The devil is in the details
Two brands are better than one — that’s one of the ideas behind Freud America’s composite-material saw-blade series, manufactured by Freud Tools under a trademark license agreement with Trex Co. The "Trex Blade" attacks the market with a double dose of branding, as well as a sharp-edged technology story.
The red color saw blade is a trademark of Freud (Freud was acquired by Bosch in 2009, but operates as a separate entity.) Recently, it became the only company that can market a red reciprocating saw blade. The Trex Blade is also covered with what Diablo calls a Perma-Shield non-stick coating.
The tip is the thing. Diablo manufactures its own carbide used in its "modified triple chip tooth grind" tip for efficient and clean cuts. According to Freud Tools CEO Russell Kohl, the design also eliminates swirl marks and makes for longer cutting life than other blades.
Before it launched the Diablo brand in 2000, Freud studied the market and knew it had to appeal to the Spanish-speaking buyer. "Hispanic users made up more than 50% of the market in a lot of the builder categories," Kohl said. A widely known Spanish word seemed likely to catch on. Here’s evidence that the plan worked: During the residential building downturn, Diablo sales have doubled, Kohl said.
The co-branded blade comes in three sizes: 12 in., 10 in. and 7 ¼ in. and is designed for use on hand-held, miter and table saws. The price point of the blade shown here is about $30.
Stamping the Trex name on the blade has the effect of "expanding Trex’s brand presence into the tool departments of retailers across America," said Kaplan.
It’s not the first Diablo blade co-branded with a specific building material. Five years ago, the Diablo HardieBlade was introduced as the only approved PCD (Polycrystalline Diamond) tipped fiber cement blade recommended by James Hardie Building Products. The product went to market promising 50% less dust and longer life than other blades.
Says Trex CEO Ronald Kaplan, "We’re addressing the needs of both contractors and DIYers, who for 20 years have not had the opportunity to purchase a saw blade designed with the efficiency, longevity and precision to cut composite materials."
Once upon a time, paint (in residential use) had a simple task to do: be colorful. Sure, it protected wall and trim from moisture and decay and reduced maintenance costs, but its mission was largely decorative.
Paint is still primarily aimed at making surfaces attractive, low maintenance and durable, but manufacturers have been making giant leaps in creating specialty products that address specific problems. The category is so hot that contractortalk.com, after repeated requests from contractors, added a Specialty Coatings forum in its chat room.
The dominant specialty category over the last 10 years is easily products with low volatile organic compounds (also known as low VOC). Organic compounds are necessary ingredients in paint, helping with a variety of necessary features. "They keep the other components — pigment for color and a binder or resin to make the paint stick — in a liquid solution long enough for the paint to be applied, then conveniently evaporate so the paint can dry," Sheryl Eisenberg wrote on the Natural Resources Defense Council website.
VOCs, of course, are also bad news. They emit smog-forming chemicals and are a source of ozone formation. Luckily, the average paint uses less organic compounds than before, so low-VOC products technically aren’t really all that "special." Still, that doesn’t make the category any less important and vibrant. Plus, almost every manufacturer now offers low- and no-VOC products that in some cases work just as well as high-VOC products.
But paints have gotten even more specialized than low-VOC. Today there is an abundance of product options that address any number of issues or needs. San Carlos, Calif.-based Kelly-Moore Paint Co., for example, now offers Enviro Coat Reflective 1545, an architectural coating that is designed to reflect the sun’s radiant heat and lower external wall temperatures.
"We wanted to create an eco-functional paint system designed for today’s popular mid-tone and darker exterior trend colors to reflect radiant heat the way lighter colors already do," said Mark Zielinski, Kelly-Moore’s VP sales. "Enviro Coat Reflective is especially suitable for homes and buildings in warmer markets."
Yorba Linda, Calif.-based Coat ‘N’ Cool manufacturers a similar product for roof applications. The company said the water-borne epoxy coating is specially engineered to reflect solar radiation — the visible and near-visible ultraviolet and infrared radiation emitted from the sun. "Reflecting solar radiation reduces both the exterior and interior temperatures of a structure, which may reduce the cost of energy used for cooling by 10% to 30%," the company said.
Not all specialty paints address environmental concerns. Some are practical. Earlier this year at the International Builders’ Show, Cleveland-based Sherwin-Williams launched Dry Erase 2K Waterborne Clear Gloss, a product that allows painting professionals to create dry erase boards for a wide variety of application in kids’ rooms, play rooms or home libraries.
"This is an extremely versatile coating that lends itself to many add-on sales opportunities for commercial and residential contractors," said Karl Schmitt, VP marketing at Sherwin-Williams. "From transforming a wall into a working surface to providing a space for kids to scribble away with a standard dry erase marker — there really are no limits to the creative applications for our new dry erase coating."
Then again, some specialty paints are simply about having fun. The Asla Corp. in Los Angeles manufactures one product called Eclipse, a basecoat that changes from black to white or from blue to white when the surface is touched or it is exposed to heat. The company said the product can be applied as a single coat over existing colors, or it can be applied alone.
It’s hard to imagine Eclipse being anything more than a novelty feature, but just imagine the impact a feature wall would have in a family or play room. But that’s what happens when you use specialty products — you get special results.
All the right moves
The 2013 Pro Dealer Top 200 Industry Scoreboard rewards strategy, vision and acquisition.
Winning at chess requires careful management of countless moves and combinations of moves. It requires the ability to identify shifting competitive positions, to execute retreats where necessary and attacks when opportunity knocks.
Most of all, it requires a vision.
Sound familiar? Lumberyard and building material dealers know very well these challenges. And then some. Fluctuating prices and market conditions magnified by the forces of a recovering housing market have added a third dimension to the game's complexity.
Through it all, based on the results of the Top 200 list of the 2013 Pro Dealer Industry Scoreboard, pro dealers — defined as companies whose primary business is selling lumber and building materials to home builders — appear to be making all the right moves.
Consider the following key results:
• Combined sales of the top 200 were $38.231 billion, up 11.1% from $34.378 billion.
• The percentage of companies to generate positive sales gains over the previous year was at an all-time high — 95%.
• Of the Top 200 companies, 84 showed double-digit percent increases in 2012 sales, compared with the year-ago figure.
Certainly, pro dealers benefited significantly from the law of supply and demand. In the most general terms, in 2012 they saw more builders buying more product at prices inflated by declining supply. And even though housing starts in 2012 were the fourth lowest on record, they were up 28.2% from 2011 — and up 24.3% on a single-family basis.
Last year the rising demand seemed to come slowly and sporadically — and then quickly.
"The first signs of the housing market recovery seemed limited to only certain areas of the country," said Chuck Bankston, chairman
of the National Lumber and Building Material Dealers Association (NLBMDA) and president of Bankston Lumber in Barnesville, Ga. "By the end of 2012, I noticed the majority of members I talked with were reporting widespread improvement, regardless of their location."
Pent-up demand was one of the main driving forces, he said, along with a roll call of usual macro-economic suspects, a high-flying stock market and swelling consumer confidence.
Acquisitions drove big gains for several Top 200 companies, and the M&A movement is one of the leading LBM stories of 2012 with no signs of slowing down in 2013.
No company on the Top 200 grew faster than Denver-based Kodiak Building Partners, No. 80 on the list. And no larger company grew faster than McKinney, Texas-based SRS Distribution, No. 12. Acquisitions factored prominently in both gaudy growth-percentages. At Kodiak, a July 2012 acquisition of Houston-based Gulf & Basco was followed by the October acquisition of Great West Drywall Supply of Greenwood Village, Colo. Those both followed the 2011 acquisition of Barton Supply.
Like several other acquisition-minded pro dealers, Kodiak looks for "good management teams and good businesses," said Paul Hylbert, Kodiak chairman and CEO. "We want to find good people and partner with them and let them run the business. We think the local people in the local market are the ones who can make the best decisions on assortment and customer base."
Selectivity is a key to Kodiak's acquisition strategy. "Last year, we probably looked at 100 deals, and did just two," said Hylbert, who stressed the importance of mutually beneficial terms. On the operations side, one increasingly important key is understanding the value of your pieces. "There's been some big movement both up and down in wood product commodities," he said, adding that passing on price increases to customers is a difficult task. "It's incumbent upon the dealer to hedge their bet in whatever way they can."
Steadily rising up the ranks of the Top 200 is US LBM Holdings, No. 14., also a company describing itself as constantly vigilant for acquisitions. But one thing CEO L.T. Gibson made clear in an interview with HCN is that when the acquisition is over, that's when the work begins to support, grow and share best practices to improve the local markets.
"The fun part is where all help each other grow," said Gibson. To achieve growth, quarterly meetings bring the company's collection of local market LBM leaders together to share best practices.
One concept to emerge from this structure deals with specialty products, and willingness of some lumberyard companies to give up without a fight to specialty distributors. US LBM Holdings companies are beginning to ask "Why?" Gibson said dealers with expertise in windows, decking, cabinets and roofing are sharing plans and exchanging information that works in various markets.
The local divisions "have to have a strategy to grow," said Gibson. "We don't give it to them, but they have to have one."
There were also fast-growing companies that avoided M&A completely. At Boise, Idaho-based BMC, a company that just missed making the Top 10 fastest-growing list, CEO Peter Alexander said the 37.6% growth for the company was all organic.
"Construction activity has rebounded strongly, and we enjoy 12-month building cycles in most markets," he told HCN.
In contrast, SRS Distribution describes itself as "tenacious in our efforts to acquire" independent roofing specialists. COO Dan Tinker is clear about the company's growth plans — triple the size of the company in the next five years to more than $2 billion in revenue.
"In our business, the big don't eat the small, the fast eat the slow," said Tinker.
The company's network of roofing specialists in 31 states includes Pace Supply in Philadelphia, Burbank Roofing in Southern California and Abco Supply in Michigan. SRS has shown steady growth during the last five years during a decidedly declining market. Tinker attributes part of that success to the recession-resilient quality of roofing. But also, the company competes as the local market player, as opposed to the national brand.
"We run our company like a family of independents, Tinker said. "To our customers, we want to be the family company down the street."
And then there's the weather — specifically hail storms, which necessitated a high level of repair in 2012. Everybody thinks about hurricanes and tornadoes, but it's actually the hail storms that drive a big piece of roofing demand. Tinker said.
Asked if tripling the sales of the company in five years is an ambitious strategy, Tinkers said: "That's what we get paid to do. Grow.