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Distributors Speak Up on OSRAM SYLVANIA’s LED Business Carve-Out

Distributors Speak Up on OSRAM SYLVANIA’s LED Business Carve-Out

By Bridget McCrea

Two electrical distributors that were on the inside track when OSRAM SYLVANIA decided to spin off its LED lighting business discuss the steps the company took to ensure a smooth transition.

When OSRAM SYLVANIA announced that it would spin out its LED lamps division into its own entity, the news could have sent shockwaves through the hundreds of distributors that carry the manufacturer’s LED, halogen, fluorescent, energy-saving and high-pressure discharge lamps and off-the-shelf luminaires, and smart home/building networked solutions.

But by the time the official announcement was made—and the subsequent sale of the “carved out” company (LEDvance) announced in July of this year—many of the supplier’s top distributors were already in the know about what was going on and how it would impact them. Even better, some of those electrical distributors were asked to participate in a distributor advisory council that gave them an inside track throughout the entire carve-out and sale process…and beyond.

The Inside Track
Ron Eberhart, executive VP at The Hite Co., in Altoona, Pa., says SYLVANIA OSRAM has been a “significant supplier” for his firm for more than 50 years. “We’ve had a great relationship with them over the years,” says Eberhart, “and we weren’t necessarily surprised when we heard about the sale.” Credit the fact that lamp lines as a whole are going through a lot of changes right now, he says, be it SYLVANIA, Philips, GE, or any other manufacturer.

To ensure a smooth transition, in 2015 LEDvance formed a distributor advisory council—a move Eberhart says is fairly commonplace in the industry, but not always on a consistent basis. “When you look at what’s going on in the lighting sector with LED,” he notes, “it’s not surprising that manufacturers would want some input from us on how to set their future direction.”

In creating the council, LEDvance brought together a cross section of regional and national companies—a move that Eberhart says helped create more diversity of ideas and input for the manufacturer. During the interactions, he says the group listened to the supplier share its vision and future direction, and then provided a “modest amount of input” and critiquing of those visions.

During the meetings, Eberhart says the distributor advisory council expressed some of the challenges associated with the carve-out, the most significant of them being the “protection against obsolescence” within the constantly-evolving LED market. “This is an issue for distributors in general in that products come out and are revised within very short periods of time,” says Eberhart. “In many cases, we’re selling the latest-and-greatest product only to have something more efficient and less expensive hit the market six months later.”

From the distributor perspective, Eberhart says that challenge exacerbates when product shelf life comes into play. “The way the LED is developing right now, it’s at a pace that’s very difficult for all of us to grasp,” he explains. “That was the number one challenge that we discussed as a group.”

During those discussions, Eberhart says LEDvance and its distributors hashed out issues like how to develop marketing programs that would help the former tackle the issue of short product shelf life. “I don’t know that we really came up with any best practices on that [issue],” says Eberhart, who is looking forward to participating in another group session next month. “I think it will be an ongoing conversation, and probably at the top of our list for next time.”

Not Just Lip Service
North Coast Electric Co., in Seattle is another electrical distribution firm that’s had a long-standing relationship with OSRAM SYLVANIA. Also asked to participate in the firm’s distributor advisory council, Cory McCulloch, executive VP of sales, says his 103-year-old firm understands the natural ebbs and flows of such alliances. “To us, SYLVANIA is like family,” McCulloch explains, “and anytime you’re in a relationship there are going to be great times and tough roads.”

Like Eberhart, McCulloch says the shockwaves associated with the LED carve-out and subsequent sale announcement were minimal for his firm. “We knew once OSRAM SYLVANIA carved LEDvance out that the latter would be put up for sale and that someone would buy it,” McCulloch explains. “It’s a great, financially-sound company; we trusted that things were going to be okay.”

McCulloch, who has participated on advisory boards in the past—not all of them effective or useful—says LEDvance’s effort was different in two ways:  They listened and then they followed up with a progress report. “Sometimes you get involved with these councils and you don’t even have any input,” says McCulloch. “Then, there’s not much action taken on what was discussed.”

Eberhart concurs, and says LEDvance’s distributor advisory council approach was both different and effective. “The whole process was designed pretty well; it was clear early on that LEDvance had a very good handle on what it was doing,” says Eberhart. “There wasn’t a whole lot of, ‘Boy, I think that might be the wrong direction,’ coming from the distributor side of the table. As a company, they were pretty much right on as to what we were seeing happening in that world.”

Specifically, Eberhart says LEDvance was keyed into the fact that the industry as a whole is moving toward a more fixture-oriented approach within the LED sector. “LEDvance has a pretty well thought out plan for developing its LED vision and taking it to market,” says Eberhart, who was particularly impressed with the manufacturer’s quick and thorough follow up. Within just a few weeks of getting together with the distributor advisory council, the company sent around correspondence to all participants. In it, the communication covered all of the key points discussed, plans for implementation of those points, and the associated implementation dates (past and future).

“It was very impressive,” says Eberhart. “LEDvance not only followed up with us, but also put time frames in for actual actions. And since then they’ve kept us up to date and they’ve moved through the implementations.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.


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