Local companies go global
A variety of private firms part of ‘the maturation of Houston’s economy’ as international trade expands
EVEN as crude oil prices tumbled in the second half of 2014, many local companies thrived. The annual Houston Chronicle survey of top private companies shows commerce growing throughout the year and Houston establishing itself as an engine to help employers grow beyond the local market.
“There aren’t a whole lot of newcomers on the list,” said Patrick Jankowski, senior vice president of research at the Greater Houston Partnership. “Which shows that these private companies are companies that were founded in Houston and they’ve grown up here and they’ve been able to grow serving what is now the nation’s fourth-largest economy.”
If publicly traded, the top six companies would be large enough to make the Fortune 1,000 list.
Three of the 10 biggest private companies are involved in building, and many more engineering and construction companies ascended the list. D.E. Harvey Builders, the highest-grossing construction firm, ranked No. 10 on last year’s list. This year, the company is sixth.
The newer companies listed, he noted, are more global-facing. The youngest companies — Ascend Performance Materials and Newmark Homes Houston — were both founded in 2009.
“The old guard grew up in Houston serving Houston, but the new guard grew up in Houston serving the rest of the world,” Jankowski said. “It’s part of the maturation of Houston’s economy. We’re no longer a domestic-focused economy, we’re now a globally oriented economy. I expect you’re going to see more companies engaged in international trade in the next year and in future years.”
The Chronicle ranked 78 of the largest private companies based in the region based on 2014 annual revenue. The list is compiled through surveys and is not comprehensive, as some companies decline to participate.
Gulf States Toyota, ranked No. 1 with $7.6 billion in revenue last year, is an importer, he noted, and Ascend Performance Materials, No. 5 with $2.5 billion revenue, is an exporter.
The beer market is growing both ways, with imported Dos Equis among the fastest-selling brands in Houston, distribu-
tors said, and the craft beer craze causing customers to drool over all brews local.
Houston’s three major beer distributors all climbed the Chronicle’s private-company list in 2014. Silver Eagle Distributors, the largest AnheuserBusch wholesaler in the country, ranked No. 13 with $1.04 billion in revenue last year. Houston Distributing rose to No. 46 with $241 million in revenue, and Faust Distributing to No. 61 with $150 million in revenue.
In the last decade, their industry has become much more complex as the number of alcoholic drinks that come in a bottle or can has exploded, from locally made Karbach brews to the Bud Light Mang-o-Rita.
“When I got into the business a little over 20 years ago, we sold four brands,” said Don Faust, CEO of Faust Distributing. “Now, just our company alone, we sell over 200 brands, and over the course of the year we’re selling over 1,000 SKUs.”
SKUs, stock keeping units, refer to different items in the distributing industry. Asix-pack of Miller Light bottles, a 12-pack of Miller Light cans and a case of Lone Star are all different SKUs. And as craft beer shines, the types of products keep multiplying.
Bo Huggins, president of Houston Distributing, said craft beer is only part of the story.
The first product he remembers that really took the market beyond variations of Budweisers and Coors Lights was Smirnoff Ice, which Houston Distributing started selling in 2000. Seeing its success, other producers wanted in on flavored drinks.
“So that trend evolved, at the same time that the import category grew dramatically, and then the second round of craft growth,” Huggins explained. He said craft beer had risen and stalled out before taking off again.
All the new options for consumers make business more complicated for the wholesalers.
Houston Distributing is preparing to replace its automated packaging system to handle how bars, restaurants, grocery stores order beer now. Years ago, general manager Rick Roberts said, beer came from the brewery on a pallet and the whole pallet was moved to a truck to go to a customer.
Now customers order dozens of products that come in specialty four-pack bottles, 24-can cases, or short aluminum bottles, among other variations. They’re unpacked on shelves where a computer can identify them, send them down conveyer belts and around spiral chutes and pick them up with giant yellow robotic arms before wrapping them together on one pallet to ship.
A lot more processing and computing power is required to figure out how to most efficiently pack a truck and stack different boxes so they don’t topple.
When the system was built 15 years ago, only some orders required extra processing. Now, nearly all do, Roberts said. Processing costs rose, but higher margins on specialty products make up the difference, Huggins said.
He said craft beer made up about 11 percent of sales last year. But defining “craft” beer, and whether it includes larger Texas brands like Shiner, or craft-style brands owned by national brewers, is another question.
“It gets about 80 percent of the talk, but it’s only about 10 percent of the volume,” Faust said of the craft market. “But it’s significant. ... It’s brought newfound excitement to our industry. People are talking about beer a lot.”
All three distributors increased revenue last year, boosting their rankings on the list. At the same time, some of the biggest companies from last year are absent.
Tauber Oil Co. and BMC Software declined to disclose revenue this year, and global chemical distributor Nexeo Solutions did not respond to requests for information.
Grocers Supply Co., a longtime figure on the list, sold its wholesale distribution and supply business to C&S Wholesale Grocers. The new owner was unable to provide a 2014 revenue figure for its new subsidiary. Grocers Supply Co. also sold off its retail grocery store operations.
“The old guard grew up in Houston serving Houston, but the new guard grew up in Houston serving the rest of the world.” Patrick Jankowski, senior vice president of research, Greater Houston Partnership