This is a part of the 2016 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2016 Distribution Trends Special Issue
Thriving new construction, remodeling markets bode well for the sector. Distributors operating in the heating, ventilating, air conditioning, refrigeration and plumbing markets fared well in 2015, with the top 10 companies averaging better than 7 percent revenue growth and two of them registering double-digit improvement. Commercial and residential construction, as well as remodeling, continue positive reports midway through 2016. "All of our customers – whether they’re contractors, developers, engineers, architects and even interior designers – are optimistic," says Tom Santer, vice president of sales, F.W. Webb Co., Bedford, MA. "Everyone who went through the economic downturn in 2008 is probably going to remain cautiously optimistic, but business seems to be good and that's encouraging to us as well."
Regulation will continue to impact distributors, as it always does. The Department of Energy is expected this year to issue 36 regulations with an industry impact of $76.6 billion, according to Talbot Gee, speaking at December's Heating Air-conditioning & Refrigeration Distributors International annual conference. One of the most recent regulations passed down from the DOE is the finalized enforcement plan for the Regional Standard governing Central & Single Packaged Air Conditioners, according to a recent HARDI alert. Effective July 1, all distributors must maintain specific records for four and a half years on the sale of each split-system central air conditioner condensing unit and single-package central air conditioners. Visit hardinet.org for more on this and other regulations.
Those regulations heighten need for a distributor to embed itself in customers' businesses. With each regulatory change, HVACR and plumbing distributors have a key value-add opportunity. They can educate customers and create more stickiness by offering that information in advance and making it available online. "Ongoing communications and training is key," says Joe Fernandez, vice president of HVAC, refrigeration and building controls, F.W. Webb Co., Bedford, MA. "Both contractors and homeowners frequently turn to the internet to keep pace with current product and regulatory information. In addition, many homeowners search for contractors online, versus asking their neighbors for a referral. Everyone expects the internet to be a rich source of the information they need to stay informed and make sound buying decisions.”
Merger & Acquisition highlights in 2015:
The biggest deal in HVACR & plumbing occurred in July 2015 when Interline Brands Inc. agreed to be acquired by The Home Depot for $1.6 billion.
Ferguson Enterprises Inc. made 10 acquisitions last year, and CEO Frank Roach told MDM about the company’s acquisition strategy and how it fits into the overall growth plan.
Winsupply acquired plumbing distributor M. Cooper Supply and plumbing, heating and air conditioning products distributor Security Supply.
Average growth for companies on the HVACR & Plumbing Market Leaders list: 7.2%