[Executive Forum] John Bolanos

In 2000, when John Bolanos was named vice president of Univar’s Professional Products & Services Division, one of the most high-profile positions in the pest management industry, he didn’t know if he was up to the job. After all, at 46 he had some big shoes to fill. Bevan Cates, the man who had preceded him in the post, was a legendary figure in the industry, a physically imposing individual who commanded both respect and fear among his colleagues, a man known for his hot temper, passionate advocacy of Univar and aggressive negotiating style.

John Bolanos was a very different animal. Analytical by nature, the low-key native of California is more of a consensus builder, a man who prefers to avoid conflict and nurture business relationships over time. “He’s not an in-your-face sort of guy,” observes Norm Ehmann, a former executive at Univar who worked with both men. “He’s sensitive to what you have to say,” a man who thoroughly assesses all points of view before arriving at a final decision.
Cates, who is now retired and living in California, says as a young executive Bolanos “got things done in a whole different style than I used to get things done. I was more of a bull in a china closet and John was little more low key, a little more laid back, and would take his time and really reason things out, where I was just full speed ahead.”

Upon his retirement, Cates personally tapped Bolanos to replace him despite their starkly different personalities because “as the business unit matured, it needed a different management style,” Cates says. “John’s an outstanding individual. His ethics, his honesty, his integrity are absolutely above reproach. Whatever John Bolanos tells you, you can take to the bank. Because he had those characteristics I felt it would make him an excellent leader, and as it turns out it has. He’s done a lot more with that business unit than I ever did.”

With the luxury of hindsight, Bolanos’ success shouldn’t have come as a surprise. The oldest of three brothers, Bolanos was always someone who was mature beyond his years. “I took being the oldest very seriously and it would drive my brothers crazy,” he says with a laugh. “I was very much the responsible child. My parents used to kid me that I was a man in a boy’s body. One of the blessings of marrying my wife, Jane, is she has tried to break me of being too serious. She’s always saying, ‘John, have fun and chill out.’”

And she should know. They met more than 36 years ago in high school and became serious while attending classes at the University of California, Davis. Bolanos originally planned to become a doctor, but a couple of things changed his mind, including the rigorous academic requirements of pre-med candidates. An accomplished student in high school, “I was under the false impression that if you wanted an A in a course you just had to study harder,” Bolanos says. “But I quickly learned that some things, like organic chemistry, no matter how hard you work at it, you can’t pass. I also was tired of going to school. Jane and I were getting serious, so the road to a career in medicine just seemed a bit too long.”

After considering a number of options, Bolanos changed his major to entomology. “As a child growing up in the Bay area, I always loved bugs, so it seemed like a good fit,” he recalls. “Back then, I’d say goodbye to my mom in the morning and come home at dinner, spending most of the day exploring the fields around our home, which wasn’t very developed at the time.” Energized by a new major, he thrived, graduating from UC Davis in 1976.

After interviewing with several chemical companies with no luck, his name was passed on to Norm Ehmann of Van Waters & Rogers (now Univar). Bolanos impressed the longtime industry executive and was hired, joining the company as a customer service representative in the firm’s San Jose office. “I was fortunate because I got on the ground-floor of the business,” Bolanos recalls, “just as they were attempting to build a national distribution business in the pest control industry.”

After paying his dues working on the customer service desk for eight months, Bolanos progressed through the ranks quickly, serving as a sales representative in the Sacramento office for five years before being named district manager in 1983 and moving over to the Industrial Chemicals Division in 1990. “When Norm Ehmann retired and the business reorganized in 1994 Bevan called and asked me to return to the pest control business,” Bolanos recalls. “I jumped at the opportunity. The industrial business doesn’t have the friendliness and intimacy of the pest control industry, so I was happy to come back.”

It was a fortuitous turn of events for both Univar and the pest management industry. “What’s impressive about John’s leadership style is he really cares about the pest control industry,” observes Cindy Mannes, executive director of the Professional Pest Management Alliance (PPMA). “He really stresses to everyone he works with the importance of being involved in the industry, and it’s not just lip service. He means it.”

Bolanos’ involvement in the Professional Pest Management Alliance is a good example of his commitment to the industry, according to Mannes. “When I first sat down with John and talked about PPMA’s goals as an organization he said he would give us a year and if we helped the industry grow, he’d stick with it, and that’s exactly what he’s done. He gets the big picture.”

PCT magazine recently sat down with Bolanos at his office in Austin, Texas, to discuss the pressures currently facing the field of distribution, as well as Univar’s plans for the future. Here’s what he had to say.

PCT: As vice president of one of the industry’s more prominent distribution businesses, what are the key business and economic factors currently impacting the field of distribution?

Bolanos: They are not dissimilar to the issues currently facing PMPs. Recruiting and retaining quality people is an ongoing challenge for Univar, just as it is for virtually every pest control company in the country. A key aspect of success in the distribution business, just like it is for PMPs, is the ability to attract and retain quality employees with good people skills. Even though we’re selling a product, we’re still in the service business, so it’s important our field staff have good people skills. And just like pest control, the operating costs associated with running a service business also are impacting distribution, such as the increased cost of health care, insurance, gas, etc. Complicating matters further is the fact the industry is also going through a revaluation of many of its most widely used pesticides as a result of the influx of post-patent products, and it’s beginning to result in lower value for the products we sell. We may be selling the same volume of products we have in the past, but the value of those products is declining. That’s having a negative impact on the real dollars earned by distributors. All of these factors — employee recruitment and retention, increased operating costs and the influx of post-patent products — are having a very real impact on distribution.

PCT: Ultimately, do you believe individually or collectively these factors threaten the future viability of distribution?

Bolanos: Fundamentally, distribution’s role is to get the right product to the right place at the right time, and to accomplish that task in as cost-efficient a manner as possible. To the extent distribution can cost effectively get product from point A to point B, I believe the distributor’s role is secure. If over time, however, we become inefficient, the role of the distributor will be at risk, so first and foremost we have to get that portion of the equation right. That’s why we’re constantly asking ourselves, “How can we be more efficient in taking an order, invoicing an order, checking our customers’ credit, delivering an order and collecting our money.” Like so much in business, if we don’t do the basics well, nothing else matters.

PCT: Given the financial pressures currently facing distribution, what are some of the things Univar and other distributors are doing to remain competitive?

Bolanos: We truly believe the electronic component of the business has been a growing trend that continues to offer cost efficiencies — placing orders online, creating an online catalog, online billing, downloading labels, etc. Online education is one of the fastest- growing segments of our business. That doesn’t mean the human side of the business is no longer important. It’s just that we can achieve some significant cost efficiencies by transferring some of our business operations online and capturing those savings. We’ve also been opening several new Pro Centers every year in an attempt to continue to grow our business. We now have 73 locations nationally, so we’re continuing to expand our market reach, while doing our best to maintain a high level of service. In addition, as mentioned previously, we spend a lot of time looking at the economics of moving product from point A to point B. We have a “hub-and-spoke” structure that we’re constantly refining to create greater financial efficiencies so we can get our products to the marketplace in as cost efficient a manner as possible.

Despite the significant challenges facing distribution, we think our core strategy is still very sound. We’re a believer in the pest control business and we’re confident the market will continue to grow. This past year was a turbulent time for the industry and we expect 2007 to be a time of significant change as well. In 2006 we experienced a decline in bifenthrin revenues as this chemistry went off patent. This year we expect to feel the full impact of imidacloprid going off patent. Faced with such dramatic changes in the marketplace, we would be remiss if we didn’t look very carefully at the costs of every aspect of our business. Therefore, we’re constantly looking at how to make our sales force, distribution processes, and marketing strategies more efficient. It’s the only way we’re going to survive long term.

PCT: The mergers and acquisitions market is red hot at the PCO level, but we’ve seen virtually no consolidation at the distributor level despite rumors to the contrary for many years. With so much cash currently available for acquisitions, why hasn’t there been more consolidation at the distributor level?

Bolanos: I think it has to do with the fact that the industry’s economics have been so strong for the past decade. The market has grown nicely during this period so the value of the industry and the volume of products sold to PCOs has increased. In addition, there hasn’t been the same economic pressures as the PCO channel to consolidate. That could change with the growing number of post-patent products that are entering the marketplace or if manufacturers choose delivery channels that bypass distribution. The Sentricon® model is certainly a threat to distribution and one we take very seriously. Fortunately it has not been widely adapted due to the very real value that distribution brings to both the manufacturer and the pest management professional.

PCT: So you don’t agree with those who contend distribution is at risk of becoming irrelevant in an economy where Internet use is on the rise and one-on-one customer contact is in decline?

Bolanos: No, I don’t think that will be the case. What’s unique about our industry is PMPs, by their very nature, are entrepreneurs, very independent-minded entrepreneurs. They take a great deal of pride in the selection of their products. They want to choose from a wide array of products. I can’t tell you how many different roach baits we carry, but it’s a lot. What I’ve learned is PMPs like specific things and as distributors they want us to carry a full line of products and be thoroughly informed about those products. The ability for an organization like Univar to provide PMPs with a full line of products is very, very valuable. For the supplier community, the ability to ship their products to Univar and count on us to handle the receivables on those products is also very valuable. The amount of money we carry in receivables is quite significant. If suppliers had to manage collections for every PMP that purchases their products, that would present significant challenges for them, so distribution plays an important role for suppliers in a variety of ways. As a result, I don’t think the important services we provide (i.e., training, collections, customer service, etc.) will ever become obsolete.

PCT: Does the average PMP understand the challenges associated with managing such a large number of products?

Bolanos: Unless you do it on a daily basis, I don’t think you can have a full appreciation of what it takes to manage the large number of SKUs in our business. The PMPs’ expectation is that we should have every product they need in stock. That’s certainly a role we’re happy to fill, but it’s probably an unrealistic expectation. There’s a great deal of complexity in managing hundreds of SKUs in dozens of locations around the country. It’s a lot harder than it looks.

PCT: What are some of the other misconceptions PCOs have about the distribution field?

Bolanos: The primary misperception relates to the amount of profit distributors make. It’s not uncommon for PMPs to form a buying cooperative and pool their resources with the expectation of cutting their chemical costs in half. What they don’t realize is that distribution operates on very small margins. By forming these buying groups they’ll be able to cut their chemical costs, but not by an overly significant percentage. They may be able to shave a couple of percentage points off of their expenses, but their expectation is that they’ll cut off 10 to 15 percentage points, and that’s not the case.

PCT: So where does that leave distributors who may consider doing business with these buying cooperatives?

Bolanos: It means for us to be able to pass on some savings to our customers — whether it’s a buying cooperative or not — we’re going to have to extract some savings from the process. We’ll start by asking, “Can you centralize you’re purchasing?” and they’ll often say, “Well no, we can’t do that.” Then we’ll ask, “Can we send you one consolidated invoice?” and they’ll say, “No, everyone needs their own invoice because they’re managing their own books.” Then we’ll ask, “Can we ship to one location and have individual companies in your cooperative pick it up?’ and they’ll say, “No, we don’t want to do that.” So, what’s the benefit of consolidation for us if we can’t save on freight costs, invoicing costs, customer service costs and other costs? Why would we want to enter into such a relationship? Every year this issue seems to crop up and while we don’t turn anyone away, we try to educate them about the real costs of our business. If you can show us you can strip out some of our costs to offer you lower prices, that’s great, but if you can’t, then it is not an attractive offer for us.

PCT: How has the recent influx of post-patent insecticides impacted distribution?

Bolanos: It’s a land mine of issues and we have to be very careful when addressing this topic because we have to balance the wants and needs of our customers with the relationship we have with the basic manufacturers. As a distributor, we don’t manufacture anything, so we must maintain good relations with basic manufacturers otherwise our warehouses would be empty. In any relationship — whether its with PMPs or manufacturers — there is going to be some natural conflict from time to time, but I want to avoid these discussions from becoming emotional because that doesn’t benefit anyone.

When interacting with the basic manufacturers I tell them you may see the things at the show we’re doing (i.e., house-branded off-patent products) that may concern you, but let me explain why we’re doing it. When I have those discussions, I try to mitigate an emotional response from the manufacturers. I want them to understand why we’ve taken a certain path, so they don’t think we’re being disloyal because the truth is when a distributor takes on a private label that automatically raises a red flag and I understand that. So, that’s something we have to be very careful about and thoroughly address all sides of an issue before making a decision. It’s part of the reality we’re facing in the marketplace and we have to be very, very careful to manage those relationships carefully and with respect. We need to strike a balance between offering what our customers may value, while maintaining our relationships with our supplier partners. That’s more of an art than a science. You have to take into account various personalities and individual business situations. The angst in the manufacturer community is pretty high right now and we need to be sensitive to that.

PCT: Based on your observations, how is the industry responding to the issue of post-patent insecticides?

Bolanos: I think the industry as a whole is also feeling some turmoil about this issue. One of the reasons for this is NPMA PestWorld and other key meetings sponsored by the National Pest Management Association are only possible through the generous sponsorships of the basic manufacturers. If the industry gravitates more and more to post-patent chemistry than the basics won’t be in a position to offer those exclusive partnerships. What will that do to the NPMA and Professional Pest Management Alliance? Some of the leaders in the industry are concerned about that, which is understandable.

PCT: What are you seeing in terms of demand for post-patent insecticides?

Bolanos: We’re seeing a rise in PMPs asking for and wanting generic chemistry.

PCT: Is the demand for generic chemistry greater in one particular area of the pest management business than another?

Bolanos: It’s across the board. While the basic manufacturers have done a good job of building their brand image, we’re seeing more and more generic products in all aspects of our society. The health care industry is a good example. While doctors say they’re only going to recommend name brands, consumers are demanding that generic products be made available to them. It’s a tough dynamic, made tougher by the fact that for the last three decades we haven’t had a lot of generic chemistry in the pest management industry. When we had generic chemistry — diazinon and chlorpyrifos — EPA took them off the market, but the pyrethroids emerged (cypermethrin and permethin), then Premise and Termidor entered the marketplace with higher levels of activity and PMPs gravitated to that new chemistry. The problem is post-patent products are no longer being replaced by new, innovative chemistry at the same rate they have in the past, so it’s having a significant impact on the industry.

PCT: What ultimately will be the result of this market trend?

Bolanos: If I had a crystal ball, what I believe we’re going to start seeing is increased innovation in the area of formulations and delivery systems. You look at Blanton Whitmire (founder of Whitmire Micro-Gen Research Laboratories), who pioneered the development of aerosols in the pest control industry and introduced the System III. He got tremendous value out of reformulating existing technology. The way products are formulated, mixed and applied, that’s where we’re going to see some of the biggest changes in the years ahead, and those things are patentable. Premise Foam is a good example of an enhanced formulation that is filling a market niche. I think you’re going to see more and more developments in the formulation and application technology side of the business, at least in the foreseeable future until a new influx of active ingredients are introduced.

PCT: It’s clearly a stressful time to be in the distribution business, so what keeps you coming back day after day?

Bolanos: I know this sounds corny, but I love what I do. I feel fortunate to be in this role and most of my job satisfaction revolves around the people aspect of the job, not necessarily the financial side of the business. I find it extremely gratifying when young people come into our organization and grow both personally and professionally, bringing new energy to the company. I also enjoy opening new offices and meeting customer needs in new and different ways. One of the things I love to do is visit with our salespeople in various parts of the country. Three or four times a year I get out and work directly with our customers and salespeople. What I’ve discovered is while accents and pest pressure might change the pest control industry as a whole is basically the same.

PCT: As you approach your 30th anniversary with Univar what are your plans for the future?

Bolanos: My goal would be to position the business so I can walk away without any regrets. While I’m not ready to retire any time soon, when I am ready to leave the business my goal is to have competent leadership in place to carry Univar to new heights. And when the time does come to retire I’m going to take a lesson from Bevan Cates, cherishing my time in the industry, but moving on to the next chapter of my life without looking back. 

*****

Univar by the Numbers

Established: 1924 by George Van Waters and Nat S. Rogers

Annual Sales (U.S.): $3.3 billion (company wide)

Worldwide Sales: $6 billion

Employees: 3,525

Locations: 73

Key Officers: Gary Pruitt, CEO, Univar Inc.; Terry Hill, President, Univar USA; John Bolanos, Vice President, PP&S; Ted Worster, Director of Marketing, PP&S; Chris Wescott, Eastern Region Manager; Tracy McEuen, Western Region Manager; Craig Hanney, Director of Business Development