A New Sunrise for The Distributors

The Distributors, Australia's largest snack and confectionery wholesaler, has entered a formal partnership with the New Sunrise Group. New Sunrise is a privately owned buying group, boasting some 650 retail outlets as members, mostly fuel operators.

New Sunrise Marketing & Sales Director, Steve Cardinale, said that the partnership with The Distributors was driven by a need to make small format retailers more competitive.

Independents working for Independents

"Big Box retailers are now moving into our market and we need to coordinate and integrate resources between retail and wholesale to deliver small box retailers a total retail system," he said. "We are trying to address supply chain issues and to give the small box retailer better service and a new alternative."

New Sunrise MD, Hugh Watters, said that the partial acquisition by The Distributors was an appropriate way to cement a formal partnership between two groups of independents.

"There is something powerful about independents working for independents," said Mr Watters. "The aim is to help all of our members to sell a bit more, to buy a bit better and to improve grocery service levels for New Sunrise members, particularly in regional areas.

"We don't own our members. They are independents who can buy from anyone. The continual challenge for us is to deliver realistic pricing and service levels as well as retail intelligence that can give independents a competitive edge. The partnership with The Distributors is an important step in that direction."

The Distributors has acquired fifty per cent of the shares in New Sunrise. However, the Distributors is adamant that the existing management at New Sunrise will remain and that there will be no changes to the way the group operates.

At the time of the purchase, which was announced at the end of June, New Sunrise was already sourcing most of its snack, confectionery and some beverage supplies from The Distributors. Distributors CEO, Ryan Maritz said that New Sunrise would maintain its existing management team - founder Hugh Watters and co-owner Steve Cardinale - and that New Sunrise would retain its independence as a buyer.

No obligations …

"New Sunrise will be under no obligation to buy from The Distributors or anyone else," Mr Maritz said. "The Distributors will have to win the New Sunrise business under normal commercial terms, where price and service are the drivers."

This begs the question as to why The Distributors would buy a customer that it already had, but might not necessarily have in the future.

The Distributors is itself a buying group, which is made up of thirty-eight independent wholesalers, who buy collectively through a head office in Sydney. Beginning life as a confectionery wholesaler, The Distributors has since branched into snack foods and is now a major distributor for Red Bull. In the last three years several large member wholesalers have been acquired by Campbells Metcash in a push by Campbells to increase its presence in the confectionery market.

A core grocery offer

The Distributors has responded by spending the last six months developing a core grocery offer, which it intends to roll out to selected stores in its very large customer base of 42,000 outlets. The acquisition of fifty per cent of New Sunrise is seen by The Distributors as a strategy to quickly build competencies in grocery as well as providing critical mass for product volume.

"With this investment, we have acquired a good deal of retail knowledge as much as anything else," said Mr Maritz, "and the synergies to us are very powerful. The aim is to develop a tailored range of grocery offers for each of the channels in which our customers trade. We have been working very hard with the team at New Sunrise for some months now to put together a grocery offer for its members that is based on proper category management disciplines."

The Distributors says its research shows that grocery demand in the convenience channel can be satisfied with a range of less than 500 SKUs, with most stores looking at the top-up-shop-market doing well with about 300.

Mr Maritz said that The Distributors had definite plans to attract selected stores in its customer base to a new independent banner.

"We have been building a lot of collective knowledge with New Sunrise," Mr Maritz said. "Longer term, we would like to build that collective knowledge into an independent branded store banner of maybe 500 or more stores, both with and without fuel. Campbells has already been very successful doing this with its development of the Lucky 7 chain.

"But there is enormous scope to bring more independents under branded banners with a retail model that can make them more profitable. We think the future for independents is to buy smarter and give the customer more … and a branded banner with a well merchandised offer is an obvious way to do that."

"Hugh and I remain in control and Hugh will be Chairman of the new Board," said Mr Cardinale. "Through this partnership we will be able to build on the retail platform, firstly by better integrating and coordinating promotional, marketing and operational activities across the supply chain and, secondly, by developing new affordable brands."