Business Blacks Out

Sanitary supply distributors know that coming through for a customer during a crisis situation can lead to a long-term partnership. On August 14, however, a colossal power failure that affected almost the entire Northeast — from New York to Detroit to Toronto — hit business owners at every level, distributors included.

Fortunately, power came back on for most states by the time the weekend was over, but in the meantime, end users were in critical need of cleaning supplies, and most distributors were powerless to help them.

“Honestly, if it would have gone on any longer, it would have been a disaster for us,” says Bob Janus, president of Janus Supply, 52 miles north of Detroit in Port Heron, Mich. “We definitely lost that day (Friday), because everything was just shut down. You couldn’t even get gas at the gas station, because all the pumps are fully automated. We had full tanks of gas in our delivery trucks, but I just didn’t want to risk it because traffic was a complete mess.”

Don Kellermeyer, president of Kellermeyer Cos., headquartered in Bowling Green, Ohio, happened to be driving to a rare sales call in Detroit when every streetlight went dead. “I usually don’t make personal sales calls, but this was an important customer that we really wanted to do business with, so I drove there myself,” he says. “What should have been a 15-minute drive turned into 2 hours.”

Aside from serving customers, jan/san distributors fully realized how dependent their own operations were on electricity. Richard Sheldon was on vacation during the time of the blackouts and was worried about the security of his company, Sheldon Supply, located in the inner city of Detroit. “Our manager went back on Friday morning to manually lock our electronic gate, because that wasn’t working, in addition to the building alarm not working,” he says.

Despite all the roadblocks that stood between distributors and doing business, some were able to capitalize on the dire weekend events and reveal their true value to customers as soon as power was back on.

“We prioritized our list of customers, because everyone was calling us for orders as soon as the phones were back on,” says Kellermeyer. “Any of the hospitals we serve, we made sure to get them supplies first. They really needed towels, tissues and gloves because they were coming out of a weekend, which is when they have more patients. In addition, they were still getting by on auxiliary power.”

Traffic was still precarious, so Kellermeyer didn’t send out all his delivery trucks — only what was necessary to supply the hospitals and other critical buildings, including the airports in Toledo and Detroit. Delivery drivers needed significantly more time for each delivery because traffic continued to be congested and unpredictable.

For Janus Supply, the Port Heron School District was the customer in dire straits. “The school district called, and they needed help right away because water was backing up in every drain in every bathroom,” says Janus. “All their computers and billing operations were still down, too, so I just let them use our equipment instead of renting it to them.”

The Port Huron School District is comprised of 25 buildings, all of which were cleaned for free with industrial wet vacuums, power scrubbers and other floor machines from Janus Supply. “They kept saying, ‘Hey, we’ll remember you for this,’ and the next day they placed a huge order for paper towels.” The school district usually passionately negotiates over the price of the paper towels, says Janus, but after the blackouts, he was told to simply “write in a fair price.”

“As a distributor, you need to be there when your customers need help,” he adds. “If you come through for them in that kind of situation, they’ll always remember you, and you’ll have a customer for life.”

NEWS MAKERS

Minuteman International, Addison, Ill., recently announced its second-quarter results, stating that the floor-equipment manufacturer’s overall sales for 2003 decreased 3.3 percent from the second quarter of 2002. Sales of industrial products to international customers rose by 13.6 percent.

McGraw-Hill Construction, New York, recently announced that national construction spending jumped by 9 percent in June 2003. The total seasonally adjusted amount in spending was $529.5 billion.

The Clorox Co., Oakland, Calif., recently announced that strong gross margins, working capital and cash flows contributed to the company’s fourth quarter EPS gain of 8 percent. Clorox’s fiscal fourth quarter and year ended June 30, 2003. The company reported earnings of $493 million.

Georgia Pacific Corp., Atlanta, recently reported a second-quarter net income of $62 million compared with a net loss of $83 million in the second quarter of 2002. Last year’s second quarter included a $235 million pre-tax loss for the impairment of assets in its former Unisource paper distribution business, severance and business separation costs.

Clorox Canada, Ontario, recently announced that it will shift its eastern corporate headquarters from Toronto to its Brampton, Ontario, facilities in early 2004. Clorox said it will consolidate its warehouse space for the eastern Canada region into the 333,604-square-foot facility, which will house its 110 employees now in Toronto.

Dade Paper Co., Miami, recently announced that it has moved its corporate headquarters and south Florida distribution center to a new 220,000-square-foot Miami facility at Beacon Station Business Park.

MERGERS & ACQUISITIONS

Soft Vac, Silver Spring, Md., recently announced an agreement with Wholesale Vacuum Supply Co., a distributor in Eustis, Fla., to provide privately labeled Soft Vac facility protection covers for one of the distributor’s customers, I H Services Inc. of Greenville, S.C.

Triple S (SSS), Billerica, Mass., a network of jan/san distributors, recently announced that Allstar Supply of The Janitor’s Closet, Yakima, Wash., has recently become a Triple S member-dealer. Under the agreement, The Janitor’s Closet has the right to market the complete line of cleaning products and systems with the SSS brand name.

REGULATORY NEWS

The Federal Trade Communications Commission (FCC), recently announced the creation of a new regulation governing the use of faxes by businesses to communicate with customers, vendors or other individuals.

The new regulation, which requires that companies obtain prior express written permission before sending unsolicited faxes for the purpose of advertising to any fax machine, was to go into effect in late August, but the FCC issued a stay until January 1, 2005 due to petitions.

The FCC granted a stay request after receiving hundreds of comments and requests for interpretation from associations and businesses. Many petitions were sent by the American Society of Association Executives (ASAE).

Legislative representatives for International Sanitary Supply Association (ISSA) commented that the new regulation, if approved, “may have a substantial impact” on the way distributors communicate with existing customers.

Currently, companies are not required to obtain written permission from customers before sending unsolicited fax advertisements, so long as an “established business relationship” existed prior to any sending of fax advertisements.

Should the regulation be approved, companies would be required to obtain a signed, written statement before sending any advertisement to a fax machine. The statement would be required to list all fax recipient’s fax numbers and clearly indicate the recipient’s consent to receive fax communications.

Penalties for violation of the FCC regulation would vary: senders of unsolicited fax advertisements could be subject to state court action by the recipient to recover the greater actual monetary loss or up to $1,500 for each willful violation.

The Illinois Legislature recently announced that the annual pesticide product and pesticide company registration fees will be increased to $200 and $400, up from $100 and $250, respectively. Industry analysts predict that the increased fee levels will take effect by the 2004 registration year.

Increased pesticide fees were “hidden” in Illinois Senate Bill 1903, which amended the State Budget Law of the Civil Administrative Code of Illinois. Although SB 1903 has now been signed by Governor Rod Blagojevich, the Illinois Department of Agriculture has stated that the fee increase is not yet official. However, Department officials said that they have been advised that increased fees will take affect, and that registrants should make appropriate preparations.

Also in relation to Illinois pesticide regulations, Governor Blagojevich recently signed two other bills limiting pesticide use and sales, one from the Illinois Senate, the other from the State House of Representatives. Illinois Senate Bill 1079, which will take effect July 1, 2004, regulates the use of pesticides in day-care centers and requires prior notification when pesticides are to be used in and around day care buildings.

The Bill’s first critical provision is that licensed day-care establishments be required to ensure that pesticide applications do not occur at the same time children are present.

SB 1709 also requires that day-care centers adopt an integrated pest management (IPM) program if such action is economically feasible. The state has prepared IPM guidelines to be used in the development of day-care IPM programs.

In addition, Governor Blagojevich recently signed Illinois House Bill 548, which includes new penalties for distributors who sell unregistered pesticide products, including sanitizers and disinfectants, to the retail market. The new penalties take place immediately and begin with a Class A misdemeanor for first-time offenders.

Report Predicts $50 Billion Increase for U.S. Cleaning Industry by 2007

A recent report, Cleaning Services & Supplies, from The Freedonia Group, a Cleveland-based market-research firm, details four long-term forecasts for the sanitary supply industry. First, the report states that the U.S. demand for contract cleaning services and supplies, including building cleaning and carpet upholstery cleaning, is projected to grow 7 percent per year through 2007 to $50 billion.

Freedonia points to “growth driven by a recovery in the economy that will loosen budgetary constraints for cleaning services and spur the purchase of new cleaning equipment.” It further states that ongoing downsizing and cost-cutting by corporate, institutional and government entities will continue to result in outsourcing of non-core operations, a trend which will spur demand for cleaning services.

Second, the report states that cleaning service revenues are forecast to advance more than 7 percent through 2007 to $45 billion: “Although nonresidential services will continue to dominate, residential cleaning services will post the faster growth through 2007.”

Third, demand for cleaning supplies is forecast to increase nearly 5 percent per year to $5.6 billion in 2007, according to the Freedonia report. Some of the contributing factors in growth are listed: concerns over indoor air quality; product developments to increase worker productivity; and more ergonomic products designed for worker safety and comfort.

Finally, Freedonia predicts that office buildings and institutional markets will remain the largest segments for both cleaning services and supplies, together representing more than 60 percent of demand in 2007.

Cleaning Services & Supplies can be purchased in full online or by calling (440) 684-9600.

Electrolux Opts to Divest Shareholding in Vestfrost A/S

The Electrolux Group, one of the world’s largest producers of electrical cleaning appliances and equipment, recently signed an agreement to sell its shares in Danish company Vestfrost A/S to the Esbjerg Group, also of Denmark. The Esbjerg Group will thereby increase its shareholding in Vestfrost from 50 percent to 100 percent.

Electrolux, which manufacturers more than 55 million products each year for customers in 150 countries, created such well-known brands as Eureka and Frigidaire, and is best known in the sanitary supply industry for vacuum technology and laundering equipment.

Electrolux has owned 50 percent of the shares in Vestfrost since 1972, but part of the company’s new corporate strategy is to focus more energy on operations where Electrolux is the majority owner, including several manufacturing operations of cleaning equipment. Vestfrost A/S manufactures and sells refrigerators, upright freezers and chest freezers. In 2002, Vestfrost had 1,100 employees.

The sale was expected to be completed by August 15, 2003, but coordination of assets slowed post-divestment negotiations. Electrolux representatives said that the sale should not diminish the company’s ability to serve the sanitary supply industry in any way.

Jan/san Bidding Resurrected

Officials in Trumbull County, Ohio, are seeking fair, competitive bids for janitorial supplies one year after dumping all suppliers amid a scandal involving excessive spending and poor record-keeping.

Sealed bids to provide toilet paper, paper towels and hand soap will be opened next month, said county purchasing director Tony Carson. This will mark the first time the county has awarded a contract for purchasing jan/san supplies since county prosecutor Dennis Watkins requested that county commissioners take control of purchasing from the county maintenance department.

From August 2001 to August 2002, the county spent close to $300,000 per year for janitorial supplies, a total far exceeding the needs of the county. Since January 2003, the county has spent $44,385 for the same supplies, according to the county auditor’s office.

Due to the county’s free-spending past, excess inventory has eliminated the need for new purchases until recently. During the time when county purchasing agents abused the allocated funds they were entrusted with, one case of toilet bowl cleaner was nearly $200 and individual spray bottles were bought for $8 each.

Trumbull County’s distributor at that time, Envirochemical, collected more than $923,000 from the county over six years. A county grand jury met twice to review evidence. No indictments were issued. Representatives from Envirochemical were not available for comment when asked about Trumbull’s decision to begin purchasing jan/san supplies again from the private sector.

NAW & Pembroke Present Forecast

The National Association of Wholesaler-Distributors (NAW) recently announced that it will join Pembroke Consulting and Economy.com to produce a new report for the wholesale distribution industry, titled “NAW 2004 Economic Forecast.”

“Given the current level of economic uncertainty, this report will be invaluable for planning and budgeting,” said NAW senior vice president of strategic direction, Ron Schreibman. “Pembroke Consulting will provide the distribution industry analysis using Economy.com’s highly detailed data and projections.”

The report will be available to distributors October 1, 2003, and will span the major industries that distributors serve, including the sanitary supply industry. It will examine the current economic factors that influence distribution channels, as well as the factors that currently influence customer decisions, says Pembroke president Adam Fein.

“Distributors need to make tough short-term decisions to prepare for the turnaround ahead,” he said. “This report provides executives with facts and forecasts for their 2004 strategic planning.”

The report includes an overall “macro forecast” for wholesale trade, and addresses additional markets such as automotive, health care, computers, semiconductors, construction, food, industrial, general building products, metals, paper and electrical.

“The recent turbulent course of the overall economy has created many challenges for wholesalers and their customers,” said Economy.com president and CEO Paul Getman. “We’re very pleased to help distributors better understand what is happening to the markets and customers they serve.”

NAW and Pembroke have partnered in the past to present economic forecasts and analysis to distributors, but NAW 2004 Economic Forecast marks the first such partnership between the two entities and Economy.com. Forecasts can be pre-ordered online .

CDC Expands, Gets Facility

The U.S. Centers for Disease Control and Prevention (CDC) recently announced that it has started building a new headquarters. The facility will provide additional capacity for the agency to continue to coordinate the nation’s response to terrorism, disease outbreaks and other important public health issues.

“This new state-of-the-art administrative building is the keystone of our master plan to upgrade facilities so we can effectively serve our nation’s public health. Health and Human Services Secretary Tommy Thompson and I are indebted to the present administration and Congress for their continued support of CDC’s mission,” said CDC director Dr. Julie Gerberding.

The new 335,000-plus square-foot facility is expected to be completed by mid-2005. It will employ more than 1,000 workers in its emergency response offices.

“A world-class institution with first-rate employees deserves the best when it comes to having the necessary facilities to conduct its business,” says Gerberding.

The CDC works closely with several agencies and associations in the sanitary supply industry to prevent infections and diseases through proper cleaning.

AmSan and I.S.O. Launch North American Venture

mSan, Deerfield, Ill., a national jan/san distributor, recently announced that it recently entered into a partnership with I.S.O., the largest Canadian distributor alliance, to form a joint venture to serve customers throughout North America.

End users with both Canadian and American locations will now be able to create a sanitary supply program that leverages the aggregate purchasing power created by the AmSan/I.S.O. partnership, said Michael Mulhern, AmSan’s CEO. “Our customers are looking for a distribution partner that can focus on providing solutions to their cleaning needs,” he said. “I.S.O. has the same customer focus as AmSan — to provide real solutions that help the bottom line. This joint venture will make it significantly easier for our multi-unit customers to do business throughout North America and create a uniform business experience in the United States and Canada.”

The AmSan/I.S.O. partnership is not the first to cross the United States-Canada border, but it could definitely be one of the most influential, with AmSan currently serving more than 100,000 customers in 69 cities in 40 states, and I.S.O.’s team of more than 100 inside-service professionals at 35 locations.