An Eventful Holiday Season

Usually the weeks surrounding the holidays are quiet as everyone tries to catch up on paperwork while at the same time complete (or start) preparations for 2008. This year was different as 6 items of significance occurred.

In no particular order …

1. HD Supply agreed to sell its Rheem/Ruud HVAC group to Watsco. While in and of itself this isn’t important to the electrical channel, it is the second significant business that HD Supply has recently sold. it was also reported in Home Channel News that HD Supply’s LBM sale to Pro-Build may have sold for book value. Given the continuing residential market issues, it would be doubtful that the HVAC group would attract much more. Question – could HD Supply’s electrical, or elements of electrical (especially residential – i.e. Edson Electric, selected branches/geographic areas), be far behind?
2. Chris Hartmann, formerly EVP & COO of Thomas & Betts, left T&B and will become the EVP & CEO of International Electric Supply Corporation (IESC), which is the North American division for Rexel responsible for Rexel USA and Gexpro. Chris, as many may recall, was also with A-D and Rockwell. Conversations have led to the question of “why?” Chris’ background with distributors through A-D provides some distribution empathy as well as a broad understanding of distributor profitability. His manufacturing experience provides operational/process, financial and product sourcing experience. The sourcing component could be critical given Rexel’s interest in private labeling. Additionally, with Dick Waterman becoming NAED chair in May (and having heard from an ex-NAED chair that the role can be very time-consuming and is expected to become more so), perhaps Rexel decided that there were benefits to having additional quality resources driving profitability throughout the company. In the eyes of many manufacturers and distributors, Rexel can use some help in improving execution.
3. Warren Buffett entered the electrical industry with his 60% investment in the Marmon Group. Marmon Group owns Cerro Wire and Aetna Wire along with a number of other wire/cable companies (and 125 companies in total). Given Buffett’s style, wouldn’t expect changes other than an expectation of growth and profitability.
4. Eaton purchased Moeller, which some say helps fill out the line a little more as well as provides additional international opportunities.
5. Viking, a division of Sonepar, purchased Anchor Electric, a very very small distributor. At least they didn’t add capacity in the marketplace by opening a small location to compete. Buying small companies helps reduce capacity while generating growth for the acquirer. With the economy slowing, will we see this become a trend … small companies selling out (some possibly due to credit reasons)?
6. Nice article in WSJ on TCP, the “Intel Inside” of CFLs (unfortunately the article was two days after Christmas, when few probably read it). Interesting that an estimated 70% of CFLs sold in the U.S. are made by TCP. They manufacturer for Home Depot, WalMart, GE, Sylvania and more. With incandescents being phased out starting in 2012, this company will continue to grow inspite of increased competition. This appears to be a company that distributors should learn more about, especially if they sell to the residential market (or perhaps we’ll see other private label CFL lines evolve).

The commonality … growth through acquisition and a desire to stimulate profitability. In slow markets, opportunities are readily available for those willing to be aggressive.

If you haven’t seen our recent articles to help in preparing for your 2008, you might want to check out:

• “Fine-Tuning Operations”, 16 steps to improving profitability
• “Creative Offense Supports Strong Defense”, 8 growth ideas
• “Gaining Intelligence to Grow Sales”, the benefits of aggregated POS information for manufacturers and distributors

It’s a lot of info, but we needed to get caught up!!