By Shane T Williams in New York City
LMG CEO Doug Misener (pictured) has set the record straight on the benefits to members and the reasoning behind the company's recent decision to exit liquor wholesaling and enter into a supply chain arrangement with ALM.
At the first business session of the 2012 LMG Conference at the Marriott New York Marquis, Misener detailed the key contract components of the deal to delegates.
He said the 15-year contract allows for long-term stability for members as the ALM percentage-based service fee is locked in and capped at a lower cost than the HLW model could have provided.
In addition to this, he said the revenue-based rebates to LMG are equal to or greater than the current arrangements. The agreement is also structured so that there are incentives to grow the business over time.
He said members will further benefit from the addition one thousand-plus SKUs ALM currently provides and will still have access to supplier-based one-off deals.
"I am absolutely confident this is the right business decision," Misener said.
In terms of the reasoning behind the HLW closure, Misener reflected on the changing supply chain landscape. He said that in 2001/2002 HLW's mandate was to "keep members as cost competitive to the rest of the market as possible" in order to hold ALM accountable in terms of cost and service.
He said that in 2012, the supply chain environment had fundamentally changed, with the increasing share of the national chains and the emergence of retailer-to-retailer sales making for an extremely competitive environment.
He said consolidation was needed, and with the opening of its new Huntingwood warehouse, which is geared to greater economies of sale, ALM needs to drive as much stock as possible through the independent channel.
Misener added that the agreement allows for a sustainable future platform that is financially secure and de-risked. It substantially downsizes the company's cost structure and increases cash flow that can now be spent on marketing the LMG banner groups of Bottlemart, Down Under Cellars, Sip N Save and Harry Brown.
Misener said orders for LMG members via ALM will officially start on October 1 and LMG's state-based teams are working to ensure there is a smooth transition.
I use ALM as our major supplier, ALM has always struggled during the Summer months to deliver at a consistent time to allow for staff planning . Based on what I’ve heard from drivers, there is no plan to put on additional drivers to cover the additional work from HLW. So will additional work from HLW mean a further erosion of service levels out of ALM?
ALM has untaken extensive planning to guarantee the integration of the LMG business is as seamless as possible and will have minimal impact on our service levels to all customers. If you have experienced poor service from ALM I kindly request that you contact your state general manager to discuss your concerns directly with them so they can be addressed. If you continue to have concerns please contact me directly. Fergus Collins ALM CEO