SAN FRANCISCO -- Partnering isn't just for the big boys.
Independent supermarket operators and the wholesalers who service them can, and must, also forge strategic sales alliances to improve their lot, especially in the face of competition from other classes of trade, said representatives from wholesalers and a major packaged foods manufacturer who spoke at the National-American Wholesale Grocers' Association's advertising and sales management conference held here late last month.
In discussions of case studies from the Minneapolis market, the speakers emphasized that multinational product vendors can offer good partnering opportunities for the wholesaler-independent community.
Perhaps even more importantly, grocery wholesalers can also ally with each other, even when they are otherwise competitors, to stand firm against the incursions of mass merchants into their retail customers' grocery business.
"Wal-Mart sales were about $53 billion last year, while the five top wholesalers combined had about $34 billion. The longer we act like the Hatfields and the McCoys, the faster they will eat our market share," said Curt Lund, director of advertising for Gateway Foods of Minneapolis.
Lund, who defined alliance as "a group of individuals or organizations that join together for a common purpose," said the intensely competitive marketplace demanded that wholesalers protect themselves through alliances.
"Why form strategic alliances? You need to adapt to change. Competition is making us change," said Lund. "It is more appropriate to ask, why not?"
Gateway last year joined with other Midwest wholesalers and independent retail groups in a
partnership program that also included Minneapolis-based Pillsbury and other vendors. The stimulus was the annual United Way campaign, to which the coalition of wholesalers hitched its wagon for joint promotions to benefit the wholesalers' sales, their retailers' sales and the charitable organization's local fundraising efforts.
According to Greg Dietz, director of advertising and communications for the Minneapolis division of Supervalu, it was Supervalu Chairman Mike Wright who urged his colleagues at competing wholesalers to find some way to work together to support the United Way, which at the time was struggling in the aftermath of national scandal.
Dietz said he and his counterparts formed Grocers United for United Way. The participants included Supervalu, Gateway, Nash Finch, Fairway Foods and local grocers' associations. It was a group of competitors partnering in a "team effort," he said.
"Helping community organizations is always the right thing to do," Dietz said. "But we decided to work together to see how we could do a better job of getting recognition for this, especially faced with competition from other trade classes. We can't allow them to steal our thunder for our community work. It is a competitive advantage."
The coalition then gathered support from two directions: from vendors, eventually securing support from 21 manufacturers in the form of case allowance donated to United Way, on 160 products; and from retail customers with ads, posters, sign cards, bag art and other local and in-store support vehicles. The forum for seeking support was a series of buyers' fairs.
"The power of all those wholesalers getting together made the message clear in a very impactful way," Dietz said. At retail, more than 500 stores in several states committed to POS support for the campaign.
The effort was launched with radio campaigns at six stations, Dietz said. The wholesalers made good use of United Way's expertise and momentum in that area, he added, since the organization already had radio and print advertising scheduled, as well as local representatives in each of the communities in the target region.
Questioned after the discussion, Dietz said it was hard to estimate the overall sales impact for participating retailers, since so many were involved and other factors were also influencing sales at the time.
However, the campaign did boost general awareness of United Way and the grocery industry's involvement in the drive, he said. In addition, employee contributions to the campaign skyrocketed. Gateway saw a 230% increase in giving, for example, while Supervalu employees boosted their contributions by 50%, with a 97% participation level, Dietz said.
"The total contribution to United Way was $100,000 over and above the support already scheduled," Dietz said.
The participants are currently trying to evaluate the partnering campaign's impact on their businesses, Dietz said.
"There were a few benefits. It was a sales building opportunity for stores and vendors, but the extent of gains depended on the amount of support at individual stores and from individual vendors," he said.
Beyond sales hikes, Dietz said, there was another definite benefit, "a sense of community among wholesalers. If we can form more alliances between wholesalers, to find common ground and compete against other companies trying to take our turf, that is very important.
"I hope we can continue to work with the organization. We are sitting down now to talk about ways to make it more efficient, to back it up more strongly and make more money," he said.
One problem first time around was that the coalition had little time after it was formed to drum up support before the United Way national campaign broke. "We had only three or four weeks before some of the buyers' fairs," he told SN. "It was perhaps not enough time to really reach out to the retailers and get them involved. In terms of sales impacts it's hard to tell."