Volume 46, Issue 9 - November/December 2007
The Most Valuable Players
Distributors are Needed in the Wood-Plastic Supply Chain
by Drew Vass, assistant editor of Shelter magazine
Wood has long been the material of choice for the decking industry. It wasn’t until this decade that composite materials began to appear regularly in place of traditional treated lumber. Low-maintenance requirements were the original mantra and remain a key concept to this day, but the composites industry is young and its manufacturers are realizing it will take more to secure a greater market share and ensure a lasting presence.
Members of the industry gathered in Baltimore to discuss its present and future October 8-9. Organized by Principia Partners, a strategy consulting firm in Exton, Pa., Wood-Plastic and Natural Fiber Composites 2007 offered the industry an opportunity to collaborate. The two-day event was packed with 30-minute sessions led by industry experts and executives. Key topics included: the state of the industry; educating for long-term success; the green movement; and a recent mass-customization trend the industry is witnessing. Dealers and distributors were at the forefront of many discussions as the industry faces new distribution challenges and an ongoing need for consumer education.
Still Going but Still Growing
In 2006, pressure-treated softwood lumber comprised 75 percent of the U.S. decking and railing market volume, while composites held down just 12 percent. Composites prove to be a distributor-friendly market, however, as 69 percent was channeled through a two-step distribution process. Of the remaining 31 percent, 24 percent of it went through home centers, five percent went dealer direct and two percent was channeled through a one-step process. With such a modest market share, the majority of manufacturers agree, this industry is still in a growth stage. They also agree that, if the industry is to continue to grow, distributors and dealers must play a key role.
Paul Bizzarri, vice president of innovation for Wilmington, Ohio-based TimberTech, asked attendees to stand during his session on Wood-Plastics and Composites (WPC) Technology and Innovation: Opportunities for Continued Growth. He then asked anyone with two years or less in the industry to be seated; then five years or less; and finally ten. Approximately six to eight were left standing in the ten years-plus category. Bizzarri’s point was that the industry may be out of an infant stage, but it is still quite young and in a critical growth period.
Starting All Over Again
“It takes seven to ten years for any product to be accepted in the marketplace,” explained Jim Daniels, president of Parkside Plunkett-Webster in Baltimore. His company markets and distributes specialty building products including Trex composite decking.
“I think it’s imperative that we get in the mindset of our dealers,” he advised. “It’s okay to be told by the dealer, ‘No, this doesn’t work.’ It’s better than getting it out there only to watch it fail.”
Martin Grohman, co-founder and president of Correct Building Products LLC in Biddeford, Maine, says the genesis of any high-tech market inevitably involves a “trough of disillusionment,” following an “initial peak of inflated expectations.” Initial excitement about a product fuels high consumer expectations, but the buzz eventually gives way. If the industry is to propel itself beyond this, consumer expectations need to be aligned with product performance. While the decking industry already has experienced this, other segments of the industry are just beginning.
James Lucci, a contributing editor for World Fence News, reminded attendees that the composites industry is an alternative. And, according to Lucci, it’s important that an alternative industry acknowledge resistance and risk.
“If you arm your distributors with the right information to pass on, I think you can cut down the length of an introductory period significantly,” Lucci explained. The industry is no stranger to skepticism.
“If we offered a dimensional product to replace traditional treated framing lumber, would you buy it?” one manufacturer representative asked a pro-dealer panel organized for the event. The panel was slow to volunteer its answer, but eventually settled on a collective “maybe.”
Continued innovation and product performance; cost improvement and competitiveness; and fulfilling consumers’ visions will all drive the industry’s future growth, according to Douglas Mancosh, president and chief executive officer (CEO) of BB&S Treated Lumber of New England and Fiber Composites LLC in New London, N.C.
Consumers still envision having wood. Initially, composite products made little or no attempt at duplicating the look of real wood, but manufacturers have now begun to incorporate woodgrain patterns and textures. According to Mancosh, composites are chosen to resemble wood, perform better than wood and require less effort on the part of consumers. In order to grab additional market share, the industry will have to strive to accomplish wood-like aesthetics, while continuing its low-maintenance mantra. Mancosh says this will be achieved through advance surfacing, increased composition options and new production techniques.
Have it Your Way
Manufacturers have tuned in to a recent mass-customization trend. Consumers have begun to demand greater options as they design more and more elaborate and fully-customized outdoor spaces.
John Barrett is president and owner of Archadeck in Laytonsville, Md. His company services the Maryland and greater Washington, D.C., area, where it has worked with more than 65,000 customers and constructed approximately $500 million in projects. Barrett says his latest customers are seeking to add seamless outdoor extensions of their indoor living spaces.
He also says his customers desire a high-quality look and design that resembles their homes’ architecture—complete with floor patterns, inlay patterns, accent colors and curved, multi-level designs. Often, achieving the desired mix of styles and colors leads consumers to utilize products from multiple manufacturers.
As WPC offerings expand, sales and distribution grow more complicated. “Outdoor living isn’t sold the same as decking,” Martin Grohman, the president of Correct Building Products LLC, announced in his session on Mass Customization and the Backyard. He was reminding attendees that composite products are no longer just a decking option, but now include everything from railings to fencing and even furniture.“It’s every room of the house duplicated outside,” he explained.
As consumers look for more, manufacturers are taking steps to ensure they provide every possible design option “in-house.” But consumers are often combining components from several manufacturers, for greater design flexibility and options. This mix-match trend represents a window of opportunity for dealers and distributors.
Get On Board
“I think it’s a good thing,” Grohman said, addressing wholesalers. “You can be a part of the whole process—invent your own brands,” he suggested. “We [manufacturers] don’t have the resources to deliver a mass-customized product. You do.”
Manufacturers readily admit that mass-customization will complicate dealers’ and distributors’ lives.
“How am I going to go about selling all of this stuff and where the hell am I going to put it all?” said Chris Terrels, vice president of Railing Dynamics Inc., while speculating about dealers’ reactions. But Terrels suggests the complication is inevitable. “You can’t carry just one or two types of railing. Consumers are demanding greater choices in the maintenance-free category,” he explained.
Many manufacturers will try to expand their offerings to encompass every possible option, keeping consumers within their product lines. Denby Snell, general manager for Elk Composite Building Products Inc. in Lenexa, Kan., says his company will often provide an incentive for dealers and distributors to encourage stocking more of its items and fewer of the competition’s. He says, often, one item is tossed in essentially at-cost, to encourage dealers to group product needs into one order, rather than mixing and matching from various manufacturers.
When complete projects are customized and purchased from one manufacturer, the temptation may exist for some manufacturers to deliver directly to the jobsite. Snell suggests one measure distributors can take to reduce that temptation is stocking larger quantities of various components, rather than piece-milling orders. Stocking more and taking an active role in custom order assembly may help distributors increase their value within the supply chain.
Many builders and homeowners are using design software that allows them to preview an outdoor space, prior to ordering. Manufacturers have the option of providing their own programs stocked with their components, but dealers can take this concept a step further, by allowing customers to combine elements from various manufacturers.
To Be Green or Not to Be Green
Although the composites industry was part of the early green movement (perhaps by default due to the industry’s use of recycled materials), the advent of certifications and the movements growing complexity make it difficult for some manufacturers to stay on board. “Green” development can be a risky proposition for the company’s involved. For this reason, low-maintenance qualities may continue to be the industry’s strong-hold.
Dick Gauthier, vice president of Universal Forest Products Inc. in Grand Rapids, Mich., says being green is less of an option from a manufacturer’s perspective, and more of a modern standard.
“Green is no longer a competitive advantage,” Gauthier said. “It’s just the fee you pay to get in the door.”
He agrees with Deffenbaugh—the purse will win over conscience every time.
“I keep hearing, ‘Consumers are demanding green.’ I don’t think they are demanding it,” Gauthier said. “Until the price is the same, I don’t think it’s a demand, but a preference.”
Gauthier suggests the WPC industry has many green attributes by default—low emissions, use of recycled materials and long product life span. But he also says many of them are a matter of business.
“We’re not doing it because we’re these great, great guys. We’re doing it because it makes good business sense,” he explained.
As the industry gears up for future growth, WPC manufacturers continue to spotlight dealer and distributor involvement. The necessity of education throughout the supply chain—from the manufacturer all the way to the homeowner—resounded throughout the event.
The industry knows—winning is a team sport. And distributors and dealers may prove to be its MVPs.
© Copyright 2007 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.