Top 10 List
These companies are the 2011 market share leaders among industrial distributors
by Lindsay Konzak
June marked Modern Distribution Management’s (MDM) release of its annual MDM Market Leaders Top 40 Industrial Distributors list and the largest distributors in 11 other sectors.
The big are getting bigger. This is not surprising given the economic rebound. But the magnitude of the rebound depended on the sector. Distributors dependent on the construction industry are having the hardest time regenerating growth.
Take Ferguson/Wolseley Canada. This year, the North American operations of UK-based distributor Wolseley topped the list but did see a decline in revenues year-over-year for fiscal 2010. No. 2 HD Supply also struggled, with just a 1 percent increase from the prior year.
But distributors serving other sectors saw larger increases, with No. 4 Airgas growing 11.3% and McJunkin Red Man, with a focus on oil and gas, growing more than 5% in 2010. No. 3 Grainger was up 15% for the year. Average growth for the Top 40 Industrial
Distributors list was 10.4% in 2010.
Part of what drove growth in 2010 – in addition to the bounce in demand – was acquisitions. Grainger is using acquisitions to fuel growth overseas and build out key parts of its specialty brands and services portfolio.
Lawson Products, No. 24, sold Rutland Tool to MSC Industrial Supply, No. 12.
Fastener distributor Wurth, No. 16, made a strong play in North American markets with its acquisition of industrial supplies distributor Oliver Van Horn Co., New Orleans. No. 22 Industrial Distribution Group bought Alamo Iron Works. And No. 14 Interline Brands and No. 17 DXP Enterprises also continued to build out their portfolios with acquisitions in 2010.
We expanded our sector coverage this year from eight to 12, including industrial, electrical, power transmission/bearing, fluid power, HVAC/plumbing, building materials/construction, fasteners, gases/welding equipment, safety, electronics, plastics and pharmaceutical distribution sectors.
Doing so really highlighted the continued channel convergence and product line expansion we have seen from the largest diversified distributors over the
past decade.
For example, Grainger appears on the lists of largest distributors in power transmission/bearing, fluid power, safety and electrical based on its sales breakout for those sectors. And HD Supply appears on the industrial, HVACR/PVF/Plumbing, electrical and building materials/construction lists.
Distributors such as Motion Industries, Kaman and Applied Industrial Technologies continue to expand in industrial supplies and in fluid power.
Diversification was a trend we highlighted in the 2011 Distribution Landscape Report that accompanied the release of the MDM Market Leaders top distributor lists in June. Here are four trends highlighted in the 2011 report:
1) Diversification of end-markets and product lines
Large national distributors have been diversifying their product availability and end-market exposure for much of this decade. But after the recession, more distributors of all sizes say they recognized the need to prioritize diversification into new markets or product types to buffer their companies from the ups and downs of cyclical business.
Womack Machine Supply, Farmers Branch, Texas, No. 36 on the Top 40 list, told MDM that it does not want to follow the price of commodities. It bought four companies in 14 months before the economy crashed with the primary goal of diversifying their exposure into new geographies and end-markets.
2) Better inventory management
Distributors are rebuilding inventories to meet growing demand, but they’re doing so carefully, according to Jon Schreibfeder, president of Effective Inventory Management. This was a key trend noted by several distributors we interviewed for this project.
Companies are still looking to keep inventory investment low, while maintaining service levels and avoiding stockouts. This is a tough task.
Three areas of inventory management that distributors are focused on: avoiding speculation as a path toward profitability; more demand for vendor managed inventory; and streamlining operations through leaner processes and centralizing and standardizing inventory throughout their organizations.
3) Lag in hiring, despite a return in business
While the average sales increase for the Top 40 Industrial Distributors was 10.4% for 2010, distributors have not yet pulled the trigger on hiring. Some have started to add back staff on a limited basis, depending on their markets, but the focus has been more on
cross-training for many distributors. Productivity is at an all-time high.
“The concern is when does it start to stress the work force too much? At what point do you need to do more?” says Skip DeVilling of DeVilling & Associates, an executive employment search firm.
4) Demand for more distributor services at the end-user
And finally, one of the biggest trends was in part due to the fact that customers are taking the same approach to hiring. Many distributors of all sizes are finding themselves doing more for customers while battling for less business post-recession. Customers
who pared back staff and resources in response to the recession want distributors to perform more services for them.
In MDM’s annual Market Trends Survey, many distributors said they have added new services, including consultations, VMI or consigned inventory, improved online support, tool regrinds, turnkey installations and customer training.
Market Leaders Methodology
The 2011 MDM Market Leaders lists are ranked in order of 2010 revenue size alone; no other factors were used to compile these lists. This year MDM refined the lists to as accurately as possible reflect North American revenues where they are clearly broken out by the global distributors. For example, Bossard moved from No. 22 to No. 35, because we used just the Americas revenues this year for the fastener distributor. But the Top 5 Industrial Distributors did not change from the 2010 Top 40 Industrial Distributors list.
Most other big moves on the list – such as that of Lewis-Goetz & Company from 26 to 23 – were due to aggressive expansion via acquisition.
We collected data for this report in several ways. Companies were asked to fill out a form online providing data about revenues, trends and executives. In addition, forms were sent to companies known to be the largest players in their sectors. 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.
We surveyed and interviewed hundreds of executives throughout the past year assembling the data and insight for this annual update. We thank everyone who shared their knowledge and insight with MDM. Learn more about the methodology used to create this list at www.mdm.com/methodology.
To view the full set of MDM Market Leaders lists, go to www.mdm.com/marketleaders. 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.
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INDUSTRIAL SUPPLY MAGAZINE
The March/April issue of Industrial Supply magazine features an in-depth cover story about Joyce Lansdale and Vallen. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and David Kahle, as well as interviews with numerous product and distribution industry experts.
