Making Tough Decisions
How many consumer product industries can you name that have had continual growth over the past ten years without ever seeing a downturn or dip in sales?
If you answered the pet industry and a couple others, such as cell phones and electronics you would be correct. And that my friends is one of the most important reasons for the continued action of mergers, acquisitions and entrance into our industry from “outsiders,” large consumer product group manufacturers, and investors. And when that takes place, you will have consolidation of brands and products, which directly affects independent retailers.
That leads me to the two most asked questions I get on a regular basis: “as a small retailer, what should I do when a small successful brand we carry is acquired by a large corporation such as DelMonte or Proctor & Gamble?” and “as a small or mid-sized growing manufacturer who needs to get their products sold to retailers via distributors, should we offer exclusive territories or sell to multiple distributors in an area?”
Let’s tackle the first question. My philosophy is split by whether the product is a hard good/durable or a consumable product such as pet food or a treat. If we were looking at a hard good product such as a cage or cat scratching post that is not being purchased on a repetitive basis by consumers, I would not worry about the price or who now owns the brand. Chances are consumers are not going to shop around for the best price for that product.
On the other hand, are the more frequently purchased products such as pet food and pet treats that pet owners are more aware of the product’s prices and who sells them for the lowest price. If you are one of the lucky few who don’t have local competition from the big boxes, again you don’t have to worry as much as the majority of the others.
If you were “in bed” with a brand that was acquired by a large corporation, you may have to re-think your strategy of that brand, especially if local competition is selling that product for less than you. You have several options:
A. Switch sizes you carry to be different from the competition.
B. Target your customers who buy that brand and offer them deals to switch to a brand only available at your store.
C. Drop that brand and work to switch customers over to a different brand.
D. Continue to stock that brand, take the lost sales, and possibility that customers will leave your business overall.
And of course is the bold option, advertise that “Y” company has bought “X” brand and here is what we are doing about it. At least you are being open and telling everyone up front your action, something many of us like these days!
Now the second question, meant for manufacturers and distributors.
The very best thing in my opinion for a brand is competition. I also know when a product from a “nobody” manufacturer is in its start-up phase, it’s hard to get a distributor to buy it from you. You are going to have to dig your heals in and be persistent. I don’t have enough space here to recount the story of Steve Jobs selling his Mac computer back in the day.
Even if smaller distributors agree to buy your product, isn’t your eventual goal to “be in with the big guys”?
Of course the controversy arises when the small distributor who carried your product in the early stages of your development claims they “made your product what it is today,” and now you’re going to push them aside and go to the big guys. Without fully answering that argument, did they really make your product successful? Or were your marketing and the product itself? This debate has been around for many, many years and may always be.
At the end of the day, if your product is good enough, and desired enough, why can’t it be sold by multiple distributors?
You decide, I just tried to make the case a bit more clear.
- Howard London