Orco “Brings it On”
LIVERMORE, CALIF. —Every year, regardless of the building industry cycles, ORCO Construction Supply sells millions of dollars of joist hangers, nails, anchor bolts and other kinds of fasteners. It’s a piece of the business that many lumberyards would like to have, neatly bundled with their 2?4s, panels and roofing tiles. And they wouldn’t mind adding on the hand and power tools, the concrete bagged goods, the moisture barriers, the adhesives and sealants, and all the other products that made up ORCO’s $282 million sales in 2006.
But like its bulldog mascot, ORCO fiercely guards its customer base. Now celebrating its 50th anniversary, the three-state chain, with 23 locations in California, Arizona and Nevada, is firmly entrenched in the home-building market. Residential framers make up approximately two-thirds of its customer base, with concrete and masonry contractors, custom home builders and other construction trades filling in the rest.
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The company has more than 5,000 active customer accounts, and ORCO maintains these relationships in many of the expected ways: service above all else, for both the customers in the field and the ones approaching the counter; customer appreciation lunches and sporting events at the local branches; and VIP treatment for the top customers, who are taken to Cabo San Lucas each year and treated like royalty.
But ORCO layers in much more than that. Hal Look, the company’s senior vp-marketing and business development, calls it “belly-to-belly marketing.” He oversees a dizzying schedule of promotions, contests, giveaways and sporting events involving poker, motorcycles, boxing, baseball, football and NASCAR.
“I’m a guy’s guy,” Look admitted. “I understand our customers.” A part owner of ORCO, Look wears monogrammed shirts and razor-creased dress slacks, but you wouldn’t want to challenge him to an arm wrestling contest. He once owned a construction supply firm in Modesto, Calif., that later became Delta Construction. Delta merged with ORCO in 1995, and Look now supervises the company’s supply chain and purchasing department, customer and vendor relations and growth strategies.
Peter Alexander, ORCO’s president and CEO, is equally at ease in the world of finance. He came to ORCO after working as a turnaround consultant and interim CEO manager for lenders and private equity groups. Prior to that, Alexander served as president of Telscape International, a telecommunications firm that serves the Hispanic market. He has also worked for GE Capital and ComputerLand International.
Alexander keeps tabs on a set of real-time KPIs (key performance metrics) and has invested in a voice-over IP phone system and GPS vehicle tracking systems for all locations. He has a clear vision—in dollars and percentages—of ORCO’s current and addressable market share in California, Arizona and Nevada.
Together, the two men form the yin and yang of a company rooted in tradition and poised for future growth. The commercial market looms large on their horizon through multiple avenues, including framing, concrete and masonry. Their rebar fabrication plant in Bloomington, Calif., is only at 55 percent capacity. And their Hispanic initiative is well beyond the se-habla-Espanol stage of some competitors.
Family roots
ORCO was founded in 1957 by Otto Rose, a salesman for an electric tool company who decided to open his own store, ORCO Tool and Equipment, in a Quonset hut in Santa Ana, Calif. After a series of mergers and partnerships, the company grew from its California base, which now contains 17 locations, to include three locations in Arizona and three in Nevada.
“We don’t have the weird politics of a big corporation,” said Alexander, who came on board in 2005. Shortly afterwards, as part of an effort to ramp up sales and take more market share, ORCO launched a major rebranding initiative. Over a single weekend in April—unbeknown to its employees—ORCO repainted its trucks, replaced the interior signage in all 20 stores and introduced a new logo and slogan.
“We did a complete facelift, from the coffee mugs to the mud flaps on the trucks to the shirts the guys wore behind the counter,” recalled Alexander. When the workers returned on Monday, they found themselves face to face with a bulldog wearing a construction helmet and a new rallying cry: “Bring it on!”
“It really has elevated the image of the company,” said Al Bru, marketing communications manager. Rumor has it that one of the company’s employees got the bulldog tattooed on his arm, Bru said, “but I haven’t actually seen it.”
A visit to one of ORCO’s stores in Northern California shows just how tenacious their branding can be. Like all of ORCO ’s retail units, the San Jose location has been remodeled in the last year. Customers are greeted by a long service counter as they walk in the door. The floor is a shiny grey epoxy, and low fixtures hold hand tools, boxes of nails and screws, tape measures, extension cords, safety equipment and other faster-moving skus. Power tools are against a back wall. The bulldog shows his face everywhere he can, on wall banners, counter stools and notepads.
ORCO has no centralized distribution centers, but every store is attached to its own warehouse. Behind the San Jose unit is 40,000 square feet of fasteners, connectors, ladders, concrete products, wire mesh, generators, rolls of building papers and buckets of coatings and sealants. Although ORCO doesn’t sell framing lumber, the company does carry plywood and boards used for concrete forms and engineered products like Trus Joist Shear Panels and Simpson Strong-Wall.
Out in the yard, San Jose has a broader assortment of lumber than many other ORCO locations, according to store manager Mark Tabaldi. “I brought [lumber> in for a customer five years ago, and now it’s a good mover for us,” Tabaldi said.
Western players
ORCO’s closest competitor is White Cap, a division of HD Supply that was recently sold to a conglomerate of private equity groups. The company also comes up against 84 Lumber, Golden State Lumber and Pro-Build in many of its locations. The lumberyards don’t go as deep as ORCO into specialty tools, but there’s a lot of crossover in fasteners, moisture barriers, concrete mixes and power tools.
ORCO’s director of purchasing, Mike Malher, has been with the company for 30 years. He oversees five category managers who negotiate directly with vendors. Joe Barnes, the director of supply chain at ORCO, works with a staff of 13 replenishment buyers. They are assisted by three individuals in ORCO ’s pricing services group who track steel and other commodity markets. Pricing is set with input from category managers and sales.
Although ORCO only spans three states, its markets vary widely, according to Malher.
“We have projects in Sacramento that are 40 to 50 minutes apart, and they’re using totally different products,” Mahler said. “It’s not always the [local codes>. A lot depends on the engineer who did the project.”
One similarity between all of ORCO ’s markets is the growing Hispanic population. While demographers have recognized the future importance of the Latino home buyer, Alexander points out that California, Nevada and Arizona each have more than 4,000 Hispanic-owned construction firms, a number that ORCO expects to grow significantly.
Four years ago, ORCO set a lofty goal for itself—to have a 100 percent bilingual sales staff. So far, 70 percent of its counter staff is Spanish speaking.
Other plans include expanding production of its rebar fabrication plant, which mostly serves residential projects in the Southland. ORCO would like to expand rebar production to Vegas, Phoenix and Northern California. Opportunity exists in the commercial market, and rebar is but one avenue, Alexander said.
ORCO has increased its penetration into the commercial sector, which now makes up 22 percent of its sales. (Three years ago, it was just seven percent.) The company is already supplying parking garages, tilt ups and mixed use projects. Plans call for a deeper assortment of commercial construction products, including framing and concrete.
ORCO isn’t about to abandon the residential framer, however. It’s just going to hold on to that bone while it looks around for new opportunities.
“I’m sobered by this market,” admitted Alexander. “But the numbers are starting to go back up.”
