Sonepar USA topped $1 billion in sales in just six years, but Richard Worthy, the company’s president and CEO, says its current growth strategy could propel the distributorship past the $4 billion mark in the future.
In the upcoming issue of Electrical Wholesaling magazine, Worthy said the Berwyn, Pa.-based Sonepar USA could eventually have 10 regional businesses, each with annual sales of $300 million to $400 million. “That’s probably where this company maxes out,” he says. “That $4 billion range will take six to 10 years to get to. Then you have to make a decision if you run out of good customers. There are a lot of customers that just don’t match up with what we provide.”
Ranked seventh on EW’s Top 200 listing, with $1.5 billion in sales, 217 locations and 3,700 employees, Sonepar USA has grown with a mix of acquisitions and branch start-ups. For a company that has made headlines for completing more than 20 acquisitions over the past six years, it might surprise some people just how many branches Sonepar has started from scratch. These start-ups, coupled with the purchases of several dominant distributors with strong existing branch networks (Brook Electrical Distribution Co., Lincolnshire, Ill.; Eoff Electric, Salem, Ore.; Viking Electric Supply in Minneapolis; and Cooper Electric Supply, Tinton Falls, N.J.), and acquisitions of some smaller companies with relatively small market share, have helped Sonepar blanket select regional markets.
“If there’s one thing that separates us from other distributors, it’s growing businesses,” says Worthy. “Buying some businesses that other people didn’t think were dominant players, not having a lot of debt, taking our cash flow and reinvesting it in branches. We opened over 30 branches in the last five years and had to close only six branches.”
Interestingly, most of these companies have grown so large over the past few years that if ranked as independent entities on Electrical Wholesaling’s listing of the Top 200, they would easily rank amongst the 50 largest electrical distributors.
Worthy said in a recent EW interview that “people, process and IT” are the keys to the distribution business, and over the past six years he made his investments accordingly. The following strategies are the foundation of the Sonepar USA expansion formula:
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• Building market presence branch by branch, whether it be through acquisitions or branch start-ups.
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• Focusing on small- and medium-sized electrical contractors as the most profitable customers to serve.
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• Using central distribution centers (CDCs) to serve branches in regional clusters.
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• Moving a distributorship’s business mix from direct business to the more profitable stock business, and servicing that stock business through CDCs.
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• Finding key personnel in a regional market and basing growth initiatives on recruiting that local talent, every bit as much as acquiring the bricks and mortar in an acquisition.
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• Maintaining the local identities and branch personnel of distributorships after acquisitions.
The decentralized strategy has been difficult for some of Sonepar’s vendors to grasp, says Jay Bricker, the company’s senior vice president of marketing.
“I make sure the market understands who Sonepar is, what we do, how we are doing it and how we are different,” he said. “It’s hard for the market to conceptualize a company like ours that is so decentralized, but is a billion-plus dollars in sales in the United States. More than that, they really struggle with the fact that we have such a small headquarters.”
Sonepar’s Paris-based parent company has over $7 billion in sales, 1,146 branches and 19,700 employees in 32 countries across four continents. —Jim Lucy, EW