Dubek has decided to expand its distribution network to include products other than cigarettes. The company will distribute, in the initial phase, Sony batteries to chain stores and groceries. Ilan Greenboim, deputy marketing manager at Isphar Electronic Trading, who represent Sony in Israel, announced this week that his company had signed a distribution agreement with Dubek.
Distribution will include the major food retail chains, mini-markets, groceries, kiosks and snack stands. In all, Dubek will distribute the batteries in 15,000 points of sale around the country.
The Dubek-Sony deal is particularly interesting in light of the fact that this is the first time Dubek’s wide cigarette distribution network, reaching so many point of sale, is being used for products other than cigarettes. Why didn’t they think of this before? Greenboim says from now on others definitely will think of it, but for now, only Sony and no other brand of battery, will be distributed via Dubek.
Greenboim says the goal is to capture a 15% share of the batteries market by the end of the first year, and some 30% by the end of the third year. Sony sells some 50 million batteries a year, of which 30 million are alkaline. Israel’s total market volume is some NIS 150 million per year; the market is currently dominated by Duracell and Energizer. Isphar distributes via photo shops, office supply stores, record stores and electric supply stores. Now Dubek will serve as distributor to the food sector.
Greenboim: "This agreement will quickly put Sony batteries in all relevant points of sale, and take advantage of Dubek’s power as a distributor of an in-demand product such as cigarettes, for the purposes of our own product. This process will create a revolution in the buying habits of the general public, due to the availability of batteries at all points of sale."
Up to one year ago, Dubek cigarettes were distributed along with competing products, via a jointly-held distribution system. When Dubek reached the conclusion that independent distributors preferred to push the far more profitable competition, the company decided to set up its own distribution network. By virtue of Dubek’s monopoly status, the Restraint of Trade Commissioner objected to the move. Over two years, the matter was debated in the Restraint of Trade Court, presided over by Justice Miriam Naor, who ruled in October 1995 that Dubek had the right, as a public company, to open up its own distribution channel.
What did this do for Dubek? Says Dr. Arie Ovadia, Dubek deputy general manger: "We halted the drop in sales. Since then there has been a reversal in product sales, which has allowed us to operate in additional areas, and give us better focus. Our sales promoter no longer competes against our wholesalers, but works together with them instead."
Dubek’s annual sales turnover is NIS 1.25 billion, exclusively from the sale of cigarettes. According to estimates, Sony battery sales will add another NIS 10 million to annual revenues. Ovadia; "Sony batteries are a trial balloon. We considered the possibility of selling matches, lighters, cigarette-related products, things that move well at kiosks. We are considering the distribution of food products, if they suit us."
Isn’t there a danger Dubek will take advantage of its monopoly status, in order to pressure retailers into taking on the new products marketing via the Dubek distribution network? Ovadia: "The company cannot make service contingent on another service. Sony battery sales are minuscule, relative to our cigarette sales turnover. After all, we won’t harm our main product with a sideline. We will not break the law, it is not in our interest, and we won’t have our market representative breaking the law either - especially as we are a monopoly."