Phil Matten is an interesting guy. I met Phil at the Vegas Show here in the U.S. but really Phil is an expert on the European Fastener Industry. His portfolio includes:
Fastener Industry Consultant, Writer and Analyst.
Editorial Consultant to Fastener + Fixing Magazines
Director, British & Irish Association of Fastener Distributors (BIAFD)
Consultant to European Fastener Distributor Association (EFDA)
Policy Advisor to Confederation of British Metalforming
For those readers in the U.S. who are members of regional or national fastener associations, the EFDA is the European body representing the interests of and supporting fastener importers and distributors throughout Europe.
The BIAFD is the trade association representing and supporting fastener importers and distributors in the United Kingdom and Ireland. Its primary role is to ensure its members are always better informed – that ranges from informative regular meetings, e-news and training resources. It represents its membership with UK and Irish authorities and through its founder membership of the European Fastener Distributor Association, with European bodies.
Phil has also been a sales director for FastenerExchange, the Managing Director – UK for Altenloh Brinck & Co, Sales & Marketing Director for Fastbolt Distributors (UK) Ltd, and held sales and marketing management positions for several other organizations.
But, best of all, Phil is generous with his time and took some time to discuss with me many aspects of the European Fastener Marketplace.
TS: I’m always curious how the U.S. marketplace compares to other parts of the world. For instance, is Brighton Best one of the main sources for commodity items like they are here?
Phil: Not the main source. They’re certainly a significant wholesaler (master distributor) in the UK but by no means as dominant as in the US. The largest wholesaler in the UK is the Hexstone Group, a conglomerate of longstanding British companies, now privately owned by an American family.
None of the UK wholesalers really penetrate continental Europe to a major extent. There are a number of challenges one of which is simple logistics. The UK is offshore and supplying across the English Channel (even before the UK leaves the EU fully which will mean additional customs processes) adds delivery time. That’s enough to tip the balance in an intensively serviced market against major competitors based in Germany and the Netherlands, and further away in Italy, Poland, Spain. Realistically, Germany and Italy are the power houses of the European fastener market, both for distribution and manufacturing.
TS: Is China and Taiwan as large a source of supply as it is here in the U.S.?
Phil: Yes. Over recent years volumes of imports from China have increased. US Section 301 tariffs also mean Chinese exporters have turned their attention more strongly to Europe. China accounts for around 38% of fasteners imported to the European Union. There is still a lot of product coming from Taiwan, generally higher grade or more specialized, but volumes have been eroded by China over the years so now it represents about 26% of EU imports. Vietnam was growing as a European source, until last year when volumes dipped as US importers switched there in response to tariffs on Chinese fasteners.
TS: Do European distributors get much product from the States?
Phil: Not a great deal. The US accounts for about 1.5% of total fasteners imports into the European Union. I’ve never really broken that down but a significant proportion is probably US companies supplying subsidiaries or partners in Europe. There are quite a few US subsidiaries, particularly in the UK. BBI mainly bring in direct from Asia which makes sense. Earnest Machine supplies US product into European customers. Supply Technologies, Optimas, Lone Star all have UK operations. Most recently Sherex established a subsidiary in the UK. Again, tariffs became a factor when the EU applied additional duties (25%) on some fasteners from the States – in retaliation for US tariffs applied by Donald Trump on EU product.
TS: Are there a lot of smaller and family owned distributors in Europe? How do they compete against the large multi-branch distributors? Is there a lot of distributor consolidation like there is in the States?
Phil: There still are a lot of SMEs, although there has been considerable consolidation over the last decade. We spoke previously about Wurth, Bossard and Supply Technologies. Bufab has picked up a number of good independents recently. Trifast made sound investments in Italian manufacturing and German distribution. Grainger has just reversed the process and divested Fabory, headquartered in the Netherlands, to a PE (private equity). Others have also been picked up by PEs, particularly if there is no family succession. That said, the SMEs are resilient, and relationships and local service still count. There’s a strong history of family ownership in the fastener distribution and manufacturing sector in Europe, so still plenty independently owned.
It’s worth recognizing that some of the German family owned fastener distributors are large by any standard. Reyher in Hamburg has sales in excess of US$350 million. Keller und Kalmbach in Munich similar. Both with massive, highly automated warehouse facilities – take a look at https://keller-kalmbach.de/unternehmen/zentrallager-hilpoltstein
Bossard, headquartered in Switzerland, is fundamentally family owned and has grown through astute acquisitions. Dresselhaus in Germany has recently gone from family to PE ownership. Amongst the manufacturers there are also plenty of very large, family owned businesses, particularly in Italy, several with a significant presence in North American – Fontana Group and Agrati are two you’ll immediately recognize.
TS: So, I’m a U.S. based distributor and I want to break into the European market. Any suggestions on how I should proceed?
Phil: It is as tough for a US company to penetrate the European market as it is the other way round. Both are mature markets and, unsurprisingly, there are plenty of companies across Europe fulfilling similar roles to those you know well in the States. We’re in an extraordinarily intensive service industry, both sides of the Atlantic, whether wholesaler to front line distributor, or front line distributor to OEM. Inventory holdings, tight lead times, VMI services, engineering support, specialist processes are all critical service values that rely strongly on market proximity.
Successful US companies have established a physical footprint in European markets (Supply Technologies, Optimas, Brighton Best, Lone Star, Earnest, Fastenal amongst others), or developed specific partnerships with European companies, often based on niche products. Others focus on servicing existing North American customers with European facilities.
TS: Finally, Phil, how has the coronavirus impacted the European fastener sector?
Phil: It has been extraordinarily challenging. There have been very tight lockdowns in Italy, Spain and the UK, amongst other countries. Across Europe the automotive sector came to a virtual standstill and car sales are only just beginning to pick up slowly as economies open up again. Aerospace has also been hit hard, Similar to Boeing, Airbus are seeing significant cancellations. That’s leading to significant job losses in supply chains – Rolls Royce is just one example, shedding 9000 roles globally.
In the UK, BIAFD surveys its members monthly. Surprisingly perhaps, a few have been doing quite well. Some had significant PPE ranges on which they built to offset fastener declines – you’ve seen a similar pattern with Fastenal. Others have been involved in critical supply chains, whether ventilators, protective screens or construction/installation of emergency health facilities. Overall, though, UK sales were hit hard in April and to a lesser extent May. For Italy and Spain the trough was a month or so earlier. June and early July have shown solid business upticks but there are concerns that was mainly catch-up and, with supply chains refilled, underlying demand looks weak. I always think the fastener market is a good barometer of economic fortunes and the glass is very definitely still reading stormy, so the industry is going to need to really demonstrate that resilience.