Enliven Beverage Deal Podcast Episode #10
What’s it like to negotiate your first beverage partnership? How do you ensure your staff don’t revolt once you adopt pouring rights? What are the pitfalls to avoid?
Ryan Donovan, Director of Avera PACE, joins the podcast to share about his experience with a beverage deal and how he helped his organization achieve 40%+ savings.
Listen on Your Favorite Podcast Player:
Related Resources:
The Key to Improving Any Beverage Deal
Why Major Brands Love Healthcare
How to Get Every Cent Owed in a Beverage Deal
Transcript:
Tim Harms:
Welcome to the Enliven Beverage Deal podcast, where we’re all about saving and making you money by taking both the guesswork and the legwork out of your beverage partnership and by leveling the playing field when it comes to negotiating your beverage contracts. I’m your host, Tim Harms. We’ve got a great show for you today. Stay tuned.
Tim Harms:
Welcome back, everyone. Today, I am welcoming Heather Neisen to the podcast. Heather, how you doing?
Heather Neisen:
Hello. Doing great. Thanks, Tim.
Tim Harms:
Awesome. Well, we’re going to switch things up today. Variety is the spice of life, and today we’re going to let you listen in on an interview that actually you recorded, Heather, about five months ago now. As we’re recording this, it’s the end of September, should say September 2020, and we’re just getting into the midst of COVID-19, and the world is going crazy. And in the midst of that, you sat down with Ryan Donovan, director of Avera PACE, to talk about his experience and how they negotiated over 40% savings on their beverage spend. But before we get into that, can you just speak a little bit? How has the landscape changed? Or what’s happened in the last five months as you’ve been working on the ground with healthcare clients and with Coke and Pepsi? How have things been?
Heather Neisen:
Thanks, Tim. Yeah, and I’m excited for everyone to hear from Ryan. I think that interview was so great, and he just walks us through kind of step by step what that beverage deal looked like for Avera. But yeah, the last five months, frankly this whole year, I think we can all agree, we wish that this year could have been different. We’ve seen week over week uncertainty. And I think we all kind of feel that way about the future right now. Just still a lot of uncertainty, but I’ll say we feel really encouraged. I think we know that beverage deals save money for healthcare systems, they make money for healthcare systems, and they’re really an awesome partnership with beverage companies. And so the encouraging part to us is to see how not only healthcare systems but also the major beverage companies have pivoted during this time.
Heather Neisen:
And we’ve still been able to run these projects and secure best in class deals for healthcare customers. We’ve had three major projects running during this time in a virtual environment. Everyone’s gotten really used to Zoom and just figuring out their home office setups. And so we’re really happy to say that we’ve been able to continue our work despite the pandemic. And I think our work even more than ever is meaningful in the healthcare world right now. Yeah, it’s been a bit of a change, thanks for asking, but we are really encouraged and inspired by our healthcare systems through it all.
Tim Harms:
Excellent. Yeah. And I’ve been encouraged seeing the extent to which the beverage companies are really understanding the value of our healthcare clients and just the heroism. They’re on the front lines battling this pandemic, and the beverage companies have really stepped up to amplify that message to the community. I won’t wait any longer. Looking forward to hearing your interview with Ryan. Here we go.
Heather Neisen:
We’re honored to have Ryan with us today. We met Ryan back in the summer of 2018, and it has been a pleasure to get to work with you, Ryan. Just to get to know you on a personal level. Thank you for being here. Just to give everybody just some context. Avera Health is based in Sioux Falls, South Dakota, and serves South Dakota, the surrounding areas of Minnesota, Iowa, Nebraska, and North Dakota. Avera operates 35 hospitals, 215 primary and specialty care clinics, 40 senior living facilities, and lots more. Avera, just to give you context, services a population of nearly a million people through a geographical footprint that covers 86 counties. Avera PACE is a division of Avera Health. It’s a regional group purchasing organization with a really strong presence in the upper Midwest, but it does serve clients from all over the United States.
Heather Neisen:
Ryan Donovan is the director of Avera PACE in Sioux Falls, and Ryan has a passion for the outdoors. He is raising two gorgeous daughters and has told me that he’s been relearning his fractions as also part-time homeschool teacher. And he also serves on a number of boards. Ryan is passionate about the community. Ryan, we’re thinking about this. The first time we met you in South Dakota, I think Tim and I were packing meals and serving the community right alongside you. You practice what you preach, and again, thanks for being here with us today.
Ryan Donovan:
Yeah. Thanks for having me appreciate it.
Heather Neisen:
Absolutely. Yeah. Ryan, before we start, I guess just want to acknowledge it’s a crazy time with COVID-19. How are you handling it personally?
Ryan Donovan:
Oh well, like you alluded to, we’ve spent a fair amount of time working from home. Today I’m actually I’m in the office, but our schools are out and have been for some time, so I spend a lot of time just helping the kids with their schoolwork, really focusing on keeping them off their screens and getting outdoors and staying active. For me personally, I haven’t been going to the gym just because of COVID-19 concerns. Trying to stay active myself, been doing a fair amount of yard work and things of that nature, but probably all similar things that other people have been experiencing in their lives as well.
Heather Neisen:
Yeah, absolutely. Well good. Well good. Take us back, I guess, to the beginning of 2018, or I guess the middle of 2018. Can you tell us a little bit about what was going on at Avera Health at the time and why Avera Health explored a beverage deal? And I guess, how you got involved.
Ryan Donovan:
Certainly, the average consumer, because they pay so much in health insurance premiums and they see their healthcare bills, they have this misconception that hospitals and the healthcare industry as a whole are just swimming in margin and swimming and profit when in actuality, that’s not the case. A lot of healthcare systems around the country are working on laser thin margins, and so there’s this continual push to look for different ways to save money or make more money, and Avera is no different. We, especially on our supply chain and with some of the different vendors that we work with, we have an ongoing initiative to review our contracts and the products that we’re buying and streamline the number of vendors that we’re working with and try and increase the amount of margin that our organization is earning at the end of the day.
Ryan Donovan:
And that’s all in an effort to improve patient care. As a nonprofit organization, any of the money that we do earn or take back in is turned around to foster development in our employees and or create infrastructure improvements for our healthcare system, which in turn, is a give back to our end patients and end customers. That’s really what brought us to the forefront of wanting to do this and how we came to exploring the deal, and the task to reviewing the process and reviewing our beverage agreements as a whole was handed down to me, and that’s when I, in turn, met you folks, and we started working on our deal together.
Heather Neisen:
Awesome. Yes. Great. Yeah. Thinking back to when you first got introduced to us and heard about this beverage partnership idea, do you remember if there’s anything in particular that you were worried about or any fears that you had going into it?
Ryan Donovan:
Yeah. A big concern for us at Avera was employee morale. And so, in Sioux Falls, South Dakota, where we’re based out of, prior to COVID-19, our city is the home of two very large healthcare organizations, Avera being one of them. And our unemployment rates within our geography is extremely, extremely low, hovering right around that 2% range. And so, taking care of our employees and being mindful of any changes that may affect them was certainly top of mind. And so when I think of that first fear, and I think everyone who hears about a beverage deal kind of jumps to this first, oh my gosh, are we about ready to take away someone’s Diet Mountain Dew or take away someone’s Diet Coke?
Ryan Donovan:
And so that’s the initial fear that first comes to mind, but once you start peeling back the layers and talking through the fact, you don’t have a choice in a lot of other areas. The hospital setting is one of the few spaces left where you might have a bottle of Coke and a bottle of Pepsi sitting next to each other on the same shelf. And so understanding that people are conditioned to necessarily not having that choice and that it’s not going to be as big a deal as what you thought helps you get moving into the process. But I would say that was probably our initial fear.
Heather Neisen:
Absolutely. Yeah. That makes a lot of sense. And we do to your point, hear that quite a bit. And I like the way you put it, you peel back the layers a little bit and start to understand and think about your last restaurant experience. You start to think about the last time you were sort of anywhere. And beyond a grocery store, maybe that choice is limited. And then we start to think about some of the benefits that can come from it. It makes sense but I’m glad you mentioned that. I do think that is a first fear. You’re taking something away, and we always find that it actually produces more choice and that’s exciting but that’s definitely not the first thought. Thanks for sharing that.
Heather Neisen:
Do you mind sharing just first your involvement, what your day to day responsibilities were on the project? And then second, was there an ultimate owner? Or how did you guys allocate resources at Avera?
Ryan Donovan:
Yeah, certainly. Avera is a faith-based organization, Catholic healthcare system, and so we’re a heavily consensus-driven organization. Really most major decisions are made with a ton of feedback and a ton of review by many different parties before we move forward. And so this decision was no different than that. I personally am the director of our affiliate group purchasing program, and so we have affiliates and managed sites and managed hospitals that are working to take advantage of this contract as well. In addition to our Avera owned facilities that are already on the agreement, but there was certainly a large number of other players that were helping out behind the scenes as well. And I could see other healthcare systems working in that same manner.
Ryan Donovan:
We certainly had contract specialists and folks from our legal team that were involved. We had representation from our supply chain team. Obviously, we had representation from our dietary and our foodservice organization. We had representation from our hospitality team. And then in order to convey that messaging out to our employees, Avera’s an 18,000 employee organization across five states, we have a very large footprint that we wanted to make sure was well educated on why we were looking to partner with a beverage company and go exclusive with someone. And so we had a lot of input from our senior leaders across the system and then spent a fair amount of time with our marketing team as well, crafting the messaging and making sure that again, everybody understood why we were going in a direction that we were going when we eventually picked the winner through the RFP process.
Heather Neisen:
Absolutely. Yeah. You guys did focus quite a bit on group consensus, pulling in all the players that needed to weigh in. I feel like did that really well. I know that that is important to you all, and it was great to see that on the front lines. But you really, Ryan, correct me if I’m wrong, I feel like you owned the process of getting all those stakeholders coordinated and getting any of the meetings set and that sort of thing. Would you say that’s fair?
Ryan Donovan:
Yeah, absolutely. You needed someone to run point and be that conduit between Enliven and the ten other major stakeholders that might’ve been involved in the process. And you guys certainly take care of all of that heavy lifting. It’s just getting senior leaders’ schedules to align for conference calls in the RFP presentations and things like that. You need someone that’s kind of at the tip of the spear helping out internally.
Heather Neisen:
Great. Yes. Perfect. Yeah. And so you were there every step of the way as far as presenting to the different groups and kind of getting that coordinated. Do you remember in the process, were there any major concerns or minor concerns from stakeholders as you went? And if so, how was that handled?
Ryan Donovan:
Yeah, so I think Avera is probably not unlike a lot of other larger healthcare organizations. And so I mentioned before that, our footprint spans, I think it’s 80 plus counties through five States. And so we had a fair number of vendors that were operating in those different regions. And so, you get that concern up front. Once you get past the choice issue, educating people on it’s not going to be a big deal. Your beverage choice is actually going to increase dramatically once you go with one vendor versus another. And so we were able to do a couple of carve-outs as well in certain high traffic areas where we could offer, still have some Coke products there alongside Pepsi. But once we got past that choice aspect, throughout all these different geographic regions, you have different people that are tied to some of the different bottlers or some of the different vendors in different capacities and so, certainly from a community sponsorship aspect, that was a big deal.
Ryan Donovan:
We might have cancer benefits and auctions and things like that that take place in different communities. Making sure that that community sponsorship aspect didn’t go away when we moved forward with our new beverage provider was key. We also wanted to make sure that any equipment that was out there, whether it be coolers or vending machines or fountain machines, that what was being replaced actually fit, looked nice in the space. And I was really, really impressed with, so we chose Pepsi, I guess I’ll just throw that out there.
Heather Neisen:
You can.
Ryan Donovan:
As we’re talking through this. But so the equipment that they put in was beautiful. It was bright. Everything is LED-backlit. Looks very clean. And you know how a fountain machine gets to look after four or five years in service, starts looking kind of dirty. But I was really impressed with all the equipment that they put in. We obviously made sure that from an IT perspective, it was all secure. That there wasn’t any issues from an IT standpoint with it. And then we worked as well, I mentioned before, we’re a consensus organization. We really wanted to get all the stakeholders and the employees behind this decision just to minimize any uncertainty or potential complaining that may have came from it.
Ryan Donovan:
Pepsi worked with us to provide goody bags for all of our senior leaders. And then some of those frontline employees that were working in cafeterias, that might bear the brunt of displeasure when you do make that switch, we made sure to arm them with information on why we switched vendors and then gave them some goodie bags and stuff too, just to again, really work to make sure that everybody was on the same page.
Heather Neisen:
Yeah. I love that. Yeah. I think it’s so funny, but a goody bag goes a long way. And just seeing what kind of products are available and really, any kind of change that happens is hard. For the employees to switch out the products, the pricing and so, I think yeah, that was a great extra piece to the conversion. Happy that Pepsi did that for you guys and yeah, it really helped. So cool. Thank you for sharing all of that, Ryan. I think, yeah, there’s definitely issues to work through. And every healthcare system we’ve found has their own kind of smattering of issues to work through. And we can do that. The beverage companies are willing and able to do that too. Those are some good ones, and yeah, the equipment that you guys have on the properties are really nice. I think some of Avera Health’s cafeteria operators and dieticians were really interested in some of the healthier for you options that Pepsi had to offer. And so there’s some vending machines that are white and clean and to your point, really bright. Makes a difference.
Ryan Donovan:
I think it’s important to note too, the Enliven team was great to work with. Heather and her team came out while we were going through the RFP process. They actually, I mentioned we’re in a big geography. We spent the better part of a week traveling around to our different sites and doing those surveys and meeting with the local stakeholders. Once we switched to Pepsi and actually had all of our gear switched out and changed, they came back again and did another site visit and actually went around and spoke with all of the regional folks to make sure that there was no issues and inspect the installations. And so it honestly went extremely smooth.
Ryan Donovan:
And it’s also important to note that we were a Coke shop for the most part. It was a big change because we went from red and white to the Pepsi blue in a very short period of time. It was efficient. It was quick. And honestly, I haven’t heard of really any issues since we made the change either, which is great.
Tim Harms:
We’ll get back to the interview in just one second, but I wanted to tell you about a way, if you’re listening, you could likely save your organization tens or hundreds of thousands of dollars even in just as little as four weeks. In fact, just heard from our team, we saved one hospital, $13,000, through this service just recently. And Heather, you’re going to come and tell us all about it. What is it, Heather?
Heather Neisen:
Yeah, thanks, Tim. I’d love to tell you about a new service we launched here at Enliven. You can find all the details about it at beveragedealaudit.com. And first, let me just say that we love beverage companies. They are innovative and fun, and they have tons of brands that we all love and enjoy, but they can often make mistakes on pricing or reporting. And these simple mistakes can be small, a few cents on a product here and there, but those cents really add up to real dollars, especially when most of our clients are purchasing tens or hundreds of thousands of products every year. If you’re listening, you may be wondering if this is happening to you, could there be some errors in your beverage deal? And you can find out by going through our beverage audit service. You can find out more about beveragedealaudit.com.
Tim Harms:
Awesome. If you’re listening, you can save your organization money in as little as a month. And once again, Heather, how do you sign up?
Heather Neisen:
Yeah, so just navigate to beveragedealaudit.com and all the details are listed there.
Tim Harms:
Excellent. Thanks, Heather. All right. Now back to the interview.
Heather Neisen:
But do want to talk a little bit about, to the extent that you’re willing, now that you have this beverage partnership, are you able to share any of the results from the deal?
Ryan Donovan:
Yeah, I think when we originally had our first meetings in 2018, and we were kicking around the idea of looking to do something, we were basing it off of how many bevs we had across our footprint and what the average beverage spend might be based on our hospital sizes. And I think we had kind of determined that we could save anywhere from 20 to 25%, roughly, while we were working through the contract negotiations. And so, like I mentioned, we were a Coke shop. And so I remember the first time that Pepsi came in and I remember thinking to myself, they really have a big challenge in front of them if they’re going to displace the incumbent who was based out of the same town that we’re in and come up with a better deal than what we were getting from Coke. And through the negotiation process and the hard work that Enliven put in, we were able to take that estimated savings from the 20 to 25% range and I think we’re right around the 40% savings range right now, which is awesome and actually way better than what we had anticipated.
Heather Neisen:
Yeah, yeah, absolutely. Yeah. They did. Pepsi had a big chore. They rose to the challenge. Yeah. I think the last estimate that we see is 42% savings on beverage spend and that’s not, you can’t really measure the soft benefits. It doesn’t include the equipment and some of the soft things that you mentioned. Yeah. Really pleased with what the partnership that has come out of it. And thanks for sharing that. Yeah. Ryan, you’ve been so gracious to spend your time with us. Is there any final thought or memory you’d like to leave us with?
Ryan Donovan:
Yeah, I just think to keep in mind that the first knee jerk reaction that people are going to have is this grave concern that employees are going to be upset because a certain flavor of drink is no longer available. And I just would say that it can be done. I think we’re living proof of that. We went through all of those initial concerns and fears and were able to come away from it by earning additional dollars that weren’t there before, with cleaner coolers and infrastructure and nicer looking solutions that are installed and in place, better beverage selection than what we had before. And like I mentioned just a couple minutes ago, I can’t really think of any negatives that came from the process, and we haven’t really had any complaints that came from it. It’s been a lot of good positives that have come from this whole process.
Heather Neisen:
Awesome.
Ryan Donovan:
And the Enliven team has been great to work with as well.
Heather Neisen:
Well, thanks, Ryan. I appreciate it. I was thinking you and your team have just been incredible to work with. If you have the opportunity to do business with Ryan, the Avera PACE, or just Avera Health in general, it’s a treat. We’re always trying to think of ways we can help. If we can do anything for you, if you’re interested to talk further, please do give us a call. Have a great day.
Tim Harms:
Wow. Heather, what a great interview. Thanks for doing that. Man, and I’m just listening, so proud of the work that you and our healthcare team did. And obviously, it’s easy to do great work when we have such great clients like Ryan and the whole team at Avera. But well done.
Heather Neisen:
Yeah. Well, thank you. I appreciate that, Tim. And yeah, like you said, it’s easy when we have good clients, but Ryan and his whole team has just been a pleasure to work with from back from the very beginning and even day to day as we continue to manage their beverage deal. Yeah, it’s really fun.
Tim Harms:
No, definitely. Top to bottom that organization is just world-class. It really is. And for everyone listening in, thanks so much for listening. Hope you found that helpful just to get some inside perspective on what it’s like to negotiate one of these types of agreements. And thanks for letting us flip the script a bit. We’ll be back with our normal programming next time. Hope you enjoyed it.
Tim Harms:
Thanks, everyone, for listening in. Hope you found that informative. If you have a burning question about your beverage negotiation or partnership, we’d love to hear from you and answer it on this podcast. Reach out to us by emailing podcast@enlivenpartnership.com. And hey, before we sign off, I want to remind you that you can take both the guesswork and the legwork out of your beverage partnership, you can level the playing field in your beverage negotiations, and you can save or make your company millions through a new or an improved beverage agreement. The first step is a free beverage opportunity analysis, which will tell you just how much you can save or you can make. Sign up for your free beverage opportunity analysis at enlivenpartnership.com and by clicking free savings estimate. On behalf of everyone here at Enliven, thanks for listening in.
