Pan-European distribution is feeling the squeeze according to CEO of Anglia, Steve Rawlins Look at the top ten distributors in each of the five major European markets and youll find that the market is split between the globals and distributors specific to that market. Regional European distribution is a busted flush – and there are two major lessons here.
The first is that a national distributors strength is its understanding of the local market and local customers and its reach into a wide customer base that the major globals dont touch. Suppliers recognise the value of these relationships and the need for a network that includes both national and global distribution partners.
Unfortunately, a national distributors advantages dont travel well across borders. A distributor moving out of its home market is caught in an awkward double bind. It doesnt have the customer relationships to attract franchise support and it doesnt have a franchise base on which to build customer relationships. Many have attempted to buy their way into the market through acquisition, but the results are not encouraging. Most acquisitions target small (niche) players which in truth doesnt give you much of a start. Ideally youd acquire one of the top ten in that market. If that can be done at a realistic price, it still leaves the challenge of integrating the two businesses without destroying the culture that made them successful in the first place.
The second lesson to be learnt is that making these acquisitions often involves the resources of a listed company, which can use its shares to do deals. Listed companies have different dynamics from private ones. As the shareholders who own the business are not involved in the day to day management. Instead, they live from one reporting cycle to the next. In the UK this is six months, while in the US it is three. This means that in an up market there is pressure to grow aggressively, through acquisition and in a down market there is pressure to cut back excessively. At its worst, this can lead to the acquisition of companies at an inflated price at the top of the market, only to dispose of them (or the staff that made them successful) at the bottom of the cycle. All businesses look at their costs in a down market, but management of a private company can take a longer term view of the structure that it needs to support future growth.
Thats why Anglias consistent strategy has been to focus on improving what were already good at. As a successful national distributor, Anglia has been profitable in every one of its 37 years and has managed to grow in most. Our position as a privately owned company, whose shareholders are also directors of the company, means weve been able to plough profits back into the business, investing in the essentials that make us tick: good people with the technical know-how to enhance customers designs, enough inventory to support demand and great customer service.
Were not alone in this successful national operations exist in most major European markets. There is no reason why these operations cant continue to survive and thrive in the long term, bringing much needed diversity to the market and taking our franchises to customers that no other distributor fully touches, with a level of service that no other distributor can match. To paraphrase the hackneyed distribution clich: get global, get national or get out.