My take: Catching up with an old friend

HomeEditorialsMy take: Catching up with an old friend

November 6/13, 2017: Volume 32, Issue 11

By Steven Feldman

 

For 14 years Bruce Zwicker led Haines, formerly known as J.J. Haines, the industry’s largest distributor. Under his watch the wholesaler experienced unprecedented growth, both organic and through four acquisitions.

I recently caught up with him, six months removed from his retirement from the company. He’s been enjoying life—traveling, family, the normal stuff—while looking for the next challenge. We talked about the past, present and future, how the only constant is change and much more of that is forthcoming.

Zwicker reflected on the past decade and a half with pride. He is most proud of the growth and diversification of Haines. He believes he left the company stronger than when he found it. And he is proud of the relationships he forged.

We talked about the acquisitions, namely Allied, Design Flooring, Wheeler and CMH. He recalls CMH being the most complex because of its sheer size, but Wheeler was difficult because the timing was less than impeccable—bought at the start of the downturn.

Regrets? He’s had a few, but then again too few to mention. He wishes he moved faster on a few key decisions, specifically the implementation of technology in sales, marketing and logistics. “Haines was good at it, but I think we could have leveraged it more if I could have gone faster.”

What’s different today than 14 years ago? A smaller industry with bigger players. He cited distributors that are no longer in business, manufacturers that have been acquired, and the erosion of the independent floor covering dealer base. The recession has made this industry smaller, both in terms of numbers and demand for its products.

Zwicker fears the continued erosion of the independent specialty retailer. Here’s why. “You look at the big mega retailers that are public companies. If you boil them all together, they are growing on average at a rate of 5%-6%. The residential retail remodel segment is growing 3% on average. So it stands to reason that if the non-independent dealers—big boxes, online, etc.—are growing 6%, then the average independent floor covering dealer is declining mid-single digits. And if some are growing greater than the market, there are a slew of independent dealers declining at double-digit amounts. So that erosion is accelerating.”

His solution? He believes dealers and distributors must diversify and sell products other than flooring. He sees the big boxes having success selling multiple products such as paint, cabinets, countertops, acoustical tiles, etc. And the typical floor covering dealer and distributor tend to sell only flooring. He sees this as a missed opportunity.

With the erosion of the independent floor covering retailer, Zwicker sees consolidation at the distributor level because distributors are battling for a smaller piece of the pie. If there are fewer retailers there will be fewer distributors. That means the remaining distributors will have to carry more brands because there will be fewer distributors for the manufacturer to go through. That’s how he sees the stronger distributors growing, and eventually they’ll have to sell products other than flooring. They’ll need to have low cost, and scale is what gets low cost.

Zwicker also sees a declining independent specialty retail channel as the result of generational change. As retailers age, often the next generation is not ready to step up, or the business is not successful to the point where that next generation does not want to take over something that may not be there.

Eventually we got on the subject of Armstrong, as Haines has long been Circle A’s largest distributor. He thinks the world of CEO Don Maier and believes he is doing “all the right stuff.” Like everyone, he saw top-line sales drop in the second quarter, due in part to the loss of some Home Depot business to Mohawk and walking away from some business that is not overly profitable. He predicts Armstrong gets bigger or smaller but probably won’t stay the same. “They have some legacy stuff. Engineered wood doesn’t make a lot of money. You have two behemoths in Shaw and Mohawk that weren’t this big 15 years ago. And you have importers that won’t go away. That’s another thing that has changed—all the SKUs that have been created on the import side.”

Zwicker predicts a consolidation of sheet vinyl plants in the next year as the category continues to lose share to LVT. He expects to see more LVT capacity, but does not see the category being commoditized because it is not a DIY product like laminate and is a five-tool player (residential, commercial, Main Street, property management and builder) while laminate is primarily residential and DIY.

As for Zwicker himself, he is ready to get back into action, within the flooring industry or not. In a perfect world he will be a CEO of a mid-size to large company, privately held, for three to five years, while sitting on some boards, formal or advisory, beyond the three to five years. He is looking to help a company, make a difference, travel and gain intellectual stimulation. “I have a brain and energy to burn.”

 

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