OAK BROOK, Ill. -- At least two more wholesalers are following the lead of their largest peer in changing how they will price the distribution of packaged beverages to convenience-store retailers.
Three weeks ago, McLane Co. Inc. informed packaged-beverage suppliers of its plans to shift from a cost-based to a weight-based fee where suppliers must pay 9.5 cents per pound shipped, with a minimum of $2.50 per case.
Since then, CSP Daily News has obtained documentation supporting identical price increases by distributors Eby-Brown [image-nocss] Co., Naperville, Ill., and GSC Enterprises Inc. And according to several industry sources, more wholesalers will be following suit, resulting in a radical change in how beverage suppliers such as Nestle Waters and Gatorade have been conducting business with the industry's leading national and regional wholesalers.
We're supportive of the wholesale distribution industry initiative, Steve Shing, corporate vice president of marketing and trade relations for GSC, Sulphur Springs, Texas, told CSP Daily News. There's certainly some relief that needs to be there. He declined to comment further.
In GSC's letter to suppliers, Shing wrote, GSC has evaluated the packaged beverages distributed by our divisions servicing the convenience channel. We have concluded the traditional methodology of applying a wholesaler mark up to the case cost to achieve a fair margin does not serve its intended purpose. Therefore, in an effort to continue to grow this category and distribute the products the convenience retailers need, GSC is supportive of the recent initiatives of the convenience wholesale distribution industry.
In its letter, Eby-Brown went as far as to suggest beverage suppliers consider alternative avenues for delivery, stating, Our skyrocketing costs of distributing these products can no longer be born by our traditional pricing model to the retail trade. We must recoup the expenses associated with your products or ask you to find another method of distribution of your products to retail.
The pricing change may force suppliers to do just that, according to beverage stock analyst William Pecoriello of Morgan Stanley & Co., who, as reported yesterday in CSP Daily News, said Nestle Waters North America and Pepsi's Gatorade branch will be most affect by the change.
One industry insider, a member of the American Wholesale Marketers Association (AWMA) who asked not to be identified, said he expects some vendors will have to look for other distribution options and suggested similar changes to fees may affect other retail channels in the future.
You're going to have some vendors that cannot do it, he said. I think some of the smaller manufacturers don't have the resources to do it. Larger manufacturers may have the resources, but then again, they may not want to do it because there are other channels that may be involved later on, not just the convenience channel, but the grocery channel and what have you.
Two other major c-store distributorsCore-Mark and H.T. Hackneyhave so far remained mum on the subject.
The AWMA member who asked not to be identified said he's not convinced all the distributors will make the change. I really don't know. I think everyone needs to look at it within their own business model and act accordingly, he said. Distributors are not making any money on handling packaged beverages, and that's something that needs to be addressed.
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