Consolidation breeds diversification

Broader product lines blur the line between janitorial and industrial distributors

By -- Industrial Distribution, 7/1/2000

The consolidation trend sweeping the janitorial supply industry hasn't transformed a fragmented marketplace to a concentrated one, but distributors are making strategic moves to hang on to market share.

After a quarter century in the business, including 17 years of running his own company, Andy Brahms, president of the Archem International Corp. distributorship in Fort Lauderdale, Fla., says he's never seen anything like the current wave of consolidations. From national roll-up companies to the penetration of industrial distributors, alternative distribution sources threaten independent distributors specializing in janitorial supplies.

Archem's annual sales are $10 million, which straddles the line between the categories of small and mid-sized companies. Brahms says superior service and a broad product line give the company an edge.

"We go in and try to show people products that are cost effective and do the job quickly using less product," Brahms says.

During the past five years, Archem has also strived to become more of a mainstream company by adding items like doormats, warehouse fans and ladders. The company catalog is now up to about 600 pages. Part of the winning strategy is making customers aware of all the products the company offers, explains Brahms.

Meanwhile, Joseph Weil & Sons, Inc. in La Grange Park, Ill., a fourth-generation, family-owned general line distributorship, is moving in the other direction. Tom Keller, director of the chemical and maintenance division, says the 106-year-old company branched out into sales of jan-san products about nine years ago. Today the division has 11 salespeople and customers include schools, universities and contract cleaning companies.

"Consolidation has affected us in a positive way," Keller says. "The fewer places our customers have to go to obtain the same product mix and the less shopping they have to do, the easier it is."

The experiences of Archem and Joseph Weil & Sons are increasingly common as more companies offer a wider product line to combat consolidated competitors. Smith Paper & Janitor Supply in Eldon, Mo., is an example of an independent distributorship using a consolidation strategy to expand its customer base. The most recent of Smith Paper's two acquisitions was in January, says company president Kim Smith.

"You start having concerns [and asking yourself] are we missing the boat when [you see consolidation] not just in your competitors, but also in your manufacturers," Smith says.

Although the industry is not dominated by giant firms, the pace of consolidation has been rapid during the past five years, says Bruce Boynick, a senior associate at Kline & Co., a Little Falls, N.J.-based business consulting company.

"Previously we had primarily local and regional [distributors] with only a few nationals," Boynick says. "Now at every level of the channel there are fewer players. There are fewer end users, chains are growing and building service contractors are growing. The upshot is upstream we require fewer vendors and makers."

Mike Bohannon, vice president of operations for Oaks, Penn.-based Peerless Paper Mills, Inc. says consolidation has both helped and hurt the master distributorship with offices in Savage, Md., Pittsburgh, Cleveland, Chicago and Minneapolis. Consolidations are positive for Peerless when the result is a larger distributor buying more product.

A negative scenario occurs when a consolidated company buys less than the total of the two former entities.

Peerless doesn't reveal sales figures, but Bohannon confirms the private company does more than $50 million in annual sales, which places it in the large company category. In the last five years, Peerless has moved beyond pure jan-san sales to distribution of industrial, hardware, plumbing and heating, and medical and dental products.

"Once the end user gets it in his mind he wants something, he wants that product," Bohannon says. "We carry 121 different manufacturers. It helps that we have a variety."

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