AD’s 2015 Electrical Division Meeting Update

 Earlier this month I attended the AD Electrical Supply Division (ESD) National Annual Meeting (NAM) held at the Gaylord Texan in Dallas.  The theme was Together, We Win, a continuation of their recent branding strategy.

The meeting attracted about 1,000 people.  134 distributors with almost 500 attendees and over 100 manufacturers. Much interaction between distributors and manufacturers compressed into two days.

And with the meeting begins the 2016 planning season for many.

From my conversations with a number of distributors and manufacturers, here are some observations:

• Practically all distributors who are involved in the industrial market are down. The decline has accelerated during the summer.  The amount down varied from “a little” to “double digit”.  Declines were due to oil / gas markets, OEM focus (especially for OEMs selling to Europe and Asia), the agricultural market and overall industrial.
  • One industrial market that appears to be doing well is food and beverage companies.
• Those involved in the contractor market where seeing growth, especially companies based on the coasts and in major markets.
• And a couple of distributors mentioned that they are having “record” years (but also admitted to winning some major contractor projects and focusing on lighting).
• Companies with a specific energy / lighting initiative are doing well.  In fact I spoke to one company that stated that they were flat, their industrial was down but that their lighting was up double digits. Considering that lighting traditionally is 20-30% of a distributors business (and in some cases up to 40% when controls are included), this speaks to growth in this segment.
• It was rumored, and in some cases confirmed, that industrially-oriented manufacturers are considering layoffs if the market does not turnaround shortly.
• Initial forecasts for 2016 is 0-3% even though an economist who presented at the Graybar national meeting the prior week, according to manufacturers, is projecting a 9% increase.  While no one could understand how he got to 9%, this is a projection based upon assumptions.  If the price of oil increases “significantly” (from where it currently is), this could change market dynamics as the oil / gas industry (and the ripple effect from this industry) could benefit the electrical industry.
• A number of distributors are adopting CRM tools.  Some of this reportedly is due to Rockwell’s reappointment process; some of it is companies recognizing the need to have better systems for customer databases, marketing automation and sales analytics.
• A couple of major gear lines are strongly pushing “loading” programs to their distributors … the pressure of being a public company and end of quarter (and eventually end of year) goals.  Few distributors expressed interest given the current marketplace unless they could receive significant price discounts and dating.
• When the economy slows it’s interesting how pricing becomes more of an issue.  There was a session for AD financial networks on pricing.  Over 50 CFO’s attended a session conducted by Strategic Pricing Associates.
• A few distributors heard that Southwire was becoming “exclusive” with Lowes (as in exclusive provider). Some expressed disappointment, some took it in stride and recognize that retail and distribution channels within a manufacturer may differ on strategy.  All mentioned that they would be checking for pricing differences (and perhaps could use Lowes as a supplier / master distributor of Southwire if Lowes pricing was lower!)

From an AD perspective,

• There was an interesting presentation to Canadian members regarding opportunities in the “connected light” space.  This is an emerging opportunity.  Canadian members requested that AD Canada seek a speaker.  This segment of the market is driven by end-user opportunities, the need to have technical specialists, an understanding of customer needs as well as unique opportunities (sometimes to help them generate incremental revenue) as well as unique diversification opportunities for distributors. I spoke to one lighting manufacturer who is pursuing this market albeit they’ve hired a number of business development people to call on end-users and then eventually bring distributors into the opportunity for material fulfillment.  Given that this is a nascent market and evolving, they don’t see distributors investing into this segment.
• AD introduced a number of new programs relating to HR services, eContent services and a demand generation tool which is being piloted and is being compared to Yelp.  Feedback from members was “variable” based upon the topic.
• AD’s Clean Energy program has been renamed EnergyForce.
• Many manufacturers were surprised that AD did not share any quantitative information at the Supplier Meeting. Many were looking forward to AD’s traditional “outlook” for the coming year to help them in setting their objectives.
• Bill Weisberg’s keynote luncheon presentation focused on the benefit of independent distributors banding together to provide alternatives in the marketplace, that independents outperform national chains, that independents help manufacturers level the playing field so that manufacturers are not leveraged by national chains and hence independents essentially help improve manufacturer profitability.  He emphasized that AD’s initiatives, based upon its size and presumably the 7 divisions, can help with targeted investments (and then he mentioned AD’s eContent initiative (in conjunction with IDEA/IDW and Unilog) and demand generation initiative.)  Comments were made about how manufacturers are helping fund national chain ecommerce initiatives (presumably through rebate and perhaps additional funding for SEO initiatives) and it was intimated that AD may request support from suppliers on behalf of independent distributors / for AD initiatives.
  • Bill’s speech seemed to infer that the eContent initiative could be across multiple, maybe all, AD divisions. The industrial division has already started this initiative.
• The closing was a rallying cry to “Choose to Fight and Win” versus national chains.

That’s the overview.  It was a high energy, productive meeting for all.  Good exchanges of information, good start to the planning season.

If you attended, what were your observations.