2001 Plumbing Forecast: Modest growth expected
No decline here. Cautious optimism prevails that plumbing product sales will continue to grow in 2001, although the increases will be in single-digit percentages. Shipments of plumbing fixtures are projected to rise to $3.94 billion, about 4% above $3.79 billion in 1999, according to the Freedonia Group, an industrial market research firm.
Other published forecasts based on U.S. Commerce Department figures project that plumbing fixture shipments will rise 2.2% to $3.78 billion from $3.7 billion in 2000.
As always, the plumbing market will be tied to activity in the overall construction industry. Residential construction will grow 2% in 2001, while nonresidential construction will be up by 4% this year, according to a construction outlook released by FMI Corp., a management consulting firm.
Single-family housing starts may show declines in 2001, but construction put in place will experience growth in the same period, FMI said. Other projections for 2001 by the consulting firm include:
- New multifamily residential construction will grow by 4%;
- New construction of privately owned offices will increase by 5%;
- New school and educational construction will rise 14%;
- New retail construction will be up by 5%;
- New warehouse construction will fall 3%;
- New industrial construction will show modest growth of 1%; and
- New hotel construction will decline by 2%.
Residential improvements, which are often driven by home purchases, will grow by 1%, while nonresidential building improvements will increase by 10% in 2001, according to FMI.
"Residential construction will most likely slow, and the industry will be led by slower but steady commercial new construction," said Jon Dommisse, manager/marketing and e-business initiatives at Bradley Corp., a manufacturer of commercial bathroom fixtures and accessories. "The bright spots will be the education and security sectors driven by the political agenda to support these project categories."
While both residential remodeling and new construction have been strong in the last few years, in 2001 remodeling activity may be more positive while new construction will probably be flat, said Alan Danenberg, director/marketing services at Elkay Manufacturing.
"Overall home starts are slowing down," said Ray Kennedy, vice president/marketing at Delta Faucet Co. "Today we project that the repair/remodeling area is a better opportunity for short-term growth."
Depending on interest rates, residential construction may decrease slightly faster than commercial, said Tom Palermo, president of Palermo Supply in Bergenfield, N.J.
"School projects take a couple of years to get underway," he said. "If they are just getting underway now, they will carry through."
Palermo has always done more business for remodeling projects than for new construction, he said. He projected about 5% growth in remodeling for 2001.
Consolidated Supply Co., Portland, Ore., does not foresee a substantial change in new construction or remodeling for 2001, said Tom Bedell, vice president/branches.
"We think new construction will drop a little and remodeling will pick up," Bedell said. "We are very strong in nonresidential/commercial business. There is a tremendous boom with public buildings in Seattle."
There are some signs of a slowdown in new construction, said Domenic Messina, president of Peabody Supply Co. in Lawrence, Mass. "Remodeling will probably be stronger," he said, "but in the past couple of years we have been capitalizing on new construction. Many of our trades people have been doing more of that work than remodeling."
Messina said he sees at least one more good year of finishing off of homes in North Boston and some new remodeling projects.
"We have had the opportunity to do warehouse buildings and offices through one or two of our commercial contractors," Messina said. "Most do new homes in the $350,000 to $650,000 price range."
Plumbing product performance"Plumbing product business was good, pretty much right on track with our expectations, in terms of the industry and our business," Danenberg of Elkay said. He predicted modest growth for 2001.
"We have heard from some customers that they are seeing some slowdown in certain markets," he said, "but we are not seeing any broad-based problems. High-end plumbing products are still very positive because a lot of remodeling is being done, particularly remodeling of residential kitchens."
At Bradley Corp. orders for plumbing products in 2000 exceeded expectations for the fifth year in a row, Dommisse said. He predicted 2% industry growth in 2001.
For the water heater industry, 2000 has been a flat year and that is expected to continue into 2001, said Rick Miller, wholesale market manager, Rheem Water Heater division, Rheem Manufacturing Co.
"The residential water heater side started off aggressively in the first quarter of 2000, continuing from a strong 1999," Miller said. "The industry was up about 41/2%. Then in the April-May time frame, it suddenly came to a screeching halt. Since then business has been off for the rest of the year. We expect to finish below what we expected for 2000."
This can be attributed partly to consolidation and reduction of inventory levels at the wholesale level and to softening of new construction, said Peter Reynolds, director of residential markets at Rheem.
All three wholesalers reported that plumbing product business met or exceeded expectations for 2000.
"We are forecasting about 15% growth for 2001 in the markets we serve, fueled by increased business with home centers, utilities and master distributors," Palermo said.
"We have 16 branches in different locations," said Bedell of Consolidated Supply. "Business was very strong to moderate, depending on location."
Bedell projected flat to a "hair's-breadth" increase in business for 2001, and said, "Overall, the three states we are in¿Oregon, Washington and Idaho¿look about the same in volume."
Plumbing product business was better than expected in both branches of Peabody Supply in 2000 and the wholesaler is optimistic about 2001, Messina said.
Growth segmentsShipments of sinks are projected to show a higher percentage increase than bathtubs/showers and toilets in a comparison of 1999 figures and 2001 estimates by the Freedonia Group. The $975 million in sink shipments predicted for 2001 by the Freedonia Group represents a 4.8% increase from $930 million in 1999.
Bathtub/shower shipments are expected to grow by 3% from $1.5 billion in 1999 to $1.55 billion in 2001.
The $865 million in toilet shipments projected for 2001 by the Freedonia Group are up 2.5% from $844 million in 1999.
Both Elkay's Danenberg and Bradley's Dommisse said they expect further growth in plumbing products that address universal access needs. In addition, Danenberg said, there has been a lot of activity in the sink and water cooler business, and increasing interest in water-quality issues.
"Solid-surface shower receptors, plastic lockers, contemporary-styled group hand-washing fixtures and new stainless steel fixture designs are the top requests from customers, who are the basis for our product development," Dommisse said.
Pull-out faucets and specialty finishes such as pearl nickel, stainless steel and oil-rubbed bronze have the greatest growth potential, Delta's Kennedy said.
Time constraints, health concerns and water conservation awareness have contributed to the growing popularity of shower systems with multiple body sprays and jets, at the expense of traditional whirlpool tubs, said Barb Lewis, marketing manager at Wolff Bros. Supply in Medina, Ohio.
"High-end homes are putting in multiple baths with two-person showers," said Messina of Peabody Supply. "We are seeing more interest in showers with eight bodyjets and a waterfall sprayhead."
Both Messina and Bedell said high-end plumbing products have the most growth potential for 2001.
"We see increases in granite counter tops and in bath and shower systems," Messina said.
The water heater industry is facing two significant issues, according to Miller and Reynolds at Rheem Water Heater division.
"The single biggest issue is the pending change to a new gas-fired product that is ignition-resistant," Miller said. It is not clear at this time when that product will be required on the product, but it will be some time in the not too distant future, he added.
New rules that specify the next level of energy efficiency required for water heaters will go into effect in 2004, Reynolds said. "That will set the stage for product development over the next three years as manufacturers try to meet those requirements with some breadth of product."