Distributors lament manufacturer price hikes

Equipment prices look set to rise by an average of between 3% and 5% from January 1st, as revised price lists issued by suppliers for 2013 come into force.

Distributors claim most major suppliers have taken the opportunity to raise their prices over the last few weeks, with increased production and raw material costs cited as the primary justification for the move.

Chris Keith, director of Tyne & Wear-based Sigma Catering Equipment, said that while price rises were customary this time of the year, they were harder to swallow in the current economic climate.

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“We are all fighting for business and nobody welcomes price increases,” he said. “As a distributor it is very, very difficult to go out to the market in January and tell a customer that there is going to be a 5% rise on a quote you put in last year for a project in 2013. You are not going to get away with that. So the reality is that unless the manufacturer works with you on the pricing, the distributor has to absorb it.”

Graham Harrison, sales manager at Cardiff distributor ABM Catering for Leisure, said price increases were always disruptive for the dealer market, particularly those working in the project field. “The problem for the distributors is that we are the ones which have to take the price rise and justify it to the end-users and the local authorities, not the manufacturers.”

Nick Howe, managing director of Court Catering in London, feels some manufacturers have put prices up just for the sake of it this year. He suggests that while transportation costs have increased, the degree to which raw material and labour costs had risen was “questionable”.

“It is what it is and we have to live with it,” said Howe. “Unless you have got negotiated contracted prices with certain clients — that are only ever done in conjunction with the manufacturers anyway — then you just pass the costs on. To be fair, if you have quoted something now and told them about it, most manufacturers will honour the old price, certainly up to the end of January, sometimes up to the end of March.”

Phil Alexander, managing director of Cambridgeshire distributor Olive Branch Catering Equipment, said the real issue was how much warning is given to the supply chain about any proposed changes.

“Year-on-year we do expect fluctuations in costs, and it comes down to the Middle East buying up a lot of the stainless steel, which is predominantly what our equipment is built from,” he said. “What concerns me is the advance notice they give because our lead times on winning projects can be anywhere from as little as three months to as much as a year down the line. The problem with that, of course, is that customers are asking us to confirm our prices.”

Sigma’s Chris Keith agrees: “We are getting notifications of price rises in January now and we break up at the end of the week!,” he said. “We don’t necessarily like price rises but we do accept them. We would just prefer to be made well aware of them before December.”

Interestingly, the issue of notice periods for amendments to pricing was one of the topics brought up at Meiko’s recent UK distributor strategy meeting, which was attended by around 50 dealers. Meiko announced a series of changes to its commercial terms, one of which was the commitment that distributors would receive three months’ notice of any price increases in future.

For example, any changes made ahead of 2014 would be communicated to distributors by September 30th 2013 at the latest, promised Meiko.

Trevor Clark, commercial director at Chester distributor C&C Catering Equipment, said price rises were part and parcel of operating in the market.

“The industry should not and cannot continue to absorb the rising prices in raw materials and fuel costs without passing some of it on,” he said. “Most manufacturers have, over the years, applied minimal costs annually and a few have actually held prices. A lot of C&C ‘s business is tender work and if there are increases applied during the tender process invariably prices are held and the old price honoured. It is all about understanding each other’s business and showing unity in the face of adversity.”

Distributors say there are instances where the net 2013 prices of some manufacturers will actually work out lower than 2012 prices, mainly because of special promotions on certain items or revised discount structures. However, this is generally the exception rather than the rule.

One dealer added that on occasions where it receives notifications that prices are actually going down, there is usually a good reason for it. “We are getting all the [2013 pricing] letters now and they try and hit you with ‘we have got some prices going down’ line. Yes, everything we never buy and you’ve still got in stock!”

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