February 25, 2008 - Modern Distribution Management

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February 25, 2008

Bunzl Sales Up 12% in 2007

Global distributor Bunzl plc announced its sales for the year ended Dec. 31, 2007, were £3,581.9 million (US$7,061 million at current exchange rates), up 12% at constant exchange rates.
Bunzl had a successful 2007 due to organic growth and strong performance from acquisitions and we are excited about recent developments, especially the entry into the promising Brazilian market," said Chief Executive Michael Roney.  "The continued strengthening of the Group gives us confidence that our business will continue to grow successfully."
Bunzl also announced it has completed three acquisitions. The company recently acquired Prot Cap Artigos para Proteção Industrial Ltda and its subsidiaries from Everaldo Baldin and Leonardo Baldin.  Based in ...

Border States Grows in Minnesota

Electrical distributor Border States, Fargo, ND, will open a branch in Rochester, MN, in April 2008. The new branch will operate out of a 15,000-square-foot facility and initially employ nine employees. The Rochester branch will serve the construction, industrial, utility, and data communications markets, and will be an authorized Square D distributor.

Our expansion into Southern Minnesota will help us to fully serve our customers and will provide opportunities to grow our business in Minnesota, Northern Iowa, and Western Wisconsin,"said CEO Tammy Miller.

Border States, an employee-owned company, has more than 1,200 employees and 51 branch operations in 11 states and ...

Housing Starts Up Slightly From December

Building Permits
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,048,000. This is 3.0 percent below the revised December rate of 1,080,000 and is 33.1 percent below the revised January 2007 estimate of 1,566,000.
Single-family authorizations in January were at a rate of 673,000; this is 4.1 percent below the December figure of 702,000. Authorizations of units in buildings with five units or more were at a rate of 336,000 in January.

Housing Starts

Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,012,000. This is 0.8 percent above the revised December estimate of 1,004,000, but is 27.9 percent below the revised January 2007 rate of ...

Orgill to Build Two DCs

Home Channel News reports that hardlines distributor Orgill, the Memphis, TN, plans to build two distribution centers to serve the Midwest and Pacific Northwest in the U.S.
The facility in the Midwest will be one-million square feet, and will act as the company's system-wide import flow-through center," according to HCN. It will replace the company's Vandalia, IL, DC.
In addition to serving retailers in the Northwest, the Pacific Northwest facility will support customers in Alaska and Asia. ...

RONA Grows 5.1% in 2007

Retailer and distributor of hardware, renovation and gardening products RONA Inc., Boucherville, Quebec, reported sales increased 5.1% to $4.8 billion in 2007, and profit was down 2.9% to $185.1 million. Growth was from acquisitions and store openings. Organic growth, excluding acquisitions but including stores opened in the past 12 months, was 3%.
In light of the increasing downward pressure on sales throughout the retail industry and a decrease in single-family housing starts last year," said President and CEO Robert Dutton, "RONA did not achieve its objective of $7 billion in annualized retail sales in 2007, as outlined in the 7-07 program."
In 2007, the company completed six major acquisitions and opened 18 new stores, including six in Western Canada and ...

Counterfeits in the Supply Chain

Here's an overview of the scope of global counterfeit trade, as well as what a few companies in one industry -electrical goods -have been doing to protect their intellectual property and, more importantly, the health and safety of product end-users. The second article in this series, published March 10, 2008, will focus on the changing face of product liability in regard to both counterfeits and private label.

Square D, best known in the U.S. as the flagship brand for the Schneider Electric North American Operation Division, realized there might be a problem with counterfeiting of its circuit breakers when the manufacturer started seeing an increase in defective product returns.

When we would go to check the returned product, we would find out they were ...

`UL Label’ Counterfeiting: Another Complexity in the Cycle of Illegal Trade

Underwriters Laboratories is a not-for-profit organization that tests and certifies products as meeting certain safety standards. UL is worldwide, and tests not only electrical products, but roofing shingles, fire products such as fire doors and fire hoses, bulletproof glass, life jackets, and any other product that may involve fire, electrical shock, mechanical or radiation hazards.

Counterfeiters not only target manufacturer brands, but also UL marks, which certify a product has met certain safety standards.

When you counterfeit a product and it carries a UL mark, then you're impacting on the safety of the end-user,"says John Dregenberg, UL manager of consumer affairs. "Counterfeiting an extension cord that could burst into flame in the middle of the night ...

Federal Government Contract Compliance

With the recent report that Grainger has been accused of not complying with its contracts to supply government agencies, distributors that sell to the government should reexamine their own systems to ensure they are in full compliance with obligations under the law.

Many companies are so intent on getting government contract awards that they later forget about having to comply with the numerous obligations tucked in the contract documents. But forgetting or ignoring federal contract obligations is risky business and not recommended.

This is especially true because government agencies are growing more aggressive about auditing contracts. So all government contractors, whether new to the federal ...

Commentary: A Tribute to a Distribution Veteran

When one of my mentors in this industry emailed in December to say he just left his office for the last time at the company he had been with for 48 years, it struck me how much impact he has had on so many people in this industry.

I first met Roy Otto, former owner of Machine Tool Supply in Eagan, MN, 25 years ago. He has been a teacher to many people in this industry and beyond. He has been generous in sharing his knowledge and enthusiasm for the industry, and has been a strong role model for hundreds of employees, peers, suppliers and competitors.

Roy started in the warehouse of in 1959, worked hard and moved into inside and outside sales. It was natural that he ended up with an equity stake. Roy built a well-planned exit strategy, sold his business a few years ...

MDM Interview: United Stationers On Private Label & Data-Sharing

MDM spoke with United Stationers CEO Dick Gochnauer recently about the company's move into the industrial sector as well as the role it plays as a master distributor. In Part II of this interview, Gochnauer addresses private label, recruiting and retaining employees and data-sharing.
MDM: How is United Stationers preparing for a potential economic slowdown in the next year?
Dick Gochnauer: I have less concern over industrial, foodservice and JanSan. In the office products space, we are seeing a slowdown. We saw it starting to occur in 2007. We figured it was coming and it did. We are prepared if the economic slowdown continues in 2008. We are planning to get growth but know that it may be more challenging. The good news in the office ...

MDM News Digest 3804

Chicago-based facilities maintenance distributor Grainger responded to a complaint filed in U.S. District Court in Eastern Wisconsin alleging the distributor had overcharged the U.S. government by charging more than the agreed-upon 26-percent markup as well as illegally relabeled products manufactured in non-trade agreement countries so they could be sold to the U.S. government. Grainger is required by contract with the General Services Administration to prevent product from countries that do not have reciprocal trade agreements with the U.S. from being offered for sale to government agencies. Grainger said: The company takes this allegation seriously. Although Grainger believes the company has fully complied with its contract, it intends to carefully review the allegations to ...

MDM Inflation Index: December 2007

Modern Distribution Management's December Inflation Index, which measures a cross-section of industrial supplies, was up 0.4% from the previous month, and up 3.28% from December 2006.
Summary of MDM Inflation Index for the past 12 months:

December 2007 Index 275.9
November 2007 Index 274.7
October 2007 Index 273.6
September 2007 Index 273.5
August 2007 Index 273.3
July 2007 Index 272.4
June 2007 Index 271.7
May 2007 Index 271.2
April 2007 Index 270.8
March 2007 Index 269.6
February 2007 Index 269.4
January 2007 Index 268.7
December 2006 Index 267.1

Please click below to view a print-ready pdf of the MDM Inflation Index for December 2007, listing the ten individual product categories ...

Distribution Financial Metrics and Trading Multiples

This table highlights key financial metrics and trading multiples for 30 publicly traded distributors in the industrial and building products industries up to Dec. 31, 2007. Download this data below. Also find graphic illustrating median EBIDTA multiples for the same distribution companies.


These materials, prepared by Robert W. Baird &Co. for MDM, are for informational purposes only.

"3/5/2008 176- Use this data to benchmark against 30 publicly traded distribution companies. ...

Grainger On Its Product Expansion, New Private Label

MDM spoke with Seth Erickson, vice president of product merchandising for Grainger, about the $6.4 billion facilities maintenance distributor's product expansion and private label strategies.

Chicago-based Grainger continues to add product to its portfolio, a long-term strategy to provide one-stop shopping for its customers. The strategy, says Seth Erickson, vice president of product merchandising, is driven by customer requests. 

We have found that in MRO efficiency is king, and the more efficient we can make our customers, the more valuable we are to them," Erickson says.

In fact, he says that as the economy slows, distributors and their customers must become more efficient and strategically reduce costs by consolidating purchases. "We ...

MDM February 25, 2008

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