NAED 2011 Western Observations

A couple of weeks ago I attended the 2011 NAED Western which was held in Palm Springs at the JW Marriott Desert Springs.  Unfortunately have been traveling, so haven’t had an opportunity to share some observations.

• NAED reported that the attendance was up.  At least the registrations were up (and if they weren’t up vs. last year …)  The two NAED receptions were pretty full.  Tough to judge number of people who showed up given the size of the hotel (people get spread around pretty quickly!).
• From a business viewpoint, many commented that there was more optimism for 2011 than what they have heard recently. Perhaps everyone is breathing a sigh of relief over the past couple of years?
• In talking to Western and Midwest distributors (the NAED Western travels pretty far inland), 2010 performance was flat to up 20%, depending upon a distributor’s business mix (higher growth was industrial), but that everyone saw increased profitability through improved cost controls. Some even said this was their most profitable year ever.  When asked why, most said that they had made personnel cuts (reduced “C” players), improved their inventory management (reduced slow movers, made returns, better controls) and focused on their pricing strategies.  Some implemented technology or made better usage of existing technology. 
• Some distributors have benefited from solar, as would be expected in the west.  Interestingly, many remarked that they are still challenged in this area and that the ones that are successful treat this as an industrial sale – must be 1) sold, 2) need in-house engineering support to do the design, 3) relatively low margins (treated as a project) and 4) no inventory given the speed of product innovation and frequent price erosion.
• Expectations for 2011 are about 5%, however, many could be falsely surprised due to pricing and copper increases.  Given that there is expected to be price increases and commodity inflation, revenue numbers could be deceiving and distributors, and manufacturers, will need to consider the number of units that they sell to tell if they have really grown their business.
• Many manufacturers are trying to push through price increases.  Most expect to realize 50% of their price increase.
• Some distributors reported that they are seeking acquisitions, but of healthy, or non-dead, companies.  We have heard of two asset purchases so far this year.  Many expect more of these as well as more small distributors either closing their doors or declaring bankruptcy.  Many commented that they are surprised there haven’t been more so far.
• Graybar is going through number of management changes with the latest being Dick Offenbacher retiring in Q1. Also hiring for management roles from outside Graybar … a first in many people’s memory. Sounds like there will be somewhat of a cultural change occuring with the influx of people in new roles as well as the company seeking newcomers for existing roles plus industrial and lighting roles. Moving up from the warehouse will not be the only way to grow with Graybar.
• Didn’t hear much re: NAED sessions … an indicator?
• Some distributors are looking forward to the new energy audit software which NAED is introducing,  supposedly in late February / early March. Potentially valuable tool for those who use; could commoditize the energy efficiency sale if all use.
• Distributors had much concern regarding copper pricing and how to help contractors who are upside down on projects and for future initiatives. Copper pricing seems be to a confluence of China, India, Brazil demand, copper ETFs, supply and demand as well as slow U.S. economic growth.  There was little, if any, talk about distributors mentioning aluminum as a copper alternative to their distributors.  (Did someone say “aluminum” (until there is an aluminum ETF coming!)
• Milbank ran a nice wind seminar, with their OEM partner, on distributed wind. Very educational.  Unfortunately only 13 people attended, of which half were not distributors.   More should attend, at least to gain some education on the opportunity in case a customer calls.  Seems like Milbank / Endurance do most of the work – distributor acts as lead generation and payment processor.  Was surprised by a map that shows where the land-based wind opportunities are (not much on the East coast).

If you attended, what were your observations?