Growth Through Consolidation
Acquisitions were reported by several leading wholesalers in the past year
The convenience industryâs top 30 wholesalers posted sales of $62.3 billion in the latest fiscal year, according to the Convenience Store News 2013 Top Wholesalers report. Coverage has been expanded this year to include the top 30 convenience wholesalers, up from 25 in previous years.
These 30 companies achieved a combined sales increase of 6.7 percent over the past year. Sales among the top 10 operators hit $53.8 billion, an increase of 6.2 percent, but a slightly lower growth rate than the overall top 30.
Companies ranked at the top of the list have remained the same for several years. McLane Co. Inc. continues to reign in the top spot with sales reaching $29 billion, a 6.1-percent increase. Core-Mark Holding Co. Inc. sits in second place with sales of $8.9 billion, up 9.6 percent vs. last year. Likewise, Eby-Brown Co. remains in third place with sales of $4.9 billion, up 8.9 percent. Rounding out the top five are H.T. Hackney Co. with sales of $4 billion, and GSC Enterprises Inc. at $1.3 billion in sales.
Only two companies posted double-digit sales growth in the past year. AMCON Distributing Co. generated sales of $1.2 billion, an increase of 20 percent, which moved it up two places to rank seventh on this yearâs CSNews Top Wholesalers list. Southco Distributing Co. also moved up two places to rank No. 20, thanks to sales of $397 million, a 15.7-percent increase.
Southcoâs growth in the past year was boosted in part by its acquisition of Coastal Wholesale Grocery. Acquisitions were reported by several other leading wholesalers in the past year. One of the largest deals involved J.T. Davenport & Sons Inc., which ranked in 15th place on last yearâs list before being acquired by Core-Mark in December.
The past year also saw Resnick Distributors (No. 26) acquire the convenience division of Consolidated Service Distributors, while Allen Brothers (No. 28) acquired Midnight Mountain Coffee in Lancaster, Pa.
Cigarettes account for the largest percent of sales among these leading wholesalers, at an average of 73 percent last year. Not surprisingly, the cigarettes category also looms large on the list of challenges that wholesalers faced in the last year. Responding companies noted that the large percent of cigarette sales is misleading, as the numbers are inflated by increasing manufacturer prices and taxes, while cigarette volume continues to shrink.
One way wholesalers are compensating for the troubled cigarettes category is by focusing on other products. Seventy percent of wholesalers reported expanding their category offerings in the past year. Among the segments they have added are foodservice, produce (including salads and fruit), natural and organic items and electronic cigarettes.
Another problem faced by wholesalers has been shifts in their retailer customers. One wholesaler noted that Walgreen Co. moved its business primarily to McLane, while another reported the loss of business from a large convenience store chain. Both of these wholesalers expect to replace the lost revenue by the end of this year through a combination of growing their business among existing customers and adding new clients.
Other challenges cited by wholesalers include: aggressive competition and subsequent pricing pressure, particularly from Costco and Samâs Club; rising fuel costs; government regulations (especially in the tobacco category); transportation costs and regulations; finding the right employees, from the warehouse level up through headquarters; and rising health care costs.
METHODOLOGY
Rankings for the CSNews Top Wholesalers report are based on sales from the last full fiscal year for each company. Data for this report was gathered through a survey conducted among the largest wholesalers primarily servicing convenience stores that derive a majority of their annual sales from tobacco and candy products. Additional data was obtained through company reports and other public sources of financial data. In some cases, estimates have been made by CSNews based on historical data and current industry trends.