Trading across the divide
The more things change, the more they stay the same. This adage applies very well to the equipment distribution business abroad. In many respects, the equipment distribution business operates quite differently outside the UK, but in other ways it runs along very similar lines.
One of the primary differences is in the size and state of the markets. The European market, though potentially quite large, is fragmented. The USA, however, presents distributors with a market that is unified and large both economically and geographically. While a large UK distributor can cover the whole country, the sheer size of the USA means that the US markets are more localised, according to Geoffrey Alderson, chairman and managing director of Scotland's Scobie & McIntosh.
The scale of things in the USA is confirmed by Robin Ashton, publisher of Foodservice Equipment and Foodservice Equipment International, two US catering publications. "There are 700,000 foodservice establishments in the US, and the market in the USA is so developed because it is so large," Ashton explains.
A world of difference
Differences in size breed differences in production and marketing techniques. The USA is large enough to produce and distribute entirely within its own borders. Paul Williams, manager of marketing services for Hobart Still, which has factories in most EC countries, says the situation in Europe is different.
"Each country produces a product line for the whole of Europe. Dishwashers, for example, are made in Germany, while food preparation equipment is made in the UK," says Williams.
"There are specifics in each country - electrical, water, waste and safety standards - but these are moving closer and closer as a result of legislation," Williams says.
"Market requirements, though, are still slightly different. For example, in Germany people like sophisticated computer-controlled machines, which have not totally taken off here," adds Williams. "Likewise, equipment manufactured for the US market is not suitable over here as there are different standards for power, water and waste."
Joe Mullane, managing director of Lockhart Catering Equipment, believes British distributors have the best opportunities of selling overseas in countries without their own effective distribution networks in place.
"The main areas for export are areas such as the Middle East and Eastern Europe or countries that have recently had wars," says Mullane. "We have just completed a major contract in Croatia and sent equipment worth £750,000 to Kuwait International Airport."
As far as developing markets are concerned, Lockhart is looking towards China and India. But, warns Mullane, when dealing with developing countries "nothing should move without a letter of credit covering the equipment".
Links in the chain
US publisher Robin Ashton believes one thing that is common in the USA is the almost complete lack of exclusive distribution agreements. "Nearly all distributors stock similar products from a wide range of manufacturers, although there is presently a noticeable movement away from this to reduce stockholding costs."
Ashton adds that some US restaurant chains have set up their own equipment distributorships, for example the Hardy's hamburger chain. While they were originally set up just to service their own restaurants, the distribution division of Hardy's has recently gone out and solicited other business from non-competing restaurant chains.
While most equipment manufacturers don't operate rigid, exclusive areas for distributors in the UK, Zanussi has set up a "family" of exclusive distributors. One of them is Ken Wheeler, from Bath, who explains: "Essentially we purchase direct from the factory rather than from a third person."
Wheeler sees the need for specialising in an increasingly specialist world. "Most distributors have one major manufacturer they deal with the most anyway," he says. "I think the way forward is to work more closely and make yourself a specialist in that line. Complex equipment requires greater familiarity with the product."
Tendering for overseas business requires careful consideration. David Smithson, marketing director of Berkeley Food Equipment says it's an investment of time and money. "You have to ask yourself what your percentage will be if you get the job.
"Once you're proposed they'll send you a pre-contractual document asking for references, accounts and insurance, but usually the lowest bid wins."
Controversially, he believes showrooms are an expensive luxury. "If a client wants to see some equipment, we'll take them to the factory or a site where the equipment is installed and functioning," he says. "A showroom is for someone coming in from a small buyer looking for a single piece of equipment."
Stephen McGarry, of US distributors Paramount Restaurant Supplies in Providence, Rhode Island, agrees that showrooms are a questionable investment, but still finds his useful.
"Large volume is rarely generated in the showroom, and if we look at the costs of space, rent, air-conditioning, heating and staff, it's not really a profit maker," says McGarry. "But it's a real necessity for research, a way to anticipate trends and keep up with what customers want."
The service game
McGarry says distributors at the top end of the US markets tend to provide the fullest possible service. "We spend a lot of time in drawing, layout, design and engineering. We have three computer-aided design systems and will do a unique design for a client. We prefer to sell quality." This sort of service, however, only comes from larger distributors who work on higher margins. Otherwise, the general rule in the US market is that you pay for the machine alone, service costs extra.
Not many distributors from the USA have outlets in the UK, or vice versa. Nor are there many from the UK in Europe. Paul Williams of Hobart Still says the only major crossover is between France and Germany. So what tends to happen is that a product will be bought in one country and sold on in another: for example, a German-made Hobart Still dishwasher may be bought by a UK kitchen designer and shipped direct to the site in Poland.
On the design front, according to Alderson of Scobie & McIntosh, the UK and US markets are very close. "We've worked with the Americans using AutoCAD for kitchen design drawings and we've both adopted the UK standard as the worldwide standard. We're far ahead of Europe on this," he says.
In other respects the US and UK markets differ in emphasis. "The Americans are much more conscious of ergonomics," Alderson says, "making sure everything is within easy reach of the chef, so that one person can produce a full breakfast without moving a step. You saw that first in US diners and now especially in fast food operations."
The UK market, however, is much more conscious of front of house and food display. Most US manufacturers and distributors would never think of selling granite-topped servery counters. Italy and Germany are also very advanced in food display design, using curved glass in display counters, for example.
Convincing clients of the importance of after-sales service is the greatest challenge facing dealers and distributors worldwide. "The US market has long dealt purely on price," Ashton says. "It's very difficult for a dealer here to offer installation, training, design - all the services that a good UK distributor likes to offer."
In the USA, there is currently controversy over nationwide wholesale distributors and buyer's clubs, which are opening to serve the catering trade. These cash and carry operations provide no services, but they do offer lower prices than conventional distributors.
Feelings are running high over the growth of the cash and carry warehouses, and Ashton predicts that before long someone will try the same technique in the UK, going shopping with a huge van and coming away with a fridge and a six-burner stove. Installation would be something that would be bought in separately or, worryingly, attempted in-house.
Along with issues of service, many UK and US distributors are jointly facing competition from manufacturers who are getting directly into the market, sometimes leading to fierce competition on prices.
