Rays of hope plumbing market

By William Atkinson Special to CONTRACTOR WHEN IT COMES to predictions for the plumbing market in 2003, the most popular term seems to be cautiously optimistic. We see 2003 as being a relatively flat year, with new construction being up only slightly, the replacement market virtually static and the commercial market being about the same, said Ted Sikorski, vice president/marketing for Bradford White.

By William Atkinson

Special to CONTRACTOR

WHEN IT COMES to predictions for the plumbing market in 2003, the most popular term seems to be “cautiously optimistic.”

“We see 2003 as being a relatively flat year, with new construction being up only slightly, the replacement market virtually static and the commercial market being about the same,” said Ted Sikorski, vice president/marketing for Bradford White. “On the plus side, while we don’t expect any growth, we also don’t see any steep declines.”

In response, the company plans to introduce new products, he said.

“We feel the traditional products are no longer able to ‘carry the day,’ so we plan to introduce some niche products where profit margins are slightly better,” Sikorski explained.

“Like most manufacturers, we were a bit surprised by 2002, but because we tend to budget conservatively, we expect to have a record year in 2002,” said Ray Kennedy, senior vice president/sales and marketing, for Delta Faucet. “Looking to 2003, we are also taking a somewhat conservative approach,” adding that he sees new construction being down about 6.5% for the year.

“However, we have been focusing on gaining market share and expect to continue this into 2003, especially in residential new construction,” he noted. “We expect repair/remodel to be up about 2.5%.”

Richard O’Reagan, senior vice president/sales and marketing for Chicago Faucet, a Geberit company, said he sees a market similar to 2002.

“We expect about 3% growth in commercial/institutional,” he told CONTRACTOR. “Residential has been experiencing higher growth, but we expect to see that level off a bit, maybe down to about 5%, as continued talk of recession causes people to be a little bit more cautious.”

What will happen in 2003 to plumbing manufacturers will depend on whether they want to be really aggressive in their forecasting and have to cut back, or if they want to be conservative and risk not having enough material, said John Heilstedt, executive vice president/sales and marketing for Elkay Manufacturing.

“For this reason, we are playing it ‘middle of the road’ by projecting 5% to 6% real growth, exclusive of any price increase,” he said.

Linda Mayer, like most others, is cautiously optimistic, but she focuses a bit more on the upside. She pointed to the fact that the projected decrease is coming off historic highs, compared to what took place in the 1980s and early 1990s.

“The research we have seen suggests a decrease in the market in 2003,” said Mayer, senior vice president/marketing and product development for Moen. “However, in the midst of this is still a lot of good news. In other words, there really is still a lot of business out there.”

Another positive sign, she said, is the low interest rates.

“People are also investing more money into their homes as they are removing cash from the stock market,” she noted. “The number of people purchasing homes for the first time is growing, especially for minorities.”

In sum, Mayer said, the industry is in the midst of a very strong market, “and that’s good news.”

Regarding specific segments of the 2003 plumbing market, the industry experts interviewed by CONTRACTOR had the following observations:

l New construction. Large new construction contractors continue to report that they are going as fast as they can, and their customers, who are the large national builders, still have a lot of pre-sale units, reported Dan Murphy, brand manager/ contractor and hospitality for Delta Faucet. In addition, the fact that the Federal Reserve Board is continuing to cut rates is good for interest-sensitive transactions, such as home building.

“Contractors see business as being very robust into at least a good portion of 2003,” Murphy said. “We are very optimistic for the first part of 2003 in the new construction market.”

As for the second half of the year, Murphy said he is hearing some “if-then” scenarios from contractors. For example, if interest rates go back up or if pre-sales dry up, then what?

“For this reason, a lot of contractors are a bit leery of the second half of the year,” he admitted. “A lot of things need to line up for the year to be strong all the way through.”

l Remodeling. The remodeling market could be very good in 2003 in certain regions of the country, Murphy said.

“One reason for increased spending may be lower interest rates where homeowners are willing to take out home-improvement loans,” he said.

The big drivers in this market, Murphy noted, are style and aesthetics. Many contractors are finding that, while they may not have as many kitchen/bath remodel jobs, the ones they do have are larger-ticket than usual. Customers are much more interested in their decor, such as wanting newer faucets, sinks and other items that are very customized and personalized.

“For example, they may want faucets with a certain feel and look, and that also blend in with the sink, countertop and other surrounding decor,” Murphy said.

l Service/repair. From at least one service contractor’s perspective, business in 2003 will be what each contractor wants to make of it. In other words, it is in each professional’s hands.

“This is going to be a great year for any service/repair contractor that has a reputation for taking care of its customers,” said Roger Peugeot, president of Roger the Plumber in Overland Park, Kan. “For our company in specific, we see things just getting better.”

One reason, he said, is that the company has an edge on its competition by having extended its hours from 7 a.m. to 7 p.m. Monday through Saturday, plus 9 a.m. to 6 p.m. Sunday. Since the company advertises these hours, it tends to receive a second wave of calls later in the day when people get home and find leaks or other problems.

“When you have husbands and wives both working during the week, the only time they can get stuff done is evenings and weekends,” he explained. “When we started working Saturdays, we had three guys. We now have so much business that we have six working Saturdays.”

Interestingly, the extended evening and weekend hours haven’t taken anything away from the company’s weekday work.

“We’re still just as busy during the week,” he said. “We have 13 large trucks with 12,000 items, and we will be adding two new trucks this year to take care of the extra business.”

Peugeot has some predictions for what he calls the “8-to-4:30 guys.”

“I don’t think things will change much for them,” he said. “In fact, I think they will begin to lose business.”

The reason: If a customer calls at five and gets an answering machine, he’ll go to the Yellow Pages and see an ad for someone open longer hours.

“That contractor will end up with a new customer,” he said.

Looking at the overall market, Chicago Faucet’s O’Reagan said he expects to see continued consolidation on the distribution side of the industry as well as the manufacturing side.

“We were recently purchased, for example, and we continue to look for opportunities to expand our presence in the U.S.,” he said.

Delta’s Murphy believes that one challenge facing contractors bodes well for the industry as a whole.

“All the segments have been working very hard to try to recruit new employees, and some of them are having difficulty doing so,” Murphy said. “What this tells me is that they are generally optimistic about booking enough new business in 2003 to have enough work for the new people they want to hire.”