“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” said the Oracle of Omaha (Warren Buffett) in 1986, but it could be equally true today for independent packaged gas distributors.
The industrial gas industry is at a crossroads, battered by both the macroeconomic backdrop and factors specific to the industry. We are exiting the longest period of economic expansion on record, caused by the Covid-19 pandemic. This shock-tested companies’ propensity to save for a rainy day, prioritise employee wellbeing, while continuing to deliver essential customer service to those industries requiring gases in a time of need.
While this crisis shall pass, gas distributors continue to contend with a shifting competitive landscape which has been underway for some time. Local distributors have witnessed two mega mergers over the last two years and the (re)entry of new large, integrated competitors in North America. Hardgoods distribution is fundamentally changing as non-traditional competitors (think Amazon, Grainger) offer speed, variety, and low prices.
Indeed, across industries, we are seeing big companies prosper at the expense of small and medium-sized businesses, as entire supply chains use size as a shortcut for quality. How independent players respond today could very well shape the structure and nature of the industry for years to come – not to mention the very survival of certain owner-operated firms.
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