Out of Service?
The continued evolution of the pet industry distributor landscape is having a significant impact on the way suppliers call on their retailer customers.
Consolidation among the ranks of pet product distributors has been going on for more than three decades. Where once local distributors—each with a handful of lines—dotted the map, regional firms grew to dominate the landscape. This first wave of consolidation was driven by economies of scale and the need to invest in expensive technologies. A garage full of merchandise and a panel truck just wasn’t competitive anymore.
The advent of premium pet food lines and decisions by the major manufacturers to award exclusive territories to fewer large distributors drove the second wave of consolidation. If you were a Purina, Hill’s or Iams distributor in the mid-1990s, you called on virtually every independent retailer in the country.
The inevitable migration of these lines into big-box and mass-market retailers created an opening for a new generation of premium pet foods. Distributors took on dozens of new lines that satisfied the pet specialty shopper’s desire to recreate human dietary trends for their pets. Super-premium pet food drove growth in the industry at a time when consumer product sales were flat or declining in other sectors of the economy.
Investors took notice and ushered in a new wave of distributor consolidation that has far surpassed earlier efforts. Private-equity firms purchased control of Phillips Feed & Pet Supply in the east, and Animal Supply Co. in the west, and the competition between the two to create the first truly national pet product distributor in the U.S. has been fierce. To date, these two companies have rolled up close to 20 formerly independent distributors between them.
The Impact on Independent Retailers
Does consolidation among distributors inevitably lead to diminished service for retailers that depend on these companies to keep their shelves stocked? Not necessarily. In most markets, competition among distributors remains keen. The name on the door might be different, but there are still more than 50 independent pet product distributors operating over 100 stocking warehouses around the country.
Brick-and-mortar distributors don’t want to lose market share to online consolidators/wholesalers, so they have to maintain a high level of service, which remains their competitive advantage. That means next-day delivery in many markets, allowing retailers to keep shelves full without tying up cash in a back room full of inventory.
What is likely to change is how distributors deploy their field sales reps. There are still more than 550 distributor sales professionals on the road calling on retail accounts every day. If you are one of a distributor’s top accounts—either because of the volume of business you do with that distributor or the total size of your business that could result in more sales—you may have seen no change in the frequency of visits from your distributor rep.
But if you fall into a distributor’s C/D account list, chances are you are not seeing a distributor sales rep as frequently as in the past, or at all. Such accounts are more likely to be serviced by customer-service reps who make outbound calls to smaller accounts without leaving the distributor’s office. Smaller accounts still have access to specials and deals being offered by the distributor. They just don’t warrant the level of personal service that was once standard across a distributor’s entire customer base.
The cost of maintaining a field sales staff is high, and distributors have to deploy these professionals in a way that has the biggest impact on the company’s bottom line. Stiff competition also means operating as efficiently as possible. Keeping expenses in check allows distributors to remain competitive in their pricing with direct-selling manufacturers, consolidators and other distributors.
Distributors continue to be a valuable resource to pet retailers. But market forces and a changing business environment are restructuring that relationship. Retailers should take stock of what they value most from each of their distributors, then work with each to make sure they understand the store’s needs. Open communication between retailers and their suppliers will keep the relationship—and sales—strong.
Steve King is president of the Pet Industry Distributors Association.