Avantor: Prime Distributor Relationships & Fisher Scientific Competition

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Yes, that's interesting. Looking at my notes from previous calls, I was surprised to find that VWR, especially in Europe, sold almost two to three times as much Thermo Fisher products as Fisher Scientific itself. It seems the distributor relationship with the customer, moreso for consumables rather than equipment, has a significant influence. The primary relationship holder is the distributor, not necessarily the manufacturer of tubes or pipettes.

Exactly, you got it right. Then it goes to strategic relationships and really putting together, again, what's the value proposition to the customer? What matters to them? Is it the speed of delivery? Is it the customer experience? Whatever it is, that is predicated on those strategic relationships. For example, VWR has had some pain points in the U.S. in the last year or two. We've seen it in Boston, for example. You take those two zip codes, 02138 and 02139, with MIT, Harvard, and all those medical campuses, right? There are incubators, institutes, hospital systems, and a multitude of accounts there. VWR had no sales reps for almost 12 months, so Fisher Scientific dominated for those 12 months. The business really grew, and we saw it. Their sales presence and those relationships have a long-lasting impact on these types of prime accounts.

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For both of them, in terms of the commoditized products they sell, is the commoditized nature of the product irrelevant in terms of maintaining barriers to entry and relevance? Ultimately, it's not just the product itself they're trying to sell. It's more like a service and the bundle of products you can access through them, similar to how Costco sells commodity products, but it doesn't make it a commodity business.

Exactly, that's it. It's about the experience and supporting the customer in the way they need it. Offering them the right solution, however that looks. At the end of the day, they don't care if it's a 5 mL pipette packet with a specific company's logo on it. Is it Corning, Thermo Fisher, or did it come from VWR and get distributed by Fisher Scientific? They might need it, and their strategy might involve primary supply from one place and secondary from another. Whichever distributor can put it all together, reduce their tail spend, and optimize for savings and operational efficiencies, those are the things that matter. It's less about the product attributes.

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