Vertical Gonsol idation:

All Eyes On The Georgia-Pacific/Southeast Wood Partnership

TI NI pa*r, the widespread consolidation in the building materials indusfry is beingdriven by Ameriea's fancy for big box retailers, A handful of retail giants produce such a large percentage of sales that they can dictate terms to their suppliers. The retailers cut out middle men and squeeze other vendors' margins so tig!*ly that suppliers are forced to band together to survive and compete.

But the consolidation is occurring not only within each level of the industry. but also across traditional lines of distribution.

Southeast TVood, the main supplier of feated products to big box behemoth Lowe'$ Cos., had purchased much of its white wood frorn G-P. Now, through a unique partnership deal, G-P is a customer of Southeast Wood.

Ceorgia-Pacific pays to put its inventory through Southeast Wood's treating facilities and has taken over sales and marketing for the treater. Southeast's sales and customer service personnel now work for G-P.

G-P, according to one analyst, oosaw the handwriting on the wall. The treaters would go out and make a deal with the retailer, then come back and have to beat up on the supplier to get the price they want."

A venical company, G-P has vast timberland holdings and a network of mills and distribution centersbut owns only two treating facilities. Southeast Wood is the nation's third largest treater, with eight plants in the South and Midwest.

"Georgia-Pacific is a very powerful, well known name." says Fran Giknis. G-P marketing services man- ager for building products. The Southeast deal "allows us to brand treated lumber and leverdge the strength of the G-P name in thE treated lumber business."

Soufheast's customers are now G-P's. The deal also allows Southeast to lock in a white wood supplier, and provides both firms with more control over costs.

Southeast continues to buy a small amount of wood from otlher suppliers-"to get tle product mix the customers want"-but G-P's goal is eventually to be able to provide everything the refail accounts need.

G-P also continues selling wood to other treaters.

Other producers and ffeater$ ffe keeping a close eye on the suecess of the G-P/Southeast Wood paf,tnership-and several reportedly are exploring similar deals of their own.