By Bryce Guerrero

With Guam being such a conglomerate of cultures, the population’s interests in products and goods varies widely. The market is a colorful one, and Guam’s location keeps wholesalers reaching far for demanded goods. For distributors, creating and maintaining a flexible relationship with manufacturers — especially those from different countries — is crucial to the provision of these goods to the island.

Christine Won Pat Baleto

At Market Wholesale Distributors Inc., the first thing General Manager Christine Won Pat Baleto looks for when establishing a relationship with the manufacturer is the value of their product. The primary driving force in determining whether a distributor wants to work with a manufacturer is whether their products are desirable to Guam’s consumers, she says.

“We get a lot of people that come to us and introduce their products and ask us to represent them on island. But one of the first things that I ask them to do is send me samples of their top-selling items,” she says.

Market Wholesale then samples the products within the office under the assumption that if they do not like something, the general population will not either.

“We’re very selective with the type of products that we bring in and with the type of people that we work with because, again, we want to make sure that whatever we bring in is something that consumers want to purchase, that they’re going to like and that they’re going to continue to purchase,” she says.

Baleto says one of the weekly practices for the company’s sales team is to conduct taste tests.

“That’s just an example of what we would do in considering products,” she says. “And once we determine that a product is appealing to our market, that’s when we would work with the manufacturer and start to negotiate with price, with what type of support they could give us so that we could get consumers to be aware that this product exists.”

Timothy T. Kernaghan

Timothy T. Kernaghan, vice president and general manager at Dickerson & Quinn International Distributors, abides by a three-fold formula when working with manufacturers. He says that the standard for a desirable manufacturer is product, price and promotion.

“You want to work with a manufacturer that’s got a wide range of products that people already have generally accepted into the marketplace. And you want to work with a manufacturer whose pricing policies are somewhat flexible,” he says.

Every distributor on Guam competes with West Coast wholesale companies including Unified Grocers, Supervalu, Wal-Mart and Sam’s Club.

“Having a distribution agreement in Guam doesn’t mean no one else can sell products into Guam,” he says. “[…] So for us to be competitive, the suppliers have to give us pricing that’s competitive to the prices that can be secured off the West Coast. And I guess that’s a good thing because that stops us from price gouging. Distributers can’t price gouge out here because we have to remain competitive against prices off the West Coast. The third increment is the promotions. We want to be working with a company that will also invest in the brands, and that’s essentially promotional policies.”

Guam’s isolation means distributors must be on the ball when scheduling shipping and estimating appropriate quantities to stock. Otherwise, the worst-case scenario can lead to consumers searching island-wide for a product that can usually be purchased down the road.

“Even from the U.S., which has been a consistent source of supply for many distributors on Guam, it’s not even something that’s thought about, really,” Baleto says.

But when a storm cripples one of Guam’s main shippers and leaves the island scavenging for produce, the challenge of getting goods from so far away cannot be ignored.

“Those kinds of issues really have a profound effect on us because we’re
trying to create a just-in-time system. We don’t want to hold too much inventory in the warehouse. We want a nice, consistent flow of inventory coming in so that we’re always selling fresh stock. The danger, of course, is if you cut it too close and there’s too many delays for whatever reason, you run the danger of running out of stock and not having it available.”

One of Market Wholesale’s main imports is bananas, and Baleto says when it comes to shipping produce, the challenge for punctuality only increases. Smooth collaborations with the manufacturers are necessary for Guam’s distributors to operate.

J. Lee Babb

When it comes to stocking seasonal items, J. Lee Babb, managing director at Guam Premium Beverages, says ordering appropriate amounts is part trial and error and part product-specific. Since Guam Premium Beverages is one of Guam’s newest distributors of craft beer, he says taking a look at the style of beer and similar products already in the market helps to appropriately gauge the order.

“You’re playing a bit of a guessing game, and until get enough sales data under your belt to determine what your daily rate of sales is, there’s just no other way to go about it. You try to bring in as little as you possibly can, but enough to keep you from going out of stock.”

Sister companies Coca-Cola Beverage Co. (Guam) and Foremost Foods Inc., which supply the island with fruit, coffee, sports and soft drinks as well as bottled water and dairy products, are proactive in maintaining adequate stock.

“We have the track records for all the items we carry. Our facility is capable of allowing buffer for the products. Only in situations when the supplier cannot have shorter date code product, we may be out of the product for a short period of time,” says Director of Operations Ernest Mak.

In the case of overabundance, Mak says, “If we are experiencing overstock on some products, we may run specials to help sell them quicker.”

Dickerson & Quinn International Distributors added Mike & Ike candies in 2014 to the selection of products it distributes on Guam and Saipan.

But whether it’s a young distributor like Guam Premium Beverages, or a seasoned wholesale veteran like Foremost/Coca-Cola, nailing the appropriate amount of goods to stock means nothing if the manufacturer cannot come through with prompt shipping.

“I don’t think people in the mainland appreciate the difficulty that we have,” Baleto says. “In fact, that’s one of the things we have to contend with when working with a new supplier out in the U.S.” She says if suppliers miss a cutoff, the shipment is delayed till the following week. “It’s very critical that our suppliers also meet our delivery date requirements to our consolidator or to the port so that it’s able to sail on time,” she says.

Ernest Mak

Mak lists financial stability, good facility setup and good quality control among the things that make a manufacturer desirable to work with. He says the company also looks for manufacturers that are capable of working with other islands in Micronesia.

For Dickerson & Quinn’s Guam branch, everything that comes from the distributor originates from the U.S. mainland. Because of that, Kernaghan says the labeling and ingredient requirements are the most challenging aspect of getting the goods.

“There are very specific labeling requirements by the U.S. and ingredient notice requirements, too. Although good products are made in Asia, just the way the ingredients are listed and the products are labeled prohibits them from being distributed in the U.S. because of U.S. laws.”

The distributor’s Saipan branch, however, does distribute Asian products because Saipan has more flexibility with what it can bring in, Kernaghan says.

“We still work with our key suppliers, but instead of buying from the U.S., in many cases, we’re buying the goods from their factories in Asia.”

Kernaghan also says that the price of paper products has been increasing, making distribution more costly.

“Raw material costs have gone up,” he says. “Production costs have gone up. Shipping costs have gone up. It’s really expensive to ship paper, so that category of product has been more impacted by pricing issues than any other category.”

Mak has seen the impact of the rising costs of raw materials.

“Last year, we experienced the biggest increase in price in the orange juice products due to the increased cost of raw materials,” he says.

With the federal government implementing Supplemental Nutrition Assistance Program cuts, previously known as Food Stamps, Kernaghan noted that Dickerson & Quinn’s canned meat business was impacted because the SNAP users had less to spend.

“As a result, whatever discretionary income they had within the family budget had to be spread further. So we’ve noticed that in many cases, consumers have tiered down one notch in their purchasing power,” he says.

Kernaghan used the example of the consumers now buying frozen beef when they used to buy fresh beef.

“We’re hopeful that with the increases in the minimum wage in both Guam and Saipan this year, that we’ll see that reversed as the year goes forward,” he says.

Despite the decrease in the canned meat purchasing, one would be hard-pressed to not acknowledge Spam as one of Guam’s most valued staples.

“One of the things that we’re still very pleased with is that there is a cultural place in Guam for Spam. It’s truly the fruit of liberation. When people came out of the Manenngon camps, the first thing they were given was […] essentially Spam,” Kernaghan says. “We work very hard to continue to make that brand apart of Guam’s culture.”

According to Spam’s website, Guam consumes some 16 cans per individual annually. The amount is more than any other country or territory.

Baleto describes Guam’s consumers as “a very loyal market,” which makes it difficult when introducing new products. She says whenever Market Wholesale introduces a new product, it’s fighting an uphill battle against long-established products. Folger’s Coffee, Jif Peanut Butter, Crisco Oil, Dole bananas and Tabasco are among the staples that Market Wholesale constantly provides to retailers. Despite the fluctuation of raw material costs, Baleto says consumption of those staples keeps the business stable as far as pricing goes.

Though interaction is limited, Guam distributors are reporting smooth operations with the Port Authority of Guam, and with its modernization being more realized day by day, operations only look to get smoother.

Baleto, being a former Port Authority of Guam board member, says its modernization will definitely help in its operations. She stressed the indispensible service of the port, saying nearly 100% of Guam’s goods come in through the port.

Kernaghan is a current board member of the port and says in anticipation of the military buildup, the federal government is helping to provide funds for the port’s update.

“We’re going to end up with a facility that is modern, and it will exceed the needs of Guam for the next 20-year period,” he says.

Guam’s consumer market stays loyal to certain products, like Tabasco, distributed by Market Wholesale Distributors, making it difficult for wholesalers to introduce new products.

Photo by Bryce Guerrero