Ahlsell is the market leader in distribution of installation products, tools and supplies to professional customers in the Nordic region. Ahlsell’s operations are primarily conducted in Sweden, Norway and Finland, which together account for 97% of the Group's net sales.
Ahlsell offers suppliers cost-effective access to a geographically challenging market. Large areas, hilly terrain, long coastlines and the many lakes present logistical challenges. The customer base is fragmented and products are sold to customers within installation, industry, infrastructure, construction, etc.
According to a market analysis conducted in conclusion to the IPO, Ahlsell’s total addressable market in the three main markets was estimated to be approximately BSEK 160 (2015). Given our broad Nordic presence, in combination with a continuously increasing product offering, and an expanding number of customer categories, the current market is probably substantially larger.Our market share of the Nordic market, addressing professional customers, was assessed at 20%.
Important role of distributors
In the Nordics, distributors represent approximately 70% of the total market. Direct sales and sales to DIY companies (Do-it-yourself) account for the remaining 30%. These percentages have been stable since 2011, which illustrates distributors’ strong position in the value chain. Suppliers’ bargaining power with the distributor varies depending on, among other things, the strength of their brand, market share and presence in the market. There are several types of distributors in the market: large specialists which solely focus on one product segment, small specialist wholesalers with local salesforces, and multi-specialists like Ahlsell. Ahlsell offers customers a unique range within three product segments.
Ahlsell's competitive advantages in the market
At Ahlsell, we offer customers the concept of ”one order, one delivery and one invoice”. Most of our customers make recurring purchases from more than one product segment, which proves that a broad product offering is important for our customers. Availability and size are a key competitive advantages in the distribution market.
We achieve economies of scale within sales, purchasing, logistics, branches, IT and overhead costs, which ensures good conditions for a competitive offering and good profitability. The competitive advantage is also proven in the branch network, where Ahlsell is able to operate profitable branches even in smaller cities thanks to our multi-segment offering.
Ahlsell’s market exposure and expected growth
Historically, the market has shown a growth rate of 1-2 percentage points above GDP growth. Ahlsell's growth target is to grow 2-3 percentage points faster than the market.
The customer base is large and fragmented. In many cases, even relatively large customers handle their purchases in a decentralised way. Most customers tend to purchase from several product categories, often in small quantities, which makes the distributor's role particularly important. Our value proposition is suitable for both large and small customers. Small and medium-sized enterprises (SME) account for approximately 45% of our net sales, and our ten largest customers represent approximately 6% of the total amount. The rest of the volume is generated by major customers within installation, industry, facility management and construction, and services-related activities.
For SME customers, rapid delivery, quality of the offering and service, a social purchasing environment, and prices are key drivers of the purchase decision. Meeting these criteria requires a broad and deep range, a local presence, and professional and experienced personnel. SME customers typically place 60-70% of their purchases with their main distributor, and only one in five customers has changed their main distributor during the last five years, which confirms customers’ loyalty.
- Installation – includes installers within plumbing, electrical and ventilation. They mainly purchase products in the HVAC & Plumbing and Electrical product segments. Customers range from small local companies to multinational installers and are usually multi-segment buyers.
- Industry – are customers active in a number of different sectors that include, but are not limited to, manufacturing. In terms of customer size, the segment ranges from small local companies to multinational corporations. For major industrial customers, Ahlsell's deliveries normally constitute only a small proportion of the total purchase, but the consolidation of a number of products in small quantities to fewer orders is valued. The customers are usually multi-segment buyers, even though their purchases are mainly in the Tools & Supplies product segment.
- Construction – comprises both major construction companies and small building firms. Major customers often work with subcontractors at the installation stage. Customers mainly purchase products from the Tools & Supplies segment, but are also multi-segment purchasers.
- Infrastructure – comprises state, municipal and private customers involved in major projects, such as “Förbifart Stockholm” (the new Stockholm bypass), renovation of the electricity grid equipment and fibre cable installations. These customers mainly purchase products within sewerage and electrical, but are also multi-segment purchasers.
- Other – examples are facility management, cleaning companies and agribusiness.
Expansion to new customer segments and sub-segments, both organically and through acquisitions, is an important driver of further growth.
Ahlsell's competitors are usually specialised in a specific product segment. Within HVAC & Plumbing, our main competitors are Dahl (St. Gobain) and Onninen (Kesko). Within Electrical, competition is mainly coming from multinational companies such as Rexel, Sonepar and Solar, whose local sales organisations are our key competitors in all three countries, despite variations in their relative strength. In Finland and Norway, Onninen is also strong within Electrical. Within the Tools & Supplies product segment, Tools (Momentum Group) and Würth are recurring competitors.