Wood-plastic composite decking appears poised to weather the housing slump better than most building product categories.
But despite the sunny forecast for composite decking - projected growth rates are in the neighborhood of 20 percent - the maturing industry has some issues it must address if it is to realize its full potential.
That, in a nutshell, was the underlying message to industry officials at the Wood-Plastic and Natural Fiber Composites 2006 conference, held Sept. 25-26 in Baltimore, an annual event run by Exton, Pa.-based Principia Partners, a building products industry consulting firm.
Stu Kemper, president of Wilmington, Ohio-based composite deck maker TimberTech Ltd., and the conference's keynote speaker, is understandably bullish on the product category, saying that homeowners with large amounts of disposable income are spending more than ever on outdoor living projects.
The general thinking among industry officials seems to be that the remodeling sector will remain strong, even in the face of the housing slowdown. According to the National Association of Home Builders, total housing starts declined 6 percent in August. New home construction is down 20 percent from the record-breaking period a year ago.
But if the decking forecasts are correct, Kemper has reason to be confident.
According to Kemper, the overall deck market in 2004 was $4.1 billion, with composite decking making up a $790 million portion of that.
Today, composite decking is a $1 billion market, Kemper said.
By 2010, the overall deck market is expected to swell to $6.3 billion, with composite decking representing $2.6 billion of it, he said.
There were copious amounts of anecdotal evidence to back up the numbers. Several building products distributors and installers at the conference said that their sales numbers clearly show composite deck products eroding the market share of pressure-treated lumber.
Key to success
Effective distribution channels are critical to success in today's marketplace, Kemper said. There appears to be a statistical correlation between the availability of composite decking products and market penetration on a region-by-region basis. Meaning, the Midwest, Northeast and Pacific Coast have the highest concentration of distribution centers and inventory in the U.S. Industry officials don't believe it's a coincidence that those same regions are also home to the highest concentrations of installed composite decks.
``You need to have inventory close to your market,'' Kemper said.
Shelf space, at retail outlets, and in the warehouses and showrooms of professional building products dealers, also helps.
And therein lies one of the many challenges facing the composite decking industry.
Darin Hildreth, vice president of marketing for Lumbermens, a subsidiary of Boston-based Pro-Build Holdings Inc. - the nation's largest supplier of building materials to professional contractors - said there are simply too many choices.
Hildreth didn't mince any words while expressing some annoyance with the composite deck manufacturing community.
``What is `best quality'? Everyone claims to have the best quality,'' he told conference attendees. ``By a show of hands, how many of you don't think you have the highest-quality product? Who in here is No. 2?''
No one raised a hand.
``Our customers come in and say they want the absolute best composite decking product we've got. We open a catalog and have to show them everything we carry,'' Hildreth said. ``It makes it very hard to talk to customers.'' Greater emphasis needs to be put on educating those distributing, selling and installing decking, he said.
``Distribution is going to separate those that survive and thrive,'' said analyst John Baugh, managing director of St. Louis-based investment house Stifel Nicolaus & Co. Inc. Consolidation is inevitable, he said.
Better view from above
``It's a fun category to be in. It's a once-in-a-career opportunity to be in a category shift like this,'' Kemper said of the wood-to-composite decking conversion.
Kemper has reason for optimism. TimberTech, among the biggest and most-respected names in composite decking, with the likes of Winchester, Va.-based Trex Co. Inc., isn't going anywhere.
Smaller manufacturers fighting for a piece of the pie will likely suffer a less-pleasant fate.
Just last month, Montezuma, Ga.-based Integrated Composites Technologies Inc. stopped production and fired nearly 80 employees after it ran out of sufficient operating capital. ICT President Bill Thornton is shopping the plant around, along with extrusion lines and injection presses, to a larger deck-board extruder.
This is indicative of what the industry is likely to see as economic Darwinism eventually weeds out the pretenders as well as the victims of bad timing.
The next two years will be when the industry leaders separate themselves from the rest, Baugh said. ``It will be the haves, and the have-nots,'' he said. ``We're going to whittle this field down over the next few years and the strong players will emerge.''
``If composite deck manufacturers can keep this price gap, or even narrow it, penetration will continue to improve,'' he said.