HARRISON, Ark. -- A goal of McKesson Service Merchandising division here is to leverage its buying clout in nonfood and better allocate trading funds to retailers on a regional basis.
Newly appointed MSM President Bob Sigel told SN the company may have to recast its present buying and marketing strategies to enable the 11,000 supermarkets in 40 states it supplies with nonfood products to become more competitive against other classes of trade.
Presently, the McKesson division is one of the nation's largest nonfood service merchandisers. Including the sales of its sister company, Millbrook Distributors, Leicester, Mass., the companies generate in excess of $700 million in health and beauty care and general merchandise volume.
"We definitely feel the need to coordinate local trade funds so that we can leverage up our buying power, and we'll be telling manufacturers this," said Sigel.
"Frankly, Wal-Mart has thousands of stores around the country, with products all bought through Bentonville, and where are the local funds there? "When a national account goes to Bentonville to do something with Wal-Mart in other parts of the country, either they have put these funds on the account globally or they have allocated it based on what they want to do in a particular marketing area."
Sigel maintains the same situation exists at McKesson in terms of having centralized buying power.
"Although regional markets differ, it doesn't mean we can't work with each of the local markets to see they are not penalized [by not receiving adequate
promotional funds]," said Sigel.
To help facilitate trade allocations, Sigel is contemplating setting up regional offices in major markets that would coordinate manufacturers' local marketing and discretionary funds and gain "a clearer understanding of retailers' local needs."
Such an office "would work with local brokers and manufacturers in that market to make sure our customers have what it takes to effectively have the right combinations of ad money available in that market."
Sigel said the goal is "to make certain our customers in major markets are being treated correctly and equally with regard to local marketing funds."
"We think, however, we can manage this from here [Harrison, Ark., facility], and use computer-generated data to segregate our purchases by market and customer, and to know where we are selling product," he added.
Sigel said the service merchandiser would utilize its size "particularly in representing customers with significant buying power with manufacturers so that they can compete with the major big direct buyers like Wal-Mart, Kmart, the clubs and all those guys. "Every retailer is looking at ways to lower their nonfood product and handling costs, and how to contend with the deep discounters and Wal-Mart. While we'll continue central purchasing of general merchandise and HBC here, there will be a sharper focus on and coordination of regional and promotion opportunities that exist in our customers' various markets," he said.
Sigel took over the helm of the MSM division here several weeks ago. He succeeds Frank Conner, who resigned to form his own firm in a noncompeting field, the company said. Sigel had been president of Millbrook Distributors, but in his new position, he will oversee operations of both Millbrook and MSM. He reports to Dave McDowell, president and chief operating officer of McKesson Corp.