PPG’s new CEO to push organic growth with existing clients
PPG Industries Inc. is always on the lookout for a good business to buy.
But the Downtown company’s chief executive says he wants to get more out of the business PPG owns.
“We’ve been very successful growing through acquisition, but organic growth has not met my expectations,” said Michael McGarry, who marked his first day as CEO on Tuesday. “This is an area that we need to get better at.”
Expanding revenue by keeping customers and winning accounts in areas where it is already doing business will be a top priority for McGarry as he takes the reins at one of Pittsburgh’s most iconic companies.
McGarry’s ascension to CEO marks a pinnacle in his 34-year career at PPG, during which he held 22 jobs since starting as an engineer at the Lake Charles, La., chemicals complex.
It is a very different company from the one that hired him in 1981 and virtually unrecognizable from the one founded in 1883 as Pittsburgh Plate Glass. When McGarry started, PPG’s business was evenly divided among coatings, chemicals and glass. Now, it is focused almost exclusively on coatings, which account for 93 percent of sales.
Sales have grown from $9.5 billion in 2004 to $15.4 billion last year amid a buying spree — making PPG the biggest coatings company in the world. During the past 15 years, PPG has made more than 65 acquisitions to expand in the coatings industry, and McGarry said he doesn’t intend to let up on the gas.
McGarry’s challenge is figuring out how to keep growing even when PPG is not buying companies by enhancing its value proposition to customers, analysts said.
To do that, PPG needs to address “customer churn,” McGarry said.
That “churn” refers to the roughly 3 percent of customers who switch to a competitor. Serving the needs of those customers — whether auto body shops, airplane manufacturers or homeowners — with better products and technical expertise can yield positive results, McGarry said.
“If you can reduce that from 3 percent to 1 percent, you’ve already grown organically 2 percent,” McGarry said.
Acquisitions are important, McGarry said, but he wants to grow PPG by deepening relationships in existing markets and keeping that sliver of customers who are considering a switch to a competitor.
One area in which the company is looking to make headway is that of professional painters. Do-it-yourselfers can find PPG brands in big box stores such as Home Depot, which sells its Glidden, Olympic and other paints. But the customers who buy the most paint — commercial painters — prefer to go to stand-alone paint stores where they can fill large orders and seek help from knowledgeable staff.
Cleveland-based Sherwin-Williams Co. is the dominant player in the commercial painter market, but PPG is trying to catch up. PPG is expanding its retail outlets nationwide, growing to 635 company-owned stores in the United States from 200 five years ago and is trying to convince competitors’ customers to give PPG a chance.
It won’t be easy, said Jeff Stafford, an analyst at Morningstar.
“Competing against Sherwin is a pretty tall order,” Stafford said. “These painters, these contractors have relationships with Sherwin, they trust Sherwin products.”
Sherwin has a much larger network, with more than 3,700 company-owned stores. Closing the gap between Sherwin’s store presence and PPG’s is important, McGarry said. The more locations, the less distance painters have to travel to pick up orders or stop in for equipment. Proximity breeds familiarity. It’s about service, McGarry said.
“Having a person they know every day who can help them make the right decision on the right paint and how do they solve a really difficult application, that’s important to them,” he said.
McGarry said he is not intent on radical change, though. The strategy laid out by his predecessor, Charles Bunch, is one that has worked well and has driven international growth at a company that operates in more than 70 countries.
McGarry will have the benefit of Bunch’s expertise. Bunch is staying on as executive chairman and will remain a member of PPG’s executive management team.
McGarry said he believes he’ll have all the freedom he needs to make decisions. At this point, he doesn’t anticipate a need to alter the direction of a company that is as strong as it has ever been. His one fear: complacency.
“The biggest fear is that people sit back and think, ‘Oh, we’ve been so successful, it’ll just keep coming our way,’ ” he said. “I don’t think we can do that. I always tell people, we’re the number one coatings company in the world, but it’s a journey, it’s not a destination.”
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or [email protected].