Wire and cable--perhaps the electrical industry's most fundamental commodity group--is undergoing some radical changes.

Wire is wonderful stuff, isn't it? It's the most fundamental of all electrical products. Without it, the rest of your inventory is pretty much useless. It's the magic pipeline that allows people to transport deadly power so safely that most Americans spend their lives within inches of it but rarely give it a thought. It costs a bundle to transport, takes up lots of space in your warehouse, requires special machines to handle, drives your warehouse manager nuts at inventory time and thwarts many a good salesperson's attempts to compete on anything other than price. And the reddish lustre of fresh-cut copper has an appeal all its own.

The dynamics of the wire and cable market have a profound effect on the electrical distribution channel; trends at work in wire and cable will in part determine what you as a distributor must do to remain competitive. The wire business may be mature, but it's surprisingly active lately, with new issues emerging constantly to change the landscape. Consolidation, redistribution, the rise in prominence of data cabling, the rising influence of the stock markets, all of it makes some difference in the fortunes of your company.

Because of that importance, the editors of Electrical Wholesaling have created the following package of articles, in which we look at the wire and cable market from many perspectives. Here's a brief overview of some issues executives from various sectors of the wire and cable business told us are making a difference in the market today.

Healthy market The wire and cable market as a whole is looking pretty strong these days. According to a recent study by the Freedonia Group, a market research firm based in Cleveland, Ohio, demand for insulated wire and cable will increase 5.5% per year through the year 2002. Much of the growth will come from demand for computer and multimedia networking and for transmission and distribution cable systems, the group says. Demand for most other wire and cable types will grow more slowly as construction activity and demand for industrial machinery (and motor vehicles, a wire market segment also included in the study) "decelerate from recent rates."

The fastest growth will come in demand for optical fiber cable and copper-based coaxial and multiconductor cable, driven by the computer market. Building wire and cable, magnet wire, portable cords and such are a mature, highly cyclical market with "relatively little potential for performance/price upgrade," though improvements in insulation technology are improving durability, the Freedonia study concluded.

The big crunch Consolidation is making changes in the wire and cable market, as it is in all segments of the electrical industry, and it's driving closer alliances among manufacturers and distributors.

Where once the wire market was wildly diverse with countless viable competitors, the majority of the production is now concentrated in a few large companies. The reasons are many. In the early years, getting into the wire business was fairly easy. The production process was relatively simple and demand seemed endless. "You don't need to be a rocket scientist to run a wire mill. You've got to know the market and you've got to have common sense," says Vince Rego, chairman, chief executive officer and president of Encore Wire Co., McKinney, Texas.

Staying in the wire business as a going, profitable concern proved more difficult, due to price competition and excess production capacity or, in Rego's view, a lack of discipline on both pricing and production. The difficulty of survival is evident in the continuing march of consolidation and the concentration of old, revered wire names in a few hands (see "Who Owns Whom in Wire World?" page 34).

With Essex International's 1996 purchase of Triangle Wire and Cable Corp., most production of the more common types of wire and cable have become concentrated in the hands of fewer than half a dozen companies.

Consolidation among distributors is also making a difference in the market. Of particular interest lately have been consolidations among specialists in low-voltage wiring for datacom, voice, video, factory automation and security wiring applications. Companies such as Anicom, Inc., Rosemont, Ill., and Communications Supply Corp., Stamford, Conn., have been acquiring smaller, regional wire specialists, seeking to build companies with national scope.

One good source End-user customers are also consolidating in many markets, and where they're not actually merging and acquiring, many are actively consolidating their purchasing functions and, like distributors, are looking for ways to reduce the number of suppliers and contractors with whom they do business. As electrical contractors take on some of these new services, they're turning to the distributors that can supply the largest portion of their needs at one time and turning them on to some profitable new business prospects.

"The electrical contractor is being asked to do everything--data, security, fire-alarm," says John Myers, president, Houston Wire and Cable Co., Houston, Texas. "They're saying to the distributor, 'I want to come to your counter and pick up that product. Theelectrical distributor has not gotten into that business."

Some of the recent distributor consolidations are aimed at providing this more-comprehensive portfolio. In turn, these distributors are asking a lot of their wire vendors. They want to pare down their line cards to the companies that can satisfy the broadest range of their wire and cable needs, and are asking these companies for more low-voltage product and training to expand their services and expertise as well.

This demand is one factor driving consolidation and marketing programs at the manufacturer level, and some manufacturers now tout their ability to supply all of a distributor's wire needs on a single invoice. Few manufacturers, however, make and supply an offering broad enough to satisfy all distributor needs, and even fewer can help distributors manage their wire inventory more effectively. This has contributed to the rise and proliferation of wire redistribution companies or master distributors.

Redistributors rising No other product category in the electrical industry rates its own redistribution channel. Only wire and cable. Wire redistribution companies, starting with Houston Wire and Cable in 1975 and continuing with the likes of Omni Cable Corp., Westchester, Pa., ; WireXpress, Chicago, Ill.; and Futronix, also of Houston, grew out of the decades-old niche of companies that bought and stocked surplus wire and cable and partial reels or "randoms" for sale to distributors. As more redistributors have become authorized resellers of new cable by major wiremakers, they have focused on providing new services to full-line electrical distributors, and as a result they have come to play a central role in many electrical distributors' plans.

For the distributor, buying from redistribution can mean less inventory, less handling and freight, better technical support, fewer purchase orders and less risk from price fluctuations and obsolescence. For the manufacturer it means higher volumes, fewer transactions, less finished-goods inventory, less cost to support a distribution network, outsourced technical support, less receivables and credit exposure and a tighter feedback loop for product development and marketing.

According to some manufacturers, selling through the added redistribution step actually can lower their costs and in some cases can justify lower pricing at the distributor level. Alpha Wire Co., for example, ships everything out of its plant at its Elizabeth, N.J., headquarters, which can get expensive when customers across the country demand quick turnaround, says Allan Marconi, vice president of sales and marketing. To solve the equation, the company uses master distributors or redistributors.

"They make it easier to get an Alpha product," he says. "They cut to length and drop-ship and provide many kinds of added value. It's cheaper for us because they buy in 5,000-ft to 10,000-ft reels. The cost to sell is lower than for a smaller quantity, because we don't have to deal with the freight or the additional transactions. There's a lot of value there."

The market is thriving for wire redistribution companies right now, though some expect that role to be short-lived as transactions become more efficient. "It's very difficult to make money when you're redistributing product to another wholesaler," says Steve Riordan, president of Communications Supply Corp. "There's not enough room there. You've got to be extremely efficient."

A public concern As part of the consolidation movement, some large wire-and-cable manufacturers have gone public in recent years. Wire and cable companies captured some attention on Wall Street toward the end of the second quarter this year after Essex International, Fort Wayne, Ind., announced that its earnings would fall short of analysts' estimates, due primarily to price competition. Analysts speculated that a surplus of capacity might be driving price competition throughout the wire market that would hurt earnings prospects of other wiremakers as well.

The announcement precipitated a brief selloff of shares and decline in share prices for the major publicly held wire and cable manufacturers based in the U.S.: Essex, General Cable Corp., Highland Heights, Ky.; and Encore Wire, McKinney, Texas., and less so for electronic-cable-oriented manufacturers such as Belden Inc., St. Louis, Mo., and Cable Design Technologies, Pittsburgh, Pa. After Essex announced a revised pricing schedule with overall increases of more than 8%, and General Cable reported higher-than-projected earnings for the second quarter, the market's confidence seemed to return.

Why copper is king Since long before wiremakers began their move into the stock markets, the electrical industry's sensors have been tracking the commodities markets and fluctuations in the price of copper. The price of copper has long been fundamental to the wire market-distributors watched copper prices closely and tried to time their purchases to bring in the most cheap wire they could just before the value of the commodity copper went up (See "King Copper," page 43).

Endless supply The building wire market has been beset with excess capacity for a decade or more, and offshore wire manufacturers have been entering the market, driving down prices. At least so runs conventional wisdom. Rego of Encore has a hard time with such complaints.

"I was told, back in 1995, that there was too much capacity, but at that time-and it continues to this day-the order-fill on 95% of the participants in the marketplace is stinko. If there's all this capacity around, why is there not enough product to fill the orders?

"The American economy is growing, and it has outgrown the capacity that has been brought onstream," Rego adds. "Now we have brought capacity on stream in order to eliminate some bottlenecks, but if I can't sell that capacity at a price where I can make money, I will shut the capacity down. I don't have to run. I just don't have to do that."

Reel inventory One recent development with positive indications for electrical distributors is the spread of software applications for managing cut wire in the warehouse. Wire inventory has always been a hassle for distributors. Keeping track of how much is left on a partial reel and getting that knowledge into the hands of the people cutting special lengths for customers has been an intractable problem, and probably would continue to be were it not for recent improvements in warehouse management systems.

Several of the software vendors specializing in the electrical distribution market have developed applications for tracking the length of wire remaining on a given spool. The systems typically can direct a warehouse worker to the reel that will result in the least waste for a particular cut length. They also track wire inventory to help with accounting during year-end or cycle counts.

Your future in data? The fastest-growing segment of the market is data cabling. As you will learn elsewhere in this month's focus on this market, the demand for networked computing and faster interfaces with the Internet will drive demand for high-speed data cabling products for years to come, with annual growth estimated at between 10% and 20% per year. Many manufacturers say that in sheer volume their product mix is moving rapidly away from traditional power cable and toward the low-voltage market.

But for all this promise, Alpha Wire's Marconi says the rush of electrical distributors into the low-voltage wire market seems to have leveled off, and he sees few of them now getting started in datacom. "The rule seems to be, the more factory automation an electrical distributor is doing, the bigger role that distributor will play in electronic wire," he says.

Big Guns in Wire World You really can't generalize very much about wire and cable specialists, other than to say that most were started up by a resourceful entrepreneur, and that more than a few of the employees worked at some time for Anixter, which has acted as a terrific spawning ground for wire and cable specialists. The following profiles focus on the largest wire specialty distributors and offer some excellent insight into what their leaders see in the future for the wire and cable industry.

MASTER DISTRIBUTORS Houston Wire & Cable In the beginning there was one . . . As you will learn in the article, "Wire? What Wire?," page 33, Houston Wire & Cable was the first of the wire and cable specialists to succeed on a grand scale in focusing on selling wire and cable through electrical distributors. Supercharged with the new ideas of John Myers, a former HWC and Graybar exec with 40-plus years in the wire market, Houston Wire & Cable is intent on reaching new highs in the world of wire.

Futronix Systems An encore engagement for Terry Hunt. Terry Hunt is one of the electrical industry's ultimate entrepreneurs, a brash visionary who enjoys the challenge of building companies from the ground up. His success with Houston Wire & Cable Co., Houston, Texas, is legend in the wire business. Hunt started the company in 1975 with a policy of selling only to electrical distributors. He built the business into a 10-location company with over $140 million in sales before selling it to Alltel Corp., Little Rock, Ark., in 1989 for $142.8 million.

After spending a few years at his Montana ranch, Hunt got the itch to do it all over again. In 1991, he started Futronix Corp., Houston, as a distributor of surplus electrical supplies. Hunt grew the business to 13 locations and 160 employees. When his non-compete clause with Houston Wire and Cable expired in 1994, he got back into the wire and cable business and quickly added top lines such as Belden, Essex and General Cable to his new stable of wire manufacturers.

The company's wire business grew to the point where it attracted the attention of Kent Electronics, Houston, an electronics distributor with $659 million in sales that focuses on the OEM end of the electronics market. In 1996, Kent purchased Futronix in a stock swap worth approximately $65 million.

Today, Hunt is president of the Futronix Systems division of Kent Electronics, and he sounds every bit as excited about his new life as part of much larger company as he did when he was an entrepreneur running his own business.

"Kent has brought to me a new way to run a business," he says. "They have me focus on the scenario of specialty distribution. You have to run it differently than I had in the past . They (Kent) think the role of any distributor is going to be squeezed tremendously, and that the only way you are going to survive is if you can operate a large business on the cutting edge of information technology, so you can operate much leaner. It's an awesome way of thinking, and they are absolutely correct. I have bought into that whole school of theory that big is great, but you better be lean."

He is equally excited about the Lucent line of datacom products. Becoming part of Kent Electronics gave him access to Lucent products, a product line of choice in the datacom market, and, he says, "an incredible calling card for the electrical distributor."

The biggest change that he sees in the wire and cable market over the past few years is that high-technology applications drive customers' demands now more than ever. He also sees customers' demands for Futronix to "operate at a higher level of information technology" and provide instantaneous order information and electronic communications capabilities. Yet the core focus of the Futronix of the 1990s really hasn't changed much from his Houston Wire and Cable focus of the 1970s.

"Our products are the specialty items," he says. "We are the extension of the distributor. The distributor does not want the types of material that I have that turn less than four times a year. The electrical distributor wants to use us for these slower-turn items."

WireXpress Looking for distributors to join the data dudes. Along with acting as a source for hard-to-find or seldomly ordered specialty cable, master distributors like WireXpress, Elk Grove Village, Ill., can help full-line electrical distributors get involved in the fast-growing datacom market.

Electrical distributors don't have any good reasons not to get into the datacom market, says Wayne Eisel, the company's national sales manager. In years past, one of the roadblocks that full-line electrical distributors had to overcome was getting access to some of the biggest lines in the market. That's no longer the case. They can now buy the products of Belden Wire and Cable Co., St. Louis, Mo., one of the market's premiere wire lines, through WireXpress and several other master wire and cable distributors. It was also tough to fill specifications for products manufactured by Lucent Technologies, Murray Hill, N.J., another company with tremendous clout in the datacom market, because until the past few years, it limited its distribution to Graybar Electric Co., St. Louis, Mo., and Anixter, Inc., Skokie, Ill., in many market areas. WireXpress now has a one-year trial marketing arrangement with Lucent.

Another change in the datacom market that works to the advantage of electrical distributors is that fiber-optic cable is much simpler to terminate than in the past, because of the availability of reliable, easy-to-use connectors, says Eisel.

"Fiber has become easier to do, because there are fiber connectors that take no more time and no more skill to use than a coaxial connector," he says. "You just wipe the cable off with an alcohol wipe, stick it in the connector and twist it on."

WireXpress is now equipping its reps in the field with sample kits of the fiber-optic connectors marketed by Siecor Corp., Hickory, N.C., a manufacturer of fiber-optic cable and related products, that will enable them to do the fiber-optic cable terminations in front of the distributors' customers. Eisel says the Lucent and Siecor product lines provide 70% of the fiber-optic end of the datacom marketplace.

"We can cover a whole lot of the specified business with those two lines," he says.

Omni Cable Corp. A maturing market on the fringes of the cutting edge. Back in 1975, Barry Siegfried was a manufacturers' rep. He became acquainted with a fellow by the name of Ron Slepin, who was involved in the wire and cable business. Together they formed Omni Cable Corp., which at the time was mainly a surplus business. Today, Omni Cable has evolved into a five-location, $40-million-plus master redistributor of wire and cable, headquartered in Westchester, Pa. Siegfried's son Jeff is now president and chief operating officer, Slepin is executive vice president and Barry Siegfried is the company's chairman.

Omni Cable has found a niche market as a redistributor of wire and cable, selling strictly to electrical distributors and giving them access to product they previously couldn't market because they couldn't purchase or stock the volumes that the manufacturer required. "We give the electrical distributor access to material that is very specific, very difficult to buy, difficult to manufacture, requires a lot of engineering, requires a long lead time and a long time to make, or product that has stringent requirements to be declared a distributor for or that requires large or minimum-quantity orders-material a manufacturer is unwilling to stock," says Siegfried.

He says redistributors, as a second tier of distribution, help distributors bridge the gap of having the right product in stock, or at least having access to it quickly so they can support customers and enter markets that were previously closed. "That redefined the wire and cable distribution business and the wire and cable business at the electrical distributor level," he says.

Siegfried adds that he sees improvements in the way distributors handle wire products. As markets like the low-voltage cable market grow and mature, products become more of a commodity item and more easily distributed. "In areas where it becomes a commodity, the distributor can identify things that are going to turn and things that they can focus on so that they [the distributors] become better vehicles in the distribution process," says Siegfried. "As opposed to just stocking things that they sell, they stock into the systems a little bit, making sure that they have all the products that their customers need."

WIRE DISTRIBUTION SPECIALISTS Anixter International Leader of the pack. If any one company has single-handedly driven the development of the wire distribution market and shaped the growth of the datacom market, that company is Anixter International, the mother of all wire distributors.

Founded as Anixter Brothers in 1957, the Skokie, Ill.-based company has become a dominant international presence. The company's activities still include Anixter Wire and Cable, which handles the traditional electrical business on which the company was founded, but Anixter's primary focus today is the "global network solutions" business, which fields an army of engineers selling network connectivity products and services of all sorts worldwide. Subsidiaries such as Accu-Tech and WireXpress (see separate items on both, pages 27 and 29, respectively) round out the company's mix.

Anixter's early and lasting influence in the growth of the datacom market is undeniable. Anixter created the original "category" standards for specifying and testing the transmission speed capabilities of data cabling. In January this year, Anixter raised the bar with the introduction of its Anixter Levels Channel (ALC) program to provide quality testing and assurance covering all components that go into a structured-cabling system, including not only the cable but connectors, patch panels, information outlets and patch cords. According to Anixter, the ALC applies rigorous standards not just to individual components, but to their configurations with other components, helping network designers and installers to select products that will work effectively together.

Any way you cut it, Anixter is huge, with annual revenues of $2.8 billion and a workforce of 6,300 people in 180 sales and service locations in 40 countries. Anixter claims $440 million worth of products in inventory worldwide. Anixter went public in 1985 and is one of the few publicly held U.S. electrical distributors. The Anixter family left the company after the public offering, but didn't stay away from the wire and cable business long. Alan Anixter and his son, Scott, founded Anicom, Inc., three years ago (see separate item, page 29). Given its track record and recent activities, Anixter is poised to continue shaping the wire and cable and networking markets for years to come.

Communications Supply Corp. A fast-growing company with national aspirations. Nick Ohnell founded Communications Supply Corporation (CSC) in the mid-70s as a distributor of voice and telco-related products. By the end of the 1980s, he began to see major changes in the world of distribution. Consolidation was becoming the industry buzzword.

In December 1996, Steve Riordan, along with outside investors and CSC management, acquired the company. Riordan came on board as president and chief executive. Nick Ohnell remained as a significant investor in CSC and moved to the board of directors to concentrate on business development.

Through a series of branch start-ups, CSC already had evolved into a seven-branch distributor and was moving away from the voice side of communications and toward data communications. With the new ownership in place, CSC immediately began a campaign to build the company into a national data-communications distributor, selling to end-users and to data contractors/installers. Today, the company has annual sales approaching $250 million dollars with 20 locations, having recently completed three acquisitions and opened two branch start-ups.

The explosion of technology, including the Internet and use of PCs is driving the phenomenal growth in the datacom industry, he says. "Today half the world's PCs are networked," he says. "By the year 2000, it's estimated that 80% of those PCs are going to be networked." As PCs are linked, and demand for Internet access increases, the sales of cabling equipment will grow exponentially.

Riordan has his eye on where the consolidation trend is going. There are 200 or 300 specialized distributors of data communications products, he says, "not counting the 7,000 electrical distributors dabbling in it." He see four or five distributors emerging as national players. CSC intends to be one of those national players, he says.

"Today, we're the largest independent and privately held distributor in our industry," says Riordan. "Our focus is acquiring very profitable, well-run companies where the management wants to roll their winnings into our equity, stay on with us and help us take this company to the next level."

Accu-Tech Corp. Some names change, but the game remains the same. In 1984, four men looked at industry in the Atlanta, Ga., market and realized there was a real need for a more technology-related distributor of wire and cable. These four men, Barry Heidt, his father Bob Heidt, Randy Guhl and Dan Delavie felt the time was right to start their own business. With the help of contacts they had in the industry, they soon developed a distribution business that focused on computer and data cabling, rather than the more common power and other electrical cabling. >From its infancy in Atlanta as a distributor of coaxial and twin-axial cable, Accu-Tech Cable, Inc., has grown into a $110 million company with 12 locations scattered across the eastern half of the U.S.

Today, only two of the original founders remain--Delavie, who is president and chief executive, and Guhl, who is vice president of sales--and only about 50% of Accu-Tech's sales comes from wire and cable, primarily unshielded, twisted pair and fiber optic. The other 50% of the company's business comes from cable subassemblies and other products that have been developed over the last 15 years, such as patch panels, wall plates and other data connectivity products.

Although Accu-Tech sells to some electrical wholesalers, its primary customer is the low-voltage electrical contractor in the structured cabling (data communications infrastructure) market. Delavie says the growth in the data communications side of the business has been driven by the explosion of personal computer usage within companies in conjunction with the proliferation of local- and wide-area networks (LANs and WANs), and he sees the growth continuing.

"Fundamentally, what used to be called telephone wire now can handle very high-speed data transmissions," says Delavie. "Initially, it was strictly voice; then it went to voice and data; now it's voice, data and video. As long as that technology keeps growing and allows more and more to be transmitted over unshielded, twisted-pair cable, the demand will continue to be there."

Last year Anixter, Inc., Skokie, Ill., acquired Accu-Tech, which by then had become one of the largest independent data connectivity distributors in the country. Anixter has allowed Accu-Tech to maintain its identity, as many datacom acquisitions have done, which allows companies to maintain their close ties with local customers that support their growth into the future.

Anicom The Anixter family's newest wire and cable venture. Changes in technology provide endless challenges and endless opportunities to companies willing to embrace them, says Scott Anixter, president and chief executive of Anicom, Inc., Rosemont, Ill. His company seems to be embracing as many of them as possible.

From its beginnings seven years ago as a wire and cable specialist with tendencies toward low-voltage, Anicom has evolved and expanded-primarily through an aggressive string of acquisitions--into a heavy focus on voice, data, signal and security wiring and connectivity products. From that platform, the possibilities are limitless, says Anixter.

"You go to (a department store), you buy a sweater, you give them your card and they swipe it through a box and you leave, and a month later you get your bill. The point is, there's a data cable attached to that box and it's transmitting information," Anixter says. "You go into a restaurant and they have a sound system, a security system. A hospital, university, a VA center, NASA, a library, a casino, a petrochemical plant, Ford Motor Co., a police station, a fire house, your own home, every where you go there're cables--running along the road to control the traffic signals--every one is a potential customer. That's what's so great about this."

Roughly two-thirds of Anicom's sales go to contractors of various sorts, mostly electrical, voice, security, sound and video (the other third goes to end-users). Anixter says there's a convergence underway among the different types of contractors as they move into each other's industries, a migration that's mirrored by Anicom's own product focus.

The goal for Scott and his father, Alan Anixter, chairman of Anicom and co-founder of Anixter International, the company that wrote the book on wire and cable distribution, is to build another billion-dollar company. Anicom is almost half way there, with analysts estimating the company's 1998 revenues at $450 million if it doesn't make any more acquisitions, and Anixter says he has a couple in the works.

The Anixter family's pedigree in the wire and cable business has helped Anicom's growth, says Anixter--anyone with any sense of the industry's history knows the Anixters are capable of delivering product to market and paying their bills on time, he says.