White Cap Breaks New Ground - HD Supply

FEATUREDDISTRIBUTORby Tom HammelWHITE CAPwww.ContractorSupplyMagazine.com AUG | SEP 2012John Stegeman,(L), president ofWhite CapConstructionSupply and JoeDeAngelo (R),CEO of HDSupply, have anambitious visionfor their companiesand a solidplan to backit up.PHOTOS: NIGEL ASHTON, JERRY BOREK18

BREAKSNEW GROUNDWHITE CAP AND HDSUPPLY AIM TO CHANGETHE LANDSCAPE OFDISTRIBUTIONFEATUREDDISTRIBUTORby Tom HammelIf you haven’t visited a White Capstore recently, you may be in fora surprise. Over the last year, thecompany has spent more than$5 million remerchandising nearly70 of its 133 stores, installingnew fixtures and signage, and bringingin new product in key categories.The new showrooms are cleanand welcoming with a pleasing,clutter-free abundance of inventory.Everywhere your eye falls, product islogically displayed, clearly signed andwithin easy reach. Some stores, suchas the branch in greater Chicago,Ill., have also moved to higher-trafficlocations to attract more walk-incontractor customers.It’s all according to plan — thereset program is designed to createa more aligned look and feel acrossWhite Cap stores, a more uniformexperience for customers and — notincidentally — a more standardizedline card across the company.Positioning and remerchandisingits stores is one element of the company’scomprehensive master planto capture the largest possible shareof purchasing dollars in its markets.It’s all about consumer awareness,which is what White Cap is seekingto capture at every level of theconstruction and industrial markets.A LEAGUE OF THEIR OWNWith seven lines of business anda Canadian operation ranging fromcontractor supplies to waterworks,MRO and utilities/electrical supply,HD Supply spans the constructionand industrial landscape of America.It’s a huge pie and HD Supply aimsto be number one in each of itsmarkets. With specialty constructionsupplies, that means White Cap.This is a big beast to get a handleon. HD Supply’s eight divisionsemploys some 14,000 professionalsin 640 locations across 45 states andnine Canadian provinces. Last year,HD Supply’s revenues hit $7 billion.That figure is down significantly fromthe $9.8 billion HD Supply reportedin 2007, but the company has alsorecently reported eight consecutivequarters of growth. The companyis hitting the comeback trail with avengeance.White Cap is one of HD Supply’sCONTINUED ON PAGE 20www.ContractorSupplyMagazine.com AUG | SEP 201219

FEATUREDDISTRIBUTORby Tom Hammelwww.ContractorSupplyMagazine.com AUG | SEP 2012In White Cap’s greater Chicagobranch, each display is cappedwith easy-to-read bilingual signage.Sign design, color schemes andfonts are consistent throughout thestore — and from one store to thenext as the company moves to astandardized visual presentation.four largest divisions. The other “bigfour” businesses are Waterworks,Facilities Maintenance and PowerSolutions (the combined utilities andelectrical supply).HD Supply’s four smaller divisionsinclude California-based Repair andRemodel, which supplies homeimprovement products and buildingmaterials to remodeling contractors,tradesmen and DIYers; and CreativeTouch Interiors (CTI), which suppliesflooring, cabinets, counter tops,window coverings and designservices for residential andcommercial projects.Rounding out HD Supply’s smallerdivisions are Crown Bolt and HDSupply Canada. Describing Crownas a smaller division is a relative term— Crown is one of the largest retailconsumer hardware suppliers in theU.S. — its largest customer is theHome Depot itself.White Cap itself employs nearly2,700 people in 133 stores in29 states, plus three distributioncenters, in Sacramento, Dallas and“THE ONLY WAY YOU CAN GROW IS TOHAVE GREAT PEOPLE.” — JOHN STEGEMAN, PRESIDENT, WHITE CAP CONSTRUCTION SUPPLYAtlanta. White Cap’s outside salesforce alone numbers more than 400professionals.On the horizon is an entry into theNortheast with branches in Newark,N.J. and Boston, Mass.ALL STAR LEADERSHIPKeeping all those people on thesame page is a major undertakingand is a central focus for thecompany as it pursues its nationalpositioning strategy and aggressivegrowth goals. White Cap and HDSupply’s leadership team subscribesto what might be termed a nucleartheory of growth, harnessing andconcentrating basic elements tounleash tremendous energy thatradiates in many directions at once.Safety products arefront and center inthe newly relocatedgreater Chicagostore, displayed bycategory for easybrowsing withharnesses in onearea, jackets andgloves in another.It takes steady hands at thecontrols just to maintain an enginethis large, to say nothing of growingit. To handle the job, HD Supply andWhite Cap have built an all-star teamto drive growth and manage theinteraction of the eight divisions.Captain of the team is the CEO ofHD Supply, Joe DeAngelo. He joinedThe Home Depot in April 2004 assenior vice president of its ProBusiness and Tool Rental divisions.His resume includes General Electricand executive vice president ofStanley Works. When HD Supplyspun away from Home Depot in2007, Joe took the helm.In April 2010, DeAngelo broughtin industry veteran John Stegeman.One of Stegeman’s jobs as executivepresident of HD Supply was to find anew president for White Cap, but heloved White Cap’s business opportunityso much he encouraged DeAngelointo letting him take the job.Stegeman in turn brought in RossAnker from MSC Industrial Supply tobe vice president of merchandising.Ian Heller, White Cap’s vice presidentof marketing, came from Grainger,and several other key team playersfollowed Stegeman over fromFerguson Supply, where he hadbeen president and CEO.CONTINUED ON PAGE 2220

FEATUREDDISTRIBUTORby Tom Hammel“The key is having significantrelevant experience to the industryyou are in,” observes Stegeman,White Cap’s president. “It gives youinstincts and an understanding of thecustomer.“Another element that makes oursenior team very exciting is individualslike Bob Jacoby, our senior vicepresident for the Southwest region;Brian Bilderback, our Gulf regionalvice president; and J.J. Jackson, ourNorthwest regional vice president.”“All three of these senior teamThe sales counterof the greaterChicago branch facesthe street. Lightingis not an issue —the showroom haswindow walls on threesides. Customers canpark and enter theshowroom from eitherend of the store.members were with White Cap andits acquisitions before White Capwas acquired,” Stegeman adds.“It’s great to be able to combinethe experience of people fromWhite Cap with that of people fromFerguson, MSC, Grainger, The HomeDepot and General Electric,” hecontinues.Each HD Supply vice presidentalso has a personal ownership stakein HD Supply, a concrete statementof their commitment to the company’slong-term success.BENCH BUILDINGGetting a great leadership teamin place is part of the equation, butcoaching doesn’t gain you manyyards without great players on thefield. White Cap and HD Supply aredetermined to build a strong bench.“As of June 2012, White Cap had2,671 employees and we are hiringmore,” Stegeman says. “Through thedownturn, many companies stoppedhiring. You held on to your best.”“Now we are back in the hiringmode. Some come from competitors,some from other areas ofindustry, but we aren’t completelyfocusing on building our bench fromnew hires. We are also strengtheningthe bench of associates we have,with significant career developmenttraining.”www.ContractorSupplyMagazine.com AUG | SEP 201222

Relentless recruiting and training isthe rule, not the exception.“The only way you can grow is tohave great people,” he asserts. “Wefocus all the time on making surewe have great leadership in our localbranches and that they are developingteams under them so we cangrow and expand. That is a veryimportant aspect of our business.”“It is also a good gauge of the kindof leader you are, both in your abilityto hire the right people and surroundyourself with smart people,” Stegemancontinues. “When you do thatyou get smarter yourself. So it isimportant to offer those individualsopportunities to develop professionallyand to take care of their families.You can build a great company whenyou do that.”GREENFIELDS ANDACQUISITIONSFinding that best fit also applies toacquisitions. As the economy recovers,the time is ripe for M&A activity.“Are we looking for acquisitionopportunities? Absolutely. But isthere value there; does it have agood foundation; is it a good fit? Isit in a geography where we want tobe? Is it profitable? We look at allthose things and many more, but thenumber one requirement is – does ithave good, quality people who wantto remain with the business andwork for the new parent company,HD Supply? Sometimes the answeris yes, sometimes it’s no.”“We always look forward towelcoming businesses into the HDSupply family,” adds Joe DeAngelo.“The key things we look for arevalues that match ours — peoplewho are hard-working, have positiveattitudes and who have achieved alevel of competitive greatness. Thosethings align with our culture perfectlyand we believe we can provide a lotof value to teams that can helpus create another generation ofsuccess. ‘Join us!’ is the battle cryI’d like the industry to hear.”In addition to growing into newmarkets, White Cap is also reviewingits territories for greenfield expansionopportunities.“A key question we ask is, ‘Whatmarkets make sense for us to bolton another location an hour or twofrom an existing branch so wecan increase our convenience forCONTINUED ON PAGE 24FEATUREDDISTRIBUTORby Tom Hammelwww.ContractorSupplyMagazine.com AUG | SEP 201223

FEATUREDDISTRIBUTORby Tom Hammelwww.ContractorSupplyMagazine.com AUG | SEP 2012Adjacent to the sales counter, the Traderwall showcases products promoted inWhite Cap’s monthly Contractor Tradermini catalog. White Cap produces 13regional editions of the Trader, which itmails to select customers and hands outin stores and on sales calls.customer pick-up points?’ ” Stegemansays. “Our recent greenfieldstores in Lafayette, La., and Conroe,Texas were both easily bolted ontoexisting networks.”“We have opportunities even inour strongest markets to fill in servicegaps. We want the contractor tothink of White Cap because of therelationships we build with them,our knowledgeable associates, ourprofessional service and our productoffering.”1,000 PERCENTCUSTOMER FOCUSEDTo DeAngelo and Stegeman,the key to successful acquisition isthe same as it is for a successfulcompany, a culture that is completelyfocused on the customer.“We frame our execution around acouple of simple things,” DeAngeloexplains. “First, we are 100 percentfocused on our customer and theurgency of performing perfectly forour customer every day. We haveover 450,000 customers and we sellover one million sku’s.”“AS OWNERS WE FOCUS ON LONG-TERMVALUE CREATION. DURING THE DOWNTURNWE INVESTED MORE IN NEW TALENT THANANY OF OUR COMPETITORS.”— JOE DEANGELO, CEO, HD SUPPLY“Secondly, as owners we focus onlong-term value creation. During thedownturn we invested more in newtalent than any of our competitors,”DeAngelo continues. “John Stegeman,Ian Heller and Ross Ankerare just a few examples, and whatJohn has added to the all-star teamthat Bob Jacoby brought to us withWhite Cap gives us the opportunityto make a real difference in thismarket.”No one wants to endure a painfuldownturn, but HD Supply learnedand adapted. It trimmed its portfolio,selling off those divisions (includingits lumber, plumbing and industrialpipe, valve and fitting businesses)where the company wasn’t eitheralready the number one player orwithin striking distance of becomingthe market leader.“Then we doubled down on ourkey investments and made sure wehad solid strategic growth initiatives,”DeAngelo adds. “We got oursystems in place so we can scaleeffortlessly as the markets return.Those investments are alreadypaying off for us.”Through it all, HD Supply andWhite Cap focused on key customergroups and on developing strategiesto most effectively cultivate eachgroup.Each of the eight businesses in HDSupply has a line-of-business president,who works under the umbrellaof HD Supply. The parent companysupplies financial backing for eachbusiness as needed and is a centralizedcenter for strategic business development,information technology,human resources, legal, marketing,communications and finance functionsfor the whole company.THE RIGHT TOOLFOR THE CUSTOMERThis umbrella system is designedto free up the divisions for what theydo best, focus on key customergroups and on developing strategiesto best appeal to each one.Stegeman sees distinct differencesbetween White Cap’s main customergroups and works to ensure each isserved to the best of the company’sability, while working to bring thebest attributes of each group to theothers.This means building lastingrelationships with traditionalcustomers, providing easy-to-useand comprehensive print offerings tocatalog buyers and paving the Webfor technology-driven buyers.“White Cap has great focus withmedium and large contractors today,but if we’re to do the right job developingour business then we shouldalso be a better distributor for smallercustomers,” Stegeman asserts.“Our job is to build relationships withCONTINUED ON PAGE 2624

FEATUREDDISTRIBUTORby Tom Hammelwww.ContractorSupplyMagazine.com AUG | SEP 201226them, so they have someone theyknow and can call as opposed tovisiting one of our competitors.”“So yes, there is a hugeopportunity for relationship sellingin our business, but there is alsoan incredible need for the catalogbusiness. Our 700-page color catalogoffers more than 16,000 professionalquality tools and supplies.Today our customers can get thoseproducts from White Cap, too.”A third major initiative is buildingnew Web capabilities.“We have a full team working onour Web capabilities to augmentour catalog so a customer can login and order from us online and getdelivery just as fast as they couldfrom a competitor, yet still be able tooffer the expertise and relationshipvalue that makes White Cap unique,”Stegeman states.“We are focusing on our coregroups, which are relationshipdriven.We focus on bringingcustomers into our locations to seethe broad variety of products wesell and to take advantage of ourindustry expertise. We are focusingon technology and how we can useit to leverage sales and profitability inthe future.”The warehouse in the greaterChicago store, immediately behindthe sales counter, is as well organizedas the store itself, and as fullystocked with product.“Our customers are pro-contractorswho need innovative productknowledge,” he adds. “It is our accountmanager’s job to go out andhelp them with speed and convenience,to take care of their problemsand emergencies. Our mission is tofulfill their needs faster than they canget them filled anywhere else.”NEXT UP: BUILDINGCITIES AND KEEPINGTHEM RUNNINGIn some cases, the job is tofulfill needs more completely thananywhere else. White Cap and HDSupply’s newest and by far mostambitious initiative, which is toprovide a diverse portfolio ofproducts and services of multiple HDSupply companies on the same job.Presently, HD Supply is testing theconcept in several metro marketsincluding Atlanta, Phoenix, Tampaand Orlando.WHITE CAPAT A GLANCEFounded: 1976 White Cap; 2007 HD SupplyOwnership: Private equityBranches: 135 branches in 31 statesEmployees: 2,671 totalSales Force: 400+Markets: Commercial and residentialconstruction, concrete, erosion control,safety, industrial/MRO, waterproofing,rebar, DOT/governmentLine Card: 3M, Armor-Tile, Black Stallion,Bosch, Brigade, Chapin, Diablo, Dayton,DeWalt, Eagle, Ergodyne, Guardian, Hitachi,Husqvarna, Irwin, Knaack/Weatherguard,Makita, Marshalltown, MAX,Milwaukee, ML Kishigo, MSA, PLS,Porter Cable, Powers Fasteners, Pyramex,Rapid Set, Razor-Back, RIDGID,Rolair, Rubbermaid, Simpson Strong-Tie,Skil, SpecChem, Spectra Precision,Sqwincher, Stabila, Stanley, Stihl, SurfaceShields, Tyvek, United Abrasives,Vaughan, Werner, West ChesterAffiliations: STAFDAWeb sites: www.whitecap.com,www.hdsupply.com“We have a tremendousopportunity to utilize our resourcesacross the portfolio to drive customersuccess,” DeAngelo explains. “Thisinitiative is designed to leverage ourresources to get customers to thinkabout doing business not only withWhite Cap for example, but with ourother divisions for their facilitiesmaintenance, electrical orwaterworks needs — any of ourcompanies that can make it easierfor them to run their business.”“It’s a unique proposition forcontractors with needs that canonly be filled by a company like HDSupply,” he adds. “That’s what weare doing at BahaMar.”The 1,000-acre, $3.4 billionBahaMar project in the Bahamas,the largest single-phase resortdevelopment in the history of theCaribbean, is being supplied by HDSupply’s White Cap, Waterworksand Electrical divisions.“If you think about it, we are theonly company that has the assetsto build a city and keep it running,”DeAngelo adds. “So that is what weare focusing on with our customers.We are working very aggressivelyto ensure that our customers ininfrastructure or construction orfacilities maintenance get everythingthey need from HD Supply.”DeAngelo and Stegeman areconfident that HD Supply and WhiteCap are uniquely positioned andstaffed to make immense strides inthe coming years.Just as BahaMar is transformingthe Bahamas, HD Supply andWhite Cap seek to transformthe landscape of distribution.If vision, sweat and force of will cantransform islands, they are alreadyhalfway there.