Buying groups and cooperatives have been around for generations, supporting and building relationships that continue to grow their membership year after year. Both organizations put their members as top priority and both offer benefits like vendor partner rebates, assistance and leadership from professional experts in the industry, marketing support, education and training opportunities, and technology support.
Traditionally, buying groups are not member-owned and have third-party involvement. They are fully or partially owned by a third party (non-member) and often do not open their books to their members. The members merely pay an annual/monthly membership fee for the right to purchase products through them. Usually, buying groups provide different classes of membership based on the volume purchased.
Hybrid buying groups, such as the WIT Group and Omni Corporate Services Ltd. - both of which are member-owned - offer the monetary benefits as well as networking and business sharing opportunities of both a buying group and co-op. However in some hybrids, unlike traditional buying groups, each owner member has an equal part in the ownership of the group. Members are independent wholesale distributors that promise a commitment to the growth of the group, and they are offered the chance to capitalize on competitive opportunities. Hybrids implement initiatives like national accounts, private labeling, importing and technological advancements to support their vendor partners.
Generally speaking, a cooperative is 100% owned by its members through the purchase of stock, which provides voting rights. It is democratically controlled by the members who use the co-op’s services or buy its goods. Also, co-ops return surplus revenues (income over expenses and investment) to members proportionate to their use of the cooperative, not proportionate to their “investment” or ownership share. They are motivated not by profit, but by service - to meet their members’ needs for affordable and high-quality goods or services.
Though the HVACR industry as a whole has been more concerned with consolidation and acquisition, and less interested in supportive groups like Johnstone Supply’s cooperative (formed in 1981), recently a group of HVACR distributors got together to form the second of such organized groups, the Blue Hawk Cooperative.
A Closer Look At Blue Hawk
Only one other cooperative existed within the HVACR industry when Dan Bleier of Able Distributors, Chicago, IL, decided to start up the Blue Hawk Cooperative in July 2005. After reading an article about cooperatives in a local business magazine, he realized that his fam-ily-owned business and other independent distributors needed a way to compete with the big boys like Home Depot. “We didn’t have the volume to get the manufacturer rebates they could,” he says.Established buying groups such as Wit, Embassy, Omni and Affiliated Distributors pre-sented PHCP wholesalers with the ability to strengthen their purchasing power as a group, but the only true cooperative during that time was Johnstone Supply, according to Bleier. “And the Johnstones were closed in our area.” Portland, OR-based Johnstone Supply pro-vides members with centralized, cost-saving merchandising, warehousing, marketing, pur-chasing and financial reporting services. The members of Blue Hawk also benefit from these services, as well as others available through cooperative membership, such as im-proved marketing channels, public relations, lobbying efforts, educational and training programs, networking opportunities, sharing of “best business practices” and technology support.
“My desire was to set up a co-op in this industry that was going to help bind these inde-pendents together,” he says. With that goal in mind, Bleier got together with independent heating and cooling supply companies Riley Sales, Touloukian Supply, Bush Supply, Naughton Sales, Milwaukee Stove and Furnace Co., and Able Distributors to form the or-ganization two years ago, and it has seen non-stop growth ever since.
Why A Cooperative?
Blue Hawk’s mission as a co-op is to harness the collective strengths of independent HVACR distributors and compete in an environment of consolidation and larger competitors. Its plan is to have member/owners grow their combined market share to a goal of 10% by partnering with manufacturers and contractors, with a focus on building a healthy and profitable business environment for all participants.Simply put, a cooperative is a non-profit entity. Each member within the Blue Hawk co-op has a right to have open-book access to all of its programs, profits and expenses, and each member owns an equal amount of shares - one share of uncertificated stock, regardless of the company’s size (locations, revenues, etc.). Bleier believes that Blue Hawk works well because it’s the most equitable way to bring a number of organizations together. All the money earned flows back to its members, unlike some buying groups where the earnings are retained. “The first member and last member to join Blue Hawk enjoy equal benefits in their cooperative ownership,” adds Lance Rantala, CEO of Blue Hawk.
Who Can Join?
In just two years, Blue Hawk has grown to an impressive 156 members, mostly family-owned companies, in 642 locations in 47 states. This young group, however, is no novice. Prospective members go through a strict evaluation process before they are accepted into the organization. Companies are hand-picked by the co-op and must meet the following criteria:
1. Privately held (not publicly traded)
2. Financially stable (credit check on all member applicants)
3. A stocking distributor of HVACR products
4. Membership is by invitation only
As for its vendors, Blue Hawk limits the number of vendor partners in each product category, allowing only three or four new vendor partners each month. The organization feels that this is the maximum amount its members can absorb. “The number of vendor partners is limited in each product category. Basically, the selection process is driven by our members’ response to our annual purchasing surveys,” explains Rantala.
“The vendor committee decides which product categories we should work on forming alliances with potential vendor partners. We request proposals from the vendors that best fit our cooperative model. After receiving proposals, the vendor committee decides which proposals to accept or reject,” Rantala says.
“Blue Hawk desires long-term, mutually beneficial relationships,” Rantala notes. “Our philosophy is, by helping our vendor partners succeed, we help ourselves.”
Why Join Blue Hawk?
As a co-op, Blue Hawk allows independent businesses to use their combined purchasing power to attain competitive pricing for the goods and services they use through their vendor partners.The primary benefits of becoming a Blue Hawk co-op owner include the following:
“Member-owned cooperatives and member-owned buying groups are essentially providing similar benefits to their constituents,” Rantala says, “however, many of the buying groups today have some third-party intervention. The main difference is Blue Hawk’s dedication to the HVACR supply chain, cooperative structure, financial transparency, aggressive member growth strategy, and selective vendor partner philosophy.”
Member Views
We asked members what being part of a cooperative like Blue Hawk has done for their business. Here’s what they had to say:
-Bill Shanel, co-owner/secretary/treasurer, Control’d Engineering Supply (Glen Ellyn, IL): “Being part of a purchasing cooperative brings us access to volume pricing and rebates that would not be possible if we were not members. [Also,] each of our spring meetings gives us the opportunity to have social and face-to-face contacts with our suppliers at the highest levels. Additionally, we’ve started buying from suppliers that we hadn’t before. We probably would not be doing business with them if they weren’t vendor partners of Blue Hawk.”
-Bruce Touloukian, vice president, Touloukian Supply (Peru, IN): “As a smaller, family-owned heating and plumbing distributorship, we are constantly trying to bring good value to our customers for the products they buy and the service they receive. By being a member of a cooperative, we can maximize our purchases by being part of a bigger entity, and the sharing of business ideas through a partnership mindframe.”
-Greg Bush, president, Bush Supply (Phoenix): “As I see it, the biggest advantage of operating as a cooperative is transparency. Members are also shareholders. As such, we see everything that transpires, from complete vendor programs to detailed operating costs. I also like the idea
that there are no hidden agendas. The Blue Hawk board of directors and vendor committee are made up entirely of members. Whatever decisions are being made, are being made in the best interests of the cooperative - which is in the best interest of the members - which is in the best interest of my company.”
-Nancy Hammer, C.P.M., purchasing manager, Milwaukee Stove & Furnace Co. (Milwaukee): “The big benefit of Blue Hawk being a cooperative is that it’s a democratic process. Regardless of the size of your individual company or when you joined the organization (first, last, or somewhere in the middle), you receive the same voting power. This levels the playing field and allows for the same input from the smaller player as the larger player.”
Views From Vendor Partners
We asked some of the Blue Hawk co-op Vendor Partners for their opinions on membership in a co-op, as well as why Blue Hawk membership is a benefit to them. Here’s what they had to say:-Dave Roatch, regional manager, CertainTeed: “CertainTeed has always worked with independent HVAC distributors to be a valued partner and provide not only high-quality products, but tools to manage an independent business. Blue Hawk’s mission aligns with CertainTeed’s demonstrated track record in the market. In addition, many of our longtime distributor partners were some of the earliest Blue Hawk members and were very instrumental in getting CertainTeed the opportunity to be a vendor partner.”
- Jane P. Lopez, wholesale account manager – refrigerants, Airgas: “We were drawn to Blue Hawk because of its reputation with numerous vendors and members. We were convinced that if we could pass the litmus test and were selected as a vendor for the group, it would mean Blue Hawk is convinced that we are a leader in the industry.”
-John Brower, VP & assistant general manager, CMC Howell: “An appealing aspect [of belonging to Blue Hawk] was the esprit de corps of the group. Many of the original group members were faced with increasing competition and market penetration by larger firms. This group of entrepreneurs banded together, keeping their individual identities, and worked to level the playing field in their respective markets.”
-Gary Fisher, VP of sales, Hart & Cooley: “We believe that each purchasing group is a reflection of its members. The challenge for the leadership of the cooperative is to funnel all this energy into a consistent direction. Blue Hawk and its members have done a very good job at aligning their goals and supporting their vendor partners.”
- Thomas M. Huck, national accounts manager, Legend Valve & Fitting: “Legend Valve continues to be dedicated to independent distributors for which purchasing cooperatives have become more and more integral to their business. Blue Hawk addressed the smaller to medium size HVAC distributor who had not already been served by a buying group. The fact that it now has 139 members is a testament to the need Blue Hawk is fulfilling.”
-Dennis Bronson, Western sales manager, Water Transfer Systems, Little Giant Pump Co.: “We were very interested in [Blue Hawk’s] co-op structure, impressed by its management and interested in its track record of success in other fields. I must say that after talking with Blue Hawk wholesalers, I find them enthusiastic and happy with their decisions to join the group. This is a point of view we share as well.”
-Gregory Miller, National Sales Manager, Mill-Rose Co.: “There is a good feeling at Blue Hawk meetings. Members are charged up about their group. They all seem to have a genuine interest in supporting each other’s efforts to ensure success.”
-Steve Ray, VP of sales, Reflectix, Inc.: “Reflectix has been a vendor partner of Blue Hawk’s for approximately two years. Its members and our sales representatives drew us to working with the group. Lance Rantala and the Blue Hawk staff have been great to work with, and we look forward to years of partnership with them.”
-REHAU: “REHAU was drawn to Blue Hawk based upon member commitment to its vendors. In addition, Blue Hawk only considers/approves select vendor members based upon a strict review process.”
-Ruth Ann Davis, VP of sales, Williams Furnace Co.: “The cooperative partnering of related distributors and suppliers provides a platform for mutually beneficial business growth and stability in a rapidly changing economic environment.”
- Thomas M. Huck, national accounts manager, Legend Valve & Fitting: “Legend Valve continues to be dedicated to independent distributors for which purchasing cooperatives have become more and more integral to their business. Blue Hawk addressed the smaller to medium size HVAC distributor who had not already been served by a buying group. The fact that it now has 156 members is a testament to the need Blue Hawk is fulfilling.”
-Dennis Bronson, Western sales manager, Water Transfer Systems, Little Giant Pump Co.: “We were very interested in [Blue Hawk’s] co-op structure, impressed by its management and interested in its track record of success in other fields. I must say that after talking with Blue Hawk wholesalers, I find them enthusiastic and happy with their decisions to join the group. This is a point of view we share as well.”
-Gregory Miller, national sales manager, Mill-Rose Co.: “There is a good feeling at Blue Hawk meetings. Members are charged up about their group. They all seem to have a genuine interest in supporting each other’s efforts to ensure success.”
-Steve Ray, VP of sales, Reflectix, Inc.: “Reflectix has been a vendor partner of Blue Hawk’s for approximately two years. Its members and our sales representatives drew us to working with the group. Lance Rantala and the Blue Hawk staff have been great to work with, and we look forward to years of partnership with them.”
-REHAU: “REHAU was drawn to Blue Hawk based upon member commitment to its vendors. In addition, Blue Hawk only considers/approves select vendor members based upon a strict review process.”
-Ruth Ann Davis, VP of sales, Williams Furnace Co.: “The cooperative partnering of related distributors and suppliers provides a platform for mutually beneficial business growth and stability in a rapidly changing economic environment.”
