The Consultant - Q1 2009 - (Page 44) PERSPECTIVES united states enter into, be it a mortgage or an acquisition. We also have to avoid panic and restore confidence in capitalism itself before we can invest and borrow to grow the economy. “ To protect his dealership’s prospects, Fishman is dialing back 2009 forecasts for industry growth and is looking to curb all “unnecessary” expenses. As for his customers, Fishman expects restaurant chains to be most affected, as they will be opening fewer stores than in recent years, and finding it harder to borrow development funding. “On the other hand, we expect noncommercial foodservices to continue doing as much business as in ’08, since their customers we’ll be looking to economize by eating in-house,” he observed. One of the truths Fishman has learned during his career is that, “Success in business is a micro, not a macro, issue. Different companies succeed or fail in equally bad times, so each of has to begin by keeping our own house in order.” For 2009, life will become harder for dealers and their distribution channel partners, Fishman believes, w ith a shrinking economy accentuating companies’ individual strengths and weaknesses. “In general, the largest dealers tend to do well during tough times, and niche dealers can also thrive. It’s the smaller dealers that tend to suffer most, because they can’t buy at optimum prices and can’t afford to hire the talent needed to evolve and grow,” he explained. One issue that Fishman feels certain will affect the distribution channel in ’09 is whether a continuing economic downturn will erode traditional practices and expectations for reciprocal fairness. “We don’t want people trying to take shortterm advantage of one another, with operators buying direct out of desperation and factories accepting the orders out of desperation,” he remarked. “Those kinds of practices would be unaffordable for everyone over the long term.” Whether the dealer segment will see further consolidations in the short-term is dependent on fi rms’ ability to gain credit. However, for those who can attain sufficient funding, “there are excellent acquisition opportunities, historic bargains, just like in the stock markets,” Fishman pointed out. “My greatest fear is that we’ll talk ourselves into a calamity and allow the media to convince us that what could have been a mild recession is actually a cataclysm.” Jeff Hessel runs BSE Marketing, one of the largest and best-established manufacturers' rep fi rms in the metropolitan New York City area. Asked how local business conditions were impacting his company, Hessel noted that, "Up to mid-August, we were cruising along doing pretty well. I was just about convinced that our customer base was spread so widely and we had so much breadth of product that we were effectively immune from the downturn. Then, all of a sudden, the bottom fell out of our customers' business and we went dead quiet." While Hessel asserted that "fear" was the strongest factor suppressing foodservice industry activity, he also noted that "hundreds of thousands of jobs are going away in New York City, so B&I foodservices here are taking a huge hammering, and design projects and renovations are coming to a screeching halt." Fortunately, Hessel is still seeing strong equipment demand among healthcare and school foodservice operations. "It seems to me that the causes of the current economic contraction are our government's inability to regulate mortgage requirements sensibly, and the readiness of financial firms to pad their balance sheets with sub-prime and securitized debt obligations," Hessel stated. "Because New York is the epicenter of our entire fi nancial crisis, the business community here tends to react or overreact to the everyday ebb and flow of the market." As of the last quarter of 2008, Hessel had already begun preparing for a deeper downturn by trimming bookkeeping, warehouse and customer service staff, and eliminating all "non-sales-related" expenses, such as travel to factories. One area in which BSE is not cutting back is in its trade show presence: it was once again among the largest exhibitors at last November's International Hotel, Motel & Restaurant Show in New York. The desire to maintain momentum from a strong first half of 2008 and remind customers of the advantages of its manufacturers' products has Hessel hoping BSE can avoid a sales decrease in 2009. "Honestly, if we can match 2008 sales, I'll be ecstatic, because we'll make most of our '09 quotas," he related. "We will see some new revenue from the next round of factory price increases, but it is extremely likely that our unit sales will decrease. No matter what, we don't want to lose market share." Among U.S. rep firms, Hessel feels that smaller, lean companies are fairly certain to ride out all but the steepest economic decline, due to their minimal overhead and cash requirements. The bigger rep organizations can grow leaner by internal cuts and survive on gross volume to cover remaining expenses. "I'm afraid it's going to be the mid-sized reps, firms with seven to ten on payroll, continued on p. 87 INTERNATIONAL MARKET 44 theconsultant
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