“The independents had good reason to be worried about their future in 1981. The gap between nationals and independents was large and it was widening. The top executives of the national chains were boasting of their success and their future growth plans. The leading experts of the day were predicting industry consolidation on a massive scale.

“And the nationals were growing,” he emphasized, “both through start-ups and through acquisition. The nationals were not better companies than independents, but they were successfully leveraging their purchasing clout with suppliers and they were cutting back-end deals that were not available to independents.”

Today's A-D numbers some 360 distributors spanning electrical, plumbing, PVF, HVAC and industrial supply divisions, with total sales of around $22 billion. The threats facing them are similar to those of 25 years ago. Weisberg, in his “State of the Industry” stem-winder speech closing the 2006 annual meeting of A-D's Plumbing & PVF Divisions, nonetheless exuded confidence in discussing the outlook for member firms.

Consolidation is raging once again, he said, yet: “Every time the national chains buy someone, our members in that market get stronger and realize accelerated growth. They pick up new customers that miss the flexibility and service levels that the acquired company no longer provides. They hire quality people that quickly become disillusioned about the new owners and the bureaucracy with which they operate. And they soak up market share like a sponge,” Weisberg stated.

“As I look to the future,” he continued, “I see an industry increasingly divided. To one side, stand a few giant distributors run from their corporate headquarters by financial managers without regard for their company's people, or their relationships with their long-time suppliers, and with little understanding of the realities of each local market. The executives at these companies have but one concern. It is the return they generate for their public or private equity masters.

“On the other side, stand a small army of strong independents. Some are family owned; some are employee owned. But all are professionally managed by people who have a deep commitment to their employees, their customers, their long-time suppliers and their local communities. And it is the independents who will be gaining share in their local markets, attracting new customers and hiring more and more of the best people in this industry,” said Weisberg.

Affiliated Distributors' Chairman & CEO Bill Weisberg said independent distributors “soak up market share like a sponge.”

Over-promising is okay

These included the keynote speech by marketing consultant Rick Barrera titled, “Over-promise, Over-deliver.” He said that to stand out from the crowd of competitors, a company needs to “articulate a brand promise and perform to the promise. Without an over-promise, you don't exist in the minds of customers,” said Barrera.

Three other educational workshops were available to the press on management topics, as well as an interactive workshop on PVF industry concerns that represented the highlight of the meeting to this reporter.

Raw materials top PVF concerns

First, the good news. It's one of our industry's dirty little secrets that rising prices benefit many distributors. Gross margin dollars are the lifeblood of distributors, and as long as they can maintain gross margin percentages, price increases mean more bucks flowing through their arteries.

Bad news is there are too many drawbacks to wild price gyrations for distributors to be jumping for joy. Here are some of the problems discussed by participants in the interactive PVF workshop.