The Supply Side: Retail consolidation continues to reduce NWA ‘Vendorville’ jobs

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.

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Consolidation and divestitures have changed the employment landscape in the Northwest Arkansas supplier sector this year with roughly a dozen big deals, the last being a $13.22 billion acquisition of Jarden by Newell Rubbermaid.

On Monday (Dec. 14), Newell, the maker of Sharpie pens publicly announced plans to acquire Jarden Corp., a consumer product company and curator of Coleman outdoor gear and Yankee Candles. Both companies have large sales office in Bentonville. Jarden also makes private label items for Wal-Mart and over the years through various acquisitions has become a diversified product supplier. In October, Jarden bought class ring maker Jostens Inc. for $1.5 billion.

Newell said it expects the deal to expand its presence in food and beverage, baby products and kitchen appliances among key retailers and geographies. The combined company, Newell Brands, will be led by Newell Rubbermaid’s CEO Michael Polk. Jarden founder Martin Franklin will join the board.

The deal, subject to regulatory approval, is expected to be completed in mid 2016. Newell Brands said it expects to realize cost savings of $500 million over the next four years.

‘VENDORVILLE IS SHRINKING’
Supplier consultants say the consolidation is likely to further reduce the number of vendor-related jobs in Northwest Arkansas. Cameron Smith, CEO of Cameron Smith & Associates, said such merger often have a negative impact on the local employment sector. Smith said the local supplier community workforce has shrunk by more than 10% this year from consolidations and other streamlining efforts. 

In addition to vendor consolidation, a factor reducing vendor sector jobs in Northwest Arkansas are the increased fees Wal-Mart has imposed on suppliers.

“Vendorville is shrinking. Whales swallow guppies and always will, but this past year it’s at an all time high. We have certainly felt the impact as well,” Smith said in an email. “Some suppliers are keeping their powder dry with regards to adding headcount.”

Clint Lazenby, co-founder of #Onshelf consulting firm in Bentonville, also said higher fees may have caused some suppliers to push the pause button with their Wal-Mart sales teams in Northwest Arkansas. He said it’s not just the higher fees but also the various restructuring efforts at Wal-Mart that likely have suppliers being cautious with employee levels.

In recent years suppliers have expanded their marketing teams to cover social and digital platforms that have gained prominence, and that has led to an expanding local supplier workforce. But recent news that Walmart’s U.S. chief marketing officer Stephen Quinn will retire in January and efforts by Wal-Mart to revamp the large division is yet another reason for supplier caution with hiring plans, according to Lazenby.

TRICKLE DOWN CORPORATE MOVES
He also agreed that vendor consolidation leads to changes in the personnel needed in Northwest Arkansas. Lazenby, who previously worked in the local supplier community for almost two decades, has seen his share of mergers and acquisitions. He said most often there is a reduction in team leader positions when two vendors merge.

“I think back to the Cadbury Kraft deal and in that instance the head of supply chain and vice president of sales positions at Cadbury were consolidated into similar positions at Kraft. Replenishment jobs and analysts roles were also consolidated,” Lazenby said.

Kraft then acquired Heinz earlier this year and the local Heinz office lost a number of its top management positions. Kraft Heinz have spent the past few months restructuring their top corporate ranks, consolidating two headquarters and recently slashing 2,500 jobs, with 700 of those being corporate jobs.

J.M. Smucker announced plans in February to buy Big Heart Pets for $5.8 billion. Both vendors have active sales teams in Northwest Arkansas. Smucker said the purchase of Big Heart Pets was an effort for the 118-year-old food staples business to expand into the growing pet category.

Food analyst Farha Aslam of Stephens Inc. predicted late last year that consolidations like the Tyson Foods acquisition of Hillshire Brands and others were a way for financially sound companies to grow their sales. She said food company sales have been largely stagnant because people can only consume so much. Aslam said cheap money and a desire to grown top line sales were the catalyst for the M&A boomlet in the food company sector.

Lazenby agreed that many of the mergers and acquisitions in the local supplier sector have been related to efforts to acquire innovation fueled by cheap money. 

STREAMLINING EFFORTS
That said, not all suppliers are seeking expansion. Some are pulling back and refocusing efforts.

ConAgra divested its private label business earlier this year, selling Ralcorp Holdings for $6.8 billion just two years after it bought the company. ConAgra ramped up Northwest Arkansas staff when it purchased RalCorp, but in October the food company announced a corporate restructuring and the elimination of 30% of its corporate workforce or roughly 1,500 before the end of this year. The restructure is expected to reduce corporate overhead costs by $200 million.

Proctor & Gamble divested 43 of its beauty brands to Coty for $12.5 billion in July. The deal will simplify P&G’s nearly $20 billion beauty business. The move reduces it to roughly $14 billion in annual sales and leaves the company more focused on hair and skin care sold at mass retailers like Wal-Mart. P&G officials said the Coty transaction marks the sale or exit of more than 90 brands.

Earlier this year P&G announced plans to sell off Duracell batteries to Warren Buffett’s Berkshire Hathaway. Last year P&G sold lams and other pet foods businesses that grossed about $1.6 billion in annual sales.

Lazenby said suppliers are likely sitting on pause through the end of this year with respect to their Wal-Mart sales teams. He said they no doubt have plans in place for the coming year, but are probably waiting until Wal-Mart – and especially Walmart U.S. –finishes its restructuring before they make staffing decisions.