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February’s news that the distributor H.B. Fenn and Company had filed for bankruptcy sent shock waves throughout the industry, and while the fallout has dissipated some, the industry is still examining what lessons can be drawn from Fenn’s demise. Although Fenn had few Canadian clients, its problems called into question the viability of independent distributors and further deepened concerns about how publishers might get their books to market.

Jordan Fenn, son of Fenn and Company founder Harold, was publisher of Key Porter (partially owned by the distributor)and Fenn Publishing, an imprint that produced sports books for H.B. Fenn. Jordan could not comment on the fate of either Key Porter or Fenn Publishing—neither has declared bankruptcy, but both have been in legal limbo since the bankruptcy of H.B. Fenn. He described the end of H.B. Fenn as sudden and completely unexpected. “My dad created H.B. Fenn when he was my age. He was in his late 30s and he was the vice president of Coles. He left and he started distributing Coles Notes out of an 800-sq.-ft warehouse.” Gradually, H.B. Fenn attracted more and more publishers for distribution, including large clients like Warner and Disney, and eventually had 250,000 sq. ft. of warehouse space and a staff of 300. But, says Fenn, “When you are representing other publishers, you are only as strong as the lists that they produce, and if they determine that they no longer want to use a distributor to enter the Canadian market, there’s really nothing you can do about it. The demise of H.B. Fenn was seeing our distribution partners elect to enter Canada directly.”

That’s what happened two years ago when Hachette Book Group decided to move its sales and distribution for its national accounts from Fenn to the U.S. Others were rumored to be planning a similar move. In the past, foreign-owned publishers needed to have a Canadian distributor in order to comply with Canada’s foreign investment rules intended to protect Canadian cultural industries. However, in recent years, the Conservative government in Canada has not enforced the rules with much zeal. In addition to allowing Hachette to distribute directly into Canada, the government has approved an application from Amazon to set up a physical distribution facility in Canada, and is currently reviewing Canada’s foreign investment policy in book publishing and distribution. Following the bankruptcy of Fenn, the U.S. division of Macmillan, which was owed C$10 million at the time of the bankruptcy, took over distribution directly to national accounts such as Amazon and Indigo, while Raincoast Book Distribution in Vancouver took over distribution to independent bookstores, library and specialty markets, and Costco Canada. HarperCollins Canada began doing sales, marketing, and distributing for Pan Macmillan U.K. on June 1.

Among H.B. Fenn’s Canadian publisher clients was B.C.-based Whitecap Books. Whitecap was owed C$1.35 million at the time of the bankruptcy. “It wasn’t easy to take a hit like that,” says owner and president Michael Burch. “And who knows what the future might hold in terms of when the whole situation has been resolved as to whether there is anything left at Fenn with the receivers, but with or without that, we’re doing quite well.” Burch said Whitecap’s new distributor, Fitzhenry & Whiteside, moved “with lightning speed” to get its billings out by the end of February. “Without the assistance of Fitzhenry & Whiteside and particularly Friesen printers, who have been a great friend of all Canadian publishers, it would have been a little harder,” Burch says.

Another large company, General Distribution, crashed in 2002. The fall of Fenn has inspired some thinking on how to remain a viable distributor/publisher. Most publishers who are also in the distribution business say that it helps to be distributing their own books in addition to those of other publishers. HarperCollins Canada president and CEO David Kent says volume makes distribution work for his house. “Distributing our own books, distributing other people’s books, gives us volume and gives them stability.” One of the challenges for any business in Canada, he says, is that the relatively small population means that there are no economies of scale. HarperCollins Canada provides distribution for such clients as House of Anansi Press and D&M Publishers. “It is not only economical for them, it is very efficient, so they can focus on what they do best and be very comfortable with the fact that the books are going to be distributed well and handled well,” Kent says. It is also advantageous to have a warehouse in Canada, he adds. “If our customers are buying in tighter cycles all the time because they don’t want to carry the inventory, then what they need is quick turnaround.”

Mike Bryan, president of Penguin Group Canada, agrees that this kind of volume is an advantage, and in Penguin Canada’s case, he notes that its distribution center also serves the Pearson Education part of the business. Efficiency is the other key. Yvonne Hunter, Penguin Canada’s vice-president of publicity and marketing, adds that their distributor clients, such as Norton, Bloomsbury, Faber and Faber, and Canongate, fit very well with Penguin Canada’s own publishing program.

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