Article Number : 2622 |
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| Date | 10/25/2007 9:49:52 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=2622 |
| Abstract | Baltimore—It’s been two months since J.J.Haines, the nation’s second-largest flooring distributor, expanded into Florida via its acquisition of Orlando-based Wheeler, a 32-year-old company doing $50 million in sales from nearly 3,000 accounts throughout the state... |
| Article | Baltimore—It’s been two months since J.J.Haines, the nation’s second-largest flooring distributor, expanded into Florida via its acquisition of Orlando-based Wheeler, a 32-year-old company doing $50 million in sales from nearly 3,000 accounts throughout the state. The purchase brought Haines up to the $400 million mark in annual sales and extended its coverage from Pennsylvania to Florida with the exception of Georgia. FCNews’ editorial director/associate publisher Steven Feldman recently had the opportunity to sit down with Bruce Zwicker, president of J.J. Haines, to discuss the move, the company, the future and business in general. What was the mindset behind the Wheeler purchase? They make money. They are a strong company. And when we were looking around, we did not want a fixer upper. We wanted to hit the ground running. We wanted a company that was growing, and we could help them do better. In addition, Wheeler has a very strong customer following as determined by independent research. Plus, their culture is great and matches ours. So expanding into Florida was not the primary driver? Our first thought was that we wanted to grow. Our second thought was to research 50 distributors from Pennsylvania to Florida. We visited and looked at over a dozen. And what we found was a great distributor in Florida. We have seen other distributors seek to expand only to find the challenges have been too great. What did they do wrong, and what will you do right? Our interest is not to become a national flooring company. Our interest is not to become a public company. Our interest is not to sell ourselves to someone else. Our interest is to be good at what we do and from Pennsylvania to Florida, if we are so fortunate, be the best we can be to our suppliers and our customers. We will not overreach and grow beyond our capabilities. What are some of the things Haines can do to help Wheeler grow? We will have remote warehouses. We will add sales and marketing personnel. We have restructured sales and marketing management. We will selectively add product lines. We are already upgrading their IT and HR support. Is Haines going to be running Wheeler now? We can’t run Florida from here. We’re northerners. Wheeler gained the reputation for being the fastest growing company in Florida, and Scott Wheeler and Bonnie Davis are both staying. Having people who know the business and are well respected, that’s a gold mine. So what is your actual involvement? I will look at ways to migrate our best practices to result in savings. For example, maybe combine back office administrative. And now Wheeler is part of a long-term strategy. Haines and Wheeler distribute competing product lines. Is it a conflict to handle products in your main trading area and in some cases competing products in another part of the country? In the case of Armstrong, both Michael Lockhart (CEO) and Frank Ready (president, flooring division) knew well in advance of our strategy and were comfortable with it. Before the deal was done, we disclosed more details to them. Florida is a $1.5 billion market for flooring, and Wheeler’s sales are $50 million. We’re small. We also communicated with Cain & Bultman, which does a fine job for Armstrong. We have a lot of respect for those people. We gave everyone a heads up. So everyone is on board? I think some suppliers will be nervous and understandably so. But this will be a separate division. We will not allow conflicts that endanger suppliers. Isn’t there opportunity to take some of your existing product lines and bring them to Florida? Right now, the plan is to sell what we have and sell the heck out of it. And if suppliers would like us to sell their products in Florida, we would certainly talk. Are there any other expansion plans? Georgia is a possibility, but it depends on whether the deal is right for the buyer and seller, and whether there is a cultural fit. We would also need the support of existing suppliers and new suppliers. Timing is also important. Would you ever look to expand to the north? Whatever we do we want to do well, and you can’t do everything. We’ve investigated it but decided south would be better than north in the long run. It has to do with population, buying power, etc. Just some general questions. With some manufacturers going direct, like to the National Floorcovering Alliance, and retail groups inking deals with national logistics providers, what is the future of the floor covering distribution? There will be consolidation in every industry. It’s not going to stop. Suppliers will make up their minds whether to deliver themselves or outsource. There will be a whole lot more, particularly those off shore. But dealers will not want to do business with two or three manufacturers—they can’t from a credit point of view. You will have dealers who will want alternatives, and you have smaller manufacturers who want distributors. So I think distributors in this industry will have a long, healthy life. Distributors add credit, a more responsive service model from an inventory point of view, and also offer entrée to smaller suppliers who need access to the U.S. market. Distributors that keep their costs low and service levels high, and treat their suppliers right will always be a player. Can you give me some ways in which a distributor can manage expenses? As examples, we went from a centralized stocking philosophy to a regionalized system. Basically, we went from a hub and spoke to a mothership with a regional warehousing system. So now it’s a matter of keeping the right inventory at the right warehouse. We actually were able to reduce inventory by this move. Our expenses went down because we were better managing what we received. Take fuel. We have not been hurt by the rise in fuel costs because very early on we put in a fuel surcharge. We also changed our fleet from all tractor trailers to a 50/50 mix of tractor trailers and 10-wheeler straight trucks. Of course, right-sizing the service level per customer is important. For example, builders need more service. Any thoughts on the Armstrong situation? I think Armstrong has done a marvelous job in promoting their products and company. If it continues as is with the distributor playing the role it is playing, and it continues introducing new products and taking market share, we would like nothing better. Could the same thing happen with a strategic or private equity purchase? Yes. On the other hand, there are potential buyers who could envision a shift in the distribution model to some extent. We will see... |