At the start of this month, BayWa r.e. bought Beacon Solar, the solar distribution division of roofing product distributor Beacon, in a deal that will see the company massively increase its warehouse stock in the US, driving down delivery times. Plans are also in the works to ‘cross-sell’ solar PV and roofing products under a “new strategy” that will see BayWa r.e. exploit Beacon’s presence across the country to drive uptake of its products.
PV Tech Premium spoke with Boaz Soifer, regional director of solar trade at BayWa r.e., to discuss the purchase, what it means for the BayWa r.e.’s US operations and how it might catalyse the company’s growth plans.
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The acquisition will see Beacon Solar integrated into BayWa r.e.’s US solar distribution business – BayWa r.e. Solar Systems LLC (hereafter BayWa r.e.).
Crucially, this will see the number of warehouses BayWa r.e. owns in the US rise from six to 16. This was a major reason for the purchase, says Soifer. It will also mean the transfer of all Beacon Solar staff, vehicles and other distribution equipment, he says.
“The timing is auspicious. The solar industry is going mainstream. We’re close to that tipping point, if not at it already. So, making this investment at this time is strategically important.”
The company’s line card will also expand to include Beacon’s key relationships with solar suppliers and, in the coming months, Beacon and BayWa r.e. “plan to explore further collaboration” to offer solar and roofing products across the US.
Soifer says BayWa r.e. have been watching “the convergence of solar with other verticals” such as heating, ventilation and air conditioning (HVAC), roofing and home energy companies that are relevant to solar for a while.
Beacon is the largest publicly traded roofing distributor in the US. It reached out to BayWa r.e. after deciding to focus on its core business area, Soifer says.
Boaz could not provide details on the terms of the acquisition but, according to a Beacon Solar press release, the company generated approximately US$111 million in net sales, net income of US$2.6 million and an adjusted EBITDA of US$3.7 million for the first nine months of 2021.
What it means
Boaz says the acquisition of 10 warehouses will see BayWa r.e. move away from a centralised distribution model. He explains that the purchase has saved BayWa r.e. many years of incremental growth – it had plans to move away from a centralised model that would have taken many years to fulfil – and will act as a platform for its growth intentions in the US.
The significantly expanded warehouse stock will cut down on delivery times – down to two or three days for most of the US, with some even hitting same day delivery – and allow BayWa r.e. to better serve smaller suppliers.
For example, among BayWa r.e.’s new branches is New Jersey, which is around four hours from its nearest warehouse. Similarly, the newly acquired warehouse in Tempe, Arizona was two days from the nearest BayWa r.e. warehouse and another one in Minnesota was two days from it’s Illinois warehouse. New distribution nodes dotted around the US will allow BayWa r.e. to get “right into those markets”, says Soifer.
This enhanced distribution network also enables BayWa r.e. to better serve small suppliers that “rely more heavily on shorter delivery times”, he says. “What they need is faster response times for deliveries.”
“Strategically, this absolutely expands our capabilities to serve that specific segment,” he adds.
The acquisition of Beacon Solar’s staff and vehicles also means a reduced need for third party carriers, which will allow BayWa r.e. to further reduce delivery times, increase delivery quality and provide a higher service level to its customers, says Soifer.
“When you’re using third party carriers, you can’t [set delivery times] with a high degree of accuracy, unless you spend a fortune for guaranteed delivery times,” Soifer explains.
The acquisition also opens the door to another opportunity – collaborating with roofing giant Beacon to cross sell solar PV and rooftop products, opening up new synergies and markets. “The best time to add solar is when you’re re-roofing,” Soifer says.
The talks are in “early-stage discussions” but focus on the idea that BayWa r.e. can use Beacon’s 400 locations across the US to set up a “road-show” where the company would “invite solar contractors and roofing contractors to beacon locations” and introduce each side to the other’s products.
Soifer says “about 5% of solar contractors have already added roofing to their to their business” and that “solar contractors seem more likely to get into roofing than the other way around”.
“I think there’re more obstacles for a roofing contractor getting into solar than for a solar contractor getting into roofing,” he opines, “the margins are different, the level of training that employees need is different for roofing contractors”.
The integration of different, complementary verticals is a space that BayWa r.e. has watched closely of late. “There have been some interesting acquisitions recently,” says Soifer, referencing deals such as Sunpro being acquired by ADT, Sunrun acquiring Vivint that had “always been an alarm company” and teaming up with global media and technology company Comcast to increase the reach of its rooftop PV products and Sunnova Energy and home security firm Brinks Home entering into an exclusive partnership.
Beacon has 90,000 customers across all 50 US states and operates in six Canadian provinces. Although terms are still being discussed, Soifer says the intention is to access this vast pool of potential customers to drive BayWa r.e.’s growth ambitions.
“We met with some of Beacon roofing senior leadership and explained how we saw our relationship working going post-acquisition and they were very excited about that,” he says.
BayWa r.e. has ambitions to outpace market growth of the residential and commercial solar sector. In 2021, it grew at three times the rate of these sectors and, with big changes afoot, a sustaining of this growth seems like a distinct possibility.