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Understanding the relative strength of a geographic area for both new construction and remodeling activity provides a perspective for a building materials supplier, distributor or dealer to assess specific opportunities to pursue. The Residential Construction Vibrancy Index was developed by Principia to address this need by normalizing the importance of new construction activity and remodeling in each region according to the number of existing homes in the area. New construction is calibrated by dividing the number of new housing permits in a time period, in this case 2017, by the number of existing homes in that region. This measure provides a perspective of the degree to which the overall housing market is growing in the area as new homes are added. Existing home sales are often a gauge on remodeling activity as the seller may remodel to position the home for sale including increasing the curb appeal with new exterior improvements, painting or upgrading the interior. Alternatively, the buyer may remodel after the purchase either rolling some of the costs into the mortgage or home equity loan or paying cash to bring the home up to date. Dividing the existing home sales into the overall existing home base provides a measure of turnover, or the degree to which home inventory is changing hands in the time period.
New permits and existing home sales divided by existing homes for each Census division are plotted in the graphic below. The size of the circle reflects the number of homes in the division which enables a calibration of the size of the market opportunity for each. The national average of new homes is 1.2% of the existing base, or roughly 1.3 million new permits out of 128 million existing homes. On the other hand, over 4% of existing homes turned over on a national basis. This first observation explains why for many building product categories, the remodeling market is 3-4X the size of the new construction market. In product categories like roofing, the installed base provides a steady and stable revenue stream from roofs that wear out in a normal life cycle of around 20 years.
The graphic is also color coded by region to show distinctions among different parts of the country. By comparing a region’s new vibrancy against its existing or remodeling vibrancy, building materials suppliers can assess which job type, building product category or even customer type to pursue. For example, in the Northeast region (i.e. New England and Middle Atlantic divisions), construction vibrancy is lower than the rest of the country for new and existing jobs. However, the region has a large installed base of existing homes, providing a strong stable market for building materials, particularly in the remodeling segment.
On the other hand, the West South Central division which includes Texas has the highest new construction vibrancy index at nearly 2% of existing homes which indicates that just from new home construction, the market is expanding by 2% year over year. On the other hand, the West South Central division is right on the national average in existing homes. Of course, within a region or division, individual states or cities can be calibrated in the same manner and may show significant differences. For example, Dallas and Austin are well above the new construction vibrancy average while Houston and San Antonio are just around the average overall.
In the Midwest, both divisions (i.e. East North Central and West North Central), are below average in new construction vibrancy, with the much larger East North Central (IL, OH, MI, IN, WI) well below at just about half the national average. However, both regions are above the average for existing home turnover. In fact, the East North Central has one of the largest installed home bases of any division and represents a strong opportunity for remodeling activity.
Principia monitors homebuilding and remodeling/ repair activity through its vibrancy index across the country, and evaluates any geography down to the zip code level to compare one area to another and help evaluate business development tactics. We plan to publish periodic updates and welcome your feedback on this unique view of the market. Click here for more information on Principia’s data analytics and custom consulting focused on the building materials and construction industry.
Far too often we see companies not recognize the power of integrating external and internal data. Powerful insights can be developed by combining market and supply data with your own sales figures – or in combination with sales from your distribution partners – to drive revenue growth.
Recently Principia partnered with a building products manufacturer who wanted to focus its two-step distribution partners in underserved markets. The company had its own view on what it believed market demand to be and one distributor had another. An integrated view of the entire market including demand and supply was needed to make the case with its distribution partner on where the best opportunities existed for sales growth.
Utilizing Principia’s customized data products platform, the manufacturer was able to map current demand for its products within uniquely distributor-defined sales territories. Data visualizations provided demand in units, market value and number of projects, in the distributor’s sales footprint. Dealer coverage was overlaid on top of demand for selected distribution centers, with specific dealers and current suppliers carried also referenced by name. The integrated data highlighted where the current level of sales focus didn’t match up with demand. Sales personnel for both the manufacturer and its distributor were redeployed to aim these resources at specific demand pockets within each territory.
The Power of Integrating Market Demand and Supply Data
The result was nearly $10 million of new sales in the first year of using Principia BuilderSeries® data. The company continues to use this supply-demand data to drive engagement with its distributors and their dealer customers in current and other targeted territories.
Click here to learn more about Principia BuilderSeries®.
Recently big data and the use of data analytics have gained increased attention in decision making importance. An often-quoted reference first attributed to IBM is that 90% of all the data in the world has been generated over the past two years however, this statistic was first presented a few years ago. Since then the amount of data generated continues to explode from business and personal purchase transactions, as well as data mined and gathered from social media, healthcare, basic manufacturing, you name it. Make no mistake, we are living and working in a data-centric world. Yet, sources monitoring big data trends suggest that less than 1% of all data is analyzed and used for operational decision making. CPG companies have long benefited from point of sale data captured from the cash register to understand shifts in sales, along with share and market demand for their brands. Regulated industries like alcohol, pharma and tobacco have tight controls over product to monitor the flow of shipments and sales, again providing more transparency and end-to-end coverage of market demand.
Principia is finding that many building products companies are hiring marketing professionals from the CPG industry to reshape how their products are marketed and sold. These acquired skills involve using data to target business growth, including pull-through strategies beyond point-of-sale distribution all the way down to the property owner. But, has the industry caught up in its availability of good data sources? Unlike the CPG industry, building products companies are not able to easily capture revenue data directly from consumer transactions due to the multi-step distribution process and business to business to consumer nature of the transactions.
A New Approach
One approach is to leverage available sources of information with uniquely developed voice of customer research to model supply and demand at detailed levels for a product category. Principia BuilderSeries® data products provide a comprehensive view of current and forecast demand coupled with a supply-side analysis and is available for 15 building product categories. Data is presented in interactive visual dashboards and tabular formats which can be easily merged with an organization’s internal data to drive sales and marketing strategies. The combination of internal and external data provides a unique ability to aim resources at specific market opportunities.
How It Can Help
A major producer of building products was planning to make a strategic move into the multifamily new construction market. The company used Principia’s customized data products platform to map current and forecast demand for multifamily in each of its unique sales territories. The data analytics provided demand in units, market value and number of projects, along with estimated frequency of use, and projected penetration for the company’s products in each of their territories. A supply-side analysis was also layered into the demand model to determine channel position and identify coverage gaps to target in each sales territory.
The company expanded into the new construction multifamily market with revenues that met or exceeded goals in 90% of its territories, supported by the data insights from Principia BuilderSeries® data products. External data about your market position combined with your own sales data can support and refine business strategy and tactics to drive company growth. Click here to learn more about Principia BuilderSeries®.
Total demand for weather resistant barriers in North America was valued at $4 billion based on manufacturers’ factory gate level in 2017. Residential construction, led by roofing applications, accounted for the majority of market demand. Principia Consulting’s recent report Weather Resistant Barriers – Residential & Commercial 2018 covers products with a primary or secondary function of providing air, water or vapor barrier properties and are applied either to an exterior wall behind exterior cladding or to a roof underneath the exposed roofing during construction. Over the next three years, the forecast for weather resistant barriers demand in North America is estimated to reach $4.4 billion, or nearly a 4% CAGR through 2020.
Capturing Market Share
Suppliers need to consider how to capture more share of this expected market growth. For roof underlayment, demand typically follows the repair and remodel market with over 55% of the roof underlayment replaced on a re-roofing project. However, only 10% of the time is the roof underlayment the same brand or manufacturer as the roofing materials selected. Many suppliers provide complete product lines, from base sheets to cap sheets, shingles, underlayment, accessories and flashing.
Figure 1 provides a look at how often the roof underlayment is the same as the roofing material, shown by respondent type for both residential and commercial projects.
Figure 1: Percent Roof Underlayment Match to Brand of Roof Materials Selected
Architects and builders typically are inclined to pay greater attention to warranty and be encouraged by the manufacturer to use the same brand of roof underlayment as the roofing materials selected. However, when contractors are involved in choosing the roof underlayment they are more likely to select the product they are most familiar with rather than the brand that matches the roof materials used. This preference is found to be similar for both residential and commercial projects.
Commercial builders also are the most likely to match the brand of roof underlayment product with the brand of roof materials. These builders are more brand and product sensitive regardless of whether specified or promoted as best practice.
Suppliers who sell to both residential and commercial markets and offer a full complement of products for roofing would benefit from targeted marketing and incentive programs. Such programs may entice contractors and residential builders to use the same brand of roof underlayment as the roof materials used. The benefits realized for a supplier could range from increased revenue and market share to less price competition and minimized technical risks.
For more insights on the market dynamics and growth for roof underlayment and other weather resistant barriers, contact Principia about its latest report Weather Resistant Barriers – Residential & Commercial 2018.
Learn more about our deeper coverage of weather resistant barriers in residential construction through our Principia BuilderSeries® data products at www.principiaconsulting.com/principia-builder-series.
While wood trim continues to account for 53% of the $1.7 billion exterior trim market in the United States, wood-alternatives like cellular PVC, fiber cement and engineered wood continue to take share. The market remains evenly balanced between new construction and repair/ remodel.
Exterior trim is one of over 12 residential building product categories currently monitored through the Principia BuilderSeries® set of data products. A short list of 5 observations from our recent industry research is shown below:
- Prefinished wood trim products competing on performance, branded for market identity
- Fly ash composites making inroads against traditional incumbent trim products
- Specialty 1-step channel growing as distributors expand further into siding and trim
- Several cellular PVC trim producers now offering complementary cellular PVC siding products
- Expected rationalization based on acquisition of quality suppliers, exit by low margin producers
Exterior Trim Demand Overview – Principia DemandBuilder® Exterior Trim
The image above provides a high level snap shot of Principia’s data product DemandBuilder® Exterior Trim. DemandBuilder® subscribers have the ability to:
- Accurately measure current share and revenue potential
- Identify opportunities to pursue in sales territories
- Set benchmarks for business using comparative market data
To learn more about Principia’s data products or exterior trim market data please contact us today.
The 2017 North American metal roofing market is a $3.3 billion industry at the manufacturer factory gate level according to Principia Consulting’s latest industry report, Metal Roofing 2018. The study includes standing seam, corrugated/ribbed panels, and specialty panels, but excludes cladding and pre-engineered metal buildings.
By all accounts among metal roofing manufacturers, 2017 was a notably strong year for metal roofing and expectations point to another record year in 2018, particularly since some of the growing pains of 2017 have been assimilated and the supply chain is stronger for it. Among the metal roofing contractors surveyed, 75% expect the market to grow over the next three years and suppliers echo similar growth expectations.
Roofing Professionals’ Metal Roofing Growth Expectations, 2017
Top Reasons Cited for Expected Growth, 2017
Growth will be driven by the expansion in both commercial and residential markets as well as by increasing acceptance of metal roofing among property owners as they come to more fully appreciate the robust performance of metal roofing and significant cost savings over the life of a roof. With a CAGR of 7%, metal roofing is expected to reach almost $4 billion in 2020.
Metal Roofing Market: Six Key Growth Drivers
There are several key factors of metal roofing demand that support the strong growth expected in the market including:
- The general economic and construction environment supports continued growth in metal roofing demand to 2020.
- The continued “greening” of North American construction will increase adoption of metal roofing as cool roof energy savings and other environmentally friendly aspects assert stronger appeal to property owners.
- Increasing life-cycle cost awareness bodes well for metal roofing, particularly in the commercial market but also among homeowners.
- Lagging installer base should self-correct as attractive metal margins entice more contractors into the market and manufacturers further invest in contractor training and support.
- Increasing structure in the metal roofing industry will support growth as larger players focus on expanding adoption, installation, and innovation.
- Job-site roll-forming will continue to expedite the supply chain and facilitate metal roofing penetration.
For more details on metal roofing, see Principia’s Metal Roofing 2018 industry Report.
Learn more about Principia BuilderSeries®
Roofing Industry Analyst
In the building products industry, data has become increasingly more important when looking for new business and growing your company’s sales. Accurate and reliable data can help identify market opportunities whether it’s in new construction vs. remodel/ repair, single family vs. multifamily, a region of the country, or with specific customers. Developing a plan from the data can drive sales targeting and resourcing, and enable you to grow your market share faster than your competition.
Principia BuilderSeries® takes a holistic approach to build its 360° view of the market and balance supply with demand, which is validated with robust voice of customer research. Our data products look at the building materials industry at a level of segmentation and detail to identify where specific market opportunities exist for each residential building products within a product category. The foundation of each data product is built from public and private data sources.
Our perspective on industry supply and demand provides a complete picture of each residential building product category to inform your company for better decision-making. The result is the most accurate market intelligence on building products used in residential construction in the United States. Principia BuilderSeries® data products point to where’s the market today, who’s serving it most effectively and what’s the expected growth with a high level of granularity.
Uses and Benefits of Accurate and Reliable Data
Principia has identified a series of uses and benefits of Principia BuilderSeries® to drive market share, expand market coverage and target growth opportunities in the residential building products industry.
DRIVE MARKET SHARE
EXPAND MARKET COVERAGE
TARGET GROWTH OPPORTUNITIES
Change the way your company views the residential construction market with Principia BuilderSeries® data products available for major building product categories.
Metal roofing is projected to grow faster than any other roofing product overall. In fact, it is gaining ground in high-end homes based on its longevity and durability as well as the ability to be designed to look like wood shakes or slate and despite its higher initial cost compared to asphalt shingles.
In commercial markets, metal roofing is used in a wide range of building types (retail, office, industrial) and is often utilized for steep slope accent sections in conjunction with low slope sections. Standing seam roofing is the predominant type but curved panels are becoming more prevalent. Lifecycle costs are particularly appealing to commercial property owners.
Metal roof manufacturers are expanding their lines to keep up with demand and even a few asphalt suppliers have stepped into the metal market. So, what does this optimism for the market mean?
1. Job-site roll-forming is expected to continue as a significant factor in the metal roofing
- Principia estimates that roughly 25% of installed metal roofing is field formed, primarily by the contractor, whether independent or part of the metal roofing suppliers’ organization. The portable forming machines made by manufacturers such as New Tech and Roll Former Corp have improved over the last ten years, and are becoming less expensive so that more contractors have invested in them.
- Field forming is helping stimulate industry growth by minimizing shipping and packaging costs, reducing damage from transit, and allowing for significantly longer panels lengths that are not feasible to ship. In addition, it can shorten the lead-time for a contractor to get panels so they are better able to meet customers’ needs and be more nimble in selling and installation process.
- Some metal roofing manufacturers such as Englert and Drexel Metals have contractor programs where the manufacturer handles the engineering, profile design, testing, code compliance, quality assurance, training, and marketing programs, then sells or leases the portable roll-forming machines to contractors and supplies them with coils.
- As appealing as on-site roll-forming may sound, there are still contractors who prefer to have pre-cut panels conveniently delivered and ready to install. There are also other inhibitors to contractor roll-forming such as the upcoming State of Florida’s requirement that each panel be marked with the manufacturer’s information, making it more difficult for field formers to comply with codes.
2. Suppliers have the capacity and raw materials to keep up with demand, but there isn’t enough installation capacity
- Most roofers prefer installing asphalt shingle roofs; installation is easy to learn, fast to install, and simple to fix if there are issues. Consequently, it’s easy to get a new asphalt crew up and running compared to a metal roofing crew. Metal roofing installation involves more craftsmanship and expertise so there are fewer qualified installers.
- However, misperceptions are rampant among contractors about the complexity and challenges of installing metal roofing. Installation is not as hard as they may think but can become complicated due to conflicting instructions from manufacturers providing system-specific instructions. There is demand for more training focused on the details of installation (where to place screws, how many screws to use) rather than just information about the benefits of the product. Often contractors must learn in the field as they go, which dampens contractor adoption overall, and can have detrimental impact on quality.
3. Metal roofing has caught the interest of the large asphalt manufacturers and commercial building materials manufacturers
- Metal roofing supply has been highly fragmented with many family-owned, multi-generational businesses and few large public companies. As market growth has made the industry more attractive it has also stimulated a movement toward consolidation. Some recent M&A activity includes Carlisle acquiring Drexel with whom they had had a standing seam private labeling arrangement. Also this year, Boral acquired the Headwaters stone-coated metal roofing group. Previously there were several other acquisitions of metal roofing manufacturers by large publicly held corporations such as NCI, BlueScope, and Gibraltar. In 2017, while the market is still regionalized, there is an increasing number of participants with a national foot print.
- In addition to the recent acquisition activity, asphalt shingle manufacturer such as CertainTeed and TAMKO have their own metal roofing lines while some metal building manufacturers such as Butler Manufacturing and Varco Pruden offer stand-alone roofing lines.
Principia’s upcoming Metal Roofing 2018 industry report will provide detail around the metal roofing market including market size and growth forecast, voice of customer feedback, channel dynamics and trends, market share review and overall strategic insights into growth of metal roofing. Contact Us today or download the report brochure to Learn More about the report.