Jeff Patchell discusses the constant change of Australian business ownership and market adjustment across the industry.

I’ve been a keen observer of the plumbing sector for close on 30 years and many readers have a longer attachment than that.

In saying that, unless you’ve been asleep for the last decade or two, I’m sure there’s one common thing we have all observed and that is the never ending change of ownership and control of the brands this industry installs and services.

Many of the iconic brands Australia was built on have either disappeared or been absorbed under broader corporate marketing umbrellas.
And if the past few months are any guide, we appear to be in the middle of a further wave of market adjustment across the industry.

While plumbing product production is an attractive business to many industrial companies, it’s more evident today that you either need ‘global market scale’ or a local niche advantage in order to survive.

In some instances, new technologies and materials have taken market share and the enormous impact of China as the world’s production factory over the past decade has been overly disruptive and will continue to be.

As in many industries, certain categories have become commoditised, thanks in part to the impact of alternate sales channels such as the large format hardware chains and direct supply lines from China and other Asian low-cost producers.

Manufacturing in Australia today is tougher than ever but many businesses are still shackled by age-old employment practices, work agreements and under capitalisation.

New ownership can be a good thing and wake-up belligerent employees and unions to the fact that only way of keeping their employer in business is to improve productivity and business viability.

Naturally everyone wants to sell more and more product (or improve margins by removing the middleman) or directly import it, as can be seen with the majority of plumbing merchants today. But there are traps and product recalls over the years are testament to some bitter lessons.

In theory, the industry should be better protected today than ever by product quality (certification) schemes but aspects of such systems are occasionally bypassed by unscrupulous suppliers.

The growing online market further assists this compliance avoidance.

Which brings us to today.

As the sun settled on 2014, there were a number of significant corporate announcements in relation to a group of this industry’s respected brands.

The saddest by far was the closure of the Crane Copper Tube factory, which had been in existence for 148 years.

Millions of homes are plumbed with Crane tube and the company will be well remembered for serving this industry (and country at time of war).

Unfortunately for copper, you the plumber, started converting to plastic hot and cold piping systems in a big way over the past couple of decades, which meant an overcapacity of production and that coupled with imports killed the company. Over 100 people, many with unique skills and long-serving careers lost their jobs. Our hearts go out to those people.

We have a more detailed story in this feature on the Crane Copper closure.

The GWA Group is Australia and New Zealand’s largest supplier of bathroom/kitchen fixtures and fittings. It was announced in October that the company would concentrate its efforts on the primary strength of the company, that being bathroom (toilets/taps/baths/basins) and kitchen fittings (taps, sinks). At the same time, the company announced it would take the production of its remaining locally produced product off-shore.

That has seen GWA divest itself of the Dux Hot Water business and the Brivis Climate Systems business units.

Not surprisingly, an Australian company lined up for the Dux business but no, our Australian regulators saw fit to stop this as it might have ‘weakened competition in the storage water heater market’!

No wonder the ACCC (Australian Competition and Consumer Commission) is so unpopular with Australian business.

Putting theory to the side, the fact is, in this day and age of global/local market competition, the likes of the plumbing merchants wield an enormous influence on what brands go in a plumbers’ shopping basket.

Unfortunately with the ACCC, there’s simply no relevance placed on Australian-based jobs/ownership anymore – it’s all about will it cost the end consumer an extra dollar or two and can everyone make a bit more margin. Canberra-based text book rationalism gone mad…have they ever thought there might be less consumers, due to more being out of work and without any spending power?

Fortunately though, Dux isn’t being abandoned and has been taken over by Noritz, a Japanese company of repute, who are keen to see the brand prosper. You will find a profile of the company at the end of this article.

Noritz’s purchase of Dux virtually gives Japanese companies the full hand of the market for storage and instantaneous heaters. Rheem’s parent is Japanese-based Paloma, Dux is now under the Noritz flag and Rinnai Corporation makes up the main balance of share.

At the time of publishing, Rinnai had entered into an agreement to buy the Brivis business from GWA.

In some ways, GWA has taken the route of the vehicle industry. They will continue to run their product development out of Sydney at a new Innovation and Technology Centre and source the manufacturing from overseas.

The Norwood (South Australia) plastics operation will phase out over the next couple of years, while the Wetherill Park (NSW) vitreous china manufacturing facility ceased production at the end of last year. All in all that will mean the termination of 164 employees, which represents around 10% of GWA’s total workforce of 1671 people across Australia.

In 2015, we’re destined to see more amalgamations as suppliers look to improve their business scale and no doubt some won’t see 2016 under their current ownership and structure. It’s an ever changing world out there in plumbing land!