Last year was a tough one for European electrical distributors, and there has been little appreciable recovery this year.
In Europe, electrical distributors have had to contend with not only global economic tightening but also the challenge of adapting to the new Euro currency — with all its implications of compliance, cross-border trading and price transparency.
But the distributor and manufacturer delegates at the 47th General Assembly of the European Union of Electrical Wholesalers (EUEW) who met in Vienna, Austria, recently concurred that industry conditions were showing signs of tentative improvement.
They also were intent on finding ways to make internal operations more cost-effective, and on expanding their business into the former East Bloc.
“Last year there was a definite sense of foreboding that a positive cycle in our industry had come to an end,” said Yves de Coorebyter, executive director of the EUEW. “That fear became a reality over the past year, as the slowdown of our business reflected a generally negative trend. This course will probably continue through the coming months, but from a total European perspective, the end of this current dark period seems to be in sight.”
Consensus is that most countries began seeing turnaround in April or May, but it is unlikely that European distributors will finish the year at the sales and profit levels of 2001.
Horst Beckers, executive director of the German federation, and co-director of EUEW's statistics program, made these observations regarding the overall picture for the 13-nation organization:
-
Total 2001 sales volume for EUEW stands at 27.14 billion euro, up 2.3 percent from the previous year.
-
The average gross margin was 21.8 percent, up slightly from the previous year's 21 percent. France and Norway led with 24 percent, followed by the UK, Sweden, and Switzerland with 23 percent, and Austria, Belgium, Finland, Germany, Italy and Spain with between 20 and 21.5 percent.
-
Sales by product category: 47 percent installation materials, 18 percent lighting, 16 percent wire and cable, and 19 percent miscellaneous.
-
Sales by customer group: 63.5 percent contractors and installers, 16.7 percent industrial, 11 percent retail and consumer, and 8.8 percent miscellaneous.
-
Prices in the industry increased 2.7 percent, with Ireland, Norway and Portugal registering 3 percent gains; and Austria, Belgium, Finland, Germany, the UK, Italy and Sweden showing an increase of 2 percent.
-
Overall GDP in the 13 countries increased 1.9 percent in 2001, down from a gain of 3.4 percent in 2000, while unemployment dropped in 2001 to 3.9 percent in comparison to 4.2 percent in 2000.
One U.S. distributor who has spent much of his electrical industry career developing markets for his company's global branch network gave a presentation at the meeting on the strategic and tactical operating systems his company uses to monitor profitability and hit-rates on orders.
John SantaCroce, president of Argo International Corp., New York, said constant re-evaluation of these indicators through daily, weekly and monthly reports has been the key to managing the growth of his firm's 27 domestic and foreign locations. Delegates at the EUEW meeting were impressed with the sophistication of the methodology and with how little time it takes to use SantaCroce's reporting system to analyze branch performance once it's put in place.
EUEW meeting attendees also got some insight into market development in the former East Bloc. Christophe Laurent-Atthalin, general manager for Rexel in Eastern Europe, gave a presentation on the electrical markets in the developed countries of Poland, Hungary and the Czech Republic, as compared to Russia, the Baltic States, and the former constituent republics of Yugoslavia and the Soviet Union.
Laurent-Atthalin said this latter market includes at least 20 countries with a population of 400 million. He said the wholesaling industry in Eastern Europe that has emerged after post-Communist political and economic changes is now experiencing consolidation much like the electrical markets in other areas of the world. Laurent-Atthalin said the distributors that will survive will be those that carve out a position in an effective value-added supply chain from manufacturer to end-user customer.
The gross domestic product (GDP) growth rates in this region are above European Union (EU) standards, he said.
“In terms of electrical usage, the closer the countries are to the European Union, the higher the consumption, he said. “This is a prime indicator of development. There's a significant growth potential for electrical manufacturers and wholesalers in this region.”
Utilities in the region are deregulating, and this might offer some new business opportunities for distributors and manufacturers in Western Europe. Commercial building has been very hot over the past decade, but residential construction and renovation will be bigger sales opportunities in the years ahead, said Laurent-Atthalin. He added that the industrial MRO market has also been growing fast due to healthy foreign investment.