The Spine Behind the Ingram Empire
If you’ve ever bought anything over the Internet, chances are you’ve dealt with an Ingram.
Operating in the background of the exploding world of electronic commerce, the Ingram family controls a $25-billion empire that consists of the biggest distributors in many of the leading online consumer-product categories: computer hardware, software, books, movies and video games.
The family’s holdings include Santa Ana-based Ingram Micro Inc., which is the world’s largest computer hardware and software distributor. Ingram Entertainment Inc. is the nation’s largest distributor of videos, DVD players and software, computer games, and audio books.
And Ingram Book Group, a unit of Ingram Industries Inc., so dominates the nation’s book distribution industry that last week the family’s plan to sell the company to bookselling giant Barnes & Noble Inc. for $600 million unraveled when the Federal Trade Commission staff opposed the deal because of antitrust concerns.
The matriarch of the Nashville-based clan, Martha Robinson Rivers Ingram, 63, ranks as America’s wealthiest active businesswoman and the country’s 24th-richest person, worth an estimated $4.7 billion, according to Forbes magazine.
All of this makes the Ingram family, which is virtually invisible to most consumers, one of the most powerful forces in e-commerce. But the rapidly changing industry poses steep hurdles for distributors, and especially for a family that has recently gone from one generation of leaders to the next.
None of the three men who built the family enterprise into the empire it is today remains as a manager; Martha Ingram and her three sons now hold the reins.
“Bronson Ingram, Phil Pfeffer, Chip Lacy. Those people were the heart and soul of this place,” said David Ingram, the youngest son who owns and runs Ingram Entertainment separate from the rest of the family’s businesses. “What I have done and my brothers have done and my mom has done don’t amount to a hill of beans.”
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Indeed, his father, E. Bronson Ingram, who died in 1995, spent nearly three decades building Ingram Industries into a distribution giant. He died in his early 60s, only months after being diagnosed with cancer.
Linwood “Chip” Lacy, whose vision created Ingram Micro, left the following year after a bitter dispute over control of the company. Six months later, Ingram Micro was spun off in an initial public offering. The rift between Lacy and the family has since healed. Lacy, who is semi-retired, sits on Ingram Industries’ board but is not involved in its day-to-day operations.
Also in 1996, Pfeffer, who built Ingram Book Group, left on friendly terms to become chief operating officer of publisher Random House. Until recently, he was the chief executive of Borders Group Inc.
That leaves the family’s holdings in the hands of the three sons, all in their 30s; and matriarch Martha Ingram, who became chairwoman of Ingram Industries in 1995 and chief executive in 1996. Before that, she spent 16 years as the company’s public affairs director.
Martha Ingram, who declined to interviewed, has delegated most of the responsibility for day-to-day operations of the companies to her sons, according to people familiar with the family’s operations. She serves on several other boards of directors, including those of Weyerhaeuser Co., Baxter International Inc. and First American Corp.
Those who have watched the Ingram sons say they bring a sobriety to business that has served them well in the years since their father’s death.
“They don’t have those airs, and they don’t have the destruction and distortion you so often think of in terms of second- and third-generation wealth,” Lacy said. “They’re down to earth and take their responsibilities very seriously.”
John Ingram, the 37-year-old middle son, guides Ingram Book Group and orchestrated the since- terminated plan to sell the company to Barnes & Noble. Ingram Book plans to move forward as an independent company, although John Ingram does not rule out another deal.
He shrugs off any notion that he and his brothers are anything less than capable of leading the companies his father built.
“We didn’t just fall off the turnip truck,” John Ingram said. “We have tremendously competent and capable management and boards of directors who have seen and done a lot. The world’s changing, but we’ve been out there trying to lead the change.”
Distribution can be a tedious business, but John Ingram is passionate about it.
“The fact that you have a sexy Web site and the ability to attract people to that site doesn’t start to address how consumers actually get things,” said John Ingram, sitting in the unpretentious conference room that was once his father’s office on the top floor of a modest Nashville office building. “The product has to get there somehow. Jeannie doesn’t just blink her eyes.”
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Internet commerce pundits have predicted the demise of middlemen, but the Ingrams see a future in which their distribution services become more integral and--perhaps more important--more profitable.
In a world linked by computers, the role of the middleman could expand to assume virtually every inventory and distribution role that a company might have, from the time that a manufacturer designs a product to the moment the customer receives it.
Ingram Micro, for example, not only distributes computers to retailers, but it also performs myriad other tasks up and down the supply chain, including assembling computers and installing software for manufacturers, and shipping customized computers to customers for retailers. Later, it handles returns and customer service requests.
Similarly, Ingram Industries is experimenting with a print-on-demand system for its book unit. Instead of warehousing seldom-purchased titles, books would be printed when customers order them. Ingram would bill the customer, print and send the book, and pay the publisher its royalties.
Both arrangements let creators do what they do best--develop and market new products--while Ingram does what it does best--distribute.
Ingram Industries grew under what by most accounts was the stern guidance of Bronson Ingram. He and his brother, Fritz, went their separate ways after they were charged in 1976 with bribing Chicago city officials to secure a sewage transportation contract. The allegations ended with Bronson being cleared and Fritz being convicted of 29 counts of bribery. He served 16 months of a four-year prison sentence.
In divvying up their businesses after the scandal, Bronson Ingram took a small Texas textbook distribution company, the seed for what became Ingram Book Group. Bronson also got a barge company, which is now operated by his eldest son, Orrin Ingram.
With the help of the then-32-year-old Pfeffer, Bronson Ingram developed a prosperous book distribution company, which grew from $50 million in revenue in 1976 to about $1.4 billion in 1997. The company became the model for the video, game and computer distribution companies that subsequently took the Ingram name.
Bronson Ingram was a very private man and liked to keep it that way when it came to business. Before his death in 1995, the plan had been to take Ingram Industries public in 1997, the year he would turn 65, when he would be ready to back away from the company.
“He really didn’t have the temperament to deal with a lot of well-meaning outsiders who thought they knew more about running the business than he did,” John Ingram said. “He wouldn’t have been very pleasant dealing with them, and he knew that.”
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With Bronson’s passing, the family switched gears, deciding to spin off Ingram Micro and keep the rest of its holdings private. All three sons joined the family business, staying in Central Tennessee even though the California-based Ingram Micro was the fastest-growing and most vibrant of their holdings.
David Ingram initially wanted to look elsewhere for work. After graduating from Duke University in 1985, he planned to work in his father-in-law’s real estate and insurance businesses in Baltimore.
“I guess as the youngest son, you’re always searching to do something different,” David Ingram said.
By his own account, David Ingram’s father was adamant that he come back to the fold, and as one Ingram associate noted, “You can’t appreciate what ‘adamant’ means until you’ve dealt with Bronson. Adamant was adamant.”
“My father was very upset that I wanted to go to Baltimore, and he essentially browbeat me to go into Ingram Industries,” David Ingram said.
Yet he still wanted to do things on his own, so he delved into Ingram Entertainment--which was then the third-largest distributor of movie videos--instead of Ingram Books, then the jewel of Ingram Industries.
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Shortly thereafter, Ingram Industries acquired the largest video distributor in the country, Commtron, which had $550 million in sales, and folded it into Ingram Entertainment.
“It was hard to say that I was ready for it,” said David Ingram, who was 31 at the time and five years removed from business school. “I think Dad wanted to keep me involved, and he did that deal as much for me as anything.”
After Bronson Ingram’s death, David Ingram took his share of the inheritance in the form of Ingram Entertainment and separated it entirely from the rest of Ingram Industries.
David Ingram bought into an Internet commerce company in 1996, which he later traded for a small stake in Aliso Viejo-based Buy.com Inc., an online retailer that is poised to go public soon.
The early move into e-commerce appears farsighted, but he quickly points out that it was not his idea.
“Chip Lacy was the reason I got into it in the first place,” Ingram said. “He would constantly be saying that the Internet is the next big thing, that we have to get into it.”
Looking to others for counsel is a trait the Ingram offspring learned from their father, those close to the family said.
“There’s no question that Bronson rubbed off on these boys as much as any father rubs off on his sons,” Pfeffer said. “The discipline that he had, the things that were important to him, the importance he placed in surrounding himself with good people, are all things that they have.”
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The Ingram Empire
Through their Nashville-based company, Ingram Industries, and other entities, the Ingram family controls a distribution empire with annual sales of $25 billion. Here’s a look at the family’s holdings:
Ingram Industries
Headquarters: Nashville
Leadership: Martha Ingram, chief executive; Orrin Ingram and John Ingram, co-presidents.
Operations: Owns Ingram Book Group, nation’s largest book distributor. Also operates an inland barge unit and an auto insurance company.
Status: Private, wholly owned by the Ingram family
1998 profit: Not available
1998 revenue: $2 billion
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Ingram Entertainment
Headquarters: La Vergne, Tenn.
Leadership: David Ingram, chairman and chief executive
Operations: Nation’s largest independent distributor of movie video rentals, DVD hardware and software, video games and CD-ROM multimedia products, and audio books.
Status: Private; 95% owned by David Ingram
1998 profit: Not available
1998 revenue: $1 billion
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Ingram Micro
Headquarters: Santa Ana
Leadership: Jerre Stead, chairman and chief executive
Operations: World’s largest distributor of personal computer hardware, software and peripherals.
Status: Public company trades on the New York Stock Exchange; Ingram family owns 48% of the stock and controls 85% of voting power.
1998 profit: $245 million
1998 revenue: $22 billion
Sources: Ingram Industries, Bloomberg News, Hoover’s
