NEW YORK — Turmoil in magazine distribution last month may alter the way magazines get to supermarkets and other big chains.
Anderson News, Knoxville, Tenn., and Source Interlink, Bonita Springs, Fla., which together supply about 50% of the total retail business, demanded that publishers pay them an extra 7 cents a copy. This led to publishers cutting off supplies this month to the two wholesalers, who deliver to an estimated 40% to 50% of supermarket doors, including major chains like Kroger and Safeway, sources told SN.
Publishers suspending supply included Time Inc., Bauer Publications and American Media — all New York-based — which together represent about 70% of the magazine business, and some of its biggest-selling titles, such as “People.”
Early last week, it was reported that Anderson had suspended “normal business activity,” although Charlie Anderson, chief executive officer, said the stoppage might last just a number of days.
Source last week filed a lawsuit in U.S. District Court in Manhattan naming certain publishers and wholesalers that it claims conspired to put the company out of business. In the meantime, Source said it had dropped its demand for a 7-cent surcharge.
This has left many retailers scrambling to find other suppliers, although with the conflict starting to develop in January, they had some time to prepare.
Most retailers contacted by SN either did not respond or indicated the situation was a concern, but was being brought under control. Some said they did not use Anderson or Source.
“We are aware of the situation and continue to watch it closely,” said spokeswoman Haley Meyer, Supervalu, Eden Prairie, Minn. “Any impact to our stores is minimal at this point, and our ability to meet our customers' needs should not be affected.”
Wal-Mart Stores, Bentonville, Ark., had been cited in the media as being particularly hard hit. “Some of our stores are unfortunately impacted by these unforeseen changes,” said spokeswoman Kelly Cheeseman. “We are diligently working on behalf of our customers to get those impacted publications on our shelves as quickly as possible.”
A Time Inc. spokeswoman said the company has already made new arrangements to get its magazines to stores, sidestepping Anderson and Source. “We have put together a new network of wholesalers to provide our magazines to consumers who shop at our retailers across the country, with as little disruption as possible.”
Observers indicated that it is unlikely publishers will resume distributing through Anderson and Source, although they noted that the situation could change. But, they added, the magazine distribution landscape has now changed, and that it might be for the best.
“It would certainly seem that you are going to see a different look to the wholesale world in terms of the entities operating in it,” said John Harrington, partner, Harrington Associates, Charlestown, R.I..
“There's no doubt in my mind that Time Inc. is not going to change its decision not to do business with Anderson News and Source Interlink. That means that the most powerful publisher with the most powerful single title has notified 50% of its distribution that it is no longer going to deal with them. Some of the existing wholesalers are going to pick up that business at some point,” he said.
This situation is not directly related to the recession, said Peter Kreisky, president, Kreisky Media Consultancy, New York. “This is related to a change in the structure of the supply chain that serves supermarkets and retailers. I think this is more a situation where two of the major wholesalers made a misjudgment in terms of their ability to extract additional margin from publishers, and the consequences are not what they expected them to be.
“In the short term, there is going to be some disruption and confusion in terms of the availability of magazines in supermarkets. My hope and belief in the long term is this will provide a more stable, efficient and effective supply chain for magazines to supermarkets that will be to everybody's benefit.”
Kreisky said he expected the situation to be resolved within three to four weeks.