Thank Kohler for putting style back in the plumbing business back in 1965 when its "Bold Look of Color" slogan was born. Credit Home Depot for offering consumers plumbing products that were once available only through contractors and recognize the Internet's influence delivering trendy showroom catalogs into your home. The American bathroom and kitchen has become one more shopping opportunity.

U.S. consumers are more educated. They want attractive faucets at every price range. Today's 40 faucet finishes and endless design choices from more than 20 major foreign and American manufacturers (and scores of niche players) are merely a good start. This investment must also carry long-term value.

"There is a very rich remodel market, but it is marked by price compression. Consumers are demanding higher design at lower prices," says Kohler's Joel Culp, director of wholesale channel marketing, North America faucets.

Consumers know they have a choice, but often have no idea how to decide. If your kitchen and bath professional can't tell them how to choose, they will decide by the one thing they know: price.

"The importance of the showroom professionals cannot be overstated. They help create demand. They also control the decision-making process; especially the last three feet of it," says Charlie McTargett, senior director of brand marketing for Delta Faucet Co.

"Co-opetition"

In a crowded marketplace, not standing out is the same as being invisible.

"There is so much pressure to come up with new styles, new finishes. We don't mind sitting back a little to see what is going on before launching," says Jeff Pratt, vice president sales for Globe Union America Corp./Danze Products.

If you're remarkable, then it's likely that some people won't like you. Home improvement centers stand out. So do many of the manufacturers that support them. For two of the largest manufacturers, sales to home centers represents up to 25% of their total sales. And many traditional wholesale distributors resent that.

But the faucet manufacturers and home centers are actually providing an invaluable service to the wholesaler, making the faucet market bigger (rather than fighting with each other over a fixed market). The vendors work to cooperate when it comes to creating the faucet market and then fiercely compete when it comes to dividing it up. They compete and cooperate at the same time -- thus the expression: Co-opetition.

"There is still tremendous opportunity for wholesalers to court customers of the high-end decorative fixture and fitting market," says Gene Carpenter, product manager/residential, Geberit Manufacturing.

"Distributors shouldn't be afraid or concede anything to the home improvement centers," he adds. "They provide added value with their expertise that home centers can't compete with. And the home centers aren't giving anyone a break on price either."

Geberit speaks with authority -- having posted double-digit growth every year as its residential product line has grown.

Moen and Delta continue to wrestle for the No. 1 spot. They make each other better in the process and their customer is the only clear winner. And don't forget about the privately held, somewhere-around $3 billion Kohler. When they speak, we all listen and learn.

Faucet Market -- Overview

The market for plumbing fittings and brass goods consists primarily of faucets and valves for bathroom and kitchen plumbing fixtures. This market is heavily dependent upon the health of the market for plumbing fixtures. Over the past two decades, for the most part, both markets have performed exceptionally well. In fact, according to Business Trend Analysts, this market experienced only two years in which U.S. manufacturers' sales decreased, 1982 and 1991.

In both those years, hard economic times negatively affected nearly all U.S.

industries. Business Trend Analysts estimates that from 1990 to 2000, the market grew at an average annual rate of 4.7%. The primary reason for the growth has been the potency in the new construction and remodeling and replacement markets. The increased prevalence of do-it-yourselfers, coupled with more homeowners expanding their bathrooms with luxury plumbing fixtures, has resulted in high demand for plumbing fittings and brass goods. In addition, more selection and higher quality finishes from manufacturers over the past few years have also boosted sales.

U.S. outlays for residential improvements, maintenance and repairs were expected to grow 1.4% to $157.2 billion in 2002, according to Business Trend Analysts. Following a 4.3% decline in 2001, outlays for plumbing improvements and repairs were expected to increase slightly by 0.6% in 2002 to just below $10 billion. And following a 2.5% increase in 2001, U.S. manufacturers' sales of plumbing fittings and brass apparently grew by about 0.7%, to $4.2 billion, in 2002.

Abandon Yesterday

The Bath and Kitchen segment for American Standard, previously known as Plumbing Products, was renamed in 2002 to reflect the new strategic approach of

focusing on total customer needs rather than on specific product sales. And thus the "total bathroom" concept was born.

"Consumers want to purchase a complete bathroom, with matching faucets, fixtures and accessories," says Rob Kass, vice president/marketing for Americas Bath & Kitchen, American Standard. "We are focused on bathroom suites. A suite has a shared design and matches all the elements for the bathroom, from the shower stall to the sink to the faucet.

"The showroom personnel have been very amenable to the total bathroom concept," Kass continues. "The process of displaying the integrated pieces affords a better store design and makes closing the sale easier."

Changes in the faucet market are sure to come from Globe Union's recent acquisition of a major share of Gerber Plumbing Fixtures Corp. The newly formed Gerber Plumbing Fixtures LLC, a subsidiary of Globe Union, is expected to serve as a platform for increased product offerings and may lead to further acquisitions.

Delta and Moen both use customer research as the biggest catalyst forcing change. Focus groups. Surveys. Brand metaphor exercises. Motivation studies. Segmentation studies. Anthropological research.

"Showroom professionals don't want to make a blind investment," says Delta's McTargett. "We understand that. So we help to create the demand. We quantify the potential results, factoring in the typically superior showroom (vs. wholesale) margins. The burden is on us to demonstrate real measurable value from consumer preferred products."

Jeff Kessler, Moen's strategic account manager, adds: "We studied consumer showering habits for five years before inventing the one-of-a-kind Revolution Massaging Showerhead."

The old rule was this: Create safe, average products and combine them with great marketing. The new rule is: Create remarkable products that the right people will seek out.

New Products

The test of an innovation is that it creates value. Moen is especially notable in embracing Internet technologies, according to Forrester Research. Moen's 50 engineers introduce from five to 15 faucet lines per year by collaborating on designs with suppliers over the Web, BusinessWeek reports. A new Moen faucet goes from drawing board to store shelf in 16 months on average, down from 24 months.

Delta launched three times more products than in the previous three years combined by slashing its design development process from two years and 18 steps to 12 months and seven steps.

Matco-Norca is an example of a niche player in the category that has recently introduced another faucet line, combining the best of European and American styles, under the name: Affordable Elegance.

Target The Right Customers

Joe Hudock, senior manager of trade channel marketing for Delta Faucet, says: "We worked with builders to understand consumer concerns -- they don't get wet enough in the shower, the shower gets cold and they have no time to take a bath -- to develop the Jetted Shower System. And the response from the builder and consumer community has been fabulous."

Wholesale showrooms and manufac-turers that successfully integrate their offerings into "one face" to the customer will be able to build two- way relationships with customers that create strong switching costs, thereby establishing a sustainable competitive advantage.

"The wholesaler must be on board with everything we offer the customer," notes Kohler's Culp. "From pricing to builder programs. It's a partnership. We sit down and develop annual plans. We meet quarterly and review our progress, making changes to the plan if necessary. We discuss what we want, and more importantly, how we are going to get there. Together we understand the market better -- especially the secondary market of builders, remodelers, architects and engineers."

Danze segments its customers into wholesale and retail. Wholesale consists of kitchen and bath showrooms and plumbing contractors. In retail, its niche is the small to medium retailer -- the Ace Hardware, Do It Best's of the world -- offering them higher end products at price points they haven't seen before.

"At Danze we are meticulous in how we fill sales positions to properly connect with the customer," says Pratt. "The sales professional must be able to hit the ground running. We closely align our sales personnel to complement our showrooms and distributor sales forces."

Delta targets four consumer segments -- Bare Necessities, Family First, Home Enhancers and Status Seekers -- and provides targeted sales leads to distributors based on these consumer segments.

The Builder

American Standard used to spend 5% of its time with homebuilders. Now it is up to about 35% and it's likely to become 50%.

"We've developed our line of shower valves and trim to offer builders unprecedented flexibility," notes Kass. "They purchase and install the

rough plumbing. Then they return, sometimes with the homeowner, to view and purchase from a variety of trim packages. Wholesalers benefit from the reduced inventory requirements."

The goal is to give the builders and their customers what they want while keeping the supply chain simple, cost-effective, and profitable for everyone. To accomplish this you must limit your choices. Distributor and vendor must work as a team.

Delta's McTargett says, "Today the builder is much more influential with the consumer. This is not always fair to the wholesaler. They still have to inventory it. The business is there, however, for the wholesaler who plays more of an active role. You almost want to act like a consultant to the builder. We also talk directly to the builder, but we don't sell to them directly."

"Retail (home centers) has figured out there is money in special orders," notes Kohler's Culp. "Distributors have to work hard to upgrade that builder early on. We're seeing the majority of homeowners who didn't originally get the faucet they wanted in their home, upgrade them at their local home center."

Gary Pember, Moen's director of marketing/bath, says: "Wholesalers must take an active role. Often the builder has the best chance to upgrade the consumer and is looking for the distributor to be a category manager for him. He has a direct link to that homeowner. The selling environment always improves when the distributor is actively involved with the entire process."

Sidebar:
The Commercial Market

There are many similarities with the residential and commercial faucet markets, but also some distinct differences.

"We don't have any decorative or residential. But we do have just as many competitors," notes Kem Davis, vice president/sales of T & S Brass. "Even the home centers are entering our food service industry niche. Importers are also springing up left and right."

American Standard, which is considered by many to be a force in the commercial and institutional market, sells only 12% of its plumbing products in the commercial category.

As demanding as homeowners are, their emotional decorative requirements may not stand up to the rigorous requirements of, for example, the healthcare industry.

"Zurn focuses almost exclusively on the specification side of the business. All of our products are high quality and engineered to add value throughout the supply chain," says Craig Wehr, vice president of commercial products.

"You can't just sell your product," says Davis of T & S. "You have to make it easier for your customer to do business with you. You have to do more with less. Our goal is to ship every order received by noon the same day. And that includes products that are modified."

Perhaps to stress the overabundance of faucet manufacturers, one of the most prominent names in the commercial faucet business is making a dramatic change. Chicago Faucet, a brand synonymous with commercial and institutional applications, is re-entering the residential market. "Throughout the year we will be introducing new residential products, blending the best of both worlds (both Geberit and Chicago), with new finishes," says Gene Carpenter, product manager/residential, Geberit Manufacturing.

"The commercial market is a little tough right now due to the economy and war-related issues," says Alan Danenberg, director/marketing services for Elkay Manufacturing. "Pricing has become very competitive so we have to work a little harder. School projects are still being completed, but some state and local governments are having budget problems. It varies by region. Commercial is still an important part of our business."

"Overall commercial business is off," notes William Tracey, director of marketing and advertising for Symmons Industries, "but there are some bright spots: schools and health care." While business for both the hotel industry and office buildings has declined, Symmons has found some success serving higher end luxury hotels, he adds.

"The commercial market is very cyclical," Tracey says. "That market will return in a very strong way."