Here is a snapshot of 2018’s building materials demand and supply. Information included in the graphic below is pulled directly from Principia’s DemandBuilder®, SupplyBuilder®, and GrowthBuilder®.
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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®.
Market Dynamics in Exterior Trim
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.
Hurricane Harvey’s Potential Impact on Building Materials Demand
Hurricane Harvey has set records for total rainfall and overall damage of residential housing and commercial buildings. Unfortunately, the total economic impact has yet to be realized but the total damage of Hurricane Harvey is estimated to fall between $70 and $108 billion. Rebuilding will take years, similar to other devastating storms such as Katrina, Sandy and Andrew.
So, what does this mean for the building materials industry? How can suppliers, distributors and dealers support the effort over the longer term? One step is to understand the scale of rebuilding required and have sufficient supply of building materials stocked and accessible to the Houston and Beaumont areas. Principia Consulting has compiled an analysis of the level of building materials inventory that may be needed in each product category for residential home rebuilding.
Overall, there are 1.8 million housing units (single and multifamily) in the Houston and Beaumont Core Based Statistical Areas (CBSA) with an estimated total replacement value of $474 billion. Of course, not every housing unit will require replacement but the total existing housing stock gives pause to consider the overall potential level of building required. The detailed map for these two CBSAs in Figure 1 depicts the relative total replacement value of housing at the county level.
Figure 1: Houston & Beaumont CBSAs – Total Housing Replacement Value (in $MM) by County
Source: DemandBuilder® from Principia
These replacement value housing figures can be translated into demand for specific building product categories with Principia’s DemandBuilder® data products. DemandBuilder® Roofing reveals an estimated 54.5 MMSQ of existing roofing in the Houston-Beaumont areas with a replacement value of $3.7 billion in materials alone. The bulk of this volume is in the Harris County area with 35.4 MMSQ valued at $2.4 billion. Although these figures represent 100% replacement, a more complete assessment of the impact on material demand will only be finalized after the complete damage of the storm has been determined. For example, if a quarter of the roofs in Harris county need to be replaced, this would represent 8.9 million squares or $600 million of roofing that would be needed.
Further, as flood damage reports become available, Principia will pinpoint specific estimates of roofing demand at a zip code level to focus on the hardest hit areas. A detailed map of replacement roofing potential by zip code is shown in Figure 2 as an example.
Figure 2: Houston & Beaumont – Roofing Replacement Demand (in $MM) by Zip Code
Source: DemandBuilder® from Principia
Principia is in the process of developing detailed assessments for additional categories including lumber, siding, insulation, flooring, windows, doors and weather resistant barriers for the Houston and Beaumont CBSAs and other regions in Texas and Louisiana affected by the storm.
Contact Principia for further detail on projections for building materials demand within the storm’s affected areas.
Market Analysis of Major Building Product Categories
Learn How Principia’s DemandBuilder® Can Help You Grow Your Business
Critical to growing your company includes:
- Better understanding your served market
- Increasing sales
- Challenging status quo
- Measuring performance
- Driving accountability
- Revealing prospects
Above are just a few of the many benefits of Principia’s market share analysis data tool DemandBuilder®.
DemandBuilder® is the core offering within Principia’s BuilderSeries® data service and provides a unique market analysis of major building product categories. Manufacturers, distributors and dealers can size and segment product demand in your company-specific regions or territories and determine current share and sales potential.
Click on the link below to submit your request for a demo and to learn more about DemandBuilder®.
Principia Consulting Launches Video Highlighting DemandBuilder® Capabilities & Benefits
Learn How Principia’s DemandBuilder® Can Help You Grow Your Business
Critical to growing your company includes:
- Better understanding your served market
- Increasing sales
- Challenging status quo
- Measuring performance
- Driving accountability
- Revealing prospects
Above are just a few of the many benefits of Principia’s market share analysis data tool DemandBuilder®.
DemandBuilder® is the core offering within Principia’s BuilderSeries® data service and provides a unique market analysis of major building product categories. Manufacturers, distributors and dealers can size and segment product demand in your company-specific regions or territories and determine current share and sales potential.
Click on the link below to submit your request for a demo and to learn more about DemandBuilder®.
Greatest Growth Opportunities for Lumberyards in South and West
The historical geographic concentration of housing in the United States clashes with current and projected lumberyard revenue. A geographic disconnect between lumber demand and concentrations of lumberyards suggests better growth opportunities for current and prospective channel participants in the South and West.
Interactive Visualization
To further examine the ranking results click on the 3 figures, move the rank filter and hover over a specific location.
Figure 1 in the interactive visualization above shows county level rankings of lumberyard location count. The top ranked counties in terms of lumberyard locations tend to be clustered along the North Atlantic coast and Great Lakes where new construction and lumber demand was most heavily concentrated throughout the second half of the 20th century. Overall, 33 of the 100 counties most densely populated with lumberyards are in the Northeast census region and 22 are in the Midwest.
By contrast, as shown in Figure 2, counties ranking highest in 2015 lumberyard revenues tend to be further south and west, particularly in Florida, Texas and Southern California. This is driven by the trend from the 1990s to the present of increased migration to the sunbelt states. For lumberyard revenues, 35 of the top 100 counties ranked by channel revenue are in the South Atlantic division, 16 are in the West South Central division and 14 are in the Pacific division.
Florida and Texas Ripe for Expansion
The implications of this disconnect are shown in Figure 3 which calibrates each county’s lumberyard revenue per location by county. The figure shows that county rankings follow and magnify the general pattern of the revenue rankings. The states of Florida and Texas look particularly strong with 5 of the top 10 counties in Florida and 3 of the top 10 counties in Texas. This analysis suggests Florida and Texas along with the South Atlantic, West South Central, and Pacific divisions more generally, provide a more relatively hospitable competitive environment for existing lumberyards and those looking to expand into these markets. With fewer dealer outlets serving a given level of demand, channel participants should be able to enjoy opportunities to scale revenue and a higher degree of pricing power. These forces should allow them to achieve greater margins and encourage other companies to enter these regions seeking to capture their fair share of market growth.
The rankings presented above were calculated using Principia’s DemandBuilder® and SupplyBuilder® databases. Learn more about the BuilderSeries® services Here.
Single Family Housing Continues Decline in New England Region
Changing Market Mix
According to the Census Bureau, single family housing permits in New England fell 11% from 18,749 in 2013 to 16,708 in 2014, and Principia’s year end projections estimate an additional drop of 22% to 12,980 in 2015. In contrast, multifamily housing permits rose slightly to 12,193 in 2014, and are projected to have further increased by 35% in 2015 to 16,425 units based on strong numbers through Q3, particularly in Massachusetts. This surge in multifamily permits leads to a modest 2% growth up to 29,405 total permitted units for the region in 2015.
Permitted Units by State and Unit Type, 2013-2015
Expected Effects
Industry participants serving this area can benefit if they focus on the decline in single family rather than the moderate increase in total units. Single family homes tend to be larger in size and thus more building product intensive than multifamily units. The two unit types essentially flipped in relative importance in 2015, with single family falling from 58% to 44% of all permitted units. This is expected to decrease total demand for most building product categories despite the gain in total units. This effect is likely to be most impactful for products more heavily dependent upon new construction, such as lumber and drywall; it can also be expected to disproportionately affect those that see higher relative usage in single family houses, such as windows and doors.
Carpet Remains King of $23 Billion Residential Flooring Market
Flooring Replacement Still Dominated in 2015; New Construction Share is Rebounding
In 2015, flooring demand reached $23 billion at the dealer level according to DemandBuilder℠, Principia’s online market share analysis tool. Remodeling and replacement continues to dominate and accounted for 83% of the total but new construction is coming back strong which bodes well for all suppliers and distributors.
Carpet, Hardwoods and Laminates Accounted for 70% of Overall Residential Flooring Demand in 2015
New Construction Mix Has Changed in Recent Years
In new construction, the mix of flooring products is different than replacement. Specifically, carpet has just over one-quarter of total revenues, whereas hardwood & laminate and tile & stone account for 41% and 22% of the total respectively. This mix shift has occurred for several reasons:
- In new construction, when the entire floor plan is covered,there is a broader range of products used, most typically carpet for bedrooms, tile or vinyl for bathrooms, hardwood & laminate or tile & stone for entry and living areas and a variety of products for kitchens.
- The trend for common areas of living rooms, dining rooms and kitchens has been to go bigger often eliminating the dining room entirely and combining the kitchen and family room/living room into an open floorplan. These areas have increasingly used either vinyl or hardwood & laminate as these products are easier to clean, lower maintenance than carpet.
- Vinyl has made a strong resurgence as digital printing has enabled development of realistic wood- and stone-like luxury vinyl tile products that are mar resistant, stain resistant and resilient as well as affording excellent appearance.
In remodeling, carpet still has a dominant share as it is still the floor covering that is most likely to be replaced by current owners to upgrade, refresh the look of a room, improve styling or when readying the home for resale. It is a relatively low cost way to upgrade living quarters and the variety of colors, stain resistance and more recently the continued penetration of softer polyester fibers has renewed interest in this product segment. Hardwood & laminate penetration into carpet replacement application continues but the response by the carpet industry has been strong and carpet will maintain a strong position based on its warmth and feel.
KITCHENS DRIVING CABINET DEMAND BASED ON LIFESTYLE TRENDS AND RESALE VALUE
Cabinet Demand Reached $14 Billion in 2015
Cabinet Channel Revenues Balanced Between Remodeling and New Construction
Cabinet demand in the United States reached $14 billion in 2015. During the economic downturn, remodeling dominated cabinet demand and enabled many dealers to maintain a reasonable and stable revenue base. In 2015 however, new construction was on a continued upswing and accounted for just under 50% of cabinet demand with remodeling holding just a slight edge.
Kitchens Still Dominant
Kitchens accounted for over 75% of cabinet demand in 2015 exceeding $10 billion in dealer sales. In new construction, kitchens have become the primary living space as the area has become larger and incorporates entertainment and dining areas and generally is the center of homeowner activity beyond just meal time. In addition to the larger space, today’s kitchens have a higher percentage of center islands, also contributing to increased demand for storage.
In remodeling, according to the real estate website, Trulia, “The rooms that buyers most closely inspect (and judge) in a house are the kitchen and master bath. These are the interior spaces where the most value can be added during a sale, so they need to look their best.” http://www.trulia.com/blog/2-most-important-rooms-in-a-house/
Consequently, cabinet demand has been growing based on increases in new construction overall, larger kitchen areas and the added pickup from remodeling in resale homes. Homeowners in regions with older homes are taking note of this trend and are expanding existing kitchen area to keep pace with lifestyle trends.
Bathrooms contributed an additional $3 billion in revenue and should not be overlooked for upselling opportunities. There are nearly as many bathroom projects as kitchens but they tend to be smaller in scale with roughly $800 per project spent on bathroom cabinets versus just over $1600 per project for kitchen cabinets.