We've seen it in the vinyl window industry and now it's invading the vinyl siding market, too: consolidation.
Vinyl siding manufacturers and distributors everywhere are being acquired by corporate giants, while consumers are looking toward ``big box'' stores and suppliers for remodeling and construction goods.
In the past several years, the number of major vinyl siding manufacturers has dwindled to about a dozen, and industry insiders expect the trend to continue into the new millennium.
Owens Corning perhaps has shaken the industry more than any other company.
The Toledo, Ohio-based manufacturer has acquired 17 companies in the past six years, including Fibreboard Corp. of Dallas and AmeriMark Building Products Inc. of Raleigh, N.C.
Fibreboard and AmeriMark purchased other vinyl siding manufacturers before the Owens Corning deal and were moving up the ladder themselves. So when Owens Corning acquired those companies, it became a major player in the industry almost overnight.
In only a few years, Owens Corning was transformed from just a marketer of vinyl siding, jumping into the top-five countdown of siding extruders. It now boasts $317 million in annual extrusion sales. But Owens Corning isn't the only acquisition-minded company in the mix.
CertainTeed Corp., Alcoa Building Products and Jannock Ltd. all have bought other companies in recent years. As CertainTeed and Alcoa were running neck-and-neck for the top spot in the market, Jannock Ltd. sold its vinyl group to Hancor Holdings LLC of New York, which is operating the business as Jannock Vinyl Group.
Jannock Ltd. of Toronto bowed out of the vinyl industry early last month and announced June 14 it plans to sell the entire company. Jannock had lost one of its largest siding customers to Owens Corning's shopping spree in 1997.
While some attribute consolidation to a booming economy, others trace it to an entire industry that is coming together to serve the nation as a whole. Everyone from contractors to prefabricated home builders are becoming less localized, as are do-it-yourself home centers.
As home centers grow, they need larger suppliers, said Norm Johnston, chief executive officer and president of Jannock Vinyl Group.
``To service those people, you have to have a nationwide presence,'' he said.
Some say the changing market also is a sign of vinyl's wider consumer acceptance. Vinyl siding is becoming more attractive; it's more durable, easy to maintain, comes in an array of colors and styles and is cheaper than brick or wood, Johnston said.
Those factors, he said, have lured more and more large corporations into the vinyl siding market, knocking smaller players out of the arena.
``The changes reflect an industry that's maturing,'' said Jery Huntley, executive director of the Washington-based Vinyl Siding Institute.
A certification program devised by VSI in the past year is holding vinyl siding manufacturers to higher standards that allow consumers to have more trust in the product, she said.
``Every vinyl siding manufacturer has got an obligation to provide homeowners with good value and a good product. Anything less is a detriment to our industry,'' said Donald Kaufman, president of Alside, based in Cuyahoga Falls, Ohio.
Companies that offer less-than-satisfactory siding, he believes, could be squeezed out of the industry. Kaufman cites other reasons smaller vinyl siding makers are being forced out.
The bigger the company, the better savings it can gain on raw materials when buying in bulk. Large corporations have the ability to pass on greater savings to the consumer. Smaller extruders don't have that luxury.
And, without the capital backing of a large corporation, many smaller players cannot afford to grow, Kaufman said.
Once the small players are gone, they probably will not be replaced. With the cost of starting a new plant at around $15 million, others cannot afford to enter the ring, he added.
While larger companies can save on overhead costs, it's tough to weave newly acquired manufacturers into the existing company fabric, said John Sooker, business director for the vinyl siding division of ABTCO in Huntersville, N.C., a unit of Louisiana-Pacific Co.
``We look at that as an opportunity'' to strengthen ties with current customers and possibly gain new ones as large competitors iron out the kinks in their acquisitions, he said.
Some believe companies such as Owens Corning and Jannock may encounter problems during the next few years because of excessive and haphazard growth.
Owens Corning acquired many distribution centers during its buying streak, expanding its distribution base, but some of those companies were its direct competitors.
As a result, Owens Corning has pitted its distribution centers against each other, said John Manning, senior vice president of sales and marketing in the vinyl siding division of Crane Plastics Co. in Columbus, Ohio.
Lee Meyer, president of Variform Inc. in Kearney, Mo., agrees, adding that Owens Corning now is competing against its own customers, which could cause it to lose business.
When a company is in the midst of an acquisition, customers tend to be wary and may look for an alternative supplier, Manning said.
``You can buy volume, but you've got to make sure that volume isn't ephemeral,'' Kaufman said.
So what will become of the vinyl siding industry?
Many believe there is room for more consolidation. The big companies will continue to grow while the smaller manufacturers fade away, Meyer said.
``Eventually, there will be these big distributors and then these smaller distributors who have a local niche,'' he said.
Those who fall in between ``will be gobbled up by the big distributors,'' Meyer said.
Kaufman agreed: ``I think there's going to be a shakeout.''
Many regional lumber yards that once held large market shares for home-improvement goods have fallen by the wayside to make room for national home centers such as Home Depot and DIY, he said.
Many suppliers, such as Owens Corning, CertainTeed and Variform, sell their wares through those stores at competitive prices. Those companies have found their niche, but so have some much smaller siding manufacturers.
MTP Inc. of Middletown, Ohio, reported only $3.3 million in extrusion sales for 1998. The company, which began dabbling in the vinyl siding market three years, said siding sales are only a small portion of its overall sales.
But James Parks, MTP vice president of sales, isn't worried.
``We try to find the niches they leave alone, and there's really quite a few of them,'' he said. MTP has only one customer for vinyl siding: a larger local distributor.
The larger companies turn to smaller competitors for help with innovative and special projects, Parks said. Those giants that try to do everything themselves leave little room for mistakes, plus they leave themselves vulnerable to minor shifts in the industry, he added.
As long as the economy is good, the larger industry players will continue to profit, Jannock's Johnston said.
Johnston also believes more areas of the United States, such as the Southwest and California, will look to vinyl siding as a nontraditional alternative for home coverings.
But that alone will not catapult the top vinyl siding players into prosperity.
With the price of PVC resin constantly fluctuating, leading suppliers must have the courage to raise the price of vinyl siding to continue to profit, ABTCO's Sooker said.