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How did Beacon Roofing Supply transform itself from a small regional firm with 32 employees to a $2 billion company with 240 branches across North America? Believe it or not, the answer is one word: values. A spirit of integrity based on enduring values has guided Beacon’s astounding growth. These values have ensured successful partnerships with suppliers and customers, and they have enabled Beacon to build a workforce that is the best in the industry.
Beacon Sales Company was established in 1928 in Charlestown, Mass., as one of the first distributors of commercial roofing materials in New England. By 1953, the company had outgrown its building in Charlestown, and built a state-of-the-art facility in nearby Somerville. In the 1970s, the company expanded to Worcester, Mass. and Lewiston, Maine.
In 1984, Drew Logie took an equity position in this well-respected company. Drew knew the roofing business inside and out. He had begun as a roofing contractor, worked in sales for a roofing manufacturer, and was a branch manager for a leading distributor of roofing materials. When he took over, Beacon had annual sales of nearly $17 million, virtually all in the commercial roofing segment.
In addition to his broad experience, Drew also had a deep conviction that business success depended on values. His vision was to grow a company of honestyand integrity, rooted in a philosophy of partnership and trust with customers and suppliers. The plan was to do business with the best, most efficient, most demanding contractors, and buy from the best manufacturers. The company would grow by becoming more important to its customers, by providing high-quality products and responsive service at a fair price. And it did. Beacon, for example, was one of the first distributors to outfit its delivery trucks with mechanical equipment such as forklifts, roof-loading conveyors and cable cranes, resulting in efficient deliveries and reducing its contractor customers’ equipment expenses.
Another fundamental value was passion for the entrepreneurial spirit. The goal was to nurture this spirit among branch managers, trusting them with a great deal of autonomy and allowing them to make decisions based on local market conditions.
Drew also focused on strengthening the quality of Beacon’s inside and outside sales staff. To become more results-oriented, the company attracted the best people in the industry by offering them an excellent compensation program, and retained them by rewarding their performance. Drew sought employees with a strong work ethic: enthusiastic employees who were willing to start work every day at 6:00 a.m., serving and advising contractors who took pride in their jobs, and who had the perseverance to aid contractors with their challenging projects.
Shortly after Drew became CEO, David Grace joined the company as Chief Financial Officer. He established financial discipline with state-of-the-art financial controls and an enterprise resource planning system that provided a solid foundation for Beacon’s growth.
Under Drew’s leadership, the company opened new branches and increased sales, diversifying into residential as well as commercial roofing. By 1997, seven branches were generating $72 million in annual sales.
Frugality drove the expansion into residential roofing. The company used resources more efficiently as drivers made residential deliveries after returning from their early-morning commercial deliveries. Beacon’s original move into residential roofing demonstrated to quality manufacturers the benefits of partnering with Beacon. Before affiliating with Beacon, a leading national shingle manufacturer had sold very few shingles in New England. Within a few years of partnering with Beacon, that manufacturer became the leading shingle supplier in New England. This resulted from Beacon’s confidence in the manufacturer, as well as the credibility of Beacon’s sales force among contractors and builders.
By the late 1990s, Drew realized that for Beacon to remain competitive, it would either have to grow beyond New England or merge with a larger firm. It was time to seek an investment partner to finance Beacon’s continued growth. Beacon received proposals from several potential investors but the partner of choice was Code, Hennessy & Simmons, a venture capital firm from Chicago. Although Code Hennessy & Simmons had not offered the best price or the most equity, the firm shared Beacon’s vision of acquiring and partnering with high-quality regional distributors. Code Hennessy & Simmons also supported Beacon’s philosophy of rewarding key managers with the opportunity to acquire equity or stock options so they would have a stake in the growing enterprise. Time would show Beacon’s values triumphed over the lure of short-term gains.
In 1998, Beacon embarked on a major program to acquire successful distributors that enjoyed good relationships with their contractors. While growing in sales and profits over the years, Beacon gained an industry-wide reputation for integrity. As a result of this reputation, Beacon was usually the preferred buyer when a regional distributorship became available for acquisition. The local founding families or managing executives recognized Beacon as a company that would respect the legacies they had established, treat their employees respectfully and compensate them generously.
Central to Beacon’s acquisition philosophy was the retention of local management. Beacon recognized that the team that had built a successful local company was best equipped to lead future growth in that region. Beacon retained key managers by offering them equity in the company and/or stock options, and gave them the autonomy to make business decisions based on their knowledge of the local markets.
As Beacon acquired local companies, often one of the first questions asked was, “Are you going to change our name?” Beacon’s reply was, “No, you’re proud of your company’s name. Your customers respect your name.” For Beacon, maintaining positive customer relationships is a key ingredient in encouraging local entrepreneurship and keeping talented, ambitious employees.
The first major acquisition was Quality Roofing Supply Company, with sales of $51 million. Then Beacon ventured into Canada with the acquisition of Groupe Bedard, a $27 million, best-of-class roofing distributor in Quebec, and Exeltherm Supply, a $49-million distributor based in Ontario. Beacon increased its size by 67% in 2000 with the acquisition of Best Distributing, a fine company founded in the late 1800s and the dominant roofing distributor in the Carolinas, with sales of $140 million. “Growing by adding Best’s regional and national reputation, its professional employees and its quality customers was a big milestone for Beacon,” recalls Drew. Beacon soon grew by another 60% with the acquisition of The Roof Center, with locations in Maryland and Virginia, and West End Lumber in Texas.
After local and regional companies became affiliated with Beacon, their sales grew and their profitability increased. In some cases, this happened by capitalizing on the new opportunities that became available to them with Beacon’s financial leverage. In other cases, local affiliates refocused on core competencies and shed unprofitable product lines with the aid of Beacon’s branch-level financial discipline.
As Beacon converted its major acquisitions, the company developed an effective integration process. Shortly after acquiring a company, Beacon sends a team of experienced Beacon employees from existing operations to the new firm for several weeks. The team supports the conversion to Beacon management systems, including the common, company-wide information-technology system. This major investment in time and effort is vital in integrating the systems and orienting the new employees to Beacon’s policies and procedures, as well as its core values, like teamwork.
While the newly acquired companies adopt Beacon systems, they retain their control over local sales and marketing practices. Branch managers know their customers best and understand their distinct local markets. Their experience and expertise are fundamental to Beacon’s success. They are entrepreneurs who are recognized and rewarded for their contributions and their adherence to the disciplines of Beacon’s financial controls.
Branch managers can make quick decisions because of Beacon’s flat corporate organizational structure. A lean corporate office staff (with less than 1% of company employees) assists the branches in reaching their full potential. This includes providing centralized management of corporate-wide functions, such as information systems. Beacon’s open-access information systems deliver comprehensive financial data to branch managers every day.
A company-wide benchmarking system enables them to see how their performance stacks up against that of their peers. And, it encourages the sharing of effective practices among the branches.
By 2002, Beacon had surpassed $500 million in revenue and was poised for another new beginning. Early in fiscal 2004, Robert R. Buck joined the company as President and CEO, and the company set its sights on becoming the pre-eminent roofing distributor in North America. Bob came from Cintas Corporation, where he was president of the Uniform Rental Division. Under his stewardship, that division’s annual sales increased over 300% from $600 million to $2.5 billion. Bob spent over 20 years at Cintas. In 1983 he oversaw Cintas’s initial public offering.
Upon joining Beacon, Bob traveled the U.S. and Canada, visiting branches, meeting Beacon’s managers and employees, and getting a feel for the company and the business. As a result, he was able to articulate Beacon’s enduring personal and business values, ensuring an understanding and legacy of how and why people would be the foundation for Beacon’s continued growth and success. He shared these collected values with all employees and developed “Best Environment” materials for use in each Beacon workplace.
To reach its goal of industry leadership, Beacon needed to tap the equity market, and the company first offered stock to the public through an initial public offering (IPO) on September 23, 2004 through the NASDAQ Exchange. Without missing a step, Beacon marched into a new era of growth as a publicly traded company. In 2005, The Wall Street Journal ranked Beacon as the sixth fastest-growing new stock issue behind Google.
The company continued to acquire successful distributors across North America and drive organic growth in existing operations. Within three months of the IPO, Beacon acquired Atlanta-based JGA Corp., which had sales of $74 million. This was followed in October 2005 by Beacon’s largest acquisition, Shelter Distribution, with sales of $313 million and 50 branches. Other additions in 2005 and 2006 included ISI, Commercial Supply, Easton Wholesale, Mississippi Roofing, Alabama Roofing, Southern California’s Pacific Supply, Minnesota’s Roof Depot, and RSM Supply in Arkansas, Missouri and Oklahoma.
Sales climbed rapidly to surpass $850 million in fiscal 2005 and $1.5 billion in fiscal 2006. In April of 2007, Beacon acquired North Coast Commercial Roofing Systems based in Twinsburg, Ohio, which had sales in excess of $250 million. This strategic acquisition moved Beacon into three new states-Ohio, New York and West Virginia. At this point, operations now encompassed 172 branches in 37 states and 3 Canadian provinces.
In October of 2007, Beacon announced the appointment of Paul M. Isabella as President and Chief Operating Officer. Paul's extensive background included over 30 years of leadership positions at major U.S. corporations where he had responsibility for operations, distribution and logistics, customer service, marketing, sales, strategic planning and supply chain management.
Beacon celebrated its 80th year in business in 2008 with a continued focus on customer service, cost control and smart growth. In the face of difficult economic conditions, Beacon increased annual sales by 8.4% in 2008 and exceeded expectations in fiscal 2009 with record net income and earnings per share. Beacon continued to grow with the addition of locations in Albuquerque and Oklahoma City and a greenfield location in Denver, Colorado.
Beacon made several strategically important acquisitions in fiscal 2010 that opened up new markets or filled in key existing areas. These acquisitions included two companies in Florida, Independent Building Materials based in Orlando and Phoenix Sales with four branches located in Tampa, Orlando, Pompano and Ft. Myers. In addition, the acquisitions of Lookout Supply, Louisiana Roofing Supply and Posi-Slope and Posi-Pentes enhanced Beacon’s market presence in Tennessee, Louisiana and Canada, respectively. At the end of 2010, Bob Buck relinquished the title of CEO to Paul Isabella. Bob retained the title of Chairman of the Board and still remains actively involved with the investment community, acquisitions and monitoring organizational structure and leadership.
In fiscal 2011, Beacon increased sales by 12.9% to a record $1.82 billion. Also, the company expanded further in Canada with the acquisitions of Enercon Products in May, a Western Canada roofing distributor with six locations. Shortly after fiscal 2011, Beacon acquired The Roofing Connection, a one location distributor headquartered in Nova Scotia, and Fowler & Peth, with 9 locations across Colorado, Wyoming and Nebraska.
In fiscal 2012, the company exceeded $2 billion in sales for the first time. During 2012, the company also made several strategic acquisitions and opened several new branches which expanded its market coverage as well as enhanced its current footprint. In May 2012, the company acquired Pittsburgh, PA headquartered Cassady Pierce, which was founded in 1947 and has 6 locations in and around the Western Pennsylvania area. Just a few weeks later, the company announced the opening of their 200th location in Myrtle Beach, SC. This branch operates under the Best Distributing name.
On July 1, 2012, Beacon acquired Structural Materials Co., which has 6 locations in Southern California. This acquisition more than doubled the size of the company's market penetration in that densely populated area. The summer also saw the company enter a new market in St. Louis, MO, where a new branch was opened under the Roof Depot name and a one-location distributor, Contractors Roofing and Supply Co., was acquired.
Shortly after fiscal 2013 began, the company acquired McClure-Johnston Co. Founded in 1914, McClure-Johnston has 14 locations throughout Pennsylvania, West Virginia, Maryland and Georgia. In another strategic move into a new market, the company acquired two companies in Northern California: Ford Wholesale, based in San Jose, with 3 branches and Construction Materials Supply with 2 branches.
The company’s long-time CFO David Grace retired on December 31, 2012. Throughout his years of service to Beacon, David was an important part of the Company's tremendous growth and success. He has built strong finance and IT teams and a disciplined financial culture that will serve the company well in the years ahead.
As Beacon has grown, specialized skills have been added at the corporate level, such as a safety and risk management department and a sales and marketing department that has the following goals: build sales talent within the organization through sales training programs; aid local sales people in strategic and tactical sales skill development; implement systematic selling processes and disciplines; and aid branches in developing customer relations and new customer acquisition skills.
Beacon has achieved its growth by cultivating the best customers and forging strong partnerships with them. In founder Drew Logie’s words, “We focus not on what our customers can do for us, but what we can do for our customers. We are dedicated to offering high quality products along with responsive service to resolve contractors’ problems quickly and effectively.”
Beacon employees at all levels adhere to the company’s enduring values in their dealings with one another, customers, vendors and other constituents. These values, originated over the years by Drew Logie and formally articulated and institutionalized by Bob Buck, have become embedded in the fabric of the Beacon culture. Consequently, the values have provided the security and motivation that have enabled Beacon’s employees to build such a successful company. The strong commitment to these values by Beacon’s employees has given the company a great deal of confidence in its future success and a continued, strong reputation to build on.
Or, in Bob Buck’s words, “When a company gets the people part of the equation right, everything else falls into place.”