It’s not every day that I have the opportunity to interview a top executive at a $13 billion company, but I was granted that last week.
On Aug. 31, I was able to interview Deidra (Dee) Merriwether, senior vice president and chief financial officer of industrial supplies distribution giant W.W. Grainger — No. 1 on MDM’s 2022 Top Industrial Distributors list — for our latest MDM Podcast.
Given its scale and stature, Grainger tends to serve as the pacesetter in the industrial and MRO markets. Everyone else selling in those markets — be it a single-location distributor or a competing national distributor — is keen on what Grainger is up to and its business strategies, besides looking to the company as a barometer for customer demand in the greater industrial products sector.
Lately, much of that interest has been on the Lake Forest, Illinois-based company’s pricing strategy. Many economists believe U.S. inflation has peaked, leading several major distributors to suggest they likely won’t enact a further price increase unless market conditions change considerably.
For Grainger, pricing has been a core focus since it revamped its strategy in 2017 to remain price competitive and target price-cost neutrality over time. In our conversation, Merriwether emphasized the importance of price changes over a longer duration, rather than looking at just one-time price increases or how pricing has changed in just one year.
“Timing isn’t always perfect, right? Cost increases don’t always perfectly align with when you can pass price on, especially in a business like ours, where we have contract relationships that dictate the timing of price changes on products,” Merriwether told me. “So, it’s really important to look at price costs over a longer period of time. It makes more sense.”
Merriwether further explained that, on a year-to-date basis for Grainger through the end of June 2022, the company was price-cost positive but was roughly neutral when taking into account the net of freight inflation.
“I know there will be quarter-to-quarter fluctuations due to timing, but we continue to have this long-term goal and focus on remaining price-cost neutral and price competitive,” Merriwether added. “We want to make sure that online price transparency is very clear, that we present value to our customers and they can actually see the price and the value that we provide. Remaining price competitive is very important for that to continue to work for us.”
Along with pricing, much of our conversation highlighted Grainger’s tech stack and the investment that the company continues to make in its digital offerings, from which 75% of its U.S. sales originate as of the end of 2022’s second quarter. Merriwether joined Grainger in 2013 and served in several financial and sales strategy executive positions before taking the CFO position in early 2021. In that time, she’s seen how the role of analytics has evolved to dictate more of the decision-making when it comes to financial strategy.
“In addition to leading the traditional finance function at Grainger, I also lead our corporate strategy and our analytics,” Merriwether said. “And part of the corporate strategy and analytics team’s responsibility is to conduct customer research — really understand and represent the voice of the customer, track their sentiment and analyze the effectiveness of our investments in technology. So, we really have the opportunity across the finance and analytics team to influence the business strategy.”
Our 38-minute conversation also touched on how Grainger has gone about best mitigating risk amid seemingly endless disruption over the past few years; what the most useful way is to measure financial performance given market volatility in 2020-2021; the company’s environmental, sustainability and guidance efforts; and Grainger’s overall state of digital transformation.
Listen to the podcast via the embedded audio above, and check out all our past episodes via our MDM Podcasts webpage here.