Progressive Distributor - Cooper and A-D battle

Cooper and A-D battle for distributor loyalty

The squabble between a major supplier and the largest North American buying and marketing group will test the strength of each organizations brand.

When Cooper Industries withdrew its five electrical products divisions from the electrical supply division of Affiliated Distributors (A-D), it set off far-reaching repercussions. The squabble is testing the strength of one manufacturers brand against the power of an alliance of independent distributors.

Following the Nov. 15 announcement that the electrical divisions of Cooper Industries planned to sever their relationship with the privately held buying and marketing group from King of Prussia, Pa., A-D responded by ending its longtime relationship with Cooper Tools in its industrial supply division (ISD). Those actions set off a flurry of activity, as Cooper and A-D moved quickly to shore up support among A-D affiliates.

According to distributors, A-D terminated its ISD relationship with Cooper Tools partly as a punitive gesture but also to demonstrate the organizations strength to other preferred vendors. Sources tell Progressive Distributor that A-D sent a memo to affiliates indicating Cooper Industries arbitrarily and with no discussion with A-D planned to leave A-D as a preferred supplier.

This imposes a fundamental threat to all affiliates in every division, as other manufacturers will be watching closely to see how A-D will respond, the memo said.

The memo urged affiliates to use every opportunity to communicate that all A-D affiliates unequivocally feel that the overall A-D relationship is more important to each and every affiliate than any single supplier relationship.

Cooper Industries, with estimated sales of $400 million among A-D affiliates, is believed to be one of the largest A-D suppliers. Approximately 95 percent of the sales come from Cooper electrical product manufacturers B-Line, Bussmann, Crouse-Hinds, Lighting and Wiring Devices. Cooper Industries had total 1999 revenues of $3.9 billion worldwide.

The impact on sales
Opinion varies concerning how the disagreement may affect Coopers hand and power tool business with A-D affiliates. Some distributors say they hope to convert 50 percent or more of the Cooper business to other brands. Others dont plan to convert any business.

I think its important for distributors to stand together, says one distributor from the South. If Cooper says today we dont need A-D, tomorrow someone else may decide to do it and it can have a snowball effect.

Adds another distributor: Cooper has some items that will be hard to replace, and well have to take a strong look at those lines. But I think distributors will make them pay for their decision.

A distributor that sells about $900,000 of Cooper hand and power tools annually says he will not attempt to convert business away from Cooper.

Its not going to affect our business with Cooper one bit, he says. Weve been with Cooper for 35 years. Theyve been a super vendor for us.

Some distributors are torn about what to do. They believe it is important for A-D affiliates to present a united front, but also recognize the difficulty and expense involved in converting business.

Distributors may openly say theyre working on converting, but privately wont rock the boat, suggests one distributor. Ive earned this business. Why should I give it up? I know thats not the answer A-D wants to hear, but as I have shared with them on occasion, dont try to tell me how to run my business.

Some distributors expressed hope the two sides could mend fences and Cooper would return to A-D. That appears unlikely, however. According to sources, Cooper offered to return if A-D would meet several demands, including accepting the new Cooper Connection distributor relationship program as the only program offered to affiliates, dropping three existing preferred suppliers and freezing its vendor list in all categories in which Cooper competes. A-Ds board unanimously rejected the offer, sources say.

Competitors step to the plate
Distributors contacted for this story say A-D is urging them to convert r suppliers so far, says a distributor who does about $500,000 in business to preferred suppliers including Stanley Proto, Danaher, Klein Tools, Bahco Tools, Pferd and Columbus McKinnon.

I have heard from four suppliers so far," says a distributor who does about $500,000 in Cooper business. Switching suppliers is not an easy issue to address. Each manufacturer can do something that Cooper can do, but theres not one that can do it all.

Even distributors who vow to drop Cooper acknowledge it is difficult to convert customers to competing lines. No. 1, not all customers will switch. No. 2, considering the amount of time and effort conversion requires, theres usually not enough profit to make it worthwhile.

Im interested in growing sales, not converting it, says another distributor. Im not being disloyal to Affiliated Distributors, but theres a cost involved in converting sales.

The full-court press
Salespeople from Cooper Tools hit the streets beginning in late November hoping to prevent defections.

We dont underestimate the importance of this issue. We see it as a major disruption to our business, says Mike Fallon, vice president of sales for Cooper Tools. Obviously, we are going to defend our market share.

He says the company will continue supporting distributors with promotional activity, joint sales calls, sales meetings and end-user training seminars previously offered through A-D. He adds that the electrical divisions of Cooper Industries and Cooper Tools maintain separate relationships with A-D and believes it was unfair for A-D to punish the tools division because of a decision made by the electrical side of the business.

Converting business isnt easy under the best of circumstances, he says. It doesnt make sense to do it as a punitive measure because of something that happened within another channel.

Sources say A-D places the blame for the dispute squarely on Cooper Industries. They say none of this would have happened if Cooper didnt terminate its relationship with A-Ds electrical supply division. The official reason given by Cooper for leaving A-D was that the company wanted to focus its energies on its Cooper Connection program.

Coopers relationship with Affiliated Distributors has been mutually beneficial to both organizations, says Ralph Jackson, newly named chief operating officer for Cooper Industries, in a company press release. Jackson formerly headed Coopers electrical divisions. We retain the highest respect and regard for the A-D executive team and organization and wish them the best. We believe, however, that our new program will facilitate closer communication and an even better working relationship between Cooper divisions and all of our distributors.

A-D declined to comment for this story, citing a policy against publicly discussing its business relationships with vendors.

Although the dispute between Cooper and A-D will test the strength of each organization, the ultimate winner and loser will be decided by the end-user. Industry observers believe it may help determine which has greater importance to the end-user the manufacturers brand or the distributors relationship with the end-user.

When it comes to the mechanic, maintenance man or production line workers who use these tools, theyre not concerned with any political battles that may exist between distributors and manufacturers, Fallon says. All they want is the most reliable tool that gets the job done as quickly and as safely as possible. Ultimately, by forcing conversions, its the end-user who suffers.