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Old habits die hard in the scrap to win business

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The start of a new year traditionally provides an opportunity to leave old habits in the past and embrace new ways of thinking for the 12 months ahead.

There are certainly plenty of companies in the catering equipment market excited about their prospects for 2013 and, having heard of the activities and projects planned by some parties, I agree the optimism is justified in more instances than not.

Unfortunately, though, this wave of enthusiasm is tempered by the stark reality that certain behaviour which came to define the market’s uglier side during 2012 is unlikely to have disappeared just because the date on the calendar has changed.

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While not wanting to be a party pooper so early in the New Year, it is difficult to ignore the concerns of industry experts who predict it is only a matter of time before the catering equipment distribution market suffers a shake-up more disruptive than the one it witnessed last year.

I have used this column before to debate the consequences of over-supply and market fragmentation, and there have been some very high-profile examples of those in recent months.

Certain themes seem to re-occur when discussing the current state of the affairs, one of which is the dwindling margin that some distributors now seem willing to accept to secure a job. Talk of margins on projects being routinely reduced to single-digit margins doesn’t just expose the vulnerability of the dealer concerned, but raises fears for the wider health of the market.

At the moment, there is something of a blame game going on. No distributor will ever admit responsibility for squeezing the life out of a job, instead it is always somebody else guilty of undermining the market.

Unfortunately when margin is the issue, the situation is never black and white, making it incredibly difficult to envisage a course of action that would change the status quo.

After all, the uncertain financial climate and the perceived lack of security that stems from this has led companies in many sectors, not just catering equipment, to act in a way they may not necessarily have done in the past.

Other factors, from the actions of main contractors and demands of end-users to the discount structures of manufacturers, have compounded matters, according to onlookers.

“The problem,” suggests one supplier, “is that some dealers are taking on jobs at unfavourable margins just to pay for the next project they are working on. It is a risky strategy with very little room for error and if it goes wrong it could be the end for that business.”

While I sincerely hope that 2013 will prove to be a fruitful year for everyone connected with the catering equipment market, there are enough warning signs to suggest it would be wise to proceed with caution.

Tags : catering equipmentdealersDistributorsEditor's ViewManufacturersmargins
Andrew Seymour

The author Andrew Seymour

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