Monday, January 28, 2013
During the second half of 2012, Schneider Electric experienced a number of changes driven by a consolidating industry. While two of its competitors (ABB and Eaton) expanded their product offerings and distribution reach through acquisitions of T&B and Cooper Industries respectively, Schneider became involved in the consolidation game through Kaman's acquisition of Zeller Electric and WESCO's acquisition of EECOL in Canada.
And we can say with confidence that discussions occurred between Kaman and Schneider as well as between WESCO and Schneider prior to each acquisition as the importance of the deal depended upon retaining the Schneider relationship ... but more importantly, ensuring the relationship could be expanded.
- In August, when Kaman acquired Zeller, we surmised that this was based upon a larger Kaman strategy and that Kaman would offer automation products (and industrially-oriented electrical products) throughout its network. We also asked "Is Graybar's industrial and automation initiative moving fast enough for Schneider?"
We now know the answer ... no ... as over the holidays Schneider announced that Kaman would carry Schneider Automation products at all of its branches
A couple of thoughts:
- According to recent research, a number of industrial end-users would like to purchase PT and electrical products from the same distributor. They see these product offerings as complementary ... and a number of Rockwell distributors have expanded into the PT business.
- This does appear to be some type of indictment of Graybar, and Schneider's, automation business. It mustn't be growing fast enough. According to one national distributor, Schneider is a "Rockwell wannabe" and their management team is relatively new to the industry.
- With the aforementioned manufacturer consolidation, one can presume that ABB and Eaton management have met with Graybar to advise them that "nothing will change, but if they ever have interest or could find ways to work together ..." Will Graybar decide that it needs to expand its industrial viewpoint / offering? Or support someone other than Schneider where Schneider has partnered with Kaman? Will Graybar look and say "with Schneider we see x% of the market, if we were dual we'd see y% of the market"? And if they did, do you think that Schneider would pull the line from its #1 distributor? With all of the changes going on at Graybar, nothing should be taken for granted.
2. Last summer, WESCO acquired EECOL and the deal was consummated the end of the year. The Canadian market is very concentrated, unlike the U.S. market. National chains control about 65-70% of the business (AD members have about 23% and presumably there are some unaffiliated, albeit small, distributors.)
WESCO, like in the U.S., represents Eaton as its distribution line. EECOL, which is primarily in western Canada and South America, is Schneider Electric. Now they have both in certain geographic areas, enabling them to have wider access to serving the market (or at least 2 chances to win a piece of business.)
Given that WESCO probably met with Schneider to advise them of the plans to ensure that they would keep the line authorization, it's reasonable to assume that a relationship was developed whereas if WESCO desired to purchase a Schneider Electric authorized US distributor, and the deal was of sufficient size and, possibly, WESCO was to run the business under a separate brand (like it is doing with EECOL), then Schneider would continue with the authorization ... thereby helping WESCO gain greater share within a marketplace.So, what could it mean?
- Looking forward, maybe short-term, maybe longer-term, will Graybar remain a Schneider only distributor or will they expand their distribution / automation offering?
- Will Eaton remain the primary distribution line for WESCO (we use primary as they also sell some Siemens Automation products in their RECO division and some GE distribution equipment (probably for national accounts.))
- Will more industrially-oriented electrical distributors expand into PT? Or PT distributors expand into electrical? Or someone like Motion Industries make a large acquisition?
- Which Schneider Electric distributor(s) in the U.S. do you think WESCO could be interested in? (and remember, they have the financial wherewithal to make large acquisitions.)
- Which other manufacturers will authorize Kaman, and will electrical distributors care? Is it now a case of "represent any line / sign-up any distributor and let the customer decide where they want to buy and manufacturer brand / authorization doesn't mean much?"
Do you think the playing field is / will change? How?