Elanco Going Direct?

More rumblings out there about Elanco moving away from Distribution and going direct. Any truth to this round of rumors?

 

It would be great i they did... distributors add no value...

 

That would be a complete shock, as they do not have any type of shipping network to offer the clinics the type of delivery that they’re used to from distributors. Then again, BI went direct under the same circumstances… that one move would effectively kill the role of a distribution rep.

 

It’s probably just Elanco putting the rumor out there to negotiate better deals with Distribution

 

Of Elanco will that why they bought Bayer and gave them job protection

 

When our stock is down 15%, and we do all the work to produce an order, why bother with distribution?

 

Being a distributor rep I find the whole animal health industry supply industry very “unique”. Support depends on the rep/vendor relationship - if the dist rep and vendor can work together, good things can happen but at the expense of other vendors. Kind of a stupid balancing act. You’re not completely wrong in your statement, but I think we can definitely move the needle for certain vendors but at the expense of others.

Personally I don’t really care what a clinic buys, as long as they buy from me. My time is spent trying to convert clinics from the competition, not promoting vendor deals unless it’s exclusive to my company. Sorry but it’s usually not worth the hassle for me to pit vendors against each other for the sake of a couple percent of margin changing a clinic from one FTHW med to another. As long as I’m paid on a majority commission basis, my time is way better spent in the distributor conversion process.

 

And this is why more manufacturers are going direct. Unfortunately Elanco is NOT going direct. We’re still going to pay average margin/commission to average distributors for sub par performance.

 

I actually enjoy working with the “small” or specialty company vendors, where they have no competing reps in the area. I’d rather stay out of the Big 4 wars - I stay in good contact with them, but usually prefer not to play them against each other. But if a vendor helps me out, I will definitely reciprocate.

 

As long as Elanco can "load in" we will not go direct

 

The fact remains, distribution is not very good at creating demand. That’s why we have went to four key players. And why an agency model is the right move for livestock and CA.

 

Distribution is not about creating demand. It’s about convenience for the veterinarian. A one doctor practice, which there are many, might only want a tray of rabies vaccine. Is Elanco going to next day 1 measly tray from Georgia to New York? Next day service with free shipping is a standard that distribution has the capability.

 

Distribution sucks... there are none of them that can do a good job. None can compete with DHL, FedEx, UPS, etc. They are not the ones that generate demand (or are they?) and they are making a HUGE margin for logistic work. Bleak future for these animal health distributors. Look at those margins today in human pharma distribution

 

By that logic, might as well just have Amazon take over the industry because they have both logistics and shipping capabilities.

 

Watch this space. Why not? and give the prescriber (where needed) their cut

 

Why would vets buy from a company that sells to their customers. Makes no sense.

 

Hmmm. I believe Zoetis is doing this with Pumpkin Care.

 

Three of the big four distributors are in some capacity selling directly to either end customers or clinics/shelters. As far as distributor reps are concerned, this should be hugely disturbing and a wake up call to get the hell out of there. Two big distributors have already cut their reps base pay by 15-25% in light of this Covid crap. When the dust settles on all this in early fall, animal health sales I think will look quite different.

 

So will you from eating the house!!!

 

HUGE margins? 10%-18% from 3 of the Big 4 & distribution has to also carry the paper in addition to providing logistics and sales support. The other one pays less than 10%. Most of the Big 4 currently have a sales force larger than any one distributor so creating demand shouldn't be a problem.

The real pisser is most of the Big 4 caved to Chewy & PetMed. If they didn't MWI did it for them. MAP pricing slowed the bleeding but that's a wound that will never heal. Distributions best bet for survival is dominating the Home Delivery piece and stealing the remaining traditional market share from each other. Some future indeed!

BTW human pharma distribution gets a much juicier back end rebate to make up for the thinner up front margins. They also operate on a much, much, much higher volume. You know the people vs pet population thing? Apples & oranges.