Top 10 Distributors
Trends driving growth among industrial distributors
by Lindsay Konzak
Ferguson and Wolseley Canada, both businesses of Europe-based Wolseley plc, again topped the Top 40 Industrial Distributors list from Modern Distribution Management in 2013. The list, which provides the largest distributors in North America, was recently released and is now available at mdm.com.
The Top 10 did not shift much this year, but MDM did add MSC Industrial Supply at No. 10, up from No. 11 last year. This was in part due to the removal from the list of Wilson Industries and CE Franklin, which were purchased by National Oilwell Varco in 2012.
MSC has also seen double-digit growth in the past couple of years, growing 19 percent in 2011 and nearly 17 percent year-over-year in 2012. The distributor is poised to grow even more next year with its 2013 acquisition of Barnes Group’s distribution operations.
The distributor’s aggressive growth plans to hit $4 billion by 2016 include an ongoing push online. E-commerce sales made up about 43 percent of overall sales in the first quarter of 2013. The distributor also increased its presence in certain markets with the Barnes acquisition, adding new product lines, growth in Canada and more capabilities with VMI and vending.
Vending was a key part of Fastenal’s strategy in 2012, putting its growth at nearly 11 percent from 2011 to 2012. Fasteners now make up less than half of the distributor’s annual sales, and the company plans to continue growing out its industrial supplies business. Vending and other inventory management solutions are also a part of Grainger’s growth strategy, one of the factors keeping it at No. 2 on this year’s list at $9 billion in 2012 revenues.
The average sales growth for the top 10 this year over 2011 sales was 10.1 percent. Combined, excluding McMaster-Carr, the Top 10 Industrial Distributors grew 9 percent from the top 10 total revenues in 2012.
Industrial distributors with some of the strongest growth in 2012 were those with a large presence in the oil and gas industries. The ongoing shale oil and gas market strength has driven growth for distributors like Edgen Group, Texas-based Womack Machine Supply and MRC Global.
Acquisitions were also a strong driver of growth for many of the distributors on the Top 40 list, many of those backed by private equity firms. FCX Performance, a flow control products distributor, grew nearly 41 percent year-over-year, thanks to its purchase of three companies over the past year. BlackHawk Industrial grew 23 percent to $320 million, primarily due to acquisition as the company, which formed in 2010, continues to build its portfolio.
As part of the 2013 MDM Market Leaders report, MDM also publishes an annual Distribution Trends Report. Here are some of the trends we are tracking:
1) Vending
Last year we reported that vending was increasing as a focus for distributors. This year, vending continues to be a big focus for some of the largest distributors and is affecting smaller distributors who are seeing increased competition in some of their accounts due to this aggressive push. Another trend we are noting for vending is that distributors that are doing it are getting smarter about it thanks to profitability challenges some are facing.
2) Generation Shift
Distributors are seeing a big impact from the generational shift that continues to occur in the industry. The impact goes beyond just a shift in leadership, with more Baby Boomers retiring. Employees in their 20s and 30s are driving improvement in technology adoption, including improvements in company websites and e-commerce capabilities. Companies are also forced to recognize that the next generation at their customers prefers to do business in different ways.
3) Mergers and Acquisitions
The distribution mergers and acquisitions market is strong, continuing to drive consolidation in certain sectors. Private equity’s involvement in the industry is
stronger than ever and several national distributors continue to expand geographically and in the services they provide by acquiring smaller regional distributors. That said, the industry remains fragmented, and smaller specialized distributors continue to fight effectively for their place in the market.
4) Technology
Finally, the market continues to be affected by new sources of competition, driven in large part by technology. Distributors of all sizes are able to compete online and reach new types of customers throughout the country and even the world.
Big-box stores like Staples are increasingly targeting B-to-B markets, and European distributors are acquiring and growing in the U.S. and Canada to balance low growth in their home markets.
To view the MDM Market Leaders lists and the full 2013 Distribution Trends Report, go to www.mdm.com/marketleaders.
Methodology
The 2013 MDM Market Leaders lists are ranked in order of 2012 revenue size alone; no other factors were used to compile these lists. Also, as much as possible, MDM refines the lists to reflect North American revenues where they are clearly broken out by global distributors. Data for these reports was collected in several ways.
Some companies self-reported data online via a form on MDM’s website providing data about revenues and trends. We also utilized SEC annual filings for public companies. For those unwilling to provide us with data, we utilized several resources to estimate where to place these companies on their lists including past reported revenues, average revenue increases in sectors, data from economic reports and conversations with industry experts.
Lindsay Konzak is editor of Modern Distribution Management and mdm.com, a specialized newsletter and Web site for wholesale distribution professionals. She can be reached at lindsay@mdm.com.
This article originally appeared in the July/August 2013 issue of Industrial Supply magazine. Copyright 2013, Direct Business Media.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
