Knight in Shining AWMA

Chairman calls for paradigm change for convenience distributors

LAS VEGAS -- Chairman Jode Bunce outlined a plan to remind suppliers and customers of the value provided by convenience distributors and to increase profitability for member companies last week at the American Wholesale Marketing Association's Real Deal EXPO in Las Vegas.

"Clearly, it is time for a paradigm change," Bunce, vice president of cigarettes at Naperville, Ill.-based Eby-Brown Inc., told members attending the EXPO's general session. Referring to analyses that show convenience distributors as "dead last" in profitability of 75 distribution industries [image-nocss] studied, Bunce said AWMA has redoubled efforts to change that.

He pointed out that the 2006 AWMA study, "The Distributor Value Equation," detailed in graphic terms the value of convenience distributor services and stressed that changes are needed to allow distributors to stop what has been a steady, industry-wide, decline in profits.

"In order for distributors to improve their profitability, it is absolutely essential that both retailers and manufacturers are reminded by us relentlessly about the value we are bringing to the convenience supply chain," he said, noting that the foundation and the tools to accomplish that were provided in the study. Already, Bunce said, that research has had a "profound impact" on the industry as a number of distributors have independently changed their policies in the packaged beverage category, which the study pointed out is responsible for a disproportionate share of cost-to-serve and profit loss.

To build on that work, AWMA is taking the following steps:

Developing two PowerPoint presentations for distributors to use with retailers and manufacturers to help communicate the value distributors bring to the supply chain. Conducting educational sessions to examine three key areas that affect distributor profitabilityheavy/high-cube items that fail to even cover costs, the erosion of cigarette profits, and how expanding collaborative relationships with manufacturers can help boost profitability. Developing a followup to the Distributor Value Equation study containing recommendations for action by distributors to help improve profits. Developing a Profitability Conference for senior management to explore issues involving profitability. Communicating, with the help of the Industry Affairs Committee, the value to manufacturers of keeping a strong distribution community by providing programs that generate profit for all trading partners. Expanding participation in the Hershey Industry Performance Analysis (HIPA report), the industry's only tool for benchmarking profitability. Conducting the Convenience Distribution Conference in conjunction with the International Foodservice Distributors Association.

"We have to get motivated to change the paradigm," Bunce said. "It is not going to be easy. Nothing worth doing ever is. But now is the time."

Bunce outlined the many activities and services provided now by AWMA and urged members to be involved and participate as the organization seeks to find ways of helping its members become more profitable for the future. "To take it to the next level, we need the involvement and participation of every distributor in this industry and all our manufacturer partners," he said. "All of you. Come to AWMA events and be a participant and not just an attendee. Become a member of one of our committees. Increase your involvement. Let your voice be heard."

(See related feature, right, in this issue of CSP Daily News.)