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Private Label Use to Grow

Commentary: Never Say Never

Never say never. It was only five years ago when U.S. industrial markets were in the deepest trench anyone could remember. Customers were shutting plants and moving offshore. Private label was going to put all known brands out of business. Nearly every conversation about the largely ignored industrial downturn in this country included the phrase: It will never be as good again.

You can argue there are fewer distributors serving fewer customers than ten years ago, but look at the growth of industrial distributors the past four years. Overall, most sectors have enjoyed double-digit growth into 2007, and from anecdotal reports, many distributors are pleasantly surprised  ; that sales haven't started to luff sooner.

Industrial markets look different today, but through a combination of consolidation and growth opportunities into tangential areas, distributors have built healthier businesses than pre-2003. Many shed the dominant customer who offered big sales volume but handcuffed profits and, perhaps more importantly, incentives to find alternate growth paths. Many diversified successfully into construction markets.

In fact, many specialty distributors benefited from consolidation of larger competitors. Customers in most markets have clearer and fewer choices for specific services and specialized products.

In this context of industrial and construction markets that have shifted significantly, the play for Hagemeyer's North American business makes sense. For Sonepar, a company heavily dependent on construction contractors, Hagemeyer's core business into U.S. industrial markets offers a hedge against its dependence on the health of construction in its established regional markets. But U.S. industrial markets will never be attractive again, will they?

© 2017 Gale Media, Inc.

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