Kroger Company’s Move From Source Interlink to The News Group

Executives speculate that the purchase of Comag by The News Group and Hudson could be the first step in forcing Source Interlink out of the business.

By Linda Ruth
06/26/2012 -05:12 PM

An interesting letter is going around today to the publishing industry from Kroger.

The Kroger Company, the letter tells us, is moving its magazine supply and in store merchandising from Source Interlink to The News Group for its Cincinnati, Fry’s, Ralphs and Food 4 Less divisions.

It’s a summer Friday, and not a lot of people are around for comment. But, everyone I have spoken to is agreed on one point: this came out of nowhere. There has been no industry rumor, no buzz, no rumblings about the specifics of this move.

But the move is a significant one, for a lot of reasons. First, the loss of those retailers can’t be good for Source Interlink, which is dealing with a severly challenged newsstand environment. Of course, sales are down for everyone; and no one can blame Source for Borders—an important chain that used Source exclusively for distribution—going out of business on their watch.

Yet, it makes industry observers—well, at least it makes me—nervous. With only three wholesale agency mega-groups left in the business, hard times for one is likely to mean hard times for all of us. Publishers have had their ups and downs with Source, but lately they’ve been really good partners—working cooperatively to solve problems, improving sales efficiencies, and coming up with interesting marketing ideas.

Source Interlink currently is the exclusive distributor nationally to Barnes and Noble for many U.S. publishers. They also own an important specialty retailer (Retail Vision), they distribute magazines in the greater Chicago area and in other important parts of the country, including in the LA area.

But Fry’s, Ralphs and Food 4 Less are LA area retail divisions, and Source no longer distributes to them.

You could look at it this way: The News Group can pick up the Cincinnati Krogers out of their Jackson, MI division. But Ontario, California? That’s a much less intuitive move.

In a recent conversation I had with an important national distributor executive, the executive speculated that the purchase of Comag by The News Group (TNG) and Hudson could be the first step of TNG and Hudson News in forcing Source Interlink out of business. The first step, the executive predicted, would be to squeeze them out of Ontario.

The fact that Kroger has made this move doesn’t mean that the full scenario is going to play out. It does mean, however, that publishers with a significant newsstand presence are going to want to keep a close eye on their distribution as they await further developments.

[Editor's Note: An earlier version of this post incorrectly referenced MagNet data comparing Q1 2012 and Q1 2011 sales data for national distributors. That chart has been removed.]

Linda Ruth is Principal of Publisher Single Copy Sales Services. Her book of case studies, "How to Market Your Magazine on the Newsstand," is available at BookDojo.com and at Amazon.