Have you looked closely at your market recently? All across the country, major and secondary markets are facing rapid changes as consolidation sweeps the ready-mixed concrete construction aggregates industry.
We estimate there were 3200 to 3500 companies in the ready-mixed concrete business in the mid-1990s. Today, there are about 2700, a view that NRMCA shares with us. That means 500-800 companies have disappeared from the landscape in just the last few years.
When you consider that the recent Cemex purchase of RMC and Holcim purchase of Aggregate Industries represented only a handful of legal entities, where have all of these other hundreds of companies gone? They are likely your former, locally owned competitors in primary and secondary markets across the country.
The consolidators are not just the large multi-national cement and aggregate players. Several privately held, regional producers have also participated. There are several consolidation success stories: Robertson’s in Los Angeles, Prairie Group in Chicago and the Great Lakes, Ready Mix USA in the Alabama-Georgia-Florida markets and MMC in Mississippi. These well-run, strategic companies have carefully chosen their opportunities to continue to grow their market presence.
The top 25 producers in the United States represented almost half of all ready-mixed concrete production 2004. We expect the same 25 will command 65-70% of the market by 2010. This torrid pace is driven largely by transactions like Cemex/RMC and Holcim/Aggregate Industries. However, many of the middle-market producers will continue to be the targets of both the publicly traded multi-nationals as well as the large, privately-held producers who dominate their regions.
Reasons for selling
In our practice, we see why so many middle-market producers are pondering selling their businesses. They are most often motivated by succession issues, estate planning, diverse interests on the part of family members and/or partners and concentrating their net worth in the business.
But they also are concerned with what the future holds for the independent producer, and whether their family business or long-standing partnership will go the way of the corner grocery store, the corner drugstore and the mom and pop hardware store.
The major consolidators tend to be competent and tough competitors. They are committed to wringing efficiencies out of their operations in all aspects of the plant delivery, sales and general administrative expenses. They will continue to embrace the newest technologies and innovations. The best run, most efficient producers often dictate prices, and in their quest for market share, they can often be the toughest competitors.
There will be an exception to this consolidation trend, and that will be the very small, independent producers in the tertiary markets. When I drive through small towns and villages, I see thriving corner grocers, drugstores and hardware stores, often far removed from metropolitan centers. With small populations, they are unattractive to both the “big box” retailers and the major ready-mixed concrete producers. Smaller, independent ready-mixed concrete producers will always play a role and will be less threatened by consolidation.
Many of us shop at Home Depot, Wal-Mart and OfficeMax because they offer good prices, convenience and a large selection of products. As the industry continues to consolidate, will ready-mixed customers look to their producers to offer the same efficiencies and mass they have come to take for granted from these retailers?
As our nation’s culture continues to trend toward patronizing the dominant players in almost every industry, consolidation is inevitable.
Pierre Villere is President and Managing Partner of Allen-Villere Partners. Contact Pierre Villere at firstname.lastname@example.org or telephone 985-727-4310.
© 2005 Hanley Wood, LLC. All Rights Reserved. Republication or dissemination of “Concrete’s Ups and Downs” (The Concrete Producer, August 2005) is expressly prohibited without the written permission of Hanley Wood, LLC. Unauthorized use is prohibited. Allen-Villere is publishing “Concrete’s Ups and Downs” under license from Hanley Wood, LLC.