Mixed Expectations for MHEDA Distributors in 2020
February 5, 2020
MHEDA member expectations are split on 2020, with some predicting growth while others regress.
By Steve Guglielmo
Each year in the 1st Quarter issue of The MHEDA Journal, we survey the industry to try to determine what can be expected from the economy in the coming year. To do this, we solicit forecasts from our partner associations like MHI , ITA and CEMA. We also speak to MHEDA members from both the distributor and supplier sides of the industry. This year, we had the added benefit of being able to interview well-respected economist and presenter at this year’s MHEDA Convention, Brian Beaulieu. Taken together, these forecasts should provide some insight into where the industry is heading in 2020 and beyond.
Though the economy has seen a historic run of growth since the depths of the Great Recession, the distributor forecast has shown signs of slowing down in the last few years. In 2018, for the first time in seven years, there was not a unanimous expectation of growth across all industry segments. Last year, while all segments did project growth, it was muted growth compared to often double digit projections of a few years ago.
This year, for the first time since the Great Recession, both a product segment of the industry (Engineered Systems), and a region of the country (Southeast) are projecting declines. Part of this can be attributed to the natural progression of the economy, as ITR Economics does project us to be in a downturn through the middle of next year, and part can be attributed to companies coming off of several record years. Whatever the case may be, it is clear that while the industry remains strong, it is definitely in a period of decelerating growth.
Editor’s note: For the purposes of cumulative averages, extreme outliers (more than 15% higher or lower than any other projection) were omitted. However, those responses are included in the roundup below.
The Northeast has been all over the map in the last several years, ranking as the least optimistic region in 2015, 16 and 17, the most optimistic region in 2018, and a middle of the pack projection of 5.13% in 2019. Underscoring a reoccurring trend for 2020, the Northeast projects less growth than 2019, anticipating a 2.5% bump.
Alliance Material Handling, Inc. saw its systems business rise significantly in 2019, leading President and CEO Tom Albero to project a 10% growth for 2020. The company intends to add technicians, sales, management and installers to its team next year, including senior management, which Albero says will be the company’s most important investment. Going forward, Albero sees consolidation and Artificial Intelligence as the Material Handling Business Trends that will have the most impact on the industry.
MHEDA Immediate Past Chairman and CFO of Liftech Equipment Companies Mike Vaughan projects a 2-3% increase for the company, with growth in rental, parts and service as the primary engine of that growth. Vaughan sees this as in line with the rest of the market for forklifts, as he does not see any indicators that would justify a meaningful increase or decrease in the market. However, he cautions that the presidential elections and fluctuating tensions with Chinese trade uncertainty could impact the growth of the industry. Vaughan does not expect inflation to be an issue in 2020 but notes that there is an expectation of a softening U.S. economy at some point next year.
Growth in market share and new services will lead Thompson & Johnson Equipment Co., Inc. to a projected 5% growth in 2020. President David Schneckenburger notes that the overall market was down in 2019 and can be expected to be down in 2020 as well, with New York State regulations exasperating that slowdown. He expects the overall material handling market to be down but, “From a historical basis, still strong.” Margin pressure is the Material Handling Business Trend that will most impact Thompson & Johnson in 2020 and beyond.
AJ Jersey, Inc. President David Rizzo projects sales to be level to down by 10% in 2020. “We are seeing no indicators locally that scare me,” says Rizzo. “Election years are not huge growth years. We are in a slight downturn and we need sales reps.” The company will look to add data mining and reporting staff next year to meet rising customer requests for data. Those employees, plus more warehouse space, are the most important investments AJ Jersey will make in 2020.
An overall economic downturn leads Mid Atlantic Industrial Equipment LTD CFO/Principal David Lang to project new equipment sales to fall by 10%, used equipment to fall by 5% and rental to fall by 3-10%. He does, however, project parts and service to be up by approximately 5%. The top three Material Handling Business Trends that Lang expects to impact the company are digital marketing, recruitment and retention. He also adds, “The current trade war has been extremely painful in regards to equipment and parts pricing.”
The Southeast projects to be the region that will be hardest hit by this downturn. Last year, the region was by far the most optimistic, projecting an 8.92% growth. This year, however, it is not only the least optimistic but it is also the only region projecting negative growth, with a -1.25% expectation. And this is not a case of one outlier bringing the entire region down; it is also the region with the highest percentage of respondents projecting negative growth. However, many respondents noted that this negative expectation must be kept in the perspective of multiple record years preceding it.
Advanced Equipment Company President Darin Boik expects sales to fall 10% in 2020. “The market has been hot,” says Boik. “I don’t see it as slowing, but normalizing to where it used to be before 2018.” The company saw indicators in its 3rd and 4th quarters that led Boik to this conclusion. Like his projection for AEC, Boik says of the overall industry, “It’s normalizing. Down from this year, but not slow. More of a typical year.” The company is working to further expand into the food and beverage and pharmaceutical markets, which Boik sees as more recession-proof markets.
The hope for a continued decent business environment, low inflation and a settlement of the Chinese tariff issues has led Jefferds Corporation President Richard Sinclair to project a 3-4% increase in 2020. The company re-added the Bobcat Tractor line and its systems business (robots, conveyors, etc.) have continued to grow as business want to become more efficient. “Our growth is affected by our ability to attract and retain talented people,” says Sinclair. “We have been very fortunate to do that but it’s getting tougher in a tight labor market.” He continues, “I think the geopolitical issues are the most pressing [material handling business trend.] We live in a world economy and we are not isolated from decisions that are made in Washington.”
Deluxe Systems of Florida is projected to grow by 10% in 2020, according to Saul Ackovitz. The primary driver of that growth will be an expansion into a new customer segment. Like Sinclair, Ackovitz’s most pressing material handling business trend in 2020 deals with the geopolitical climate. He notes, “Increased prices due to steel tariffs and anti-dumping rulings indicate that sales to existing customers will be flat to slightly negative.”
Gregory Poole Lift Systems Group VP Hal Ingram projects sales to be down 2% in 2020 compared to 2019. “We expect aftermarket revenue to be up 4% with new unit revenue down 6%,” says Ingram. “ITA is down 17% year over year in 2019 with 2020 predicted to be flat or down 4%. Backlog from 2018 pushed 2019 revenue up but will not have as robust a backlog going into 2020.” The company is working to deploy several robotics products/services in the second half of 2020.
Ted Springer, president of Springer Equipment Company and Southfork Lift Truck, projects sales to be down 8-10% in 2020. Like many others, Springer attributes this to political uncertainty in an election year combined with the unprecedented growth of the previous years. While the industry-wide trend toward consolidation has impacted the companies, Springer sees this as an advantage. He says, “Factory owned stores are easier to compete with than family-owned business.” He does expect this trend to continue, meaning larger and fewer dealers in the industry.
Carolina Material Handling President Mid Middleton expects 2020 to be level with 2019. Government and Commercial Construction and Service will continue to drive sales next year. The company expects to add service technicians in the second half of the year. Middleton has seen customer behaviors changing in recent years, noting, “They’re more knowledgeable. However, with their increased knowledge of the product it has been an asset. It gives the MORE knowledgeable sales force an opportunity to give additional details and options, widen their level of service range, and that confidence ‘sells’ the customer to roll with us.”
In 2018, the Midwest ranked as the least optimistic region in the country, projecting a 5.13% growth. Last year’s 3.7% projection ranked it as the second least optimistic region in the U.S. This year, however, that same 3.7% projection makes it the most optimistic region in the country by more than an entire percentage point.
All Lift Service Co., Inc. President John L. Gelsimino projects a 1-3% growth in sales over 2019 levels. “I believe that the economic and geo-political uncertainty we experienced in 2019 will subside,” says Gelsimino. “That change in mindset will activate the animal spirits and companies will make decisions and invest in the future once again.” All Lift Service experienced a soft summer that seemed to extend into the fall before noticing a slight uptick towards the end of October and into November that Gelsimino believes will continue through the end of 2019 and into 2020. He cautions, however, that, “Margin pressure is real and will continue to be a challenge that we need to focus on.”
An expansion of products offered and better sales coverage will lead Riekes Equipment to a 6-9% growth in 2020, according to President Duncan Murphy. “Our regional market will be down economically. Though we do not sell to farmers we support companies that do. Ag prices are down for many reasons but the prime one is Chinese tariffs,” says Murphy. “Since we are planning to be up we are mixing in the productivity gains coming from a new computer operating system with the addition of a few income producers.” Riekes will be adding technicians each month, field sales support and e-commerce support during the year.
MH Engineered Solutions President Scott Hennie projects sales to increase in 2020, with automation and business expansion as the drivers of that growth. An indicator that Hennie noticed in 2019 that leads him to this conclusion is a growing understanding and acceptance of warehouse automation amongst customers. To help prepare for this expansion, MH Engineered Solutions will add staff in engineering, project management and sales. While the company expects to be up, Hennie expects the industry to be flat to down. He cites election/media fears, long expansion running its course and businesses continuing to invest in growth as things that could impact that projection one way or the other.
Nate Storey, VP of Operations at Storage Solutions, Inc., anticipates 2-3% growth in 2020. One indicator he cited was, “Continued Amazon effect. We believe ecommerce will continue to expand and grow as a higher percentage of total retail sales. The pain of brick and mortar is a gain for industrial distribution and materials handling.” He agrees with the Material Handling Business Trend that says that demand for automated solutions continues to increase and that members need to be positioned to capitalize on this trend.
Shelving + Rack Systems, Inc. experienced a lot of anomalies in 2019, leading President Mike Burskey to project a 20% decrease in sales next year. He notes that the market in 2019 is slowing down now compared to earlier in the year as further evidence. The company will be investing in computer hardware upgrades in 2020 that Burskey feels will be their most important investment.
Bernie’s Equipment Co., Inc. expects to see a 2% increase next year, according to President Jeffrey Conger. The company has a couple of large projects coming up that will be the primary reason for that growth. In addition, Bernie’s will be adding sales support in the second quarter next year. Conger expects a stable economy for the overall industry but cautions that government regulations and an election year could impact that.
Dan Hegler, VP/COO at Toyota Material Handling Ohio, projects 5% growth for the distributor in 2020, citing new equipment purchases from Q4 orders. While the company doesn’t have any new lines planned, Hegler expects to see growth in existing allied/ancillary lines. With multiple generations in the workforce now, Hegler notes that there is more email contact than ever before and has seen that it is tougher to coordinate face-to-face meetings.
In recent years, the Southwest has been consistently bullish, projecting growth of 6% in 2016, 5.86% in 2017, 7.36% in 2018 and 13% in 2019. This year, it ranks as the third most optimistic region, albeit with a smaller by comparison 2.4% growth projection.
WW Cannon President/CEO Greg Brown foresees a 5% increase in 2020, driven by a variety of factors, including: e-commerce investment, website investment, experience of sales force and an investment in automation. Brown notes that a slowdown at the end of 2019 shows pent up demand that should follow in 2020. Brown sees the overall industry following a similar growth curve, with steady growth increasing in the second half of the year. He sees Material Handling Business Trend 10, “Members must invest the necessary resources for the professional development, mentorship and retention of their employees in order to position the business for future success,” as most relevant to WW Cannon in 2020.
“2019 was a growth year,” says Nelson Equipment President Mark Nelson. “We anticipate a slowing growth with the end result of revenue being around the same in 2020 as 2019.” Nelson sees continued commitment to productivity improvements by its top customers, which buoys his projection that 2020 will follow in 2019’s footsteps. Nelson sees the consolidation trend continuing but does not believe it will impact distributors who are progressive in their customer relations and support.
Kyle Free, COO of Lift Parts Service, projects 5-7% growth in 2020. Free says that growth will be driven primarily by, “new products to market to open doors into different customer segments, aggressive growth strategies to secure new business, customer retention programs to maintain existing business.” He specifically notes that the cannabis market entering Lift Parts Service’s territory will be a growth bubble for the industry. Like many, Free notes that the geopolitical climate will be a Material Handling Business Trend to watch going forward.
More sales staff, more technicians and new product offerings from Doosan will drive Miner Material Handling-Houston to a 40% growth in 2020, according to Territory Vice President Jim Evans. The company will be able to handle the growth in house for the first half of the year but will be looking to add staff in Q3 and 4. That staff will comprise an additional parts associate, 3-5 more technicians, a full-time receptionist and one more CSS/CSR Rep. A new dealership will be the most important investment that Miner Material Handling makes next year, which will contribute to this robust growth.
In 2019, the West Coast had the least optimistic projections of any region, projecting essentially flat sales overall at 0.83%. This year, the West Coast is one of the only regions to have actually increased its projections, cumulatively expecting 2.2% growth.
EKKO Material Handling Equipment COO Don Hwang sees big things on the horizon for the company in 2020, projecting sales to increase by at least 30%. New equipment and the company’s reputation of offering quality equipment that dealers can maximize their margins with will help drive that growth. “The reputation and traction of the EKKO brand is emerging in the industry being known as a vendor who actually allows high GP’s as well as 10 new lines to be launching Order-pickers, Stand Up Reach Trucks, Stand up Forklifts, and Rider Pallet Jacks,” says Hwang. To handle that growth, EKKO will be adding staff in 2020.
Level sales are on the horizon in 2020 for HOJ Innovations, according to CEO Tim Hoj. “We see continued growth for sales in the e-commerce market, as most companies continue to add projects to handle this growing sector in their business,” he says. That growth in the e-commerce, with parcel fulfillment growth, will help offset the market instability from tariffs that are fueling some of the general market slowing, according to Hoj. The company will be releasing a 2020 version 5.0 upgrade for its iOS app deployed Warehouse Management Software. The company has spent significant effort on improvements for 2020 on its digital strategy.
Watts Equipment CEO Shirley Perreira anticipates a small bump in sales for 2020. “We are really focusing on our aftermarket team and touching every customer,” she says. She notes that equipment sales were down in the territory, but Watts’ sales were up. “Automation is going to be the next big thing, as well as lithium.” As many have noted, election years seem to slow things down.
Harry Neumann Jr., President of Western Storage and Handling, projects sales to be up 5-6% in 2020. “There continues to be positive business growth in our market area in various industries,” he says. “Businesses continue to relocate to Colorado and bring opportunity to the businesses that are established and can assist with the rules and regulations.” Due to some contraction in the local material handling distribution market, there will be opportunity for growth, Neumann says. “Customers now more than ever are looking for someone to guide them through the rules and regulations imposed by local and state municipalities. We have partnered with the professionals like engineering firms and inspection experts to make sure we can assist our customers navigate through the maze.”
FMH Material Handling Solutions, Inc. President John Faulkner projects sales to be up by 3.5% in 2020. He notes that low interest rates and lending by banks will help drive that growth. “We continue to look for good people. We plan to add 10% to our staff in 2020 with demand to improve sales coverage and IT expansion,” says Faulkner. “Finding people is the key. If we can find the people we will continue to grow.”