Chicago, IL-based Grainger, broad line distributor of facilities maintenance products, will combine its Lab Safety Supply (LSS) and Grainger Industrial Supply businesses, President and CEO James Ryan announced at the distributor's annual analyst meeting.
Our Lab Safety business has under-performed," Ryan said during the analyst meeting. "We've hit a wall with growth … We are going to take aggressive action to unlock the potential of that business."
The company says the combined businesses will allow Grainger to leverage volume with suppliers for better pricing, improve product assortment and information, better logistics service for Lab Safety Supply and Grainger customers, and optimize the existing network for better service and cost.
Mike Pulick, senior vice president and president of Grainger Industrial Supply, said during the analyst meeting that Lab Safety Supply's acquisitions in the past few years have not been the growth engines Grainger expected. "Post-integration the growth has slowed," he said. In addition, the single-channel focus of LSS has become a "competitive disadvantage." LSS is a catalog-based distributor.
Grainger Industrial Supply and LSS are increasingly competing against each other in the safety market. "We've also had cost structure redundancies," Pulick said. "It makes sense to bring these two businesses together."
Grainger expects between $70 million and $100 million in incremental revenue and between $20 million and $30 million in cost savings over the next 18 months as a result of this move.
Products sold under LSS will be added to the Grainger network. In the first quarter of next year, the products will be added to grainger.com and to the Grainger catalog. The products will be available for sale by Grainger salespeople. Pulick says the addition will strengthen Grainger's position in safety products.
The distributor also plans to selectively add product from the Grainger offering to be sold under the LSS brand. In addition, Grainger says that LSS customers will gain better service on the east and west coasts.