Lundberg Family Farms

Tracking and Controlling Discounts Claimed by Buyers

CLIENT
Lundberg Family Farms is the largest producer of organic and sustainably grown rice products sold in the United States, Canada, and many other countries.  The company got its start in 1937 when Albert and Frances Lundberg started farming rice in the Northern Sacramento Valley with a dedication to stewardship of the land and a focus on producing a healthy and quality product.

Today, the third generation company contracts with over 15,000 acres of rice under cultivation (70 percent of which is organic, the remaining “eco-farmed”) and has propelled Lundberg to become one of the top heritage consumer food brands in the Organic and Natural Grocery segment.  Their wide range of products includes rice cakes, rice chips, risotto, pasta, brown and white rice, “Heat & Eat” rice bowls, and other top quality products.

THE CHALLENGE
Lundberg products are distributed through numerous channels including natural foods stores, conventional supermarkets, and club stores.  There are often legitimate deductions applicable to these sales, such as promotional allowances, volume discounts, damage, etc., however there is no standard method used by buyers to report them.  Many are taken with little or no explanation.  Deduction documentation submitted with payments can be sparse or might run hundreds of pages, which can serve more to complicate than clarify.  Deductions taken are frequently incorrect, not authorized, duplicative, or otherwise in error.   These issues face many companies that distribute food products through similar channels and can result in significant uncleared deduction balances that must eventually be written off.   

“Morrison’s work was very helpful in giving us valuable options on how to solve a complex and important challenge.”  -

Grant Lundberg, CEO, Lundberg Family Farms

THE PROCESS
Morrison & Company was engaged to prepare an initial overview of deduction related issues and potential solutions, along with recommendations for next steps.

We began with discussions with sales and accounting management, followed by interviews with personnel who directly handle accounts receivable and deductions.  We reviewed the processes, systems, and paperwork used to handle, review, and approve deductions, then walked a sample of transactions through the system.  We then documented our findings and potential issues, which were reviewed with company personnel for verification. 

To supplement our analysis, we obtained permission to review deduction management processes used by another Morrison client, an internationally known food processor and distributor.  Including interviews with key employees, we were able to assess their specific experience with a wide variety of policies and tools to manage common deductions issues.  These had resulted in a decrease in uncleared deductions, with the use of less staff. 

THE RESULTS
We provided Lundberg executives an overview of issues and recommendations as to next steps.  These were based on our own experience and observations as well as the real-life experiences of the other food company that sells to a similar customer base.  The recommendations included possible software tools, communications with sales personnel and customers, broker involvement with monitoring and approving deductions, separate tracking and aging of deductions, policies regarding customer backup for deductions, requests for repayment of unsupported deductions, and other important considerations.

Morrison’s work led to subsequent major updates to the company’s deduction management process and was the beginning of the development of a more sophisticated system that has resulted in significant reductions in uncleared deductions.