Ten years ago, the leaders of W.W. Grainger saw what they believed to be an opportunity to further bolster its operations overseas.
The suburban Chicago MRO giant had built an online industrial supply business in Japan with MonotaRO, and its officials identified another market with similar potential. The U.K., Grainger executives suggested, offered one of the largest e-commerce markets in Europe, and the company jumped in with both feet in the summer of 2015, snapping up Cromwell Group – the nation’s largest independent MRO distributor – for some $480 million.
Grainger said at the time that combining its supply chain and e-commerce capabilities with Cromwell’s customer relationships and broad industrial product lineup would provide the scale and momentum needed to build a MonotaRO-like online model in both the U.K. and Germany.
A decade later, however, Grainger leadership decided to pull the plug on its U.K. efforts — citing circumstances well beyond the company’s control. Grainger in late October announced an agreement to sell the Cromwell business to private equity firm Aurelius, and shutter its Zoro online business in the U.K.
Grainger officials said in the announcement that the company had “altered our assumptions about our future potential in this region,” and Chairman and CEO D.G. Macpherson elaborated on the decision during the company’s most recent earnings call. He indicated that the U.K.’s vote to leave the European Union just months after the Cromwell deal was completed had a great deal to do with what happened in subsequent years.
“We thought we had an opportunity to learn and build off that platform for Zoro U.K., and then, potentially, think about expansion and learn about the European market,” Macpherson told analysts on the call. “That turned out to not be true, obviously, when ‘Brexit’ happened, and at some point, it becomes clear that you’ve got a mid-sized business that isn’t really material to our portfolio.”
Although Grainger argued that the economic landscape shifted beneath its feet just as it was expanding in Europe, one analyst on the earnings call also pointed to the company’s experience with Fabory, a Dutch fastener and MRO distributor acquired in 2011 and sold in 2020.
Lee Pruitt, the chief digital and marketing officer at London-based MRO giant Rubix, wrote in a column for ID earlier this year that Europe has a more “dispersed and diffused” MRO market than the U.S. — and that American companies attempting to break into that region can be unprepared for its nuances and complexities.
Macpherson, for his part, contended that Fabory and Cromwell were “very different experiences” for the company.
Grainger expected to chalk up a loss of $190 million to $205 million related to the U.K. departure, most of which was recorded in its third-quarter results. Macpherson said on the analyst call that Grainger is now “focused entirely on growing our North America and Japanese businesses, where we can deliver the greatest long-term impact.”
“We want to make sure that our attention goes to things that really matter… that can move the needle for us,” Macpherson said. “And so that’s why we made the decision.”
But although Cromwell failed to move the needle for Grainger, company officials indicated that they remained optimistic about the business as a whole following its spinoff. Founded as a tool supplier in England’s Midlands region more than 50 years ago, Cromwell today provides more than 500,000 branded and supplier products to thousands of customers across the U.K.
“We do think Cromwell is a good business,” Macpherson said. “And [that it] will continue to be a good business going forward.”
This column originally appeared in the November/December issue of Industrial Distribution magazine. Sign up here to subscribe to ID’s Today in Industrial Distribution daily newsletter.
