This is a part of the 2015 Distribution Trends Special Issue. The annual feature was researched and written by MDM editors based on interviews with dozens of wholesaler-distributors, as well as industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2015 Distribution Trends Special Issue
Concern over counterfeit bearings grows. Nearly every major bearing manufacturer has been hit over the last few years by counterfeiters – and as a result, they're working with channel partners to combat the growing issue. For example, NSK is providing training to its distribution network on how to identify and address counterfeiting activity. China remains the primary source for counterfeit products, but more seizures are taking place in the Middle East, as well.
Automotive sector continues to strengthen. Auto sales in the U.S. are expected to be 16.8 million units in 2015 and 17 million in 2016, a return to prerecession levels, according to Consensus Forecast. Low gas prices help boost consumer interest in new vehicle purchases, and it appears that pent-up demand is being released. According to the 2015 Economic Benchmarks for Wholesale Distribution, original equipment manufacturers are the largest end market for mechanical power transmission (bearings) supplies, so the upward trajectory is good news for the sector.
Oil and gas – and other natural resources – increasing volatility for distributors. States that saw significant boosts from the oil and gas extraction/exploration boom are now struggling to adapt to oil prices that dropped 50 percent earlier this year. Expectations are for prices to increase, but to remain well below the "norm" of above $100 a barrel seen in the last four years. Coal mining also continues to see declines as the country looks toward "cleaner" energy sources, such as wind and solar.
Diversification expands. Many end markets served by power transmission and bearings distributors have seen wild swings in demand since the recession. As a result, many distributors have been expanding their target markets. Key targets for growth: food and beverage, automation and wind.
Mergers & Acquisitions in 2014:
Applied Industrial Technologies had an acquisitive 2014, with a particular focus on expanding services to oil and gas markets in the U.S. and Canada – including the acquisitions of Knox Oil Field Supply, San Angelo, TX; Reliance Industrial Products, Nisku, Alberta; Texas Oilpatch Services, Houston, TX; and Ira Pump & Supply Co. Inc., Ira, TX. Applied also completed acquisitions in Mexico and Australia in 2014.
Kaman Industrial Technologies' M&A activity in 2014 was focused on targeting growth opportunities. Kaman acquired fluid power distributor B.W. Rogers and is using the company as the platform for its fluid power business. The distributors also sold its Mexican business unit.
Motion Industries acquired Commercial Solutions Inc., Edmonton, Alberta.
OTP Industrial Solutions acquired Advanced Industrial Products, Lexington, KY.
Average growth for companies on the Power Transmission/Bearing Market Leaders list: 9%