How to Survive Consolidation Attempts

June 5, 2006
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The Palms Casino Resort, Las Vegas, hosted 150 participants during the newly formed Blue Hawk Distribution Cooperative's first ever spring member meeting. The two-day gathering began with a member and vendor face-to-face session. During this session, members were able to talk to the 26 vendor companies in attendance on a rotating 10-minute meeting schedule. Each vendor met with approximately 25 decision makers, all from different member companies. The entire session yielded 1,045 face-to-face appointments.

After this all-day session, members and vendors were invited to a dinner reception where Blue Hawk recognized all of its new members and presented them with their stock certificates. Blue Hawk also recognized its board of directors, vendor committee, and vendor partners.

The meeting was well-attended and was well-received according to Lance Rantala, recently hired CEO of Blue Hawk. "For a new co-op, I can already feel the cohesion develop, and this is a rarity so soon."

Victor Taras (left) and Daniel Bleier of Able Distributors Inc., Chicago, meet with Bruce Lyons from CMC Howell Metal to discuss business solutions and arrangements.

GETTING TO KNOW BLUE

Blue Hawk is a distribution cooperative that was initiated by Daniel Bleier, owner of Able Distributors Inc., and a member of Blue Hawk's board of directors and vendor committee. It was "established to ensure the survival and growth of the independent HVAC distributor," according to Nancy Hammer, Milwaukee Stove and Furnace Supply Co., and Blue Hawk board chairperson.

Not to be confused with a buying group, Blue Hawk is not owned by one person, but by everyone. Every member owns one share of stock and every member shares the profit of the cooperative. The cooperative started in May of 2005 with six members. Now, a year later, it boasts 66 member companies, 273 locations, and over $2 billion in purchasing power said Michael Riley, owner of Riley Sales Inc., Plymouth Meeting, Pa., and member of Blue Hawk's board of directors and vendor committee.

"With the big companies buying us up or trying to buy us up, we are left with the option of join or sell," said Riley. "Independents are getting bought up or squeezed out, and that is not good for manufacturers or for business."

Besides protecting independent businesses and increasing purchasing power, according to the cooperative it provides multiple benefits to its members, such as: Improved marketing channels, lobbying efforts, educational training and programs, networking opportunities, technology support, and the sharing of ideas and best practices.

Blue Hawk, a member of the National Cooperative Business Association (NCBA) and a member of Heating, Airconditioning, & Refrigeration Distributors International (HARDI), started with a heavy concentration in the East and is rapidly expanding towards the West.

Debbie Moriarty (left) and Susan Quintiliani of Total Air Supply, New Hampshire, engage in a meeting with Bill Spiegel from Southwark Metal Mfg. Co.
"We see a definite need for cooperatives," said Donald Frendberg, executive vice president and COO of HARDI. "Membership in a cooperative is becoming an important and common practice for more independent wholesale distributors everyday."

Its vendor company list, which was developed through careful selection by the vendor committee, according to Rantala, currently includes: ATCO Rubber Products Inc., Boss Products, Cambridge-Lee, CMC Howell Metal Co., Connecticut Electric, Continental Industries, Covalence Adhesives (Tyco), CPS Products, Diversitech, Flexible Technologies, General Filters, Hardcast, Hart & Cooley, Heating and Cooling Products, Honeywell ECC, Honeywell Genesis Cable, Legend Valves, Little Giant, LT Copper, Majestic Steel USA, Malco Products Inc., The Mill-Rose Co., Nu-Calgon Wholesaler Inc., Reflectix, Southwark Metal Manufacturing Co., and White-Rodgers.

Blue Hawk looks for opportunities to partner with vendors in a way that benefits both the members and the vendor.

"Our objective is to achieve 75 percent or greater market penetration in each product category with as few vendor partners as possible," said Riley. "We also ask our member partners to support the vendors that support the business they [the cooperative] own."

Blue Hawk, a distribution cooperative, was established to ensure the survival and growth of the independent HVAC distributor.

A NEW ATTITUDE

"It is not a country club," commented Riley. "Success comes when you invite your competition in and work together to compete with the big companies and the big box."

Each member still keeps its autonomy and does its own purchasing, but the idea of sharing and working together for a common goal overrides the instinct for many to undercut the competition.

According to the cooperative's vision statement, it is committed to independent business; it believes there is strength in community and that members should treat those they have dealings with as they would want to be treated; and it views its vendors as partners.

Blue Hawk's current mission is to be recognized as the vehicle of choice to improve supply chain performance for distributors, manufacturers, and contractors throughout the industry. The group is also working to make the Blue Hawk name synonymous with quality, integrity, and value.

"We believe that the dedication and drive of individual owners, paired with the strength of numbers and community, can outperform large corporations in head-to-head competition," said Hammer.

As part of this new attitude of integrity and fierce competition for survival, Riley has been stressing to his employees to give the customer the right answer. "Don't give them the answer they want to hear," he said. "Be up front, a customer has to be able to depend on you."

ON THE HORIZON

Membership is growing at Blue Hawk, and to achieve its market share goals, the cooperative is continuing to "recruit quality member-owners and build mutually beneficial relationships with its vendor partners," said Rantala.

Blue Hawk will hold its fall member meeting, Nov. 2-3 in conjunction with the upcoming HARDI meeting Nov. 4-7.

For more information or to become a member, visit www.bluehawk.coop or contact Lance Rantala, CEO of the Blue Hawk Distribution Cooperative at lrantala@bluehawk.coop.

Publication date: 06/05/2006

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