North American Plumbing Industry and the GFC

BRG Consult released a special edition of their monthly bathroom newsletter for the North American bathroom industry titled “Is There a Recovery Out There?” According to BRG all indications speak for a strong recovery in 2010. The following is an excerpt from the report written by Victor Post, the Vice President and Head of the Building Products Group for BRG Consult, with regard to the plumbing industry.

BRG is in regular contact with the Kitchen & Bath industry. We speak with manufacturers, distributors and installers throughout the year. During our interviews, we repeatedly heard stories of gloom. Some commented the market was down by 30%!

But was the gloom real or perceived?

Various companies have reported their 4th quarter earnings and first glance would indicate the market was not so dire.

Home Depot, Lowes and Ace Hardware were down 7.5%, 2.5% and 10% respectively. Ferguson, the nation’s largest distributor of plumbing products reported sales being down by 18.6%. Various leading plumbing manufacturers reported sales down by 15 and 20%.

Yes, the market was down significantly in 2009. In fact, BRG research indicates the total US plumbing market was down in units by 16.5%. Across the various product sectors there was an average of 4.8% price increases affected during 2009. This resulted in a $‐valuation decrease of the market at Manufacturers Selling Price by 12.4%.

Gerber Plumbing and Caroma both showed gains in the market place. Kohler Company is believed to have maintained its overall market presence, while companies such as American Standard and Toto lost share. Delta has regained the number one spot in the faucet market, while Moen slipped to position Number 2.

The biggest winners in the market places were achieved by companies that had gained little attention. In the fixtures market these were companies like Aquadis International, the Foremost Group, Niagara Conservation, the Tynan Plumbing Fixtures Group and WDI International.

On the fittings side, the growth of private label offerings was staggering. Private label products now represent the single largest grouping within the faucet market.

The plumbing market’s perfect storm
The plumbing market experienced the Perfect Storm in 2009. Private expenditures for new residential construction were down 14.3%. Repair/Remodeling was down 8% and commercial construction was down 20%. But to compound matters even worse, plumbing wholesalers, home centers, hardware stores and kitchen/bath showrooms paired back their inventories. According to our market analysis distribution reduced their inventories significantly – in some cases inventory purchases were 25% below 2008 levels.

As has been illustrated, manufacturers have started to rebuild. Production increases started around March 2009 and have showed month over month consecutive gains. Since approximately June, distribution started rebuilding their depleted inventories. Consumer confidence has been on the rise for several months. It suffered a bit of a setback in February, but we believe this may have been weather related.

BRG is predicting a first quarter boom in new house purchases, especially by first home buyers. We believe the ending of the new home buyers tax incentive will fuel this boom.

For the full report or to look at other research in the bathroom industry go to: www.brgconsult.com/about_newsletter_index.asp

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