Then in 2002, the company received word that ExxonMobil planned a major shake-up. The U.S.-based energy giant planned to slash the number of dealers that it worked with by about 90 percent in Germany. The few that remained would be expected to grow significantly, to cover wider areas and to cooperate with ExxonMobil to improve their operations. Moreover, many dealers would take on the additional role of packaging lubricants.

For many distributors, this was a crossroads.

The first thing they asked us was whether we wanted to remain a dealer, said Alexander Maier, sole shareholder and one of the companys two chief executive officers. For us, the decision was clear. We wanted to do this.

The company got its wish. When the dust settled four years later, Maier Korduletsch was one of 19 distributors remaining. As a result, the company ended up with a much larger coverage area that extended into Austria and the Czech Republic. Customer base and sales volumes grew significantly, and in 2006 the company moved to a new facility to accommodate the growth.

It has made a big difference, said Johann Berger, who was co-CEO wheninterviewed in February. It led to significant growth in our lubes business, and additional investment.

An insider to Europes lubricants industry said many more distributors may get caught up in similar consolidations. Europack owner and General Manager Werner Moeller said other lubricant marketers have started to take similar actions or are considering doing so. His company, which is located in Hamburg, provides packaging, labeling, logistics and consulting services to the lubes industry.

ExxonMobil is out in front on this, and was the first company to do it in such a big way, Moeller said. But other companies are considering it and see that it is a good idea. The industry is going to see much more of this, and it is going to have a huge impact.

Moeller identified one regional lubricants marketer which he said has begun consolidating distributors. LubesnGreases contacted that company, but it declined to confirm any actions or to respond to questions. ExxonMobil also declined to answer questions. A spokeswoman explained that the company does not comment on the details of business strategies, discussions or commercial agreements. Several other international lubricant marketers were asked about their plans, but they also declined to respond.

Moeller said its clear why a lube supplier would want to consolidate distributors. Its all about taking ownership of the supply chain.

ExxonMobil is one of the two biggest lubricant suppliers in the world, he said. They believe they have very good products, and they want to have a very good organization to sell them – an organization that understands products well enough to effectively sell them, that can bring them to the customer and that can help the customer. To do those things, they want to make their distributors strategic partners and help them improve their operations.

ExxonMobil, he said, believes the key to doing that is to streamline distribution.

It makes the distribution and delivery parts of the business more efficient if you have fewer distributors, Moeller said. Dont talk to 100 distributors; talk to nine or 10.

Consolidation also allows the supplier to concentrate the resources that it devotes to supporting distributors. Such support takes many forms. Many suppliers offer technical assistance by providing training about their products. Many also assist in sales and marketing by cooperating on things such as promotional materials and sometimes advertising.

By streamlining as it did in Germany, ExxonMobil was able to take this assistance to another level. For example, the supplier worked with Maier Korduletsch and other distributors to set up packaging operations that met ExxonMobil quality control standards. Maier and Berger said their packaging line improves the companys ability to respond to orders by shortening the supply chain. The distributor can package some products as needed, rather than waiting for deliveries from ExxonMobil.

By focusing its resources on a smaller number of distributors, the supplier is able to make its partners stronger, Moeller said. They help them get filling lines, they help them get storage tanks. The benefits for the distributor are obvious, but it also helps the supplier because the whole supply chain – from blending plant to the end-user – becomes more effective.

Maier Korduletschs lubricant business has certainly risen to another level. Going back to 1990, the companys lubricant business consisted of three sales people. Today it has a team of 34, including four engineers who offer customer support. A number of employees are devoted to specific end-user industries, such as food products, metalworking and automobile service.

The Passau company now supplies ExxonMobil customers in Austria and is one of three ExxonMobil distributors covering that country. It also serves parts of the Czech Republic through a local logistics center. The center has its own trucks and staff and sells bulk and packaged products.

Berger and Maier said ExxonMobil was clear about its criteria for choosing which distributors to keep. It was looking for quality businesses that had a history of success. They wanted dealers that showed an ability to handle significant growth in sales volumes. And they wanted partners with effective sales forces that were capable of bringing in new business.

According to Maier, the transition to a smaller network was not perfectly smooth. In the wake of the reduction in dealers and the subsequent reassignment of some supply chain responsibilities, those that remained experienced repeated problems with deliveries from ExxonMobil. Maier recalled that there were lengthy communications between distributors and ExxonMobil, although he declined to provide details.

I will only say that things got worked out, he summarized. The situation today is much improved.

Having emerged from the consolidation, the CEOs at Maier Korduletsch say ExxonMobils plan was wise because it built up a few distributors and then leveraged their strength in delivery to end-users.

I think it was the right decision of ExxonMobil to focus on research and development and producing the best possible lubricants, Berger said. A big company like ExxonMobil does not want to have a very complex business with field engineers and field staff interacting with its end users. They want to have a strong representative to be responsible for that interaction.

Moeller said the reactions of distributors caught up in consolidations depends mostly on whether the supplier keeps them. Not surprisingly, those that survive are pleased.

For those that are kept, its wonderful, he said. They have an opportunity to grow, and they may get more support. But of course, the number that do not make it is larger, and there are a lot of them who are very, very unhappy.