The “Cost” Of Industry Consolidation

One of the associations to which I belong is called the Association Education Alliance (AEA). AEA consists of Executive Directors and senior staff members from associations that have distributors and manufacturers as their members. The 40 associations represent industries as diverse as pet food and petroleum distributors. Although each association is facing its own unique challenges, one common denominator that cuts across all of the distributor-based associations is the impact of consolidation.

Shrinking memberships, reduced dues revenue, smaller meetings and limited prospective new members—the results of the reduction in the number of distributors across all industries—are not surprising. What has been surprising is that many of these associations have been able not only to survive dramatic consolidation in their respective industries, but have in fact been able to remain strong and vibrant associations that continue to deliver quality and valued services to their remaining members.

GAWDA is shrinking. This should come as no surprise to anyone who has been a member for any length of time. Our peak membership numbers are part of our history and realistically will never be regained. In the year 2000, GAWDA had 738 distributor and 431 manufacturer members. Today, only seven short years later, our membership has declined to 430 distributors and 273 manufacturers, or a reduction of 40 percent. Acquisitions and mergers are very sensitive subjects to our membership, but they are a fact of life in our industry. Retirement, financial incentives and economies of scale will continue to drive this trend.

The impact on GAWDA from the large number of mergers and acquisitions is dramatic. Every time one of our major members purchases a mid-sized or smaller member, the dues previously paid by the acquired member are lost forever, since the largest members are already paying the maximum level of dues. In most instances, the benefits of membership that were received previously by the acquired member continue to be provided by GAWDA, since they become a branch of the larger company and continue to receive GAWDA publications, have access to the Web site, attend educational sessions and receive member discounts to the meetings.

Consolidation impacts more than just membership numbers and dues revenue. Annual convention attendance has decreased steadily each year, from over 1,200 in the year 2000 to only 815 in Orlando last year. Total attendance at the three Spring Management Conferences in 2000 was 1,049. Total attendance at the SMC in Chicago last year was 478. Although meeting attendance is influenced by factors such as location and the economy, the trend is clearly a steady decline as membership numbers continue to decrease.

Although we continue to dedicate resources to identifying and recruiting new members, the majority of companies in our industry that currently are not GAWDA members are usually very small and not able to dedicate the time and financial resources necessary to benefit from membership in GAWDA.

All this being said, the future of GAWDA is far from being in jeopardy. Even with the impact of consolidation, GAWDA remains a strong and vibrant association that continues to have the resources necessary to serve its members. One indication of GAWDA's continued viability is the fact that total net assets have increased from $956,000 in 2000 to over $1.5 million today.

In Phoenix, the GAWDA Board of Directors participated in a Strategic Planning Session. A survey that was conducted in preparation for this meeting highlighted the importance that our Board places on the impact of consolidation on the future of our organization. How to structure GAWDA and its meetings and programs to position us to minimize the impact of consolidation or to potentially even benefit from the changes in our industry was the major focus of the strategic planning discussions.

I am confident that the leadership of GAWDA and the strong core of long-term and dedicated distributor and manufacturer members can adapt to the changes created by consolidation in the industry and continue to support an association that provides the networking and educational opportunities on which GAWDA was founded and continues to build upon today.