Selling up the food chain
A supplier of restaurant linens plans to clean up by selling directly to large clients and expanding operations.
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| Pinnacle CEO Methven sees new markets for his restaurant supply business. |
(Fortune Small Business) -- Business was good at Pinnacle Textiles when we met its CEO, Patrick Methven, at his firm in King of Prussia, Pa. ("Profits From Polyester," June 2007). Sales hit about $15 million in 2007, up 18% from the previous year. And profits grew at the same rate.
But Methven was worried. Pinnacle sells linens - such as chefs' coats and aprons - mostly to distributors that supply eateries. Increasingly, large accounts, including chains, which make up about half of U.S. restaurants, want to buy directly from manufacturers, avoiding the middleman's markup. The good news: Chains liked Pinnacle's products and could become lucrative new clients. One expert urged Methven to sell to these big players. But Methven, 39, hesitated to ditch the distributors that Pinnacle has long supplied.
The entrepreneur plans to follow one expert's advice by selling directly to the biggest customers, such as chains.
"Many distributors realized they'd never win that business," Methven says. But to keep key distributors happy, since the Makeover, Methven has set up platinum, gold, silver, and bronze categories. The more his clients buy, the deeper the discounts. Meanwhile, Methven has raised prices for small distributors as much as 15%. " Volume sets price," he says.
One expert suggested a Web-based ordering system for Pinnacle's smaller clients. While Methven will upgrade his site, he won't heed that advice. It's inefficient, he says, to pursue small orders.
Methven is still eyeing a western expansion. He plans to move Pinnacle's Houston warehouse to perhaps Phoenix or Las Vegas in 2009. Either locale would help extend Pinnacle's reach to the West Coast. He will then hire an ace regional salesperson, nixing one expert's advice that he become Pinnacle's superseller.
"We're better off hiring someone with client relationships," he explains. 
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