Competitive threats tighten market
By Industrial Distribution Staff -- Industrial Distribution, 9/1/1999
Increased international competition and industry consolidation continue to wreak havoc in the belting market.Through the first half of 1999 many market segments remained strong, including the grain industry, road aggregate producers and food processing customers. A depressed North American mining industry is the major exception.
Yet foreign competition is becoming a big factor for many distributors and manufacturers, says Ronald Roalsen, president of Rubber & Plastics, Inc., a Portland, Oreg.-based distributor. Cheaper belt imports from Asian manufacturers have resulted in shrinking margins for his company, and Roalsen says in some instances his firm has responded in kind with price reductions. Rubber & Plastics has also switched its focus to service customers' applications needs.
Richard Womack, eastern regional manager for Downers Grove, Ill.-based Flexible Steel Lacing Co., and past president of the National Industrial Belting Assn., says consolidation among industrial distributors has a pronounced effect on supplier-distributor relations. Flexible Steel Lacing Co. is in the midst of re-examining its distribution network partly as a result of the growing integrators.
"Some of these real large distributor organizations, there's nothing wrong with them, but they create problems with manufacturers that have relations with small to medium ones," he says. "After an acquisition by a bigger player, we find ourselves saying, 'What do we do now? We must do business with them.'"
Womack sees no signs of acquisition activity easing.
In one case, a pending acquisition by a major end user is expected to benefit one of its distributors. Cargill Inc.'s proposed buyout of Continental Grain Co.'s commodity-marketing group would mean more business for Applied Power Products in St. Paul, Minn., since the firm is an exclusive belt seller to Cargill, says Angela Field, national marketing manager.
Field says that overall her company is optimistic this year and expects a slight revenue increase. A key factor is that despite low grain prices, high yields have forced customers to invest in new facilities to house and move their products -- which means more demand for Applied Power Products' elevator and conveyor belts.
"Hopefully the volume will offset the lower grain prices," she says. "The grain industry people are upbeat on new products to be sold and new capital expansion products ... and we are, too. I see a lot of big things coming down the pike."
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