Eighteen months ago when Bob Adams started calling UK dealers and suppliers to gauge their interest in joining a new catering equipment buying group called ENSE, it’s fair to say that he encountered a certain amount of scepticism.
For some, the prospect of being involved with a buying group wasn’t something they’d ever really entertained before or necessarily wanted to do now. For others, the idea sounded interesting in principle, but they were reluctant to put their name to a group that hadn’t yet proved its credibility.
Distributors wanted to know which suppliers were backing it. Suppliers wanted to know which distributors were in it. “It is one of those ‘which comes first, the chicken or the egg’ scenarios,” was how Adams described the predicament in an interview with Catering Insight in August last year.
Fast forward a little over 12 months and the situation couldn’t be more different. Last week ENSE held its autumn conference in the West Midlands and more than 34 dealers, and a similar number of manufacturers, took part in the two-day event.
As an organisation, ENSE is still very much at the start of its journey in the UK catering equipment market and has a lot to do to prove that it can be an effective, positive force that is here to stay, but the turnout for its event was the biggest indication yet that it is on the way to defying those who claimed a second serious UK buying consortium would never work.
With the likes of Meiko, Adande and Precision all coming on board within the last few weeks, plus unwavering support from the Middleby Group brands, ENSE has shown it can attract the big ticket names that doubters questioned it could. Specialist areas such as extraction, fire suppression and food prep equipment are well covered, too, although there are major opportunities for someone to step up to the plate in areas such as stainless steel fabrication and cold rooms.
From a dealer point of view, the minimal risk of belonging to the group is undoubtedly one of the main reasons why the collective buying power of ENSE now exceeds £110m. One dealer said that as a one-off £250 joining fee is the only cost involved, membership was a “no-brainer", especially as it doesn’t even require them to alter anything internally. They still order and purchase the product from the manufacturer directly and pay them under their normal terms as usual.
In return, though, membership offers them access to more favourable terms, special deals and retrospective rebates. All they need to do is demonstrate their loyalty by buying product from ENSE brand members.
Now, if a dealer has spent 25 years building their business on a brand that isn’t part of the group, let’s just say Electrolux for argument’s sake, they probably aren’t going to start buying cooking ranges from another supplier all of a sudden. But if they also happen to regularly buy Lincat combis then they might be more inclined to buy Lincat boilers in future as well if there is a greater financial reward at the end of it.
One dealer said: “We currently buy our shelving off of one manufacturer that is not in the group. For something like shelving, it really wouldn’t be a big deal to switch to a brand that is in the group.” Looking at it like that, you can suddenly understand the sort of dynamics that membership to the group has the potential to drive.
If everything works as it is supposed to, then manufacturers should see their share of business increase, either because new dealers start buying their stuff or existing dealers buy more of their stuff. It’s a model that is tried and tested in the US, where there are several catering equipment buying groups, at least one of which has as many as 125 dealers.
Indeed, for many ENSE members, the fact that Adams and his partners in the business have a proven track record with this sort of model across the Atlantic is particularly reassuring. Perhaps one of their cleverest moves, however, was hiring ex-CEDA managing director Robin McKnight. It is no coincidence that since his appointment the number of dealers on board has more than doubled.
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Manufacturers and dealers who attended the conference were, on the whole, pretty upbeat about the impact that membership of ENSE would have for their businesses. Having seen the market suffer a few tough years, there was also genuine excitement about a new concept starting to evolve and take shape. But what does ENSE face in the way of challenges?
Well, clearly the success of a buying group of this nature hinges on its exclusivity. ENSE has already said that it won’t have any more than two manufacturers per product category and at some point the dealer numbers will also have to be capped or it will compromise the very behaviour the model seeks to trigger. That said, there is a feeling from those associated with the group that 12 months from now there will be twice as many dealers and quite a few new suppliers.
As the group expands, keeping everybody happy becomes more of an issue, too. The first day of ENSE’s conference saw dealer members meet behind closed doors and spend the whole day discussing various group-related topics, from operational matters to brands they might like to see join the organisation. That is easy to do when there are 10 voices in the room, slightly harder to manage when there are 30, but a whole different ball game when there are 60. As mentioned earlier, buying groups in the US have twice as many dealers, so it certainly isn’t an insurmountable challenge, however.
Manufacturers understandably want to see reputable, creditworthy dealers joining the group and ENSE faces ongoing pressure to deliver that. Equally, it needs to ensure that dealers support supplier members consistently and over a long period, not just during the ‘honeymoon period’ that comes when they first join up.
Additionally, the majority of dealer representatives at the ENSE meeting were the owners or managing directors of their companies. If they want the retro cheques to keep stacking up then as they move forward they will need to start thinking about how they get their own sales forces to embrace the concept. If they want their sales team to start pushing ENSE brands ahead of others, they are ultimately going to have to offer incentives or tweak their commission structures for this to happen.
Suppliers, on the other hand, will need to closely monitor what terms and tactics work for them and how to put the right kind of programmes in place to encourage the loyalty they crave. As some have already discovered, simply signing up to the group and assuming the orders will come rolling in is not the way it works.
If there was one over-arching theme to come away with from the conference, it’s that if a buying group is to prosper, suppliers need to engage with their audience and dealers need to embrace it wholeheartedly. Anything less and it won’t achieve the desired results.
There will always be companies that have no aspiration or inclination to be part of a buying group because it just doesn’t fit with how they want to run their business. That is fair enough. Equally, nobody for sure can say what ENSE will look like in one, five or 10 years from now.
But a comment from a dealer that joined the group earlier this year and has already seen a payback summed up for me just why you can’t ignore the impact the group could have on the market. “We have got half a million pounds of business that could quite easily be pushed the way of ENSE brands if things take off,” said the dealer.
One might conclude that when ENSE picks up the phone in future, it will no longer receive the lukewarm response it once might have expected.