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Diverse Offering

Posted By webcomm On May 10, 2010 @ 9:59 am In Features,Spring 2010 | Comments Disabled

IngramDavid1

During lean economic times, many business owners look for a lifeboat. In the case of David Ingram, Chairman and President of Ingram Entertainment Inc. (IEI), his came in the form of beer. Or beer distribution, that is. When IEI—a Nashville-based business that distributes DVDs, video games and other home entertainment products—was faced with a challenging marketplace several years ago, he decided to start an entirely new company: DBI Beverage Inc., which now operates beer distributorships in eight different California markets.

In becoming Chairman of DBI, David wasn’t looking to jump ship and abandon the home entertainment business. Instead, he was looking for a way to stay in it. With his feet planted firmly in both companies, he has leveraged each one’s individual strengths to help the other succeed. This willingness to diversify and evolve has enabled David to steer through difficult waters and find new revenue streams that have done more than just keep his ship afloat. Today IEI remains the nation’s leading distributor of home entertainment products, and DBI is one of the fastest growing companies in beverage distribution.

The story, however, doesn’t end there. If the ability to diversify and evolve is important in business, David believes it’s equally so for a business school, particularly one as young and as small as Owen. Since 2006 he has served as Chair of Owen’s Board of Visitors, which assists Dean Jim Bradford in determining the strategic direction of the school. In this role David has been a force in encouraging Owen to chart a new, exciting course—much as he has done in business.

Family Ties

It’s little wonder that Owen is an important part of David’s life. Yes, the school has played a key role in his success, but his devotion to Vanderbilt was fostered by his parents long before he ever earned an MBA.

His father, E. Bronson Ingram, former Chairman of the Vanderbilt Board of Trust, built a hugely successful barge company before branching out into lucrative areas of distribution, including books and microcomputers. At his death in 1995, Bronson left a tremendous legacy of giving to the university that continues under the stewardship of his wife, Martha Rivers Ingram, who now holds his former position on the board. David and his three siblings—brothers Orrin, BA’82, and John, MBA’86, and sister, Robin Ingram Patton—have followed in their parents’ footsteps by supporting Vanderbilt in a variety of ways.

In addition to their devotion to family and civic life, the Ingrams instilled in their children a tradition of responsibility and a strong work ethic. As the youngest of three boys, David was well aware of the demanding hours his father kept while running the family business. “My father had a free pass from my mother to play golf on the weekends,” he says. “So I learned that if I wanted to see my dad, I needed to play golf.”

One thing I definitely gleaned from my dad is that in any business, if you’re not growing, you’re dying.

—David Ingram

David’s passion for golf continues and is reflected in his office decor. With characteristic modesty he notes, “I liked golf, and I had some ability.” That ability garnered him a spot on the men’s golf team at Duke University, where he earned his undergraduate degree in 1985. He met his future wife, Sarah, when she visited the school as a prospect for the women’s golf team.

“I like to tell people she chose Duke because she met me,” he says with a grin.

After graduation he worked on a $200 million capital campaign in the development office at Duke for a couple of years, partly to be near Sarah while she finished her degree. He played in amateur golf tournaments before he says he realized, “I wasn’t the next Greg Norman or Jack Nicklaus.”

Bronson suggested business school, and David, who found that he missed the quality of life in Nashville, chose Vanderbilt. Sarah was finishing up her undergraduate degree, and he knew they’d both be too busy to spend much time together anyway if he chose to stay at Duke for business school.

At Owen, David demonstrated the personal qualities that became hallmarks of his success in the business world. Classmate Justine Brody, MBA’89, was in his study group and part of a student team that conducted a marketing research project for Ingram Book Co., assessing the market for booksellers to sell prerecorded videocassettes.

“David was not only reliable and considerate to work with, but he added the needed humor and perspective to make it through long and sometimes not-so-agreeable group meetings,” remembers Brody, Director of Retail Marketing at Sony Pictures Home Entertainment.

“David had the insight to utilize the core strength of the book company to break into a new industry, build a new business and become the dominant force in the industry,” she says. “Today, as video struggles with new distribution platforms, David is again facing the change head-on and breaking into a new distribution business—beer. He’s always looking for the next opportunity to future-proof his company.”

Or, as David himself says, “One thing I definitely gleaned from my dad is that in any business, if you’re not growing, you’re dying.” His business acumen often is compared with his father’s, but David sees himself as a more collaborative leader.

“He was a demanding guy, a perfectionist, yet fair,” he says of his father, who’d taken over the family business from Orrin Henry “Hank” Ingram, a member of the Vanderbilt Board of Trust from 1952 until his death in 1963.

Another classmate, Fleet Abston, MBA’89, Chief Financial Officer of Old Waverly Investments in Memphis, Tenn., watched David use the skills he’d learned from his father and take them to the next level. “David is very serious and good at what he does, but at the same time, he values relationships,” Abston says. “He’s got a far different way of motivating people than his dad. He’s different in ways that complement his abilities. He’s taken his dad’s talents and added to them.”

David is quick to say that his success is largely due to luck and accident of birth. “Everything was given to me,” he says. It was understood that he would go into the family business just as Bronson had. David and his siblings grew up working for their father during the summers.

“Dad wanted us to have an understanding of what it was like to work in a warehouse or work on a towboat, if nothing else so we could relate to people in those situations,” he says.

Upon graduating from Owen in 1989, he married Sarah and announced that he didn’t want to work for the family business anymore. “My father and I had an interesting discussion. It got pretty tense, but I now understand why it meant so much to him,” he says. “So I came into the family business under duress.”

David took a job as an assistant to the company treasurer, Tom Lunn, because Bronson wanted him to understand the banking side of the business. After they had worked together for some time, Lunn offered David some blunt advice on a long business flight. “He said, ‘David, what do you want to do with your life? I don’t see you getting to the top of this company through the finance area.’ ”

David appreciated the straight talk and Lunn’s suggestion that he would blossom in one of the operating companies.

“I had one brother in microcomputer distribution and another in the barge business, so I picked the video side, really because I thought it was the most likely one to go out of business soonest due to changing technology. When it did, that would free me to be on my own,” David recalls. He announced his intentions to his father and started in sales at Ingram Entertainment in 1991.

DVD sales in supermarkets and drugstores account for much of Ingram Entertainment’s distribution business.

DVD sales in supermarkets and drugstores account for much of Ingram Entertainment’s distribution business.

The next year Bronson cut a deal to buy a large video distributorship, Commtron, located in Des Moines, Iowa. Though it may have made more sense to locate the newly combined company there in Iowa, Bronson moved the headquarters to Middle Tennessee, near Ingram Book Group in La Vergne. He wanted to avoid traveling for board meetings, David says.

Still new to the video distribution business, David began by concentrating on building grocery and drugstore sales. “Sell-through was a new phenomenon then,” he says. In 1994 a shake-up at the top of the company led to David’s taking over the helm of Ingram Entertainment quite a bit sooner than expected.

He began by integrating the newly merged company more fully, identifying the best employees from both companies. “It’s very interesting from a culture standpoint when the small fish eats the big fish,” he says.

Just four months after David became President of IEI, his father was diagnosed with cancer and was severely weakened by the treatment. It was a difficult period for the family. Toward the end, the once powerful man was unable to speak. Still, Bronson appeared at board meetings “even when his hair was falling out on his suit,” David remembers. He is proud that his father got to see him run one of the family companies before he died in 1995.

With Martha Ingram succeeding her husband as Chair and CEO of Ingram Industries, the family had some decisions to make: At $11 billion, it was one of the largest privately held companies in the United States. First, they decided to take Ingram Micro public, as it was the fastest growing company in the group. The world’s largest wholesale distributor of technology products and services, Micro had sales that exceeded $35 billion in 2007 and currently has a market cap of $2.9 billion.

Soon after Micro went public, David, at 33, spun off Ingram Entertainment from Ingram Industries. He kept a stake in Ingram Micro. “I finally had a chance to become my own boss and do my own thing,” he says.

On His Own

Immediately after striking out on his own, David’s video business got “a nice shot in the arm,” he says, with the advent of the DVD format. “IEI was actually the original distributor that launched the DVD format for the studios in seven test markets,” he notes. The DVD format gave Hollywood the chance to resell consumers their favorite movies in a superior format. He hopes some of that momentum will continue with Blu-ray technology today.

While file sharing and piracy have hurt the video business, the impact has not been nearly as great as in the music business because video file sizes are so much larger. “What’s affected us more is the growth of Wal-Mart and other retailers that deal with studios directly,” David says. Consolidation has decreased competition from video wholesalers as well. “When I started in this business in 1991, 70 percent of sales went through the wholesale distribution channel. Now it’s less than 10 percent,” he says.

The beer distribution business is different, David says, because a retailer, in general, must go through a wholesale distributor to buy alcohol. “So if you’re a Wal-Mart in Northern California, you most likely have to buy Coors Light from us,” he explains. “Picking beer distribution was the culmination of a concerted effort to look for an industry that would likely undergo consolidation and play to the strengths of our management team.”

IEI already had a large distribution center in Memphis when David came across Crown Distributing Co., which was losing more than $1 million a year but had the Coors and Pabst distributing rights for the area.

Even though a competing Budweiser distributorship had 65 percent of the market share in Memphis, Crown was a way to “get a foot in the door to meet suppliers and show them what we could do with a troubled company,” he says. Lessons learned along the way made David ready when the opportunity arose to buy another beer distributorship in the San Francisco area, where IEI already had a distribution presence.

“We suddenly went from losing money in Memphis to a great distributorship in San Francisco with people we could learn from and with all the supplier relationships we didn’t have,” David says. The company began to expand into other areas of California—Chico, Napa, Sacramento, Stockton, San Jose, Truckee and Ukiah—and the Memphis distributorship eventually was sold.

Consolidation in the beer industry has occurred faster than expected, beginning when Miller and Coors formed a U.S. joint venture in 2007 and Anheuser-Busch teamed with a Belgian company a year later. (See sidebar above.) In early 2010 Heineken sealed a $5.4 billion deal to buy the beer unit of FEMSA in Mexico, giving the Dutch brewer a huge presence in Latin America.

The beer business is about market share, David says. It’s important for distributors to get their beers on tap handles in bars, for example, because “bar behavior translates into what happens in stores,” he explains. In stores, what matters the most is having prominent displays and taking up more space in the refrigerated aisles than the competition.

DBI Beverage distributes products from leading beverage suppliers, including MillerCoors, Heineken USA (FEMSA), Crown Imports LLC (Corona), New Belgium Brewing Co., Sierra Nevada Brewing Co., Diageo-Guinness, Pabst Brewing Co., Pyramid Brewing Co., Boston Beer Co., Anchor Brewing Co., Sapporo USA, Mendocino Brewing Co., Deschutes Brewery, Red Bull, AriZona Beverage Co., and Crystal Geyser.

David often tells people that he got into beverage distribution because “you can’t digitize beer,” but tough economic times do change beer drinkers’ habits as they tend to move toward cheaper brands. DBI’s diverse selection has helped solve this problem. While some of the cheaper brands that DBI distributes are admittedly less profitable, the company also offers an array of popular craft beers, which, David says, have good margins and sell surprisingly well in these recessionary times.

…I picked the video side, really because I thought it was the most likely one to go out of business soonest due to changing technology. When it did, that would free me to be on my own.

—David Ingram

As for IEI, its business has historically been countercyclical, with people preferring to rent or buy movies and stay home rather than go out to the more expensive movie theaters in a recession. However, new pressures that leave out the wholesale distributor have made the industry much riskier.

“Whether it’s video or beer, there’s a distinct advantage to becoming larger and spreading your fixed costs over more sales. That was a big reason why we got into beer. We wanted to continue to grow and spread our costs between these two companies,” David says.

This arrangement allows DBI to buy services from IEI and share personnel, such as treasury, accounting and human resources staff—in essence making both companies better equipped to face future challenges. Many of the executives echo Justine Brody’s comment about David’s quest to “future-proof” the business, not only for his many loyal employees but also for his two sons, Henry, 14, and Bronson, 12.

“David is building a business that he can leave for his children if they want it,” says Bob Webb, Executive Vice President of Purchasing and Operations at IEI. Bob Geistman, IEI’s Senior Vice President of Sales and Marketing, adds, “I’ve been at Ingram for 24 years, more than 17 with David. He has followed his father’s philosophies well: Take care of your associates, and they’ll take care of your business.”

David’s approach to business has made others outside of his organization take notice as well. In working with DBI Beverage, Pete Coors, Chairman of Molson Coors Brewing Co. and MillerCoors, has become well-acquainted with him. “David is a very astute businessman,” he says. “He’s a creative and innovative thinker who is always in search of new ways to improve and grow his business. He’s the type of distributor who understands the importance of execution in the marketplace and provides the leadership and motivation that is required in the beer business.”

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Back to School

The qualities that Pete Coors describes are precisely the reason why Jim Bradford looked to David to lead the school’s Board of Visitors. When Bradford became Dean in 2005, one of his first initiatives was to establish the board as a strategic partner to the school, which offers insights on curricular issues in relation to the needs of business and opens new doors for mentoring and career opportunities.

“The Board of Visitors is an essential component in ensuring that Owen is providing the most relevant, meaningful education for the next generation of business leaders,” Bradford says. “That means combining the real-world business perspective of these accomplished individuals with the cutting-edge research of our renowned faculty.”

In its current state the board comprises 36 members representing a range of industries, from health care to finance to manufacturing. While some, like David, are Owen alumni, a significant number are not. The idea is to bring together those individuals who are best equipped to advise the school, regardless of their personal ties to it.

Under David’s leadership the board has helped Bradford launch several innovative programs at Owen, including the Health Care MBA, the Master of Management in Health Care, the Master of Science in Finance, the Master of Accountancy, and Accelerator—a 30-day summer program for highly qualified undergraduates. A separate Health Care Advisory Board and Real Estate Advisory Board also have provided critical perspective for Bradford in these endeavors.

“David’s leadership is exceptional. He is perhaps best described as an enabler,” Bradford says. “He embodies the Owen experience by supporting, encouraging and questioning. He keeps us focused on what’s most important for the school’s success.”

David is just as quick to return the praise. “I think Jim is the best choice we could have possibly made” as Dean, he says. “He comes from a business background, so he can relate to people who’ve gone to business school and are out doing business. At the same time, Jim has a true respect for business-teaching professionals.”

As Chair of the Board of Visitors, David often finds himself looking ahead, trying to project where the Owen School will be several years from now. When he considers Bradford’s vision and leadership, the top-notch faculty and student body, and an ever-expanding alumni base, he is confident that the school is headed in the right direction. “I think the Owen School gets better every year,” he says.

Of course, the same could also be said about David himself and the companies he runs. Like the school, Ingram Entertainment and DBI Beverage continue to evolve and adapt, growing stronger in the process.

Special thanks to Harris Teeter management for their assistance in arranging the photography.


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