Sanitary Supply Industry Impacted by War on Iraq

As citizens around the nation and the world watch the United States invasion of Iraq unfold on their television screens, sanitary supply distributors are still going to work each day, solving customer problems and making sales calls. However, it isn’t “business as usual” for corporate America.

Budweiser, Ford Motor Co. and General Motors products are among the American-made products being boycotted in Europe, primarily by an activist group, Consumers Against War. Coca-Cola and Microsoft Corp. have taken financial hits abroad, according to the Wall Street Journal. And in the sanitary supply industry, U.S. manufacturers and distributors are also experiencing changes caused by the war, albeit on a smaller scale.

“We manufacture commercial cleaning products, so we’re not a very visible company,” said John Matthews, vice president of corporate communications for JohnsonDiversey, Sturtevant, Wis. “We haven’t perceived much business impact from the war, but it’s still early. What we are keeping our eye on is the cost of raw materials.”

As more and more resources are devoted to manufacturing for military needs, raw materials used in cleaning products and equipment — emulsions, petroleum, and steel, for example — might rise in cost. Significant price increases would eventually trickle down to distributors.

“Raw materials have a significant impact on manufacturers. An increase in the cost of oil would affect how we sell some products, just as a shift in the availability of other raw materials could affect packaging costs,” said Matthews.

In addition to monitoring the war’s impact on raw materials for their own businesses, chemical manufacturers are now being asked by government officials (at varying levels) to step up their security efforts during this period of Orange Alert, announced by the White House in late March.

Rex Chemical, a Miami-based manufacturer of floor care and carpet care cleaning chemicals, has been given specific security instructions by the Miami Police Department. “When everyone went on high alert, local police forces were required to be alert to activity in their area, so they’ve been talking with chemical manufacturers like us,” said Betty Granja, president of Rex Chemical. “They told us to be aware and look out for any people who might be asking for extremely toxic chemicals or suspicious amounts of chemicals. Mostly, they wanted us to be attentive to what our customers are doing.”

A manufacturer of cleaning chemicals may seem like an unlikely source for materials for terrorist or destructive activity, but Granja said she appreciated the safety efforts of the police officers. “The reality is that we only have cleaning compounds, but it’s better to be on the safe side,” she said. “It’s important that they know if people are going around asking for certain chemicals. “[The police] also visited pool service companies because chlorine, ammonia and muriatic acid can definitely be used in destructive ways.”

As an international manufacturer, JohnsonDiversey has been increasing security at its worldwide locations since late March.

“We’ve had to increase security at all our manufacturing facilities around the world,” said Matthews. “We have 14,000 total employees, and they’re in every region, including the Middle East, so right now we’re taking precautions to ensure their safety. We have aggressive employee regulations right now, especially when it comes to business travel overseas.”

Wall Street investors were obviously optimistic that the war in Iraq would be short-lived, and stocks rose significantly as security advisor Donald Rumsfeld predicted that the conflict would be over in “a matter of weeks.” However, as casualties increase, domestic business seems to have woken up to the reality of war, says D. Bruce Merrifield, president of The Merrifield Consulting Group, Chapel Hill, N.C. “Don’t be fooled by the volatile U.S. stock markets,” he says. “Last week we had a big down day followed by the fastest increase in the averages since 1982; this week started off with another huge down day. In the short run, the markets are an emotional barometer.”

Who’s Afraid of Janitation Depot?

Less than three months ago, Office Depot, a national retailer of office supplies for facility owners and consumers, officially launched a website dedicated to meeting the needs of end users in the industrial cleaning markets. The purpose of the site, www.janitiondepot.com, is to sell cleaning and janitorial supplies to building service contractors and facility managers, according to Agustin Viola, Office Depot’s director of e-commerce.

“The goal is to cater to the jan/san professional,” says Viola. “Office Depot does $2.1 billion of e-commerce sales annually, second only to Amazon.com.”

So far, the results have been favorable, says Robert Kravitz, Janitation Depot’s public relations advisor for the jan/san markets. “We’ve been analyzing who has been clicking onto the site, and it’s mostly facility managers,” he says. “They’re a little ahead of the building service contractors at this point.”

Most distributors seem unimpressed with Janitation Depot’s early attempts to secure jan/san customers from the commercial markets. ”When it comes down to it, you can’t replace service,” says Harvey Hiller, president of Liberty Paper & Janitorial Supply, Bayonne, N.J. “I recently read that Office Depot is the No. 1 seller in the country of mop buckets. That’s great for them, but really, that kind of item isn’t going to affect my business.”

Currently, Janitation Depot specializes in selling commodity items — such as mop buckets — to industrial cleaning customers. However, the company’s business plan calls for growth into the industrial cleaning equipment and machinery markets as well.

“We have products that cover all product lines, but we plan to go deeper,” says Viola. “We’re always looking into what we need to include in order to be competitive. In the next few months you’ll see a lot more — we’ll be investing more in the heavy-duty, machinery side.”

When asked if distributors should see Janitation Depot as a threat to their customer base, Viola and Kravitz promoted the site as a resource for them as well. However, they mentioned that distributors are often worried about losing their place in the supply chain.

“I know firsthand that distributors have been nervous. They’re often afraid of the Internet and afraid of change,” says Kravitz. Viola adds: “This could actually be a resource for a distributor, price permitting. Our overnight delivery could help them out.”

With hundreds of Office Depot locations, and the allure of lower prices, Viola thinks that the industrial cleaning market is ripe for the picking. “We’re able to pass on the savings because we can order huge quantities,” he says. “We have our own trucks that can deliver overnight, as long as customers purchase $50 or more in orders. If we don’t have a store nearby, then we can ship it UPS.”

Even with all its advantages, Janitation Depot lacks experience and service, says Hackensack, N.J.-based BCB Janitorial’s president, Barbara Casse-Bender. “Actually, a lot of my customers come from Home Depot, because they’ve got a kid over there who is constantly telling his customers, ‘That’s a complicated cleaning problem, so you should probably go to BCB Janitorial.’ It’s great. I wish I knew who at Home Depot was giving me so much business.”

AmSan and Triple S Part Ways

Triple S, Billerica, Mass., a sales and marketing organization of sanitary supply distributors, and AmSan, Deerfield, Ill., a large conglomerate of 62 national distributor locations, have mutually reached the decision to end the “strategic alliance agreement” that has been in place between the two companies for the past four years. The termination of the agreement will take effect on May 13, 2003.

When asked about why the alliance dissolved, Alan Sadler, Triple S president, said that the two companies were headed in different directions. “It has become obvious that the direction of AmSan and the focus of Triple S are no longer aligned,” he said. “This allows us to return to our strength, which is serving the needs of independent distributors.”

Sadler added that a separate notice would be sent to all Triple S members and suppliers for each AmSan division whose Triple S membership had been terminated. “Our supplier partners should not remove any member from their Triple S customer list until they have received a notice of termination for that member,” he said.

After a series of acquisitions over the past three years, AmSan has been scrutinized by industry analysts for poor planning (see cover story, pg. 14). However, AmSan and Triple S are said to have mutually broken their alliance without animosity.

“We’ll continue to do business together, but the strategic alliance has ended,” said Triple S board chairman, Ken Crutcher of Kenway Distributors, Louisville, Ky. “We have a lot of respect for the AmSan organization, and they have respect for us.”

More information about the dissolved alliance is scheduled to be shared with Triple S members at a “town meeting” question-answer session at the spring meeting in San Antonio in early April.

MERGERS AND ACQUISITIONS

Bunzl Distribution, St. Louis, recently announced the acquisition of Enterprise Incorporated from ConAgra Foods, Dallas. Enterprise had sales of $24 million in 2002, and has other locations in Greeley, Colo., St. Joseph, Mo., and Atlanta.

Sorbent Products Co. (SPC), Somerset, N.J., recently acquired National Sorbents Inc. (NSI), Cincinnati, a full service provider of sorbents, material disposal services, hazardous waste consultation and management training.

Atlantic Paper & Foil, Hauppauge, N.Y., recently announced the acquisition of a paper mill in Winchester, N.H. The mill has an annual capacity of 20,000 tons of toweling, tissue and napkin parent rolls.

NEWS MAKERS

Rochester Midland Corp., Rochester, N.Y., was recently the first company to receive GreenSeal certification for janitorial cleaning products. Green Seal is a set of stringent environmental, safety and performance standards approved by the U.S. Environmental Protection Agency (EPA).

President Bush was expected to unveil a proposal that would add an estimated 1.3 million low-wage workers to those eligible for extra pay if they work more than 40 hours a week, reported The Washington Post.

JohnsonDiversey, Sturtevant, Wis., recently estimated that sales growth for the fourth quarter, which ended January 3, 2003, was 4.3 percent to $660.6 million.

MYTEE Products, Poway, Calif., a manufacturer of carpet cleaning equipment, recently moved to a new facility — also in Poway — that will triple the company’s capa