Johnstone Supply:
A cooperative approach to the HVACR distribution business
BY MARY JO MARTIN
Editorial director
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Johnstone Supply may have started small with just a single store in 1953, but that’s hardly the case these days. A major industry player for years, Johnstone Supply could cite 2006 as the year the national HVAC/R wholesale distribution cooperative unquestionably established its prominence among industry leaders. Johnstone officially passed $1 billion in sales in March 2006. In July the cooperative opened the doors to its 300th store nationwide and, to top it all off, the year marked the 25th anniversary of the formation of the Johnstone Cooperative -- the watershed event that has propelled the company to its present day success.
Based on a cooperative business model and the concept of giving independent owners the resources, support and buying power they need to compete with their larger chain store competition, Johnstone Supply has distinguished itself by focusing on the best contractor service and resources and by forging close relationships with its suppliers.
The story of Johnstone Supply is not just that of a successful player in the wholesale distribution game, but of a unique company with an uncommon business approach in the hvacr distribution world. Johnstone has had its share of strong company leaders, but the heart of the company and the key to its current success lies in the cooperative concept and the strength of uniting independent owners to create a larger whole.
Cooperation fuels success
It’s an old concept -- uniting many individuals together to become stronger as a group. In the case of Johnstone Supply, its cooperative business model allows independent store owners to control their own destinies while still competing with corporate chain stores and their traditional advantages of pricing, selection and marketing support. The benefits of hundreds of independent businesses working together to share ideas and resources have been the key to vaulting Johnstone into the top ranks of the industry.
Johnstone Supply president/ceo Gary Daniels is leading Johnstone into new areas of customer and vendor services, and in conjunction with the Johnstone Board of Directors has been a driving force in developing an aggressive company strategic plan.
“It’s the nature of a cooperative business model that we think has been the difference for Johnstone,” said Daniels. “Our members are all entrepreneurs and independent owners of their stores, and that makes them remarkably motivated and customer focused.”
Daniels says the company’s emphasis is on having the best customer relationships and service in the industry, backed by equally close relationships with the product manufacturers. “We never could have achieved our goal of passing $1 billion in sales without the support of the suppliers and contractors,” he noted. “Our vision is to be our customer’s best choice for hvacr products and services, our supplier’s best choice for distributing products, and to be the best place to work in the industry.”
As a cooperative, Johnstone Supply’s corporate office and management team is focused on increasing profits for the stores, not the other way around, and the support provided by the cooperative’s corporate function has enabled many formerly independent stores to grow and prosper. Johnstone Supply provides operational support, training resources, and an array of other store services to accomplish things local owners find difficult, expensive, or simply can’t do themselves. This allows co-op members to concentrate on what Johnstone believes matters most: industry-leading service and unusually close customer relationships.
Celebrating a milestone year
2006 marked the 25th anniversary of the formation of the Johnstone Cooperative, which formed in 1981 with 32 stores and yearly sales nearing $28 million.Since that time, Johnstone Supply has added an average of more than 10 new stores a year and averaged annual sales growth of $38 million. Today, Johnstone stores number more than 300 with locations across the country, its signature parts catalog continues to be the industry standard and, as a newly-minted billion-dollar company, it has joined the ranks of some truly elite players in the wholesale business.
While the company has seen a consistent growth curve since inception, the rate of growth has accelerated remarkably in recent years. During the five-year tenure of current president/ceo Gary Daniels, Johnstone Supply has doubled overall company sales and added more than 100 new stores. The company reached its goal of $1 billion in sales much earlier than originally forecasted as sales far outpaced the average industry sales growth of 5% to 12%, posting more than 16% in average sales growth over the last three years.
Looking toward the future
While the past year was one to savor, Johnstone is actively setting new benchmarks to work toward. “We’re not sitting on our laurels,” said Daniels. “We’ve got to keep growing and adapting in order to succeed, and we’ve set some ambitious goals.”
One of those goals is a new sales benchmark characterized by the company as ‘two by ten” -- doubling their sales to reach $2 billion by the year 2010. A key strategy to achieve that lofty objective is a new focus on regionalization. The company opened a regional distribution center in Allentown, Pa., in 2004, joining existing facilities in Memphis, Tenn., and Portland, Ore. --which is also home to Johnstone’s company headquarters. Plans are in place to site several additional distribution centers in key regions.
The company’s regional distribution strategy aims to further speed product delivery times, enhance product availability and improve order accuracy. Regionalization will also enable Johnstone stores to stock more items based on local contractor needs and climate conditions. Johnstone believes that a regional focus is the future of the industry, and is supporting it not only through operational and distribution moves but in member services as well.
“We recently hired a new regional account manager for the Northeast to help those stores with marketing, program development and to serve as a liaison between the stores and the Cooperative’s corporate staff,” said Daniels. “We’ll work to implement that same approach across the country. The strategy is to reflect the needs of local stores and their customers, and make sure each market has the parts, supplies and equipment that contractors need in their particular region.”
Even with such a memorable year behind them, Johnstone Supply sees an equally bright future in store. “We really feel that the cooperative business model and the company that our members have built is uniquely flexible and responsive, which is a great strength in an always changing industry like ours,” said Daniels. “We feel like our customers and our vendors are actually a part of the Johnstone family. With their continued support and the hard work of our stores we feel our future is unlimited.”
From humble beginnings to today’s standing as one the key players in the wholesale distribution business, Johnstone Supply found plenty to celebrate in its banner year of 2006. Clearly, the cooperative is determined to keep the celebration an ongoing one for years to come.