By Ken Ryan—NSDespite numerous challenges, many flooring distributors are taking advantage of the continued strength of the home improvement/retail industry and the SPC/rigid cores category to record healthy profits in 2021, with some wholesalers rising 50% or more from 2020 onwards. And while the problems that have ravaged distribution are likely to persist into 2022, such as port congestion, the near-term outlook looks bright, executives say.
FCNewsThe Top 20 Distributors issue looks not only at the industry leaders, but also at stories impacting the wholesale floor segment in general.
(Editor’s Note: FCNewsAnnual distributor list includes companies that supply products for various manufacturers. We do not consider companies that only process their own wares to be eligible for listing.)
WWith apologies to Charles Dickens, 2020/21 was truly “the best of times and the worst of times” for floor distributors. Seasoned executives who have experienced economic ups and downs in their time say nothing compares to the period between March 2020 and now.
On the one hand, there is the much-discussed blockade in ports that has restricted supply chains and maintained upward pressure on prices; there are labor problems that have acutely affected floor distributors; and inflationary pressures that have affected freight and commodities.
And yet, despite these hurdles, distributors are riding healthy increases – mostly double digits – in 2021 after a challenging 2020. “It’s a bizarre world – good and bad at the same time, the most ironic situation I’ve encountered in my 45 years,” says Jeff Striegel, president of Elias Wilf, the No. 20 wholesaler: “It’s literally the best of times and the worst of times happening at the same time. It’s just insane.”
Most observers agree that supply chain problems, including longer ocean travel times and port congestion, will continue well into 2022 and perhaps beyond (see Port update story).
In the meantime, as distributors work on shipping delays and product failures, they are taking advantage of the still rising waterproof vinyl category and turning the strong home improvement/retail side of the business into healthy profits. The West Coast is particularly vibrant as the top distributors Galleher and Tri-West, for example, report sales increases of 50% or more thanks to acquisitions, territory expansions and generally strong activity.
“Acquisitions in the Pacific Northwest and Texas have had a very positive effect on the company,” said Ted Kozikowski, president and CEO of Galleher, now the industry’s No. 2 wholesaler with 2021 revenue estimated at $335 million. “Our renewed focus on commercial sales has helped our Southern California neighbor, Tri-West Ltd., also gain momentum, with sales up approximately 52% year-over-year, pushing it to No. position was catapulted. overall just a tick below Galleher at $330 million. “Our expansion into the Northwest and tremendous growth in the other outdoor markets, as well as slight underreporting in previous years, is why the number is significantly higher,” said David White, vice president of sales and marketing for Tri-West. Tri-West has also aggressively launched new products in all four market segments – retail, construction, commercial and multi-family – that will continue through early 2022.
Not to be outdone, the Manteca, California-based Tom Duffy Company (part of a BR Funsten and Tom Duffy brand transition) said it will achieve 15% growth by 2021; this despite the departure of Armstrong Flooring, which is now a Tri-West brand. Combining decades of experience, technical expertise and its portfolio of supplier partners from two entities into one, Tom Duffy Company is well positioned for the future, according to company officials. “Our strong supplier relationships have enabled us to secure product allocation, enabling us to best meet order fulfillment demand in this environment,” said Donna Lagano, vice president of marketing and digital strategy, Tom Duffy Company. . “Continued growth in the strong waterproof products category, along with ample inventory, has been beneficial to our business.”
Acquisitions/territory expansions by Galleher and Tri-West respectively, and the integration of BR Funsten and Tom Duffy are typical of the current state of distribution, where consolidation is increasingly common with larger players taking over smaller buyouts or additional territories and product lines (see story of Industry Consolidation).
The biggest gathering is at the top, where No. 1 Haines and its controlling partner, Belknap White Group (formerly No. 6), are now coming to market as Belknap-Haines. While the official announcement of the name change has not yet been made, Belknap-Haines president Paul Castagliuolo told FCNews that they have used the new name in industry correspondence and announcements, as well as a distributor show in late July. “We will have a marketing campaign in early 2022 to highlight the change,” he also shared the increase in sales. Overall, most of the increase is related to an increase in sales of our own products, driven by very strong demand for home improvement.”
As a combined entity, Belknap-Haines is expected to reach $600 million in 2021, up from a combined $570 million in 2021, being by far the No. 1 distributor in terms of revenue.
One of the thorny issues that keep distributors up at night is labor, especially drivers, but also warehouse and back office staff. Indeed, alongside installers, truck drivers are arguably the most sought-after position in flooring today. The problem is, they’re hard to find – and even harder to keep.
According to statistics from the American Trucking Association (ATA), the average annual churn of long-haul truck drivers at major trucking companies was over 90% (significantly less for LTL drivers).
The situation worsened a few years ago when the government mandated Electronic Registration Devices (ELDs) for all 2000 model year or newer trucks engaged in interstate commerce. The new rule made it virtually impossible for drivers to work more hours than the legal limit and was seen as overly intrusive by employees. “Many truck companies went bankrupt and drivers left,” explains Striegel of Elias Wilf. “It is difficult to find new drivers, especially young ones. What 18 year old boy wants to enter a field where he is regularly drug tested, where if you get a positive drug test, you lose your driver’s license and you are off the road for 30 days? We don’t have a pool for new guys coming in. As the economy got stronger, there was a greater demand for drivers at a time when there is a shrinking pool of them. ”
With the shortage of truck driver positions expected to reach 175,000 by 2024, companies are looking for ways to encourage people to join or at least enrich the pot for those already employed, according to ATA.
Galleher, for example, has adjusted the salaries to the new market rate, especially for drivers and warehouse employees. Average salaries for drivers and warehouse workers rose 7%-10% last year, Kozikowski said. Belknap-Haines, meanwhile, raised wages, offered sign-up bonuses and implemented a more lucrative employee referral program, Castagliuolo explained.
A referral program has also benefited Herregan (No. 8), according to Craig Folven, president. “We are fortunate to have permanent employees throughout our company. Where we needed to replace or add people, we used a referral rewards program for our current employees to refer a friend or family member. This strategy has worked very well for us.”
Other wholesalers try different strategies to retain or recruit talent. “We spend a lot of time recruiting and working to use technology whenever possible to help create efficiencies,” said Scott Rozmus, president and CEO of Romeoville, Ill.-based FlorStar Sales (No. 12). “There is no panacea as most of our fellow employers in the region face similar challenges and employ similar tactics.”
It in Earth City, Mo. established EJ Welch Company (No. 9) partners with qualified recruitment agencies to find people. “You have to be agile and quick to find strong candidates,” said Tressa Samdal, vice president of marketing at Welch. “From 2022, we will reinvest corporate profits to retain our employees and reward them for a higher level of performance.”
Looking ahead to 2022, distributors remain optimistic. While the same issues plaguing them now are expected to continue, there are positive signs as well. For example, the stock of homes under construction rose in September to the highest level since February 1974. Why is this good news for floors? When these homes are finally completed — and projects don’t get canceled — the floor will benefit by being one of the last products to go into the house, observers say.
“Sometime between the fourth quarter and the first quarter of 2022, there will be a massive increase in business as these homes are completed,” said Elias Wilf’s Striegel. “When this starts to hit, it will create a pandemonium for cabinets and floors to get homes over the finish line. There is a huge tidal wave of activity that even if new contracts were to decline in the fourth quarter, there would already be so many in the pipeline – and with pent-up demand – it should be a great fourth quarter.This year has been a beast and it looks good for the next six months.”
Other executives agreed. “While we continue to be hit hard by ocean freight delays, we expect things to remain smooth,” said Terry Gray, senior vice president of marketing for Augusta, Maine-based NRF Distributors (No. 6). “The feedback from our customers remains positive. Consumers continue to be concerned about COVID-19, but are also looking for some normalcy and are ready to buy.”