Commons Bros.' service level key to N.Y. wholesale success

Drug Store News, Nov 19, 1990

Commons Bros.' service level key to N.Y. wholesale success

ELMSFORD, N. Y. - Management at Commons Bros., the drug wholesaler, has battled its way through a tumultuous New York metro market by setting aggressive sales growth programs and slashing costs. In one critical area, at least, it remains deliberately in the 1950s, president Bob Castello told Drug Store News.

"We practice 1950s thinking on customer service," said Castello, as he proudly displayed letters from satisfied customers.

Castello says Commons Bros.'s ability to stress service is critical in the tri-state drug wholesale scene of New York, New Jersey and Connecticut. Competition has been heightened by McKesson Drug's purchase of S&P Drug Co., an aggressive campaign by Cardinal Distribution for New York business, and the repositioning of Ketchum, the nation's 12th largest wholesaler, by its French parent, OCP, according to market sources.

Meanwhile, competitive smaller firms, including Neuman Wholesale, Ridgefield, N.J., Drug Guild, Secaucus, N.J., Blinn Wholesale, Brooklyn, N.Y., and the Bindley-Western-owned Stamford Superior, Stamford, Conn., are sharing in the region's double-digit revenue growth, the sources say.

`Buddy system' adds value

When Castello and ceo John Tendler bought Commons in January 1987 in a highly-leveraged deal, one of their first priorities was to establish advisory boards for retail and hospital accounts to make the wholesaler more responsive. Then each client got a "buddy", a personal contact within Commons, for prompt problem solving.

The service is one of the value-added components introduced by Castello and Tendler that have helped propel the firm's sales from $80 million in 1986 to a predicted $300 million for the year ending April 1991. Commons sees sales reaching $416 million in 1994, as higher-margin retail accounts (only 20 percent in 1986) build to a 50-percent share of the business.

Noting the momentum, Inc. Magazine and its corporate sponsors have named Castello one of 1990's outstanding entrepreneurs. National finalists were to be selected this month.

Tendler, as credit vp, and Castello, as vp-operations, were with S&P Drugs in 1986 when they decided to try it on their own. They discovered that Commons Bros. - founded by two English brothers in the last century, and recently moved from 73rd Street in Manhattan to its current 100,000-square-foot facility in Elmsford - was available.

Among reforms: * A 15-person sales staff is built to pursue "totally neglected" retail accounts. Retail today is 40 percent of sales. The staff gained the company's first Connecticut accounts, and is pursuing growth there, on Long Island and in northern New Jersey.

H&BAs expanded

The company's H&BAs assortment is expanded and a product catalog launched along with programs for driving stores' sales. An in-house buying group is being developed. Savings on buys will be passed on to accounts. Total sales have grown at a 25-percent annual clip. * Expenses are slashed from 6.5 percent of sales in 1986 to about 4 percent currently. * A 24,000-SKU inventory turns 13 times, up from nine, with a six-week cycle reduced to four weeks. Assuring that all product is shelved the day of delivery cut one week; the second week was phased out by using a pre-inventory alert system in which incoming orders are tracked to promote faster delivery. The company has gone from monthly to weekly purchasing. * MIS has been revamped. On-line ordering for 95 percent of incoming orders has enabled Commons to cut office order-taking staff from eight to three. It is developing a retail management computer system, following the success of Comtech II hospital management system. * Earnings before interest and taxes, at 2.4 percent in 1986, hit 3.5 percent this year.

The partners want acquisitions to play a role in sales growth. They haven't shied from new debt and challenges. When debt was freer to come by in the late 1980s, they admit to having been "involved in discussions" for buying, among others, Ketchum, Amfac and even Alco Health, over five times its size.

PHOTO : John Tendler, left, Common Bros.' ceo, and Robert Castello, president, relax at headquarters.