DemandBuilder Archives

Market Analysis of Major Building Product Categories

January 31, 2017

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

October 13, 2016

Learn How Principia’s DemandBuilder^SM 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^SM.
DemandBuilder^SM is the core offering within Principia’s BuilderSeries^SM 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^SM.

Greatest Growth Opportunities for Lumberyards in South and West

June 30, 2016

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 20^th 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

March 9, 2016

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

March 1, 2016

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

January 17, 2016

CabinetsBlog 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.

WEATHER RESISTANT BARRIERS FOCUS DEPENDS ON PRODUCT MIX

December 9, 2015

Weather Resistant Barriers Demand by Application, 2015

Roofing Dominates Demand
Demand for weather resistant barriers reached $4 billion in the North American market in 2014, according to Principia. Residential projects accounted for nearly 80% of demand with 85% of residential projects using weather resistant barriers of some type within the building envelope; compared to 70% for commercial buildings.
Nevertheless, for both residential and commercial buildings, roofs account for the bulk of demand due to the frequency of replacing underlayment weather resistant barriers during reroofing. Demand for the wall segment is lower due to the fewer number of residing projects compared to reroofing as well as the frequency of replacement during residing projects.
Interestingly weather resistant barriers for walls command higher prices, in the aggregate, than those used for roofs and 17% of total annual value, whereas roof underlayment accounts for 83% of the industry value.

New Products Making Inroads
More than half of all contractors use housewrap of some kind in their construction projects, regardless of whether residential or commercial construction. A rapidly growing product is pre-wrapped sheathing which combines an OSB sheathing for walls or roofs with a pre-adhered barrier. Over 20% of contractors report having used such a product within the last year. In commercial construction, fluid applied membranes and newer drainable systems are seeing more widespread use along with building papers.

Selection Criteria Differs Between Residential and Commercial
Residential contractors rely on historical product performance and manufacturer reputation to drive their product choice. The story is a bit different when looking at the commercial picture; selection is always driven by product performance and specifications. Fluid applied products, rainscreens and wraps dominate, but more building papers and non-permeable membranes are used in the western region of the United States.

Manufacturers can take heart, because product performance is also the top criteria used to select brands, followed by the manufacturer’s reputation for quality and level of technical service and support, consistent availability and then price. Most contractors are very loyal to specific weather resistant barrier types and brands to the point of working to influence these selections on their construction projects. Most contractors believe they are successful at influencing the products used in a project, so manufacturers can benefit from educating contractors on key benefits of weather resistant barriers and proper installation methods. Dealers should also pay attention, as three-quarters of contractors would switch dealers if their dealer no longer carried their preferred brand.

Despite Milder Winters, Insulation Demand Sizzles In the Sunbelt

November 16, 2015

Codifying Climate

The International Energy Conservation Code (IECC) is commonly used by state and municipal governments in the establishment of minimum design and construction requirements for energy efficiency. The IECC divides the United States into 8 climate zones, which in addition to affecting building codes serve as a useful proxy for studying the impact of weather patterns on demand for building materials.

New Construction Insulation and Reinsulation Demand by State, 2014

A Southern Surprise

An important question facing producers and distributors of insulation is how large of a role these climate zones and their impact on state and municipal regulations plays in driving demand for their products. To help shed light on the issue, we looked at insulation factory gate revenue by state for new construction and reinsulation and found that contrary to conventional wisdom, demand for insulation is most robust in the warmer parts of the country. As shown in the figure the top three states for insulation demand were Texas, Florida and California driven primarily by new construction. New IECC 2015 codes calling for higher insulation R-values and the use of continuous insulation on exterior walls primarily impact Zones, 5, 6 and 7 in the North where new construction has rebounded more slowly. An aggregated comparison across ICEE zones yields a similar result; overall demand is clearly strongest in Zone 2, primarily impacted of Florida and southern Texas, and the slightly mildly Zone 3 is solidly second. There are a few clusters of high demand counties outside of the south, notably in the mountains of Colorado and the northern Great Lakes states, but the overall trend is clear: the hot market for insulation is in the Sunbelt.

As of October 2015, only Maryland, New Jersey and Vermont had adopted the 2015 IECC code and only 13 others had others had adopted the 2012 IECC code. The remainder of the states are still on the 20019 codes or earlier. The implication is clear that in the near term, a significant bump in insulation demand will be delayed due to the slow adoption rate of the new codes and the low build rate for new housing in the colder climate zones. The industry will benefit from more rapid build rates in the South and West, increased awareness by builders and homeowners of the importance of insulation to drive energy savings, and the overall move to more “green” building practices. In addition, when new construction in the colder climates does rebound, all insulation types will benefit, particularly foam and hybrid systems which can meet the new energy code requirements.

Future in Lap Siding Varies By State and Project Type

November 16, 2015

Future in Lap Siding

What Lap Siding Products Should Suppliers, Distributors and Dealers Carry?

DemandBuilder℠, Principia’s online market share analysis tool enables evaluation of demand for building products on a national, regional and local basis. Assessing siding suppliers, distributors and dealers success is largely dependent on where in the country they are located and which products they are emphasizing. A case in point is the graphic above contrasting 2014 channel revenue for vinyl and fiber cement.

Lap Siding Demand Varies by Region

Looking at the left side in the image above, it is clear that vinyl siding demand is heavily concentrated in the Northeast and Midwest specifically for repair and replacement. The right side indicates the opposite for fiber cement which has higher demand tied to new construction and is heavily weighted in Texas. Fiber cement as well as engineered wood are alternative product choices to vinyl and in order to capture share, will need to drive a value proposition for replacement applications in areas that are dominated by vinyl. This means developing a value proposition around competitive on-the-wall costs, highly dimensional appearance and durability.

Conversely, vinyl siding has a large upside potential in further penetration of new construction, particularly for entry-level and move up homes in the growth areas of the South and West. Key features of long term performance, low maintenance and overall lower on-the-wall costs should be emphasized along with attractive appearance especially in combination with other siding options like brick, manufactured stone and polymer shakes and shingles.

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