Workin' the Two-step
By Bill Sendelback
If you think two-step distribution in hearth and outdoor products is dying, think again. Despite some dealers who buy dealer-direct, two-step distribution is alive, well and growing, as witnessed by the recent major acquisitions among distributors.
There are at least 140 two-step hearth and outdoor products distributors in North America, according to the HPBA’s latest Membership Directory. Recently some of the industry’s distribution giants have gobbled up competitors and expanded into new, larger territories. Now we have true “800-lb. gorillas” distributing throughout almost all of the U.S.
|Olympia Chimney Supply||Associated Energy Systems||BAC Fireside||CUI Distribution||Ray Murray, Inc.|
Olympia Chimney Supply
Areas Covered: All of USA
While not a case of a distribution giant gobbling up other distributors, the January 2019 acquisition of distributor Copperfield Chimney Supply, Fairfield, Iowa, by venting manufacturer Olympia Chimney Supply, Scranton, Pennsylvania, is unique, with a manufacturer venturing into two-step distribution.
Copperfield was started in 1978 by Bob “Sooty” Daniels, selling primarily venting products to chimney sweeps. It grew to sell a wide variety of hearth products to hearth dealers and sweeps throughout the U.S.
Olympia began in 1999, and now has 100 employees and is manufacturing a complete line of hearth venting products. With this acquisition, the Copperfield brand and operations will continue unchanged, says Bryan Yourdon, CEO of Olympia. “Both Copperfield and Olympia are entirely focused on its customers,” he says, “and we’re both very bullish on the hearth market. This is a good match for each of us to better serve our customers.”
Associated Energy Systems
Areas Covered: Alaska, Arizona, Arkansas, California, Colorado, Hawaii,
Idaho, Illinois, Iowa, Kansas, Louisiana, Michigan, Missouri, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin, Wyoming
Associated Energy Systems (AES), headquartered in Kent, Washington, was pioneered in
1978 by the late Ben Newby as an offshoot of his three Burien Fireplace retail stores in the Seattle area; AES was then distributing hearth products in western Washington State. Upon his passing, his sons Kirk and Craig took the reins and began to grow the company, not only in territory covered, but also into patio and grill products.
Today, Kirk Newby is president and brother Craig is vice president. With 50 employees, AES distributes throughout the entire West Coast and Rocky Mountain states, with recent moves into the North Central and South Central areas. AES has warehouses in Kent, Washington; Sacramento, California; Denver, Colorado; Dallas, Texas, and Minneapolis, Minnesota.
The company moved into the California market in 2001 with the acquisition of Jay Fenton’s Energy Works distributorship in Sacramento. After it had expanded into the Rocky Mountain states, AES, in 2017, purchased Even Temp Distributing in Waco, Nebraska. Already with a warehouse in Denver, AES shut down the Waco facility and moved it to Minneapolis.
“It is unusual to have acquisition opportunities where the products and brands are homogenous with what we have been offering,” said Kirk Newby, “but these purchases were very good fits for us.”
Newby sees two-step distributors offering real value to today’s dealers. “As product lines expand, it’s more difficult for dealers to make stocking decisions. It’s harder for dealers to guess what products they will need and what products will sell. Inventory at the dealer level requires capital and warehouse space of that dealer.”
Newby points out that, with distributors located close by and most able to ship in one or two days, he does not think dealers realize much, if any, savings by buying dealer-direct. “That is because, with most manufacturers selling dealer-direct, they probably also are operating warehouses just like a distributor with similar warehousing costs.”
Areas Covered: Alabama, Connecticut, Delaware, Dist. of Columbia, Florida, Georgia, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia
The eastern half of the U.S. with its much greater population has allowed not one, but three 800-lb. gorillas of hearth and outdoor product distribution. BAC Fireside, headquartered in Hudson, New York, is a 2018 combination of the former BAC Sales with Fireside Distributors in Raleigh, North Carolina. BAC was started in 1975 by Bob Cohen; at that point he was a retailer and distributor of hearth and grill products, with its distribution efforts covering the Northeast U.S. Today, Bob Cohen remains owner of BAC, but he has stepped aside from operational duties in favor of his son Jack Cohen, now president.
A decade ago, BAC Sales began growing its territory by purchasing the hearth division of Philadelphia, Pennsylvania-based HVAC distributor Pierce Phelps, giving BAC entry into the Mid-Atlantic states. Fireside Distributors was started in 1965 by the late Bob Cline, and was later owned by the now retired Steve Hall. With that 2018 acquisition, the new BAC Fireside now covers the Northeast, Mid Atlantic, and Southern U.S. with BAC Fireside North operating out of Hudson, New York, and BAC Fireside South headquartered in Raleigh, North Carolina.
“We’re always looking for acquisitions,” says Jack Cohen. “With the recent purchase of Fireside Distributors we got some amazing people. Yes, there are now three giant, two-step distributors in the East, but with our much bigger market, we’re all thriving.” Cohen says he has considered taking on other product categories, “but we’re really good at hearth and grills. This focus gives us a competitive advantage.”
BAC Fireside is concentrating on being a two-step distributor, says Cohen. “As a distributor, it is our job to bring in products early and be ready for the season. Manufacturers are focused on making the products. We’re focused on being a distributor, being more nimble in order to have the products in stock, and getting products to dealers quicker and at less expense.”
Areas Covered: All of USA
While somewhat flying under the radar, CUI Distribution, based in Simpsonville, South Carolina, has grown to now cover the entire eastern half of the U.S. and into the upper Midwest and South Central states, distributing gas hearth products, grills, patio furniture, and LP gas equipment. With its 2018 acquisition of distributor Total Hearth & Grill, Mt. Sterling, Kentucky, CUI now has five regional warehouses in Simpsonville, South Carolina; Richmond, Virginia; Ocala, Florida; Cullman, Alabama; and Mt. Sterling, Kentucky.
Started in 1978 as Cans Unlimited, CUI began as a supplier of kerosene heaters, accessories, and parts before moving into gas products in the early 1990s. Today, with 23 people, CUI has 88% of its sales in gas hearth products and grills.
“We always have thoughts of acquisitions,” says Chuck Tunnell, president of CUI’s appliance division, “and we’re pleased with the incredible growth we’ve had. This recent acquisition of Total Hearth & Grill has added some strong, exclusive lines to our lineup.”
Tunnell recently has seen a positive change in attitude from dealers toward two-step distributors. “We bring so much to the table for dealers. We can ship the next day, and we handle warranty claims. Plus we do extensive product training for dealers and their people. We have better technicians than some of our manufacturer suppliers.” Tunnell claims CUI carries $22 million in inventory going into the season, with never less than $12 million in stock.
Ray Murray, Inc.
Areas Covered: Alabama, Connecticut, Delaware, Dist. of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia, Wisconsin
Ray Murray, Inc., Lee, Massachusetts, began in 1973 and has been a long-time two-step distributor of a wide variety of product categories, once including scuba equipment. But after shedding some of those product categories, the company has “for a number of years” been moving more toward hearth products, says Michael Hopsicker, president and CEO. Today, in addition to hearth products, Ray Murray distributes grills, propane equipment, HVAC, and outdoor living products. The company now covers the entire eastern half of the U.S. plus the Midwest and North Central states.
With growth aimed toward specialty hearth dealers, Ray Murray in 2007 acquired NRG Distributing, Flint, Michigan. Then in 2015, it purchased Best and Langston in Goldsboro, North Carolina. In 2018 it acquired another distribution giant, Masda Corp. in Whippany, New Jersey. Now, with 86 employees, Ray Murray has regional warehouses in Lee, Massachusetts; Bensalem, Pennsylvania; Flint, Michigan; and Goldsboro, North Carolina.
“We’re bullish on the hearth market. It is embedded into our culture,” says Hopsicker. “With 120 million homes in the U.S., 5% a year are replacing their heating equipment. That’s a five- or six-to-one ratio of replacements to new home construction. So the market is growing, and we’re always looking for opportunities to expand geographically. We’ve gained something positive with every acquisition, so we would love to help more guys retire through more acquisitions.”
Hopsicker obviously also is “bullish” on two-step distributing. “Buying through a distributor costs the dealer less than buying dealer-direct,” he says. “Dealers have all the same costs included even when they buy dealer-direct, so in most cases the dealer is not getting the best deal when all things are considered, such as inventory costs.” Hopsicker also points out that many manufacturers set up overlapping dealers where a good distributor can offer territory protection.