WWEMA Window: The Evolving Industrial Sales Channel

By Fred Siino

When I went to work for a manufacturer of mixing and aeration systems in the mid-1980s, we had products that fit both the municipal and industrial markets. At that time, all municipal sales were channeled through manufacturers’ representatives who covered their territories by networking with municipalities, consulting engineers, and contractors. This remains one of the major pathways for municipal sales today. Almost 40 years ago, that same type of sales channel existed on the industrial side of the industry throughout the U.S. and Canada. Many manufacturers’ representative firms had personnel dedicated to both the municipal and industrial markets.

Flash forward to 2023 and the industrial sales channel has changed markedly. There are not only very few independent industrial representative firms remaining, but also very few industrial salespeople in the larger firms that cover both markets. In fact, of the industrial representatives we deal with on a day-to-day basis, most of this sales force is over 60 years old, with some firms scrambling to train new personnel before the inevitable “brain drain.” What it has meant for our business is that most of our revenue is from direct sales to industrial customers, which is markedly different compared to my first 20 years in the industry. I confess I do not have all the answers as to how things have transformed across the years, but I have asked the question to many on the manufacturing side of the industry and get all sorts of answers from both sales representatives and principals. 

To begin to find the answers, I will start by going back to the 1980s and describe what business was like for us in the industrial market. In the U.S., there were good industrial sales representative firms in most regions of the country and often multiple competing firms in many of those regions. Depending on the product you were offering, you could align the industries you were targeting with the regions they were in and almost always find a good sales representative in that region who would take your product on. Industrial sales representatives existed in Canada then also, but traditionally covered way more territory to make a living. This was because the Engineers in Montreal, Toronto, and Vancouver had vast influence across the provinces where the production plants were, and a good salesperson had to cover both. For example, in the pulp & paper industry, we had one firm in Vancouver that covered the west and a firm in Toronto that covered the east.

As we moved into the mid-1990s, the route to market remained the same in the U.S., but as our export business grew into Mexico, Europe, and Asia, the sales channels for industry were very different than what we were used to. For example, it was common for the companies we worked with to have their own mechanical contracting businesses and be required to not only supply the equipment they sold but also install it. Globalization really helped grow many U.S. companies’ exports in the water industry, and over time you learned most European companies had an inside sales team to access the industrial market in many regions of the world. It was also during the 1990s that the U.S. water industry went through a major consolidation led by the newly formed British water companies, followed by US Filter and others. Many large, mid-size, and small manufacturers were acquired and lumped together with the intent of streamlining them into large companies that could offer one-stop shopping for large-scale water projects. It is a concept that still exists today but was difficult to execute in practice. It seems to me that this is where things started to change. As a person involved with a company that was acquired, I spent a great deal of time in meetings where corporate management tried to lead what we called “Sales Rep. Rationalization.” For our situation, where more than 15 companies had been acquired in a short period of time, it was a challenge to get any agreement on the way forward. In the end, there was very little progress made to consolidate the industrial sales channels of the 15 acquirees, although the natural synergies of some of the individual technologies streamlined sales channels in various market sectors. The other thing that came out of the “rationalization” was the beginning of a corporate inside, direct industrial sales effort that was designed to help grow the business at a rate the outside investors were promised and expected.

While we were dealing with the challenges of sales force streamlining in the 1990s, it seems to me that by 2000 many of the largest consolidators had finally concluded that a municipal representative force made sense for their products. In the industrial sector, this was not always the case; companies like Siemens (after the US Filter acquisition) fine-tuned the existing inside teams of salespeople dedicated to specific industries like oil & gas, mining, pharmaceutical, pulp & paper, and food & beverage.  It is a concept that makes a lot of sense if the business has the size and resources to make it work.

Another aspect that must be considered is how globalization impacted not only the concept of how best to form a sales channel but, in the U.S., how it impacted American industry. Over the past 30 years, the exodus of certain industries overseas and the under-capitalization of some that remained has had an impact on various regions of North America. I can think of Michigan and Ohio and the automotive industry; Canada and the U.S. for the pulp & paper industry; the Southeast U.S. for the textile and related industries; and U.S. pharmaceutical industry in the East and Midwest to name a few. All those industries were vibrant and investing in water infrastructure well into the 1990s. The number of projects that we have been involved with in these industries over the past 20 years has diminished greatly. It leads one to think that the significant reduction in sales opportunities also has had an impact on the evolution of the industrial sales channel in our industry.

In the past five years, there has been very active M&A activity in the manufacturers’ representative sector in the water industry. Both private equity companies and one public company have acquired multiple representative firms and the consolidation is continuing today. From a pure geography perspective, the strategy is unfinished. However, a good portion of the companies that have been acquired have a very strong municipal presence in their territories, and a few also have at least one salesperson dedicated to the industrial market. One wonders if the new financial owners have gotten accustomed to the comparatively slow pace and large cash flow needs of municipal sales. With all the changes happening, it will be interesting in the next several years to see if one of the consolidators attempts to roll out a national industrial representative force to take advantage of the faster-paced projects with much more favorable cash flow. However, for the present, smaller companies will still have the challenge of bringing a new technology to the industrial water market, and my company will continue with the hybrid approach of working with good industrial representatives where available and a healthy dose of direct sales from the factory.

Fred Siino is the President of KLa Systems, Inc. Siino serves on the Water and Wastewater Equipment Manufacturers (WWEMA) Board of Directors and Marketing & Member Services Committee. WWEMA is a non-profit trade association that has been working for water and wastewater technology and service providers since 1908. WWEMA’s members supply the most sophisticated leading-edge technologies and services, offering solutions to every water-related environmental problem and need facing today’s society. For more information about WWEMA, visit www.wwema.org.