The CMA or Commission Merchants Association effectively ceased to function in the early 1990′s and since that period the industry has lacked a forum to discuss major issues, or indeed a common voice with which to engage with the Social Partnership. This hiatus seems to have come to an end courtesy of the activation of the Food Group within the wider Chamber of Commerce, which now meets on a frequent basis and includes several major distributors and retailers. Issues currently under review include the alarming rise in smuggling/illicit trade affecting the alcohol and tobacco categories as well as the sharp increase in the incidence of bounced cheques. This body is also determined to continue efforts to further educate consumers and other interest groups on the various elements which contribute to the final price of the items that comprise the average basket of everyday purchases. This exercise is an important one as we attempt to combat the negative PR associated with the business in recent times as manifested by the constant references in the media to ‘price gouging’. At the end of 2007 the distributive and retail trade met with the government and agreed caps on the mark-ups applied to a number of essential items, which were subsequently legislated. This collaborative effort was an important initiative relative to the Social Partnership but was rendered somewhat ineffectual due to the sheer rate and weight of price increases emanating from international suppliers in 2008 and early 2009.
After an intense period of consolidation in the first half of the decade, which saw household names such as MER Bourne, Frank B Armstrong, Interage and Geddes Grant absorbed into larger entities, the mergers and acquisitions picture has remained quiet in the last few years. The remaining players have invested in upgrading and expanding infrastructure rather than in acquiring an ever larger stable of brands. While companies continue to pursue economies of scale on the back end of the business, they are realizing that it is imperative to maintain independent and focused sales and marketing structures to avoid conflicts of interest among suppliers whose portfolios may include common products. The vacuum created by the disappearance of several of the older names in the business has been quickly filled by start-ups, which have made inroads into the trade with a narrow focus on one or two suppliers/brands.
The intense competition in this industry has always driven the Barbadian distributor to continuously seek out new products and sources, which will bring value and excitement to the trade and consumer alike. This has gradually led to a reduced reliance on the increasingly expensive and traditional sources of Western Europe, the UK and North America. Instead, there is an increasing proliferation of choice for the consumer from countries such as Chile, Colombia, Argentina and Mexico in Latin America to farther-flung producers in South Africa, Turkey and China who can meet the quality and value-for-money standards demanded by the local consumer.
Increasingly, the line between distribution and retail has become blurred, as power in the channel shifts more in favor of the players closest to the final consumer. Distributors have taken major positions in a variety of retail operations in order to protect their existing volumes and to attract suppliers away from competitors. In addition, as distribution/trading companies were in many cases the foundation for what have become today’s leading regional conglomerates, the integration has now extended to manufacturing/import substitution where the profit margins are more attractive. For these entities, having a stake in the distribution/retail chain facilitates the launch and continuing sales of private-label brands, either manufactured in-house or sourced from low-cost production centres.
The larger retailers for their part are ramping up their own sourcing engines and either bypassing the distributor entirely or purchasing on an indent basis. This is particularly true for market-leading brands, which can be readily sourced from wholesalers based in Florida and to a lesser degree, the UK. The additional margin presented is highly appealing in an industry where the net profit margins can be perilously low but must be weighed against the need to tie up working capital in the process of acquiring and storing product.
These changes make for a highly volatile demand planning environment as the available market for resale constantly shifts and also presents issues related to responsibility for defective/expired product and investment in brand promotion.
Regulatory Environment – This area is becoming a more challenging one as suppliers/distributors seek to come to terms with the rapidly changing requirements/positions of the local authorities. This is currently being manifested in new interpretations relative to classification of goods under an increasingly outdated Customs tariff as well as labeling requirements under the BNSI that are at variance with those of many of our major trading partners.