Core & Main on the New Name, Initiatives Heading into 2018

Water Finance & Management recently sat down with Brad Cowles, chief operating officer at Core & Main to discuss the company’s direction since being sold by HD Supply in August 2017. Cowles chats with us about company goals, challenges and how the business of an equipment distributor reflects the condition of the market.

WF&M: Can you give us some background behind HD Supply’s reasons for selling the Waterworks business?


Brad Cowles, Core & Main: I think it’s been the next step in the progression for HD Supply to focus on its core business of Facilities Maintenance, its biggest and most profitable business, along with Construction and Industrial, now their number two. Fundamentally, those businesses have different financial profiles from Waterworks and that’s where HD Supply’s overall business was really focused. The Waterworks business was a high-value asset that was at risk of losing value because it wasn’t first in line for new investment. Selling the business was a win for HD Supply because it allows them to really focus on their primary businesses and pay down debt. For Core & Main, it’s a huge win because now we’re first in line. Our ownership is really dedicated to us and eager to invest in our growth.

WF&M: With Core & Main moving forward, what is the outlook for the business?

Cowles: One thing we have that’s really powerful is a nationwide footprint. That gives us a platform through which we can expand products, services and enter new businesses. It’s still a challenge to find the right people but we’ve already made the investment in a 3,000-member team, the real estate, the trucks and the warehouses. We know the municipalities well and we’re well-positioned for organic and acquisitive growth, which could bring about some even better ideas about how to grow the business and help the industry.

WF&M: You’ve already announced the acquisition of Minnesota Pipe & Equipment. With the new name and rebranding, talk about some of your current initiatives and goals for the near future.

Cowles: We’re essentially going to be accelerating the game plan we already had in place. With Core & Main, we’re going to be looking toward acquisition growth. You’ve seen the first shot across the bow with Minnesota Pipe & Equipment. They’re a strong Minnesota player with three locations. They were probably our best regional competitor in that area, but we found that our businesses are very complementary in terms of customers, location and talent. They focus on a core waterworks business just like us, and there are also a lot of areas in which we can learn from them. It’s a really good fit.

WF&M: Tell us about the new name. How was it developed?

Cowles: We reached out to our associates to get their input, and we received more than 500 suggestions for the name. In 2016, our marketing team had done a ‘brand essence’ study with a third party and we got some interesting ideas from our team and our associates that reflected what we stand for. We really solidified our notions of “dependable expertise” and “local service, nationwide.” We’re much more than a supply house, we’re really a company that knows what the local cities and towns need to get a job done and we can help them with specific problems and what they’ll need to solve them. We combined those results with the results of an internal survey, and between those, we wound up with Core & Main a month ahead of schedule. I think of the name Core & Main as a nod to a main street intersection – it speaks to the essence of small town, community and providing our core services and expertise to those groups.

WF&M: In 2016, your fusible pipe and equipment was a big push for the business in the trenchless market. Is that still a big growth area?

Cowles: Even bigger. We feel that’s a very strong lever to pull to get more growth out of this company and we’re doubling down on it. Oil and gas is really coming back to life and we’re investing in talent, rental equipment, locations, and we’re staring to feel the benefits of that oil and gas market. We’re also just at the beginning of rolling out a fusible service center network across the company. The fusible market is a lot smaller than the water market or the traditional product space. So, we’re trying to get traction out of consolidating our expertise into a smaller network of branches.

WF&M: What about smart metering and smart water technology?

Cowles: That has been really good for us. We are the largest distributor in smart metering. We’ve sold a couple of municipalities sizable amounts of meters – one with more than 150,000 metered connections, and we are winning small and mid-sized projects to revitalize municipal water meter systems every week. But overall, the meter market is still very predicated on municipal funding, which right now, is pretty sluggish.

Here’s what I find striking…in most municipalities in the United States, the leadership is divided up between the various utilities – electric, gas, water, etc. There’s not a lot of centralized business decision making done with the goal of making a city “smart.” They’re all kind of chipping away at it independently. It might make more sense if we had more of a big picture view in some cities of how to implement smart technology, and I hope to see more of that emerge.

“The industry is sort of getting into an iterative design-build type of process and the funding is being aligned with that process. As we get more certain about what a project is going to cost, we talk more seriously about the funding.”

WF&M: From your perspective as a distributor, what are some of the big trends you’re seeing in the water and sewer market? What are some of the big market drivers?

Cowles: I think about it in three categories. First, on the product side, people are using better materials and installations techniques. Things like the use of zinc-coated ductile iron pipe for extended life, and the use of fusible in trenchless and water to go in, around or under existing infrastructure are growing. On the tech front, we’re staring to see smart meters that give monthly flow reads along with pressure, temperature, hourly flow reads, advanced shutoff, etc. There are things you can do with that data that will ultimately help utilities become better stewards of water.

The second trend we’re plugged in to is the consolidation and privatization of municipal water management through private water companies. One thing that’s great is that those companies run more like big businesses. We’re a great provider of efficient, consistent service and pricing to big business, so we are the perfect provider for these guys.

The last thing has to do with the way big projects are being funded and how that’s changing, such as with the use of public-private partnerships. The industry is sort of getting into an iterative design-build type of process and the funding is being aligned with that process. As we get more certain about what a project is going to cost, we talk more seriously about the funding. We are big on early supplier involvement, and we have a lot of people who are getting trained on how alternative project delivery and alternative funding approaches work.

WF&M: That’s interesting because municipalities do seem to be changing their way of thinking when it comes to project funding and being more innovative to fund necessary projects on limited budgets.

Cowles: Well it’s sort of sad, but I think that it’s helping us when disasters rise to the level of public awareness, like the crisis in Flint, Mich. People take water infrastructure for granted because it’s out of sight, out of mind and easy to ignore. But when you have high visibility situations like that, it can get lawmakers and the communities more aligned. The Clean Water and Drinking Water State Revolving Funds were born out of crises. So I think we need a greater sense of urgency when it comes to developing funding sources like those.

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