Sector analysis: Jan/San



Breaking the surface


As the industry looks to push beyond traditional office products supply, cleaning and breakroom products remain the biggest opportunity out there


Those people that go on about the office products industry resembling an iceberg, and one of a magnitude that we’re only just beginning to appreciate, have a point when it comes to cleaning and breakroom supplies (CBS).


With Jan/San products leading the way, it has been in wholesaler catalogues and prominent on trade show floors for some time – it has even helped carry some companies through a couple of otherwise barren years – and yet there is still a feeling that we’re only just beginning to appreciate the opportunity that is being presented to the industry.


Growth may have slowed but it has not tailed off, and the good news from vendors, wholesalers and resellers is that there is much more to come. In fact, if you have only been dipping your toes in so far, now may be the time to dive right in. You don’t have to take OPI’s word for it, ask Staples.


Under the uber-title of ‘Facility management solutions’ the category is one of the six core offerings that Staples has identified as part of its global one-stop solution for business customers (the others being Office Products, Print Solutions, Business Interiors, Technology Solutions and Promotional Products). Staples has already said that it has expanded its facilities assortment, sharpened its pricing and ramped up its marketing efforts.


So important has it become that it has forced Staples to re-think the way that it re-shapes its contract business as it continues to assimilate the Corporate Express behemoth.


"We made an acquisition of a company in the north west of the US, in Oregon, called Coast Wide Janitorial Supplies," says Jay Mutschler, SVP of Staples Advantage. "We made that acquisition and it gave us a great chance to really see close up what this business was all about."


Mutschler says that soon after the Corporate Express acquisition in 2008, a review of its ancillary lines of business showed that Coast Wide could be part of an initiative to grow its business beyond office products.


"I think that they immediately shared the same enthusiasm for facilities and breakroom supplies that we had shared.


"Very quickly on Staples made a decision that this was going to be a business that they were going to pursue because it was such a natural tie-in to office products distribution, and when we talked to our customers, they indicated to us this is a product offering that we would very much like for you to supply to us because it’s similar in nature to office products."


Staples is so certain it can be part of its core growth initiatives in the contract scene that it has commited for the long term to the Coast Wide business and is investing a great deal into the infrastructure to support customers. It is also a neat fit with its objectives post-integration with Corporate Express.


"I think, uniquely to other people, we had a great deal of that infrastructure in place through the acquisition of Corporate Express. We had product offering, we had sales specialists, we understood the unique supply chain aspects of this business."


To help bridge the gap between selling office supplies and cleaning and breakroom, Staples has recruited a number of product specialists from the industry who now support its office supply sales organisation. Mutschler estimates that it now has a 9:1 ratio right now in its account management group.


"That is we have one specialist for every nine account managers out there who are working with them and their customer base exposing this product and helping them to sell it."


Chris Whiting, VP Cleaning and Breakroom Supplies and Healthcare for SP Richards agrees that, when it comes to this category, expertise and knowledge really is power.


"Now that most progressive dealers ‘get it’- that the cleaning and breakroom category is in a zone that they must be in to truly offer a total solution to their customers – the battleground has shifted to who can provide the best expertise and knowledge to create better solutions."


To that end, SP Richards is augmenting its sales force with business development managers in the field that have valuable expertise in the cleaning and breakroom environment and "can help dealers be successful in this space at a faster rate".


He is also quick to point out that dealers are also recruiting specialists in the area.


"The real focused dealers are hiring local cleaning and breakroom talent from traditional Jan/San or paper distributors to champion and drive the new business opportunity," he enthuses.


There is no doubt that the already healthy sector received a boost from a series of health scares in recent years. Whiting can see it being an important category for mant more years to come.


"The need for healthy and productive offices is increasing, largely due to the rise in pandemics over the last several years," he says. "We’ve been able to re-package the Jan/San business as an exciting growth vehicle that is an honourable, refreshing, new category. In today’s world, cleaning exists not only to enhance a company’s image, but it can also be considered as potentially life-saving."


From an industry point of view, Whiting feels that the need to share expertise in a relatively new area has had the knock-on effect of encouraging a lot more collaboration between dealers and manufacturers.


"Another interesting dynamic that is taking place in the CBS channel is the additional focus and ‘mindshare’ in the leading manufacturing rep groups," he comments. "Many of the larger rep groups have pro-actively added key cleaning and breakroom suppliers to their portfolio and it is increasing the number of training meetings and exposure for these suppliers. This is an exciting trend that I know will continue as the need for more knowledge, samples, and awareness is very real and much needed."


Moving forward, the wholesaler is taking an analytical approach as it progresses the business. Whiting calls it "making decisions from a data driven mentality" and adds that much of the data is sourced through the industrial supplies association ISSA. Industry researchers NPD have also been brought on board to provide statistical data on the market.


The wholesaler has seen its sales boosted by the category, although Whiting says that further down the line the end-user is looking increasingly for value. Private label brands have typically been the major beneficiary of this change.


"Consumers and dealers are embracing private brands in increasing numbers. Consumers appreciate a bundle of products that can be presented as one packaged solution," he explains. "And dealers receive the benefits of improved margin, insulation from competition outside the channel, and the edge they can gain from offering a big value to their customers."


As an example, he explains that breakroom is outpacing other categories based on the success of single-serve coffee and the complementary products it pulls along with it such as cups, creamers and sugar.


"In addition, proprietary brands are growing as business look to cut costs – Genuine Joe sales are double those of branded sales. Last year’s growth in hand sanitizers and disinfecting products was a key driver for changing people’s habits. We believe approximately 20 percent of people will continue those habits in the long-term."


While retailers, dealers and wholesalers, are busying themselves with getting deeper into industrial supplies, many manufacturers and vendors are already looking at other avenues for their products. However with new territories, come new demands.


Private label manufacturer Kleinmann has just launched a disinfection product, Destix MK75, for surfaces, otoplasty (ear correction surgery) and hearing aids. It marks a new strategy for the Sonnenbühl-based company, as until now it has restricted its range for office equipment. So determined is Kleinmann to succeed inside the medical industry it is already expanding the range, and has quickly added disinfectant cleaning wipes to its medical inventory. However moving into new territory has not been without its challenges, demanding the company modify its approach to market.


"The disinfection of medical inventory is understandably subject to stricter regulations than the disinfection of office equipment," says Kleinmann International Sales Manager, Gunnar Mitzkat.


Indeed Kleinmann has found that existing EU regulation, the devastatingly excitingly titled, EC Directive 93/42/EWG, has been an essential standard to achieve for the company’s long term objectives in the sector.


"The disinfection of medical inventory requires that the disinfectant be produced in accordance with directive," Mitzkat says. "Such certification is a legal requirement for application on surfaces such as dentists’ chairs, otoplasty and hearing aids. In addition, it facilitates the movement of goods within the EU region."


Mitzkat adds: "As a specialist for private label products, we also want to be able to offer this product under our customers’ own brands."


With Kleinmann looking to feed the product as private label to resellers, the company is finding itself in the position of having to pass on what it has learned and educate the channel on the specifics of supply to the healthcare sector.


Consequently, interested resellers and dealers are being treated to a crash course in labelling requirements (products must be explicitly labelled as intended for use on medical inventory, such as disinfectants for doctors’ surgeries, hospitals, etc) and directions for use (product may only be used on surfaces such as couches, cupboards and shelves, but not on medical instruments). The supplier/seller obligations are then laid out in an OEM agreement between the customer and Kleinmann.


"The customer will always take over our product and its EC certification, 100 percent. As a result the customer is obligated not to change the properties, application and declaration of this product and to register it with the public authorities."


Gaining the proper accreditation is not only important for getting the go-ahead to sell in a highly regulated environment such as the healthcare sector, it matters because even consumers are more concerned with buying the right and safest product than they have been before.


Staples’ Mutschler explains that it is now determining the success of a product such as the retail giant’s Sustainable Earth By Staples brand.


"I think in the initial conversations that we have with customers, typically they want to discuss the branded type products and chemicals in cleaning supplies," he comments.


"Once we’ve had an opportunity to introduce them to the Sustainable Earth line of chemicals and they’re able to see first of all the eco-value plus the effectiveness of the products, it hasn’t been difficult to get a lot of excitement from the customer around this product offering because our customers today are telling us you’ve got to help us become more green in our organisations. The ability to provide them with a green product, that’s highly effective in its application has been received very well."


Mutschler adds that Staples is confident it will gain a substantial market share of what, he estimates, is a "$23-24 billion-sized market". However, it may be the biggest player out there but Staples still faces the same problems that a one man band dealership faces when expanding the conversation beyond office products to Jan/San, and beyond. Talking to the right facilities buyer is something even Staples has to overcome.


"Typically in the smaller customers it’s the same buyer and then as you move up the food chain as far as account size, and once you get into your larger customers, there’s a separate facilities buyer of this product," he says.


Staples does have the advantage of being able to employ expert talent to help its push, once through the FM’s door. "As we move up


with our larger enterprise accounts, then we have a more specific product subject expert that supports our enterprise accounts and they call directly on that buyer and they really manage that whole process of selling them a full system."


Strong demand, new opportunities in new channels and swine flu helped make 2009 into a record year. SP Richards’ Whiting says that there are other factors at work, such as demand for greener product, that will ensure that the industry’s customers are bursting open blister packs for years to come.


"There’s no doubt the green movement and sales of the sustainability products has a firm footing and will continue to grow," he says. "There is exciting innovation in this area that gives the entire channel something to talk about. We’re looking forward to reaching a critical mass."