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Barry Wallett Posted: Mar 07, 2007 09:48 PM	Foam buying group Just a thought It seems the consensus is that the cost of foam is too high to easily compete, are their any buyer groups set up to negotiate the purchase of foam on a group basis? I know the auto parts stores group together (NAPA) and negotiate better prices than each individually. As time goes on this might be the most effective way for a solo sprayer to be competitive with the dealer/distributor networks ie Icy and insul-spray. What do you think?
Posted: Mar 07, 2007 11:19 PM	hmmm... sounds good, but who loses in this situation? if lower prices are negotiated, who is making less profit?
Dave Strnad Posted: Mar 07, 2007 11:25 PM	I suppose this is off topic, but what is the deal with all the private label stuff going on. It seems like manufactures are willing to put whatever name you want on it. (I'm not saying it's a bad thing) I'm getting a call every week from someone new that has their own foam, which comes from a manufacturer where I can buy direct. The crazy thing is that most of these have better pricing then direct. I am assuming that it is the same foam just different labels because it would be fairly difficult for the manufacturer to come up with a unique blend for everyone. Also I doubt that the distributers have much say or knowledge about the chemistry of the foam. So I guess I have the following questions. 1) How can a small distributer be buying the foam cheap enough to resell for a profit and still be quite a bit below direct pricing? 2) Is part of the cost of foam in liability so a distributer takes risk instead of the manufacturer therefore reducing costs? 3)Are the foams different? I know some of them are and the distriubuter usually markets this. But how can anyone other than a chemically engineer have any say in the chemistry of the foam. Most of the smaller distributers are not chemical engineers so who's specs are the foams being made to.
Barry Wallett Posted: Mar 08, 2007 07:14 AM	When a manufacturer private labels their product they do it because they have the capacity to manufacture additional product which is not being utilized by their distribution system. Lets say their is a product "super foam" that is distributed only by "super foam" distributors, well super foam distributors may only sell enough product to keep the manufacturing process at 70% of capacity. All of the fixed costs of the manufacturing process are being distributed over that quantity of product. Their is still 30% of product that could be produced with really no fixed costs for the manufacturer, or less fixed costs if you allocated the costs over the 100% of capacity. This is why a manufacturer will entertain private labeling their products. You would get the same "superfoam" but it would be called something different and cost much less. So the answer to who loses the profit, it would be the manufacturer but they would do it willingly. The second post re private labeling, same deal, someone went to the manufacturer and committed to purchasing a large amount of foam from them, they would spec "superfoam" same product make up different name (or not), and they would get products that cost less than "superfoam" would cost direct. The manufacturer would have pricing based on levels of sales the bigger the buyer the less cost per set. Large numbers(volume) equals volume discounts. Also this is a way for other manufacturers to break into a market that they are not strong in. If you had 100 installers using their product and distributing their products liturature all of a sudden they are a player in this market and their "superfoam" sale would increase as a result. Or in this case "ultrafoam"(ha ha new player) For what it is worth
SprayFoamSupply.com Posted: Mar 11, 2007 08:24 AM	Dave, Some manufacturers don't want to deal with installers directly, especially new installers. They just want to make and sell foam. It is much easier for them to sell a truckload of foam to a distributor than to sell one set to 40 installers. Plus they have to collect $$ from 40 different people instead of one. George
Dave Strnad Posted: Mar 11, 2007 10:27 AM	George, The thing that I don't understand is that there are alot of small distributers. I'm guessing that large installers buy more than a small distributer. How can a small distributer buy a truckload of material that has a 90 day expiration on it? I'm just curious I think it is a good thing to have small local distributers especially if they give better pricing than I can get direct. Either there is more markup on foam than I thought or small distributers have some other arrangements worked out with manufactures and if that is the case a larger SPF company should be able to do the same thing. Obviously that is not me and I can still make a buck spraying $2000 p/set foam. If I were a larger operation that 30-40% markup or whatever it is would be a big part of my bottomline. Like I said I'm just curious about the business, all parts of the business. I just seems like the risk for a small distributer is very high and I see a lot popping up so either the risk is not as high as I thought or the reward is greater than I thought. I am seriously getting calls every week.

Author

Comments

Barry Wallett

Posted: Mar 07, 2007 09:48 PM

Foam buying group

Just a thought

It seems the consensus is that the cost of foam is too high to easily compete, are their any buyer groups set up to negotiate the purchase of foam on a group basis?

I know the auto parts stores group together (NAPA) and negotiate better prices than each individually.

As time goes on this might be the most effective way for a solo sprayer to be competitive with the dealer/distributor networks ie Icy and insul-spray.

What do you think?

Posted: Mar 07, 2007 11:19 PM

hmmm... sounds good, but who loses in this situation? if lower prices are negotiated, who is making less profit?

Dave Strnad

Posted: Mar 07, 2007 11:25 PM

I suppose this is off topic, but what is the deal with all the private label stuff going on. It seems like manufactures are willing to put whatever name you want on it. (I'm not saying it's a bad thing) I'm getting a call every week from someone new that has their own foam, which comes from a manufacturer where I can buy direct. The crazy thing is that most of these have better pricing then direct. I am assuming that it is the same foam just different labels because it would be fairly difficult for the manufacturer to come up with a unique blend for everyone. Also I doubt that the distributers have much say or knowledge about the chemistry of the foam. So I guess I have the following questions.
1) How can a small distributer be buying the foam cheap enough to resell for a profit and still be quite a bit below direct pricing?
2) Is part of the cost of foam in liability so a distributer takes risk instead of the manufacturer therefore reducing costs?
3)Are the foams different? I know some of them are and the distriubuter usually markets this. But how can anyone other than a chemically engineer have any say in the chemistry of the foam. Most of the smaller distributers are not chemical engineers so who's specs are the foams being made to.

Barry Wallett

Posted: Mar 08, 2007 07:14 AM

When a manufacturer private labels their product they do it because they have the capacity to manufacture additional product which is not being utilized by their distribution system.

Lets say their is a product "super foam" that is distributed only by "super foam" distributors, well super foam distributors may only sell enough product to keep the manufacturing process at 70% of capacity. All of the fixed costs of the manufacturing process are being distributed over that quantity of product. Their is still 30% of product that could be produced with really no fixed costs for the manufacturer, or less fixed costs if you allocated the costs over the 100% of capacity. This is why a manufacturer will entertain private labeling their products. You would get the same "superfoam" but it would be called something different and cost much less.

So the answer to who loses the profit, it would be the manufacturer but they would do it willingly.

The second post re private labeling, same deal, someone went to the manufacturer and committed to purchasing a large amount of foam from them, they would spec "superfoam" same product make up different name (or not), and they would get products that cost less than "superfoam" would cost direct. The manufacturer would have pricing based on levels of sales the bigger the buyer the less cost per set.

Large numbers(volume) equals volume discounts.

Also this is a way for other manufacturers to break into a market that they are not strong in. If you had 100 installers using their product and distributing their products liturature all of a sudden they are a player in this market and their "superfoam" sale would increase as a result. Or in this case "ultrafoam"(ha ha new player)

For what it is worth

SprayFoamSupply.com

Posted: Mar 11, 2007 08:24 AM

Dave,

Some manufacturers don't want to deal with installers directly, especially new installers. They just want to make and sell foam. It is much easier for them to sell a truckload of foam to a distributor than to sell one set to 40 installers. Plus they have to collect $$ from 40 different people instead of one.

George

Dave Strnad

Posted: Mar 11, 2007 10:27 AM

George,

The thing that I don't understand is that there are alot of small distributers. I'm guessing that large installers buy more than a small distributer. How can a small distributer buy a truckload of material that has a 90 day expiration on it? I'm just curious I think it is a good thing to have small local distributers especially if they give better pricing than I can get direct. Either there is more markup on foam than I thought or small distributers have some other arrangements worked out with manufactures and if that is the case a larger SPF company should be able to do the same thing. Obviously that is not me and I can still make a buck spraying $2000 p/set foam. If I were a larger operation that 30-40% markup or whatever it is would be a big part of my bottomline. Like I said I'm just curious about the business, all parts of the business. I just seems like the risk for a small distributer is very high and I see a lot popping up so either the risk is not as high as I thought or the reward is greater than I thought. I am seriously getting calls every week.

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