Four giants of the HVACR distribution world with annual sales of more than $1 billion each dominated this year’s Distribution Trends Top 30 Distributors list.

Watsco. Inc. topped the list, as it has in most of the last 10 years. Based in Miami, Florida, Watsco reported having 690 locations and 7,425 employees as of the end of last year.

Watsco, along with Ferguson Enterprises, Winsupply Inc., and R.E. Michel Co., reported combined 2023 sales of more than $14.48 billion, 73% of the total sales — more than $19.8 billion — of all 30 firms on the list. The 2023 and 2022 lists also included four firms with annual sales of more than $1 billion.

The remaining 26 companies in the Top 30, including several that were not on it last year, accounted for more than $5.32 billion in sales. Six of those companies listed sales of more than $250 million, but only one of those, The Habegger Corp., topped $500 million.

The Top 30’s 2023 sales total of $19,807,425,862 far outstripped last year’s total of not quite $13 billion.

TOP 30 (HVACR SALES)

Refrigerant Transition, the Economy, and More

The annual Top 30 Distributors contest, sponsored by The ACHR NEWS, ranks HVACR distribution companies by reported gross sales for the previous calendar year. Survey respondents — typically a company executive such as the president, CEO, or CFO — are encouraged to answer questions about the state of the HVACR distribution market, and responses this year focused on the impact of the refrigerant transition, federal regulations, industry consolidation, and the broader economy. An aging HVACR workforce, the upcoming election, and consumer incentives for qualified HVAC purchases were also mentioned.

“The government’s indecisiveness on the A2L transition wreaked havoc on our industry for a while, from manufacturing to contractors. They put out ‘final rulings’ more than once that caused so much undue stress on all levels of the industry because they were making uninformed rulings before determining if it was possible,” said Christopher Hendricks, president and CEO of Duncan Supply Co. Inc., in Indianapolis, Indiana. “I feel because of this the HFC equipment phaseout is still going to be a difficult song-and-dance due to the continued shortened time frame.”

“With the new refrigeration rules, product availability will be a problem,” said Mike Luongo, president of Total Home Supply, in Pine Brook, New Jersey. “My suggestion is stock up on what is available.”

“Consolidation is starting to have a significant impact on the industry. Long-term successful relationships are being destroyed in favor of national agreements, and price is being favored over value in those situations,” said Terrance Tarantine, vice president of sales at Young Supply Co., in Chesterfield Township, Michigan. However, Ron Kinman, president of Charles D. Jones and Co. Inc., in Riverside, Missouri, said that from his point of view, purchases of HVAC companies by private equity firms had slowed because of higher interest rates.

Sales Increases, Challenges Ahead

A majority of all companies that answered the survey, slightly more than 61%, reported that 2023 sales had increased over the previous year. Nearly 28% reported decreased sales, and 11% reported that 2023 sales were flat.

Nearly all survey respondents said they expect sales to increase this year; a few said they expected sales to be flat, and none said they expected a decrease. But several mentioned distribution challenges ahead.

Matt Bedard, CEO of S.G. Torrice Co., of Wilmington, Massachusetts, said that although the HVACR supply chain “has improved significantly,” its recent disruptions have eroded brand loyalty. “Contractors are now more apt to represent multiple brands to protect themselves against further disruptions,” Bedard wrote.

“Our industry is feeling the impact of the ‘COVID pull-through’ of HVAC installs,” Bedard continued. “This impact on demand is compounded by the rising costs of HVAC installations in an uncertain economy.”

“Business is stronger than originally anticipated, however, pricing challenges are quite significant,” said a distribution company CEO who requested anonymity. “Will be interesting to see how the markets adapt to the pricing dynamics with the newer equipment.”

A few companies reported increasing the number of brands offered, or expanding in other ways in 2023.

“We still see strong sales. We have doubled our warehouse size to accommodate more inventory, so we are ready to ship,” said Luongo, at Total Home Supply. “We feel this will give us the edge for 2024.”

“We have made investments in supplies, building out a new supply-focused team, negotiating better buys, and adding to breadth of product,” said a distribution professional who did not want to be identified. Sales of supplies are up 100% month over month, she added, and now make up nearly a quarter of the firm’s business.

Another executive noted that more consumers seem to be repairing HVAC systems rather than replacing them, a trend others in the industry have seen. “With consumer spending down, we’re already seeing more parts replacement versus total equipment replacement,” she wrote.

She added that her company is getting calls from contractors who ask about the refrigerant transition, and that the firm is responding proactively. “We’re hosting a number of training events to address their questions and concerns,” she said.

New to List, or Back On It

Companies among the top distributors that were not on the list last year included Team Air Distributing Inc., First Supply, and Sanders Supply Inc. First Supply returned to the list for the first time since 2020, when the list included 50 firms rather than 30.

Sanders, of Hot Springs, Arkansas, had 20 branches and 200 employees at the end of 2023. Its branches are in Arkansas, Louisiana, Mississippi, Tennessee, Florida, and Oklahoma.

First Supply, of Madison, Wisconsin, had 28 branches and 650 employees at the end of 2023. Branches are in four states — Wisconsin, Minnesota, Iowa, and Illinois. Team Air, based in Nashville, Tennessee, had eight locations, located in Tennessee, Kentucky, and Indiana, and 78 employees.