Plumbing and HVAC/R wholesalers across Canada may find themselves with a tough new competitor following the sale of a major Ontario wholesale distributor to a home improvement retailer. On Feb. 7 Rona Inc. of Montreal announced an agreement to purchase Noble-Trade Plumbing Supplies Inc., one of the provinces fastest growing wholesalers. They did not buy Noble-Trade to stay in Ontario. Theres no doubt about that, said Michael Storfer, president of Noble-Trade. Specific locations outside the province havent been determined, he added, but one of the key reasons for the sale was that Noble Trade officials felt they needed the backing of a larger company to become a national player. And despite remarkable growth that has seen Noble-Trade post an average annual sales increase of 27 percent over the past nine years, managers were worried that industry consolidation along with the movement of big retail companies like Home Depot into the wholesale sector may result in difficult times for medium sized independent wholesalers in the future, said Storfer. Noble-Trade was created in 1998 with the merger of two small Toronto wholesalers Trade Plumbing Supplies and Noble Plumbing Supplies with six branches between them. Today the company has a distribution centre and 19 branches across Ontario with 300 employees. Sales during the last 12 months were $150 million. Storfer noted that Noble-Trade will continue to operate with the same management team and its existing customers will see little evidence of the new ownership. When an opportunity came to sell to a company that was very entrepreneurial and offered us a lot of opportunity to grow& it made (selling) easy, he said. Theyve been very forthright about what they wanted us to do. They wanted me to stay and, quite frankly, I dont know if I would have sold otherwise. As recently as 14 months ago Noble Trade management had no intention of selling, he added. But at the end of the day, there was a lot of people calling. Eventually, it comes to a point where it makes sense if you have a chance to run the company the way you want to going forward and you get your value out of it.
A partial surprise
There was only one aspect of the sale that surprised other wholesalers. (The sale) didnt surprise me, but the buyer did catch me off guard, reported Rick Fantham, president of Emco Corp., London, Ont. I was expecting it to be Home Depot. Home Depot purchased U.S. wholesaler Hughes Supply last year and Canadian companies have been bracing for a similar move in this country. Home Depot and Rona have been approaching the bigger independent wholesalers for awhile now, added Robin Todd, president of Marks Supply Inc., Kitchener, Ont. Everyone in the industry had the feeling that they were building up the company to sell it &, agreed Jacques Desch?nes, chairman of Groupe Desch?nes Inc., Montreal. Wholesalers worry about the impact of a major retail chain in the plumbing and HVAC/R wholesale business. Clearly, we have another player on the landscape and it makes the distinction between retailer and wholesaler a little muddier, said Fantham. However, said Storfer: I am not sure how clear those waters are today, noting that a number of wholesalers are selling direct to the public through their showrooms and the big box stores are selling products that were previously available only to licensed tradesmen. Noble Trade plans to remain part of the Octo buying group, he added. (Buying groups are typically made up of smaller wholesalers that work together to negotiate better prices with manufacturers.) We will operate as a separate entity from the retail portion of the Rona organization we are not a retailer. I am sure we are going to look for synergies in buying power, logistics and sales points in the future, but our industry has been changing constantly in the past 15 years, said Storfer. In this environment, the demands that the retailers have put on the wholesaler to get better from a bar coding point of view, from an information systems point of view and from a customer service point of view have been good for the industry. This is still my baby. I liken it to a father handing off his child on their wedding day. It doesnt mean you stop worrying, caring, nurturing and overseeing what goes on, he added.
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