As a contractor, Tadeo Peralta Johnson often found it difficult to find the right HVACR parts and supplies for his business. Tired of running around looking for parts in his home city of Hermosillo, the capital city of the Mexican state of Sonora, Peralta decided to do something about it and opened his own distribution business. He convinced his brother-in-law, Oscar Tapia, to join him in this venture.
Seventeen years later, the wholesale distribution business that the two men created, T&P Refrigeracion, has six branches in four states throughout northwestern Mexico. Peralta and Tapia, who are partners in the business, have recently opened a call center to reach customers throughout Mexico. As the business flourishes, they want to show others, especially HVACR manufacturers, that two-step distribution can work as effectively in Mexico as it does in the United States.
Peralta readily admits that he and his brother-in-law were an unlikely pair to start a wholesale distribution business. While Peralta was a contractor, Tapia worked for the Sonoran government — his job, ironically, was promoting small business in the state. “He got tired of telling everybody else about business, so I said instead of talking about it, let's do it,” Peralta recalls.
The first lesson learned was that they shouldn't listen to what others have to say about the HVACR wholesale distribution business. Peralta says people told him that it was a very competitive, low-margin business. “So we started out in appliance parts,” he says. “And after a few months, we began moving into air conditioning and refrigeration.”
As that side of the business grew, they gradually let go of appliance parts — eventually exiting it altogether about five years ago. “If you want to be a serious HVACR wholesaler, you cannot sell appliances,” he notes. “It's a whole different ballgame. The skills are kind of the same, but the customer and the market are different.” It was, he says, like having two separate businesses under the same roof, and that was not good for either business.
Peralta came to learn that HVACR distribution was, in fact, a very rewarding business, but it required a great deal of dedication and a strong commitment to customer service. Peralta says the learning curve was steep. With neither man having a business background, it took them about eight years to really understand how to stock their store with inventory, hire and train employees, and develop a base of loyal customers. Over time, however, they had a smooth-running operation. “We had a dream team with that one store,” Peralta recalls. “It was very organized, very profitable, very efficient and productive.”
But Peralta and Tapia had greater ambitions. They opened a second store in another state 500 miles away. Using the lessons learned from the first store, they moved one of their top people to serve as manager of the second location in Culican, in the state of Sinaloa.
Why did they locate a second branch so far away from their base of operations? Peralta says some of T&P's suppliers told them that Culican would be an ideal location for an HVACR distributor. As Peralta looks back on that decision, he says it may not have been the wisest move at the time. “We should have started a store in the same city, but we didn't,” he says. But doing it the hard way taught them valuable lessons. “It helped us to speed up the learning process and the skills that have allowed us to build what we have today.”
Soon after, Peralta and Tapia opened locations in additional cities and built a new distribution center in Hermosillo. T&P recently opened a call center that can ship products and supplies to customers anywhere in Mexico. Peralta says they decided to open a call center because the demand has been so great, extending well beyond the radius of their branch locations. The Internet has made such an operation much more effective, especially for contractors who are in smaller, more rural areas where getting to a distributor is often difficult.
As Peralta and Tapia learned to start and run a successful business, they also learned the importance of bringing aboard quality people. T&P now employs 60 people throughout its organization, including counter people, an inside sales team and outside salespeople who work directly with contractors. “We have a very good team,” he says, noting that about 65 percent of their employees have college degrees.
Hiring and training people are among the most important — and time-consuming — parts of the business, he says. “We put a lot of effort in hiring and training constantly. It's not the tools, it's the team that we have been developing over time that makes us strong. And we're always looking for good people.”
Professional HVACR contractors make up T&P's core customer group. Peralta emphasizes that T&P does not sell to end-users. Its focus on two-step distribution makes the business unique among its counterparts in Mexico. “We are probably one of the very few true wholesalers in Mexico that follows two-step distribution,” he says.
T&P's competitors run the gamut of local, regional and national distributors, similar to the U.S. market. But unlike the U.S. market, the lines of the supply chain are blurred. Distributors will sell their products to anyone, and regard Peralta and Tapia as “crazy” because they are so selective on selling only to contractors, Peralta says. But he is committed to following the model that has worked so well in the United States because it is working for their business. “The main difference is how well organized the U.S. and Canada are in two-step distribution,” Peralta says. “You guys don't realize how good and how efficient the two-step distribution that HARDI promotes is there.”
The Mexican market is “growing and maturing,” according to Peralta, in the same way that the U.S. market expanded and matured in the 1950s and 1960s. “It took the U.S. market time when it was growing and maturing, and we're facing those same issues now,” he says. Peralta would like to see manufacturers and organizations like HARDI aggressively promote the two-step distribution model in Mexico. “It is good for business, it is more efficient, and it's a better way to service the contractor because they get the best selection of equipment,” he says.
It can work in Mexico, he says, if the manufacturers would enforce the rules on its distributors about selling only to the contractors and contracting community. “I want to send a message that two-step distribution can be done in Mexico,” Peralta says. He suggests that manufacturers create a process to educate and train Mexican wholesalers on the benefits of wholesale distribution.
Peralta has become actively involved in HARDI and has developed a network of friends in the United States who are helping to strengthen his business and promote the two-step model in Mexico. He says that after the recent HARDI conference, Tom Roberts, the president of cfm Distributors in Kansas City, MO, visited Peralta and Tapia to see firsthand T&P's operations. Peralta and Tapia have also visited Roberts in Kansas City and toured his facility.
HARDI has built this network of friends. Through HARDI, he's also reached out to manufacturers to talk about the issues that he faces in Mexico. “I've encouraged them to look, and if there's anything that we can do for them, we are more than open and glad to do it,” he says of the manufacturers.
T&P certainly represents the best of what a true wholesaler distributor can offer customers — both in the depth of its product line and the educational opportunities and technical knowledge that it provides to contractors. “We've been dedicating a lot of time and effort to build relationships with contractors, helping them to better understand this distribution system,” Peralta says. This includes seminars on general business acumen as well as technical training.
There is certainly a hunger among contractors for continuing education. A recent two-day conference for contractors sponsored by T&P drew 86 contractors from 15 cities. The seminar addressed basic issues that contractors face — from how to hire and pay their technicians to how to effectively work with customers and wholesalers and grow their business. In addition to the seminars, T&P holds contractor trainings at their branches.
All of this education by T&P helps the maturing of the Mexican market — which helps T&P too. “We need our customers to grow and become better in business,” he says. “We would be happy if the manufacturers embraced that too.” He'd like to see manufacturers sponsor training in Mexico. After all, he says, the more familiar that contractors and distributors are with the products, the more they will sell.
For all the hard work that Peralta and Tapia have put in to build their business from the ground up, they appear to be as eager and motivated as when they first got into the business. While they continue to build T&P and plan for future expansion, they are also fighting for the future of two-step distribution in Mexico. They know how well it works for the players in the United States — from the manufacturers down to the customers — and they want to see that success in Mexico.
The future is bright for both T&P and wholesale distribution in Mexico, he says. “The vision for the past is always 20/20,” he says. “When you look at the future, you can't see it clearly, but you have to keep at it. I have been enjoying every single minute of it and learning too.”
Michael Maynard is a business writer in Providence, RI, who writes on issues related to HVACR, construction and architecture. Contact him at [email protected].
To be the first in Mexico to introduce and establish two-step distribution, which is the heart and soul of HARDI, a wonderful association. We work closely with contractors to help them become better businessmen.
Definition: We are committed to helping contractors become better businessmen and support their success.
Example: We annually organize a three-day business seminar for our best contractors, where we discuss issues of interest for them related to the industry. At our last seminar, we had the privilege of having a very successful contractor and former president of ACCA, Larry Taylor, from Dallas-based Air Rite. He spoke to contractors about best practices and how a contractor firm works in the United States. As part of our commitment, we have been working closely to introduce ACCA to Mexico so they can help contractors with their professional development. Currently, eight Mexican members have joined the association.
Also, with the invaluable support from our suppliers, we schedule training courses throughout the year, and we have been talking to NATE about the possibility of becoming their first testing organization in Mexico.
Significance: Helping establish order in the distribution channel for manufacturers, wholesalers and contractors. Our efforts add value to the distribution channel and deliver benefits to the end- user. We are convinced the two-step distribution model is the secret to the improvement and future of the industry in Mexico, as it is in the United States and Canada.
Benefits: We are certain that by helping contractors and manufacturersto be more profitable, our company will be in a better position to take advantage of the opportunities ahead. This has led to increased growth and business in our industry during the past two years. We feel it is the catalyst for growth in the future.
Other considerations: Our company is doing its part in promoting two-step distribution by being the first company in Mexico to follow this model. We are proof that the model works. However, organizations such as HARDI, ACCA, NATE and especially our manufacturer partners continue to help us promote this successful practice in Mexico.
Contact: Tadeo Peralta Johnson, [email protected]
|President & CEO:||Oscar Tapia Forni|
|Vice President:||Tadeo Peralta Johnson|
|Headquarters:||Hermosillo, Sonora, Mexico|
|Operations:||Hermosillo, SON |
|Tijuana, BCN |
|Major Product Lines:||Bohn, York, Dupont, Emerson, Copeland, Honeywell, ICM, Sporlan, S&P, Mueller, Atco, Knaff, US Aire, Scotsman, Aerocell|