Q&A with M. A. Stewart
& Sons Ltd.
Big Canadian rep firm aims to be player
In U.S. industrial valves marketplace
BY MORRIS R. BESCHLOSS
Contributing editor
MANUFACTURERS'REPRESENTATIVES and distributor M. A.
Stewart & Sons Ltd. was founded in 1955 by Melville A. Stewart
for the purpose of distributing pipe, valve and fittings to meet
the growing demands of the Canadian market.
In August 1999 the firm established M. A. Stewart & Sons (USA)
Ltd. in Charlotte, N.C. It was the first venture of a prominent
Canadian pvf rep firm into the U.S. market, indicating the closer
bonds developing between the two nations.
As this interview reveals, M. A. Stewart's stateside activities
will focus almost exclusively on the pvf sector, a digression
from the more phc/pvf diversified approach in Canada.
M. A. Stewart CEO Dan Hardy discloses that the move into the U.S.
was motivated by a saturated Canadian market as well as the growing
opportunities available in the U.S., initially in the Southeast.
Hardy believes that his company's 46-year history in the pvf business
well qualifies it to integrate successfully into the American
market and serve it well.
Beschloss: M. A. Stewart is one of the largest pvf rep/distributor
firms in the U.S./Canadian market. How large is it?
Hardy: Revenues total $50 million Canadian. Our total employment
is 59. At present the bulk of our business is Canadian.
Beschloss: M. A. Stewart was incorporated in Vancouver, B.C.,
in 1955 as a rep/distributor of pvf and plumbing/heating/cooling
products. What prompted your greater emphasis on valves as your
business matured?
Hardy: The ability to facilitate acceptable gross margins
on pipe and fittings declined as more and more products were imported
into Canada resulting from domestic closures and reduced import
duty tariffs. Consequently the company provided greater emphasis
on valves and specialty products.
Our Canadian operation now consists of seven locations across
Canada, with more than 100,000 sq ft of office/warehouse space
to service valued distributors and users.
Beschloss: What motivated your entry into the U.S. market?
Hardy: M. A. Stewart & Sons (USA) Ltd. was incorporated
in Charlotte, N.C. for the purpose of expanding the company's
growth opportunities in new markets. With 45 years of history
and experience in a now relatively saturated Canadian pvf market,
geographical expansion would be necessary to meet our future growth
objectives.
What expedited the transition to the U.S. was an acquisition in
1998 of a Taiwan-based valve manufacturer. The initial focus of
this venture was to establish a consistent supply of product for
our Canadian supply chain and end-users while having influence
on product design and production. This acquisition created opportunities
south of the border, as the majority of our existing product offerings
are contractually bound to the geographic boundaries of Canada,
limiting any expansion.
It should be noted that in our decision to enter the U.S. with
a subsidiary-formed company, as opposed to through acquisition,
we remain extremely conscious of the different markets and will
be dependent on our Charlotte headquarters to adapt accordingly
within the U.S. circuitry.
Beschloss: What lines comprise the bulk of your revenues?
Hardy: In Canada we carry Kitz, Apollo, Toyo, Center Line,
Flowseal, Duo Check, RP&C, MAS branded, Vogt, American Valve,
San Yang Metal and Hitachi Metals.
In the U.S. we carry Kitz bronze, brass and iron; WKM high performance
butterfly valves, in North ans South Carolina only; MAS branded
carbon and steel ball valves in NPT/SW/flanged, stainless steel
knife gate valves, brass ball valves, gate valves and check valves;
SVC in API 600 carbon and low alloy steel gate, globe and check
valves, and SVC in API 603/ANSI B16.34 stainless steel and high
alloy gate, globe and check valves.
Beschloss: Are your stateside efforts regional, or does M.
A. Stewart expect to eventually have national distribution?
Hardy: The company's initial geographic selection was Charlotte
because it represented central opportunities to the pulp and paper
markets in the southeast U.S. Investment cast stainless steel
ball valves and a variety of pulp stock knife gate valves, being
an integral part of a paper mill piping process, influenced our
headquarters location decision.
As with our Canadian operation, our long-term objective would
be to develop a national status in the U.S. Our primary focus
will be regional, as we have much to learn about distribution
and representative agent networks in the U.S., which differ greatly
from Canada.
Beschloss: Has the North American Free Trade Agreement given
M. A. Stewart a boost in its growth strategies? Are there plans
afoot to broaden your base into Mexico?
Hardy: NAFTA has had little impact on our expansion strategies,
as most product entering our U.S. subsidiary is not produced in
North America. On the reverse side, our Canadian operation has
received import duty relief on our valve shipments originating
in the U.S. and Mexico.
At this time we have no immediate plans to broaden our base into
Mexico, although we will not ignore the potential valve opportunities.
Beschloss: With M. A. Stewart being privately-held, is the
generation of growth capital for expansion adequate through private
sources?
Hardy: Yes, our generation of growth capital will be adequately
financed through private sources.
Beschloss: Has your penetration of the relatively small Canadian
market reached its limit, or are there additional opportunities
available?
Hardy: As indicated earlier, we're operating in a relatively
saturated Canadian market, although our long-range business plan
calls for continued growth. This penetration will be generated
through the introduction of innovative new products and expansion
of our inhouse valve automation programs.
Beschloss: What plans do you have to develop the much greater
potential available to you in the U.S. valve markets?
Hardy: It indeed is our intention to participate in the much
greater potential available in the U.S. valve markets. However,
our successes and expansion will depend on our acceptance within
the marketplace.
It's our aspiration to be viewed as an excellent, value-added,
cost-reducing and quality supplier to the pvf industry. It will
be a long process to achieve such status and gain respectability
amongst customers, although I can say we're committed and here
for the long haul.
We'll be patient and take one step at a time, as we have much
to learn, offer and gain in the pvf industry.
Beschloss: Your eight-year sales breakdown indicates a steady
trend toward pvf and a lessening dependence on plumbing. Does
this indicate a total long-term commitment to valves?
Hardy: Our concentration in the U.S. will be primarily the
pvf markets. Our Canadian trend will remain approximately 60%
pvf and 40% plumbing, with a strong emphasis on valves and automation.
Morris R. Beschloss, a 45-year veteran of the pipe/valve/fittings industry, is Contributing Editor for Pipe/Valves/Fittings.
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