Top 200 Analysis

June 13, 2008
Recession talk. Consolidation. Inflation. Wild copper and steel pricing. Skyrocketing fuel and health-care costs. With these headaches pounding on the electrical wholesaling industry, one might expect this year's Top 200 companies not to be the most optimistic bunch of electrical distributors.

Recession talk. Consolidation. Inflation. Wild copper and steel pricing. Skyrocketing fuel and health-care costs. With these headaches pounding on the electrical wholesaling industry, one might expect this year's Top 200 companies not to be the most optimistic bunch of electrical distributors.

That's not the case. This year's Top 200 electrical distributors reported a solid 2007 and are surprisingly optimistic for 2008, despite all the talk of a recession.


One wire and cable specialist that had a 34-percent sales increase in 2007 is expecting another solid year in 2008. Priority Wire and Cable, North Little Rock, Ark., expects to increase its $186,113,860 in 2007 sales by 22.5 percent this year. The company plans to nail its aggressive target by “expanding its distribution base by supplying a diverse offering of wire and cable at market-level price,” the company said. “We have expanded the breadth of this offering in 2007 to include a full line of aluminum products.

“Our wire and cable package, known as our ‘combination program,’ allows customers to better control their metal risk and increase their inventory turns by buying fewer items of each product line.”

As a whole, the average growth rate in 2007 for the more than 130 distributors that supplied sales data was 8.2 percent, a healthy growth rate that's at the upper end of the electrical wholesaling's historical annual sales growth range of 4 percent to 8 percent. Interestingly, many distributors are forecasting growth of approximately 8 percent in 2008, too. As you can see in the chart on page 28, more Top 200 distributors expect 2008 sales growth of 6 percent to 10 percent, than any other growth rate.

Bill Elliott, president, Elliott Electric Supply, Nacogdoches, Texas, is one of the more optimistic distributors for 2008. After a somewhat slower year of sales in 2007 in which Elliott Electric Supply's sales grew approximately 5 percent, he expects his company's business to be up 15 percent in 2008. Helping to fuel growth this year will be the 12 new branches he opened in 2007.

Other distributors were busy opening new branches, too. Fromm Electric Supply Corp., Reading, Pa., opened a new branch in Scranton, Pa., and two trade-only design centers that focus on lighting and appliances. Hill Country Electric Supply, Austin, Texas, opened branches in College Station and Round Rock, Texas. Schaedler Yesco Distribution Inc., Harrisburg, Pa., also opened two new branches. Jim Schaedler, the company's CEO, said his firm also formed an Energy Saving Solutions (ESS) group, hired two certified lighting designers and expanded its marketing team. He said his biggest challenge for the future is developing the proper corporate structure to handle the 65 percent growth he anticipates for Schaedler Yesco over the next five years.

Another company that's gunning for big growth is Utility Supply and Service, Georgetown, Texas. Johnny Andrews, the company's senior vice president, is looking for a 30 percent increase in sales. He says the biggest puzzle that Utility Supply and Service is trying to solve is managing the growth that the company has had in six years, when it climbed from a start-up to $100 million in 2007 sales, and the double-digit growth it expects over the next few years.

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Green market

All the current media attention on global warming, out-of-hand gas prices and green buildings apparently hasn't percolated down to as many real-world sales opportunities for energy-efficient electrical products in the electrical wholesaling industry as we might have expected. When asked, “Has all this talk about the green market made a tangible impact on your sales?” twice as many respondents had seen little or no impact. As Daniel McLaughlin, president and CEO, Benfield Electric Supply Co. Inc., White Plains, N.Y., put it, “A lot of talk, no action.”

One Illinois distributor said her company's customers were just starting to get familiar with these products. “They are not on the bandwagon yet,” said Karen Dolins, controller, Idlewood Electric Supply Inc., Highland Park, Ill. Jo Ann Hardy, CFO, Harris Electric Supply, Nashville, Tenn., said the impact of green products was “minimal, but growing.” “Certain cities in our area will not issue a building permit until watts-per-square foot are within a certain range,” she said. “This has led to a change in some products being sold.”

However, the green market was providing some solid sales for several distributors. Steve Barker, vice president of sales, Villa Lighting, St. Louis, says the shift to energy-efficient products and the focus on green products made the biggest difference in the company's fortunes in 2007.

John Maltby, Maltby Electric Supply Co. Inc., San Francisco, also said green products had made the biggest difference in the company's 2007 sales and said Maltby Electric Supply was, “actively involved selling more controls in commercial applications and offering more energy-saving products as well.”

Sanford Leff Jr., Leff Electric Co., Brooklyn Heights, Ohio, said the company has an energy division and that compact fluorescent and ballast conversions were providing opportunities. Leff Electric is also working with customers on a recycling program.

Wade Patterson, president, Tri State Utility Products Inc., Marietta, Ga., said his company was supplying box pads for transformers, cable and connectors to wind farms. Ken Walter, president, Steven Engineering, South San Francisco, Calif., was also seeing sales opportunities in the alternative energy market and said it offered his firm “new opportunities for our products with promising and continued rapid growth.”

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While mergers and acquisitions are always on everyone's mind in the electrical market, acquisitions of Top 200 distributors have slowed down compared to two years ago. Electrical Wholesaling estimated that the 12 Top 200 companies that were acquired in 2006 had a combined sales of approximately $5.3 billion. In 2007, only eight Top 200 companies were acquired with an estimated total sales volume of approximately $2.8 billion. These companies were Minnesota Electric Supply Co., Willmar, Minn. (acquired by Border States); US Electrical Services Inc. LLC, Exton, Pa. (CED); Bryant Electric Supply Co. Inc., Lowell, N.C. (Hagemeyer North America); Roden Electrical Supply Co., Knoxville, Tenn. (Kendall Electric); HD Supply Inc., Orlando, Fla. (private equity firms); Crawford Electric Supply Co., Dallas, and Ralph Pill Electric Supply, Boston (Sonepar USA); and Shepherd Electric Supply, Raleigh, N.C. (State Electric Supply).

At press-time, there had been an estimated $575 million in sales volume changing hands in the acquisition of Top 200 distributors year-to-date in 2008. These deals included Sonepar USA's purchase of Hagemeyer's North American operations and ESSCO Electric Supply, Chandler, Ariz.; and the purchase of Beacon Electric Supply, San Diego, by Gexpro.

While it appears that the slowdown in acquisition activity is continuing for now (see charts on pages 26-27) dozens of companies of all sizes have been acquired in the last few years. Electrical Marketing newsletter has reported on 40 acquisitions in 2007-2008. Add in the 34 acquisitions that occurred in 2006 and the 26 the publication reported on in 2005 and you have at least 100 acquisitions of distributors of electrical supplies in 2005-2008. That figure shocked EW's editors.

Because of all this consolidation, the Top 200 electrical distributors accounted for an estimated 60.7 percent of the electrical wholesaling industry's $89.1 billion in 2007 sales. The five largest full-line electrical distributors — IESCO, Dallas; WESCO Distribution Inc., Pittsburgh; Graybar Electric Co., St. Louis; Sonepar USA, Philadelphia; and Consolidated Electrical Distributors Inc., Westlake Village, Calif. — had an estimated $23 billion in sales. That's 42.6% of total industry sales. In total, these electrical distributors had an estimated 34,878 employees and ran 1,987 branches in the United States.

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By the numbers

The Top 200 distributors that provided figures for the number of employees and locations (or where we could provide a solid estimate) employ at least 80,738 employees and operate 5,355 U.S. branches. Electrical Wholesaling estimated that the Top 200 electrical distributors had $54.08 billion in 2007 sales.

At least 35 of these companies are product specialists, including 12 utility specialists, 10 wire and cable specialists and eight lighting specialists. For the 109 full-line electrical distributors that provided both their 2007 sales figures and an employee count, sales per employee were $519,215.

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