Ready for the industry’s next aggregator … Southwire?

Southwire is a very intriguing company. Years ago they took a commodity product that defined the company (wire), combined it with some acquisitions and mixed in marketing to convert the company from the perception of a staid, commodity company to a brand with differentiated products.

From there they added product development and, while still having some semblance of a saturation distribution policy have layered on a selective distribution strategy focused on preferred service and a willingness to work “close” with preferred distributors.

And over the past few years they have further diversified their offering.

They acquired Maxis in 2009 to provide jobsite tools that enhance productivity.  In this article from Electrical Wholesaling, Jack Carlson, then president of Southwire’s electrical division, used the term “contractor solutions.”

The company launched its Tools division in 2013. At the time it was understood that this division was crafted based upon guidance / input, and an early launch, with Lowes. ElectricalTrends touched on the topic based upon feedback we heard at the 2013 NAED South-Central meeting. Over the years we’ve seen how Southwire has introduced new products, invested into marketing of the line and have more recently heard of initiatives to “motivate” their reps to seek further market penetration and “encourage” distributors to support the line.

Over the past month the company has made two more acquisitions:

• Garvin Industries, a small fittings, metal boxes and “miscellaneous” products (including some lighting!) company that is known for importing and selling direct to contractors was acquired in August. Much of the business reportedly is / was in the Chicagoland area. The company is about a $25M company. Southwire placed this acquisition into its Tools and Assembled Products Business Unit. Feedback from industry sources is that Southwire is planning to use this brand in a “retail” environment.  Whether that means big box or direct to contractor is unknown (but you can go online and buy now … perhaps someone can share on how competitive these prices are for their market?)

Some key comments from Southwire’s press release:

“As a company, our goal is to grow 50 percent over the next five years,” said Rich Stinson, Southwire’s president and CEO. “To do so, we must be intentional about listening to our customers and creating solutions to meet their needs. The acquisition of Garvin helps us further expand our product offering and will give us a broader opportunity to provide custom solutions for our electrical customers.”

• More recently the company purchased ProBuilt Professional Lighting. This company, with revenues reported at less than $10M. ProBuilt’s focus has been on job site lighting and as such the acquisition will also be folded into the Tools and Assembled Products Business Unit. Again, a small tuck in of a sourced line to expand the Southwire offering.

According to Southwire’s press release, ““As a business group, our mission is to make contractor’s lives easier,” said Norman Adkins, EVP and president of Southwire’s Construction Systems & Solutions group. “The acquisition of ProBuilt strengthens this commitment, and we are pleased to add these products to our growing suite of contractor solutions.”

The recent acquisitions, and the language in the press releases, generates some thoughts of:

• To grow 50% in 5 years infers that Southwire expects copper pricing to rise significantly and hence to artificially benefit from it or, assuming that they forecast in units, is going to seek to further diversify its offering to generate additional revenue streams.
• There is a definite interest in growing the “tools” business with “tools” being defined as more than hand tools to a broader definition of “jobsite tools” which can encompass a range of products.
• The terminology of “contractor solutions” could open the diversification, or acquisition, focus to be larger deals of other contractor offerings in the fittings / boxes arena, potentially positioning Southwire as a construction products aggregator. Consider … what interacts with wire? And as a privately-owned company, perhaps culturally they appeal better to other privately-owned / family-run businesses?
• What, if any, conflicts could Southwire’s acquisition strategy have with its rep network? What lines could become conflicts? What “rationalization” will happen with the current deals, albeit small companies? Most supplier acquisitions result in “winners and losers” for reps and hence income windfalls and crunches.
• How will Southwire accelerate its tools traction?
• The Garvin “direct” model could be an intriguing experiment, utilization of a brand for other markets or access to sourcing for product line diversification.

Some interesting deals that could highlight Southwire’s direction?

As a distributor, what is your reaction to a “wire” manufacturer leveraging the business to gain tool / contractor supply business (if it comes to this?)