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    BONUS CONTENT: The Supply Side of M&A, Part 1

    Supply chain integration is a quiet, but key, piece of the puzzle.

    By Melissa Kress, Convenience Store News

    NATIONAL REPORT — Consolidation has been the name of the game in the convenience channel for the past couple of years. Everyone from big names to smaller players is taking their turn at bat.

    When news of a deal hits, numerous questions come to mind: Will the acquired stores be rebranded? Will some of the locations be closed? What will happen to the management team?

    One thing, however, seems to fly quietly under the radar: supply chain integration. And yet, there is no doubt the supply side of the convenience channel is being impacted by the increasing industry consolidation.

    "It is always a challenge to work with multiple wholesale distribution companies,” said one executive with a convenience store chain that jumped into the merger and acquisition game two years ago.

    “The first major acquisition [we did], we decided to keep two different wholesalers. Both had different values that met our objectives," recalled the executive, who requested anonymity. Further growth, however, resulted in even more wholesalers. After two more deals, the company found itself with four different wholesalers — a position it still finds itself in, for now.

    "We’ve chosen not to switch until we had an opportunity to review and evaluate their services and programs. This creates many challenges to our category managers on product authorizations, promotional activity and program management," he acknowledged.

    With all the changes that go along with any acquisition, though, the executive pointed out that sometimes it just makes sense to keep the status quo of the supply chain while newly acquired stores transition from one owner to another.

    "We have a major transition plan that is implemented day one. Switching wholesalers has not been part of this transition," he explained. "Our newly acquired stores are faced with many new systems, programs and strategy changes. We found that keeping current wholesalers is most effective during this transition stage."

    Maintaining the status quo, though, doesn’t mean standing still. According the executive, following any new deal that results in a new distribution partner, the retailer meets with that new wholesaler and makes sure it can meet the company's expectations on service, back-office data, product selection, etc. In addition, it introduces its portfolio of proprietary items so that the newly acquired locations can have these programs quickly after the changeover.

    "We have always asked for a realistic, mutually agreed upon, short-term agreement so that we can evaluate the new wholesaler," the exec noted. "We want to date before we look at getting married."

    With the initial transition stage coming to a close, this particular c-store chain is now ready to evaluate its wholesaler network and will be making decisions on which distributor — or distributors — will meet its long-term strategy. The chain is weighing several factors: competitiveness, a good track record, and the ability to meet corporate objectives in regards to service, cost structure and flexibility.

    How to ensure a smooth transition and not disrupt the existing supply chain must also be a key consideration. Any transition has to be seamless for the retailers’ customers.

    While M&A transactions involving larger store counts grab the headlines, the supply chain integration process is generally the same in terms of the steps required — such as the routing of deliveries, resetting of stores, new planograms and information technology systems. The number of stores involved, however, can increase the complexity of the transition.

    "The transition of a smaller number of locations, such as five to 10 stores vs. 50 or more locations, is easier from the resetting and delivery perspective. It is less complicated to reset the stores and implement programs in 10 locations vs. 50 or more stores," George Abdoo, vice president of business development at convenience distributor S. Abraham & Sons Inc., told Convenience Store News.

    "With a smaller acquisition, we can typically work the deliveries into existing routes. With a larger acquisition, additional trucks and drivers may be required, as well as additional time and manpower to reset the stores,” he continued.

    Still, for the most part, he said “whether it is a small or larger acquisition, the timeline to complete the transition typically remains the same.” 

    Editor’s note: Check out the March issue of Convenience Store News for our full report on the c-store M&A market, including this year's ranking of the Top 20 Growth Chains. A digital edition of the issue can be accessed by clicking here.

    By Melissa Kress, Convenience Store News
    • About Melissa Kress Melissa Kress joined Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner in November 2010. Her primary beats include alcoholic beverages and tobacco. Kress has been a professional journalist since 1995. A graduate of West Virginia University, she began her career in community journalism before moving to business-to-business publishing in 2000, covering commercial real estate.

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