Distinct niches served by strong value propositions developed over decades have created a lot of value — and revenue — that digital can’t displace.
Welcome to the 2019 edition of MDM's annual ranking of the top 150+ North American industrial and construction product distributors across 16 product sectors. View directory pages for each of the more than 150 distribution companies in these lists, including ten-year revenue trends where available, key contacts, number of locations, contacts, and more.
This is the tenth year MDM has profiled the size and shape of these markets. We've expanded the list this year to more accurately capture the largest suppliers of an incredibly diverse and fragmented product portfolio of MRO, production and consumable products (OEM products excluded). MDM Analytics estimates the total North American market size for the product categories sold by the companies listed here at approximately $650 billion (U.S. market $550 billion). Please see the Methodology section at the end of this introduction for more information on how the lists are compiled.
It’s important to note that ranking industrial/construction product distributors is far from an apples-to-apples exercise. While there are direct competitors, the fragmented nature of industrial and construction product markets in North America means that most of the companies on this list compete at a tangent: to varying degrees, each distributor has an overlapping product assortment with a list of similar, but not identical, competitors. The emerging exception is Amazon Business, which, as a platform company, cuts a wide swath across an increasing number of industrial product sectors with its marketplace of participating distributors and suppliers.
Digital Changes Everything … Almost
At the top of the list, Ferguson Enterprises dominates in HVACR, plumbing and PVF markets, with $16.7 billion in 2018 revenues and 11% growth over 2017. Chicago-based W.W. Grainger follows at number two on the list with $11.2 billion in 2018 revenues, more than doubling its prior-year growth rate with a 7.4% increase over 2017, compared to a 3% growth rate 2016-2017. More than ever before, digital innovators are defining the top of the list. Grainger was first out with a CD-ROM catalog in the 1990s. Ferguson has also pushed the digital envelope, building out a collection of B2C online sites that has grown to 9% of its annual revenues, roughly $1.5 billion in 2018.
That's just one data point for why we are far from Amazon Business taking down the companies in our 2019 listings. While there may be some significant share shift by digital disruptors, I expect our top 20 list will remain fairly stable for years to come. The very nature of these deeply fragmented markets that digital sellers are exploiting also bodes well for the distributors on this list and for smaller, agile specialty distributors as well. North American end markets are distinct niches served well by strong, customized value propositions developed over decades in most cases — that’s why they’re successfully made it to the top of the heap in revenues. There’s a lot of value companies in these pages have built that digital can’t displace.
Overall, digital transformation continues to shape the competitive landscape as customer buying patterns shift and distributors adjust their business models to adapt. Amazon Business clearly has the lead, but the industry is in the early stages of sorting out how new types of digital marketplaces and alliances will define winners and losers. New channel models are evolving rapidly, and marketplace platforms will increasingly define how distributors gain access to customers.
At the same time, traditional outside sales models are increasingly strained by these disruptive shifts impacting every distribution channel, where digital disruptors keep raising the bar on pricing visibility, delivery performance and integrated supply chain and workflow management.
For the second year in a row, Amazon Business is the headliner when talking about revenue growth for industrial products sales. Debuting on the MDM list at No. 6 last year, the industry disruptor continues to move quickly up the list of largest distributors to No. 3 this year by MDM estimates. Amazon Business does not report financial results, but said it would surpass $10 billion in its revenue run rate near the end of 2018. By MDM’s calculation, that puts its 2018 total revenues at roughly $9.5 billion, with its share of U.S. industrial/construction/MRO products at roughly $6 billion.
It’s not a big stretch to project for Amazon Business to be the largest broadline MRO industrial products distributor in the next year or two, if it is able to maintain its current pace. It’s getting closer in 2019. For many, it’s hard to imagine W.W. Grainger not owning that spot — but that’s just the point. The Amazon Business platform, as both a direct seller and a marketplace, has a capability to scale across the incredibly fragmented markets that traditional or even hybrid brick-and-mortar business models simply can’t go head-to-head against. But traditional distributors that leverage digital effectively have a potential for value differentiation that is extremely difficult to displace.
M&A and Economy Both Strong in 2018
The year 2018 was a vintage year of strong sales growth. That was reflected in double-digit year-to-year revenue growth in 2018 for many of the distributors on these lists, where most industrial and construction market sectors were hitting on all or at least most cylinders — automotive, aerospace, energy and more — for two consecutive years or more.
The semi-quiet blockbuster deals award for 2017-2018 goes to power PE firm Clayton, Dubilier & Rice, which has had the most impact on shifts in our 2018 Top 40 Distributors list . CD&R acquired the HD Supply Waterworks business in August 2017 to form Core & Main, #13 on our 2018 list with $3.2 billion in revenues. CD&R then acquired SunSource at the beginning of 2018, which in turn acquired Ryan Herco Flow Solutions, #36 on our 2018 list, and The United Distribution Group, #15 on our 2018 list with $1.4 billion in 2017 revenues. While the company doesn’t report revenues, SunSource revenues in 2018 were likely in the $1.5-billion range, and will certainly move up in our 2020 edition with the full-year impact of its acquisitions.
Other top deals of 2018
• Applied Industrial Technologies, Cleveland, acquired FCX Performance, which ranked No. 25 on MDM’s 2018 list with $557 million in revenues, significantly expanding its flow control product offerings and services to complement its fluid power segment.
• HD Supply, Atlanta, acquired A.H. Harris Construction Supplies, a specialty construction supplies distributor, strengthening its markets in the Northeast and Mid-Atlantic regions. A.H. Harris had 2017 revenues of $380 million.
• MSC Industrial Supply Co., Melville, New York, acquired All Integrated Solutions (AIS), with $66 million in 2017 revenues, strengthening its position in the Upper Midwest region.
• Most recently, Kaman Corporation, Bloomfield, Connecticut, announced in June 2019 that it will sell its Kaman Industrial Technologies unit to private-equity firm Littlejohn for $700 million.
• Motion Industries in early 2018 acquired electrical specialty products distributor EIS, ranked #13 on MDM’s Top Electrical Distributors list with $781 million in 2017 revenues. A year and a half later, Motion is spinning it off to PE firm Audax.
While there have been fewer large-scale deals this year by industrial distributors, conditions are favorable to see continued add-on acquisitions as well as the potential for larger deal announcements moving into the fall. With a forecast slowing economy and more digital disruption certain to keep pressuring margins and traditional distribution models, I expect we’ll see some bold moves to strengthen both digital capability as well as drive growth in challenging markets.
Data for MDM’s lists of top distributors were based on 2018 revenues, either reported or estimated by MDM’s researchers. In most cases, we used fiscal 2018 revenues, but in some cases, MDM uses calendar-year revenues for a more accurate comparison. Companies were asked to provide data about revenues, with information supplemented by SEC filings and publicly available information. For companies that don’t share revenue data, MDM estimates their relative position in its list based on best available industry resources and information.
Trends summarized in this report were developed through a combination of MDM research, industry surveys and interviews with industrial distributors and their supply chain partners within the past six months. Economic trending is based on MDM’s annual Economic Benchmarks for Wholesale Distributors and economic analysis by the MDM research team.
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