The announced acquisition of European distributor Fabory Group for $344 million in August was an opportunity to enter the largest MRO market in the world, according to Grainger U.S. President Mike Pulick at the Oppenheimer 6th Annual Industrial Conference earlier this week. The acquisition, which you can read about here, also allows Grainger access to the fast-growing markets in Eastern and Central Europe.
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Pulick quantified the European market for MRO at $200 billion for distribution. He also said that Europe is more consolidated than Latin America and Asia, providing different dynamics for growth. Fabory provides expertise to Grainger in the high-margin fastener market focused on OEM customers in Europe and around the world, according to Pulick. He said that Grainger brings a track record in product line and private label expansion to Fabory.
Court Carruthers, Grainger's president of its international operations, spoke with MDM in September just after acquiring Fabory. (Read that interview: Grainger International President on Expansion in Europe)
He said that a key component of expanding internationally is that the distributor has to focus on "ensuring local relevance." "As a result, our business model may be different depending on the market," he said. For example, in Canada the distributor has a big presence in rural areas of the country due to the focus on resources, different from its footprint in the U.S. In Japan, Grainger is mostly Internet-based, focused on small customers.
"Given Fabory’s unique business model and specialized OEM expertise, our intention is to operate it as a standalone business unit and retain its brand, keeping its operations, leadership team and team member base intact," Carruthers told MDM.
Other comments from Pulick during the conference:
- Expect to see Grainger's e-commerce sales to grow to more than 40 percent of revenues in the next three to five years. That's the plan Pulick presented. He says adoption rates are high, and the distributor plans to continue tweaking its online presence, making the website more personal, easier to navigate with more functionality.
- Sales force expansion continues to be a priority for the distributor, who considers vertical segments, the size of the customer's business and the potential for MRO spend in its decisions on where to allocate sales resources. "Over time we've gotten more aggressive with our sales force and we've seen better margins come from it," Pulick said. The distributor has been expanding its sales force over the past five years, most recently starting a program focused on "territory sales managers." These reps are focused on mid-sized customers across the U.S. The distributor added 150 new territory sales reps in the first half of this year, and plans to add 150 more by the end of the year.
