Thursday, September 17, 2015

Consolidation activity continues in the Western European Electrical Wholesale market

The overall electrical wholesale market within the EU (excluding recent accession countries) is estimated to be worth around £26bn, with the market value having remained at a similar level since 2012 - though there have been significant changes within individual markets.
AMA’s new report focuses on developments in Germany, France, Belgium and the Netherlands and, while the EU economy as a whole is currently experiencing a difficult period, some of the largest electrical wholesale markets in Europe have generally performed reasonably well over the last 5-6 years. Germany is the largest market accounting for over 30% of sales in ‘Western Europe’, reflecting high specification standards and a strong manufacturing base requiring electrical components.
A key trend in the electrical wholesale market is ongoing rationalisation of wholesaling, with further acquisitions consolidating the dominant positions of Rexel and Sonepar across the major markets. It is becoming ever more difficult for the smaller, independent companies to compete in the market, with a high dependence on buying groups and few new entrants to the sector.
Positive influences in this market include growing investment in IT, growth of renewable energy initiatives. In particular, the increase in online activity is changing the electrical products distribution sector, as companies develop more of a multi-channel approach to targeting customers. However, in comparison to other sectors, E-commerce is underdeveloped in this market, though changing as electrical contractors overcome their traditional approach to product selection and ordering processes.
The electrical wholesale market in France is mature and the dominance of the two leading players means that major developments in market structure are unlikely, at least in the short term. Future prospects for the construction sector are not optimistic in the short term, but our forecasts are for a slight improvement in the electrical wholesale market value, based on some positive effect from legislation and the development of more complex technologies. Beyond 2015, a steady increase in the French electrical wholesale market is forecast as the construction market slowly begins to recover from the recession.
The German economy entered 2015 positively and our forecasts for the electrical wholesale market are for growth of around 2% in 2015/16, and beyond that even higher, assuming that the recovery in the economy is sustained. Sonepar, the market leader in Germany, continues to grow and to make acquisitions internationally. However, there is scope for further growth within the German electrical wholesaler market and it would seem likely that further acquisitions by nationals will continue to be made in coming years.
Our forecasts for 2015-17 for the electrical wholesale market in Belgium are for low levels of growth, reflecting the relatively flat economy and construction industry in general. The market has a dual structure, with two internationally active players accounting for around 70% of the market, and the remainder made up of independents. Although the regional split in the market is likely to continue, international groups will seeks expansion through acquisition and developing more formal cooperative groups between them.
The electrical wholesale market in the Netherlands is highly consolidated, with the leading international groups accounting for well over 70% of the market. In general terms, the market appears to have remained flat over the last 5 years, though this conceals several years of volatility – particularly in 2012/13 when there was a significant decline. Given a positive general economic background, with GDP growth rates of around 2% forecast respectively for 2015/16, prospects for construction markets are better than they have been for some time.
In summary, while 2015-16 is likely to be a difficult period for most European electrical wholesale markets, medium term prospects are generally relatively optimistic. Broadly, forecasts indicate modest recovery, reflecting a combination of increases in new housebuilding levels and a steady recovery in consumer spending feeding through into rising demand for electrical products in the medium term. New market opportunities are also emerging, with the electrical sector adopting variable levels of involvement in renewable energy, home automation etc., while IT/communications also continues to attract significant investment. Conversely, external threats to the sector have grown with a switch to offsite manufacturing in some countries and a growing focus on modularity in areas such as wiring and circuit breakers for example, which may impact on the role of wholesalers in some countries.
“A relatively low key but important development in the last year is that Sonepar have entered the UK market with the acquisition of Routeco in 2014” said Andrew Hartley, Director of AMA Research. “While this acquisition gives them only a small share at present, it seems likely that this will be a platform for further acquisitions in the medium term, and probably represents a key growth opportunity given their high shares in other EU markets.”
It is forecast that acquisitions will continue across all European markets, though at a slower rate than over recent years.

The ‘Electrical Wholesale Market Report - Western Europe 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

No comments: