of the hazards of price fluctuation taught him that he needs to be constantly vigilant. For
instance, surging demand for ethanol has put upward pressure on
corn prices and, in turn, on another commodity that Sunny Delight
uses extensively.
“What’s the big bear this year might not be the big bear next
year,” Cyr says. “A year ago, I didn’t know a lot about corn pricing.
I now know a lot about corn pricing and demand for corn and
ethanol, and how that whole matrix works so that I can be effective about making decisions about how we formulate products,
when we use alternate sweeteners, when we have to take pricing
based on the cost of corn, and how far out we should lock in our
corn prices.”
