By Brandon Ost, Air Filtration Holdings LLC

Brandon Ost, in an interview style format discusses the consolidation and growth potential of the the air filter industry through education, automation and innovation

Today, the fact is, that the way people purchase and choose products has changed dramatically. There is a whole generation that no longer relies on salespeople for information.

Most of us here are acquainted with you however could you comment on your personal background and what you have been doing most recently?

I am a third generation filter guy. My grandfather started Midwest Air Filters, Inc. in Chicago in the early 1940’s as a distributor. In the 1970’s, our supplier told us they were getting out of the filter business so my father had a choice – he could either go back to being a sheet metal worker like he was before he joined the business in the late 60’s, or he could buy the manufacturing equipment and start making filters. Lucky for me, he chose filters. That manufacturing company eventually became Filtration Group, Inc., which is where I’ve worked since my mid 20’s.

In 2010, after I had been at the company for 20 years, we sold the business. After the sale, I took some time off, but I decided I wanted to get back in and have fun again. Most recently, I have partnered with The Edgewater Funds and Duchossois Capital Management to build a world class filter manufacturing business. Not exactly like the humble origins of Midwest Air Filters, but I see a lot of similarities to what my father and grandfather did by starting an entrepreneurial business with a driven team, great customers and suppliers here in Chicago.

What do you see as the advantage of bringing together a number of diversified filtration companies?

We want to be all about product and service innovation. I know this phrase is overused, however in my career in filtration, I have consistently observed that smaller manufacturers are usually the most innovative. I believe this stems from a certain survival instinct and “can do” attitude that the larger companies sometimes do not have.

When we were a very small business and I was starting out in sales, I remember making a sales call with my father. I had studied the product catalog day and night for two weeks. I knew most of the sizes, costs, prices and even committed to memory a lot of the top part numbers. I remember it was January and we were making calls outside of Minneapolis. On about the 5th call of the day, we met with a new customer that we were really trying to get. The buyer had some ideas for a new filter that was clearly not in our catalog. I tried to convince him that one of our standard products was a better option because we were more efficient making that version. My father immediately assured the customer that we could do it. In the car I said, “We don’t make that filter.” My dad replied, “We do now.”
Unleashing that attitude and creativity is what we are striving for, and the best building blocks are small to mid-size American manufacturing businesses that do not rest until they meet their customer’s needs.

Has this been good for the customer; both the end user and distributor? How have they been most affected?

Consolidation in the filter industry was inevitable. It had and continues to have all the hallmarks of an industry ripe for realignment. If you are a manufacturer or distributor, I think that it is important to keep an eye on what best serves the end user and to work back from there. Today, the fact is, that the way people purchase and choose products has changed dramatically. There is a whole generation that no longer relies on salespeople for information. Let’s face it; it is all a few keystrokes away and that is not going to change.

What hasn’t changed is that filters are real products that are not optional for the user and these users have desired outcomes and results. They want clean air for their people and processes with as little hassle as possible. There is so much that goes into making a perfect order for a customer and the best distributor adds a ton of value in this process. From inventory to packaging, sorting, interfacing with end user IT systems, JIT and all the unusual requests that are the hallmark of the “last mile” to the customer. A good distributor owns the last mile and is continually finding ways to help the end user achieve the results they are looking for seamlessly.

What do you see as the future growth potential of the HVAC filtration market?
I am very bullish on the HVAC filter market in the US and around the world. I would not have got back in the industry if I wasn’t. The emerging middle class globally is going to create new demand and awareness. Advanced manufacturing and education along with some regulation will drive growth in the US. As an industry, we have an opportunity to grow our business collectively through education. I think what NAFA is doing with CAFS is a big part of this, but there is more to do in this area. An example would be the impact of the energy costs associated with improper filter selection. We talk about this a lot. However, I believe, the awareness among end users could be greatly improved which would be mutually beneficial.

Do you see any specific risks on the horizon; more specifically major game changers? What’s our Uber?

I would be very uncomfortable if I were a small business owner who relied on price, delivery and a good relationship with a purchasing agent as their key differentiators. They run the risk of being Amazoned in the same way we are seeing whole industries come under incredible pressure. Several staple items at Whole Foods were cut by 43% on Aug 28. That’s the definition of disruptive.

Additionally, we are seeing companies start to look to provide total solutions. I would not be surprised to see subscription type pricing in the future where facilities would pay for an outcome, in this case clean air, and no longer worry about installation, disposal and monitoring of their filters.

How will the sudden rise of Internet companies affect the supply and distribution of filtration products?

All filter companies are internet companies. The ones that have a storefront have a role to play. It’s very convenient for the residential and small commercial users who know exactly what they want and just want it to show up. It will be interesting to see how these businesses scale over time. Right now, most seem to have relatively low barriers to entry but we are keeping an eye on this segment as we expect to see innovation coming from this channel.

 

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