Lanoga Corporation

17946 N.E. 65th Street
Redmond, Washington 98052
U.S.A.
Telephone: (425) 883-4125
Fax: (425) 882-2959
Web site: http://www.lanogacorp.com

Private Company
Incorporated: 1883 as Laird, Norton Company
Employees: 7,000
Sales: $1.45 billion (2002 est.)
NAIC: 551120 Offices of Other Holding Companies; 444190 Other Building Material Dealers

Lanoga Corporation is one of the largest retailers of lumber and building materials in the United States, with about 240 stores in 14 states. Owned by roughly 300 Laird and Norton family heirs, Lanoga operates through regional subsidiaries and divisions, each of which has significant autonomy. Lanoga goes to market through its five divisions: United Building Centers, which has 180 lumberyards and component facilities in the upper Midwest and Rocky Mountain regions; Spenard Builders Supply, which serves Alaska with 13 lumberyards and component parts; Home Lumber, which serves the Front Range of Colorado through five large facilities; Lumbermens, which serves Washington, Oregon, Idaho, and Arizona with 70 yards and plants; and Dixieline in Los Angeles, California.

The First 50 Years

In April 1855, brothers William, James, and Matthew Laird purchased roughly $1,000 in lumber products from a firm in Eau Claire, Wisconsin. After rafting their purchase down the Chippewa and Mississippi Rivers to the frontier town of Winona, Minnesota, they used the lumber to start Laird & Brothers. In October 1856, brothers Matthew and James Norton, cousins of the Lairds, joined the company, and the firm changed its name to Laird, Norton & Company. Over the next two decades, the new company expanded to include a sawmill with 400 employees, numerous lumberyards along the Winona & St. Peter Railroad, and thousands of acres of timber holdings throughout the pinelands of Minnesota and Wisconsin.

As settlers moved west from Minnesota, particularly after the Civil War, Laird, Norton & Company expanded its operations westward as well, setting up sawmills in Idaho and Washington along railroad routes. By 1883, the company had outgrown its original partnership model, and Matthew Norton, James Norton, and William Laird incorporated their business in the state of Minnesota as Laird, Norton Company.

In accordance with common business practices of the time, Laird, Norton established separate companies for each of its various business undertakings, a practice that left its long-term influence upon the organization of the company. After incorporation, two companies, the Hayes-Lucas Lumber Company and the Botsford Lumber Company, assumed management of retail yards operated by Laird, Norton. After half a century of steady growth, Hayes-Lucas Lumber Company and Botsford Lumber Company merged to form United Building Centers in 1962.

1980s: Serving Multiple Markets

In 1978, Laird, Norton merged its United Building Centers company with its newly acquired, four-store Spenard Building Supply chain to form a holding company called Lanoga (an acronym for Laird, Norton and Galco Distributing, Spenard's original parent company). Norton Clapp, a prominent timber and real estate financier, became the company's first chairman, a position he filled until 1986, while Booth Gardner, later governor of Washington from 1985 to 1993, became Lanoga's first president, a position he filled until 1981.

Spenard's history could be traced to 1952, when George A. Lagerquist and A.J. Johnson opened the first Spenard Builders Supply store with three employees in Anchorage, Alaska. In the 1950s and 1960s, Anchorage experienced a boom period in both the public and private sectors as the military expanded its presence in south central Alaska; Spenard Builders Supply grew along with the boom. The company withstood a devastating earthquake in 1964, as well as a fire that destroyed its facilities three years later.

In 1980, Lanoga purchased Lumberman's Building Centers, which it set up as a third division (United Building Centers being its first and Spenard's its second). Lumberman's also had a rich history that could be traced to the 1890s.

During its first year in operation, Lanoga generated sales of $140 million. Throughout the early 1980s, management had worked to centralize buying, but these efforts were eventually abandoned, due to cultural and logistical challenges among the holdings. Daryl Nagel, who became president of the company in 1987, credited the company's success in part to decentralization. In a 1993 Puget Sound Business Journal article he stated, "It's a retail business and you've got to be close enough to the customer to respond."

Nagel had spent almost his entire career working for Lanoga and had a legendary network of contacts; he became one of Lanoga's greatest assets, formulating a strategy of placing stores away from city centers, favoring suburban and rural areas where competition was less stiff, and beating others to the punch in making acquisition deals. He preferred to locate stores in rural "county seat markets" in cities with populations between 5,000 to 100,000.

With the advent of such building superstores as Home Depot, Lanoga faced stiff competition in the building materials market. In response, the company shifted from selling lumber and building supplies exclusively to also offering a broad range of home improvement supplies, including plumbing, electrical, and lawn and garden supplies. The company targeted for expansion fringe metro areas undergoing waves of new construction and remodeling. In these markets, the presence of warehouse retailers skewed Lanoga's customer mix toward the professional.

The Acquisitive 1990s

Relying on earnings to fuel growth in the 1990s, Lanoga embarked on a path of steady acquisition. Preferring to buy an established chain rather than introduce new concepts, Lanoga would identify a potentially lucrative market and then buy out the top-tier player. Good acquisition prospects were stores in non-metro areas that would fit nicely into one of the company's three divisions.

Business was good for Lanoga in the early 1990s. Its aggressive acquisition strategy provided the company with 51 percent volume growth from 1991 to 1994. In 1992, Lanoga generated gross revenues of $556 million. In 1993, with stores in 12 states, that figure increased to $657 million. By this time, the company ranked near the top of Washington's largest private companies and was the 13th largest chain of its kind in the country. BSHC magazine named Lanoga its Generalist Retailer of the Year for 1993. At the time, approximately 40 percent of Lanoga's customer base were individual consumers, while 60 percent were building professionals.

Despite its growing renown, the company's headquarters, with its staff of five, was located in small offices in an unremarkable business park in Redmond, Washington. According to Nagel in a 1994 BHSC article, the company's small administration was consistent with its philosophy of micro-marketing, making decisions at the individual store and regional level. Each division had its own president, as well as its own departments for human resources, advertising, and marketing. Benefits programs and holding company finances were administered from the corporate headquarters. With such a high degree of autonomy among its holdings, Lanoga hoped to achieve the buying power of a large chain with the flexibility of a small regional player. Moreover, each store within a division determined its own product mix beyond a core mix of products. "Instead of merchandising and marketing driving product and forcing it into stores, it's really the reverse. Stores are finding out what's necessary in that market, and they pull the goods into the store," Nagel remarked in BHSC. Nevertheless, Lanoga's divisions did collaborate frequently. Marketing executives met quarterly to discuss market trends, company strategies, and pricing issues. In 1994, the company with stores in a multitude of markets launched a company-wide advertising campaign.

During the last years of the 20th century, Lanoga's overall sales continued to grow. In 1997, Lanoga hit the $1 billion mark in sales, an increased of almost 7 percent over 1995 sales. In 1998, Lanoga's sales again rose slightly more than 4 percent, taking the company over the $1 billion mark for the first time. Sales reached $1.25 billion in 1999. The company now wavered between positions as 10th-or 11th-largest home improvement company in the country.

2000 and Beyond

The 1999 acquisition of the Home Lumber Company brought Lanoga into the Denver and Yakima markets. Home Lumber was so large a company that Lanoga created a fourth division simply to accommodate it. Home Lumber had begun in 1954 in Littleton, Colorado, as a business focused on serving professional builders.

Daryl Nagel retired in 2000, and Paul W. Hylbert, Jr., became president and chief executive of the company, which by then was reporting annual sales of more than $1.3 billion and was firmly positioned among the nation's ten largest companies in the retail lumber and building material industry. Additional purchases in Utah, Missouri, Wisconsin, Oregon, and Iowa during this time bolstered Lanoga's presence considerably. Part of management's plan was to insulate Lanoga from the impact of regional downturns by having chains in different parts of the country. During this time, Lanoga also joined with six other building materials distributors to launch an online marketplace.

Company Perspectives:

The Lanoga family of companies is a great place to do business and to work. We focus squarely on meeting the needs of our customers and believe this is best accomplished through well-trained, knowledgeable and satisfied employees. We strive to build strong and long-lasting relationships with our vendors and other business partners who support us in these efforts. There are always good things happening at Lanoga, and we're constantly looking for the right people and partners to help us keep the momentum going.

In 2003, Lanoga purchased the assets of Dixieland Lumber Company of San Diego, creating a fifth operating division. Dixieline had been founded as Dixie Lumber in 1913 as a branch of another lumber business. It was acquired by Weyerhauser in 1979 and Nortek in 1985, and then reacquired by the founding Cowling family in 1994. Dixieline served a customer base that was 80 percent professional contractors and 20 percent consumers. The acquisition well suited the company's established strategy of targeting industry leaders with a strong focus on contractor business in the Midwest and western states.

As it looked to the future, Lanoga anticipated additional growth from its established strategies as well as from fine-tuning the merchandise and marketing plans for its existing stores with the goal of increasing its market share at its established locations. With revenues at $1.8 billion in 2003, the prognosis for Lanoga's continued growth was good.

Principal Divisions

United Building Centers, Lumbermens Building Centers, Spenard Builders Supply, Home Lumber Company; Dixieline.

Principal Competitors

84 Lumber Company; Building Materials Holding Corporation; Lowe's Companies Inc.; The Home Depot Inc.;

Key Dates:

1855:

William, James, and Matthew Laird found Laird & Brothers.

1856:

Brothers Matthew and James Norton join the lumber firm, which is renamed Laird, Norton & Company.

1883:

The company incorporates as Laird, Norton Company.

1952:

Spenard Builders Supply begins operations in Anchorage, Alaska.

1954:

Home Lumber and Supply Company is established in Littleton, Colorado.

1962:

Hayes-Lucas Lumber Company and Botsford Lumber Company merge to form United Building Centers.

1978:

The company acquires Spenard Builders Supply (aka Galco Distributing) and becomes Lanoga Corporation.

1980:

Lanoga acquires Lumbermen's Building Centers.

1999:

Home Lumber Company becomes Lanoga's fourth division.

2003:

Dixieline becomes Lanoga's fifth division.

Further Reading

McDowell, Bill, "The Quiet Giant," BSHC, June 1994, p. 48.

Park, Clayton, "Low-Profile Lanoga One of Area's Best-Kept Secrets," Puget Sound Business Journal, June 18, 1993, p. 46.

Tice, Carol, "Lanoga's Big Buy," Puget Sound Business Journal, November 8, 2002, p. 1.

——, "Lumber Retailer Responds to Changing Market," Puget Sound Business Journal, June 23, 2000, p. 42.

——, "Slow and Steady Tack Pays Offs for Lanoga Corp.," Puget Sound Business Journal, June 25, 1999, p. 45.

Wood, Chris, "Group Effort: With a Focus on People and an Eye on Expansion," Prosales, January 2003, p. 32.

—Carrie Rothburd