UK crisp brand Tyrrells Crisps has just made its first overseas acquisition, buying Melbourne-based snacks business Yarra Valley Snack Foods, in a move which will see the company relocate production to Australia.
Tyrrells specialises in premium, hand-cooked potato crisps, vegetable crisps and premium popcorn. The company, which employs over 270 staff, has a presence in 37 countries and hit revenues of over £40m last year. It’s worth taking this opportunity to reflect on how the company got to where it is today, as its interesting history highlights at least two important insights about Power in negotiation.
Tyrrells was founded in 2002 by a potato farmer, Will Chase, who started to manufacture up-market crisps after his potato margins were virtually wiped out by supermarkets’ demands for low prices. Chase felt his way of cooking potatoes by hand gave the product a distinct quality and price advantage, and so refused to trade with Tesco, who wanted to price the product too cheaply, and pay Tyrrells accordingly. Tesco then began to source Tyrrells crisps on the grey market and to sell them at a much reduced retail price, despite complaints from Tyrrells. So Chase threatened to sue the retailer. In the end Tesco decided to back down and withdrew the brand from its shelves. The incident was hailed as a David and Goliath story by the media.
Tyrrells brand continued to grow in popularity and in 2008 Chase sold the business to Langholm Capital for £30m. Chase went on to found another potato-based business, award winning vodka producer Chase Distillery. In July 2013, Tyrrells was sold again for £100m to Dubai-based luxury brands investor Investcorp. Tyrrells finally started a successful trading relationship with Tesco five years after this incident, in 2011.
A couple of important insights from Tyrrells’ story:
Firstly, Size isn’t Everything. Power is shifting constantly according to time and circumstance. In 2006, Tyrrells had a turnover of just £10m and Tesco of £40bn. However, Tyrrells recognised that despite of their size, they had something that Tesco wanted – this gave them power. Tyrrells also understood that Tesco had a PR problem around supplier management and would not have wanted to get involved in a potentially embarrassing public spat with a small supplier. I find that most of my clients tend to credit the other party with more power than they have, irrespective of the circumstances. Try to get inside their head and understand their needs and problems – you’re likely to realise that the balance of power is often far more balanced than you think.
Secondly, this is a great illustration of how it’s not enough to have Power – you also need the wisdom to know how to use it. And sometimes, when you use your power, it begins to flow to the other side. In this case Tesco had used its power to such an extent to discourage another company from trading with it – the very opposite of Value Creation.
As the Russian dissident Solzhenitsyn famously wrote, “You only have power over people so long as you don’t take everything away from them. But when you’ve robbed a man of everything, he’s no longer in your power – he’s free again”.
Remember these insights next time you open a packet of Tyrrells crisps, and more importantly, next time you are involved in a negotiation.