Smooth Sale-ing

Aug 31, 2009 12:00 PM, By MARK HAMSTRA

Sales and marketing agencies say the trend toward outsourcing among CPG companies is a wind at their backs


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It not only does a significant amount of work with Wal-Mart Stores — it has about 1,300 workers servicing the Bentonville, Ark.-based retail giant — it also has expanded its business into other channels, including military commissaries.

The company's global military business, which it acquired from a third-generation, family-run operation — has “remained very healthy” in the economic downturn, Hill said. CPG companies that seek to serve that sector can turn to Acosta as an expert in the channel, he explained.

“The acquisitions Acosta has made have been really positive,” he told SN. “I think many CPG companies were eager for a solution in military, that brought together analytics, technology and customer insights, and, because of our scale and size, we were able to easily implement solutions. We have been able to differentiate our business in the military channel, and get growth because of that.”

He said acquisitions overall have been a boon to Acosta, and, although he said he believes the days of large-scale consolidation activity in the sales and marketing agency industry have passed, some niche opportunities might still remain.

“I believe you will see acquisition opportunities in the perimeter of the store, as it relates to niche meat, deli, produce and bakery brokers, but the bulk of the major consolidation in our traditional business has come and gone,” he said. “There may be channel-specific opportunities, in the club and drug channels, for example, but in terms of scale, they are not like some of the regional acquisitions you saw back in the late '90s.”

He added that Acosta was still on the lookout for such opportunities, “and there could well be some acquisitions to enhance marketing services.”

Sonny King, CEO of Los Angeles-based Advantage Sales and Marketing, agreed that the sales and marketing agencies are benefiting from their status as part of the food retailing industry and from the shift toward outsourcing.

“The economy is affecting everybody, but fortunately we are primarily in food, and everyone has to eat,” he told SN. “That's good for us.”

Although he said he has seen a shift away from some of the work Advantage does for higher-end, discretionary offerings, business at the value end of the spectrum has improved.

Business overall has been up on the food sales side of Advantage's operations, which represents about 70% of revenues, although he said the other 30% of the business — including the marketing-services side and the service to home-improvement chains Lowe's and Home Depot — has been “challenged.”

That portion of Advantage's offering will be under pressure through next year, King forecast, but the bulk of the company's business is doing just fine.

“Our clients and customers are challenging us to be more efficient,” he explained. “As they are downsizing, they are looking for us to find ways to help cut their costs — they are looking to cut their way to profit, because they are having a tough time, as all of us are, in growing the top line.”

He said the Advantage's business in such back-end areas as order processing and deductions is on the rise, for example.

“We are seeing a lot of movement in that business, because we can do it for about 50% of what they can do it for,” he said. “We have an awful lot of people in that business, and we can flex a lot easier than they can to do other things, and so it's a more efficient process for us.”

The company is also looking for ways to become more efficient through elimination of duplication in the performance of certain functions, such as order taking and order correction.

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