Market reports, business information and market research - Midnight Croquet. AMA Builders and Plumbers Merchant Market JANUARY 2001.

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AM52001 AMA BUILDERS AND PLUMBERS MERCHANT MARKET JANUARY 2001

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KEY AREAS

AMA Research have recently published an intermediate review of the UK Builders & Plumbers Merchants. The review updates the "UK Builders & Plumbers Merchants Market Report 2000" and gives concise revised information on market trends and statistics.

Key Sectors Covered Include:-

OVERALL MARKET VALUE - current value and future forecasts
LEADING BUILDING & PLUMBING MERCHANTS
REGIONAL SALES VARIATIONS
MARKET SHARES
PRODUCT MIX
REVISED FORECASTS

In addition the review contains an overview of both the macro and socio-economic influences affecting the UK Builders & Plumbers Merchants Market.

2001 Update includes the following tables and charts: -

The review is written by marketing professionals, with experience in the Merchants industry, enabling us to provide accurate and detailed coverage of these fast changing markets. The report comments not only on what is happening in the industry, but why, and whether it is likely to continue.

This update is published as part of the UK Builders & Plumbers Merchants Market Report 2000 (Fifth Edition) which was originally published in February 2000 and gave a comprehensive review of the UK Builders & Plumbers Merchants Market. The review and original report cover over 160 pages.

UK Builders & Plumbers Merchants Market Report 2000

In addition to areas covered in the 2001 Update, the 2000 report content includes:-

THE MERCHANTS

Major Merchants, their turnovers, shares, number of outlets, major characteristics, regional and product strengths, etc.
The large & local regional Merchants - who they are, turnover, key products and characteristics.
Buying Groups - their role and presence in the industry.
Merchants profitability, indications of net & gross margins, debtor levels, stock coverage by product group, overall stock levels, etc.
Buying processes of major/regional merchants and for Buying Groups - barriers to entry.
Strengths, Weaknesses, Opportunities & Threats to Merchants.
Competitive channels, their changing emphasis (DIY Outlets, Specialist Distributors, High St etc.).
Overall Merchant product mix.

THE MARKET / PRODUCTS / SUPPLIERS

The infra-structure of the building products market - suppliers, distributors, contractors, architects and users.
The market size in value terms, 1992-1999 and forecast through to 2003.
Market trends through the 1990’s. Opportunities and threats, trends for the future.
Regional variations in construction and merchant performance.
Product mix within major product groups.
Product sectors, definition, Merchants’ strengths and weaknesses by product, competitive channels.
Key suppliers per product sector.
Product trends by product group and by major product sector.
Sales through Merchants by main product group.
Purchasing criteria of Merchants - what they look for in their suppliers.

CUSTOMERS / FUTURE PROSPECTS / HOUSING / CONSTRUCTION

Merchants key customers. Nature and operation of the house-building market.
Role of Housing Associations. Buying criteria of the small builders and plumbers.
New build, RMI, population shifts, building and construction, and their implications for Merchants.
Future developments, implications for suppliers. / Economic influences, growth prospects etc.

The report contains over 130 pages and 50 tables of ORIGINAL research and comment on UK Builders & Plumbers Merchants and provides an independent and incisive view into these fast growing markets.

Product Sectors Covered Include:

Roofing & Insulation	Timber Boards & Products	Decorating Materials
Bricks, Blocks & Concrete	Plumbing Products	Heating Products
Cement & Plaster Materials	Kitchen Equipment	Ironmongery & Misc.

EXECUTIVE SUMMARY (2000 report)

The UK Builders and Plumbers Merchant market was worth over £8.25 billion at merchant selling prices in 1999, reflecting good growth in the market during 1997 followed by more modest growth over the last 2 years.

Although some growth in market size has been achieved, the 1990’s have generally been difficult for the builders merchants. Consumer confidence and both new build and RMI (Repair, Maintenance & Improvement) work were low throughout 1992, though 1993 and 1994 showed some signs of improvement. This improvement was, however, relatively minor, with new build showing only marginal gains. Increasing interest rates in late 1994 led to a deterioration in consumer confidence and a resultant reduction in new housing starts, with a negative effect on the building and construction products markets and as a result, the Builders Merchants market remained difficult over 1995 and 1996. However, there was some improvement in activity levels towards the end of 1996, as new housing starts showed signs of increasing.

The market’ growth was hindered by raw material price increases, in particular plastic products and certain timber products, leading to pressure on merchants’ margins, as not all price increases were easily passed on. In addition, the growth of the speciality distribution companies, such as SIG and the growth of the DIY Multiples made the building materials market highly competitive.

The market improved somewhat in 1997. Consumer confidence in particular received a boost from the various "windfall gains" during the year, and this was supported by lower unemployment levels and a low level of interest rates. The repair, maintenance and improvement sector was given a boost from the windfall gains, and though new house building levels increased, the changes were not substantial. The levels of non-domestic construction output also increased during the course of 1997, with the private commercial sector (offices, shops etc) in particular, performing positively. In addition, the commissioning of various Millennium projects also contributed to the construction markets growth at this time.

Several successive interest rate rises were implemented towards the end of the year, in order to constrain consumer spending, GDP growth and inflationary growth. Nevertheless, consumer confidence remained high and retail spending continued to rise during this period.

The effects of the increased levels of interest rates were felt early in 1998, which was a difficult time for the building and construction industry. Consumer confidence had been eroded by the higher interest rates and retail spending had subsided, alongside home improvement expenditure. Reducing levels of interest rates in the mid to later parts of the year succeeded in improving the level of consumer confidence and the levels of construction and building, though the more substantial benefits came through into the market in early 1999.

The benefits included higher levels of consumer confidence, levels of RMI and retail spending and an upturn in business confidence. Nevertheless, the overall building products market remained highly competitive with prices constantly under pressure, from cheaper imported goods and because of the low prices of certain raw materials, such as copper tube, where prices dropped substantially over 1998/99.

The level of housing completions remained similar to 1998, though the housing market in general has been far more buoyant, with house price inflation starting to grow and the number of house moves also increasing. As a result, the level of demand for building products from the new housing sector has remained relatively steady. The level of domestic RMI has been improving, with increased house values beginning to fund home improvement projects in some cases.

The pressure on prices has been caused by a number of factors, in particular a higher level of imports in many product sectors, leading to lower selling prices. In addition, many of the larger distribution companies, merchants, DIY Multiples and others, are increasingly own-labelling their product, and often positioning these products in the lower price spectrum. The level of prices of many raw material products has also been under pressure, leading to further pressure on the merchants’ margins.

To add to this, competition remains intense from the DIY multiples, particularly on RMI work. In particular Wickes and B&Q, through their strengthening Warehouse operation, continue to market themselves toward the ‘building’ end of the home improvement spectrum. In addition, there remain threats from specialist distributors such as those in the insulation, roofing or bricks market. While many of these companies will frequently market their services and products to merchants, some may also be prepared to sell direct to contractors.

The industry has consolidated at a rapid rate over the last two years, with some very large acquisitions complemented in many cases by smaller acquisitions. This has led to the larger merchants taking a relatively larger share and increasing their buying power. Indeed, the three largest merchants now account for around 43 percent, compared to some 22 percent in 1997.

The major competitors in this market include Jewsons (incorporating Grahams, Harcros), Wolseley Centers (who operate Plumb Centers, Builder Centers etc), and Travis Perkins. Many have made acquisitions over the last two years, with Jewson acquiring Graham the largest transaction. Wickes and BSS are also major merchant operations.

The top five companies account for 54 percent of industry sales with a group of regional merchants accounting for 17-19 percent. The balance is held by local companies, reflecting the key service offered by merchants - a local supply of a wide range of commodities to a large number of small and medium sized builders and plumbers.

The major products sold by the merchants include plumbing products, timber and timber products, roofing & insulation products, bricks/blocks & plasterboard along with plaster & cement, heating, kitchens, decorating materials and a wide range of miscellaneous products.

The key groups are plumbing products with 20 percent of merchants turnover, timber & timber products with some 14 percent, bricks/blocks and concrete with 16 percent, space and water heating with 14 percent, roofing & insulation with 9 percent and cement & plaster with 10 percent.

One of the key growth areas in recent years has been tool hire, with many of the major merchants now offering tool hire facilities from a large number of existing branches, and in some cases stand-alone branches. Tool hire now accounts for around 1.5-2 percent of the merchants overall market.

Merchants are of most significance in the plumbing market where they account for a share of almost 60 percent, compared to their share of the timber products market at 20-25 percent. They are also of significance in the roofing & insulation market and the bricks, blocks & concrete market where they account for around 40 percent. They are least strong in the kitchens market and the decorating products market, which reflects the high level of competition from alternative channels in each of those markets.

TABLE OF CONTENTS

Contents		Page
1.	INTRODUCTION	7
2.	SUMMARY	8
3.	ECONOMIC ENVIRONMENT	11
3.1	GDP	11
3.2	Inflation & Interest Rates	11
3.3	Unemployment & Consumer Spending	12
3.4	Housing & Construction	12
3.4	Conclusion	13
4.	THE BUILDERS AND PLUMBERS MERCHANTS MARKET	14
4.1.	Definition	14
4.1.1	Market	14
4.1.2.	Products	14
4.2	Market Structure	16
4.2.1.	Light-side	16
4.2.2.	Heavy-side	18
4.3.	Market Size	18
4.3.1	Market Background	18
4.3.2	Current Situation	21
4.3.3	Forecast	24
5.	THE BUILDERS & PLUMBERS MERCHANTS	28
5.1.	Market Shares	28
5.2	Merchant Companies	31
5.2.1	Major Merchants	31
5.2.2	Larger Regional Merchants	38
5.2.3	Local Merchants	42
5.3.	Characteristics of Builders & Plumbers Merchants	44
5.3.1	Product Range	44
5.3.2	Stock Levels	46
5.3.3	Profitability	47
5.3.4	Turnover Per Employee	49
5.3.5	Pricing	50
5.4	Buying Processes	51
5.4.1	Major Merchants	51
5.4.2	Medium Size & Smaller Merchants	53
5.4.3	Buying Groups	53
5.5	Strengths, Weaknesses, Opportunities & Threats	53
5.5.1	Strengths	53
5.5.2	Weaknesses	54
5.5.3	Opportunities	55
5.5.4	Threats	57
6.	PRODUCTS	60
6.1	Product Mix	60
6.2	Merchant Shares by Product	61
6.3	Product Trends	63
6.3.1	Roofing & Insulation Materials	63
6.3.2	Bricks, Blocks & Concrete Materials	68
6.3.3	Cement & Plaster Materials	74
6.3.4	Timber Products	78
6.3.5	Plumbing and Drainage Materials	83
6.3.6	Decorating Materials	89
6.3.7	Heating & Ventilating	93
6.3.8	Kitchens	101
6.3.9	Ironmongery & Miscellaneous Products	105
7.	MERCHANTS' CUSTOMERS	112
7.1	General	112
7.2	Builders	112
7.3	Plumbers	115
7.4	Heating & Ventilating Engineers	116
7.5	Other Contractors	116
7.6	Consumers	117
7.7	Local Authorities and Public Bodies	117
7.8	Other	118
7.9	General	118
8.	KEY MARKET INFLUENCES	119
8.1	The Housing Market	119
8.1.1	New House Build	119
8.1.2	House-Moving Levels	122
8.2	Construction	123
8.2.1	Contractors Output	123
8.2.2	Contractors Output - Commercial Sector	124
8.3	General	126
8.3.1	Interest Rates & Inflation	126
8.3.2	Consumer Expenditure	126
8.3.3	Population Profile	127
8.3.4	Employment/Unemployment	129
9.	FUTURE PROSPECTS	130
Tables and Charts		Page
CHART 1	MERCHANTS MARKET 1992-2003 VALUE £M AT MERCHANTS SELLING PRICES	8
CHART 2.	DISTRIBUTION STRUCTURE (LIGHT-SIDE)	16
TABLE 3	UK BUILDING & PLUMBING MERCHANTS MARKET £M AT MERCHANT SELLING PRICES 1992-2003	19
TABLE 4	REGIONAL VARIATIONS OF NEW ORDERS OBTAINED BY CONTRACTORS.	23
TABLE 5	REGIONAL VARIATIONS OF BUILDING MATERIAL SALES BY BUILDERS MERCHANTS	24
CHART 6	UK MERCHANTS MARKET 1992-2003 MERCHANT SELLING CONSTANT 1990 PRICES	25
CHART 7	MERCHANTS MARKET SHARES 1999	28
CHART 8	SHARE TAKEN BY THE TOP FIVE MERCHANTS 1990 1995, 1999	29
CHART 9	MIX OF MERCHANTS BY TYPE 1999	31
CHART 10	MERCHANTS BY TURNOVER 1999	42
CHART 11	percentAGE OF MERCHANTS STOCKING BY PRODUCT GROUP	45
TABLE 12	MERCHANTS STOCK IN WEEKS 1992-1999	46
TABLE 13	MERCHANTS PROFITABILITY 1992-1999	47
TABLE 14	MERCHANTS DEBTORS LEVELS 1992-99	49
TABLE 15	MERCHANTS TURNOVER PER EMPLOYEE	50
TABLE 16	BUILDERS & PLUMBERS MERCHANTS PRODUCT MIX 1999 AT MERCHANT SELLING PRICES	60
TABLE 17	BUILDERS & PLUMBERS MERCHANTS SHARE OF THE MARKET SECTORS 1999 AT MERCHANT SELLING PRICES	61
TABLE 18	THE UK ROOFING AND INSULATION MARKET	63
TABLE 19	PRODUCT MIX – ROOFING & INSULATION MARKET 1998	64
TABLE 20	THE UK MARKET FOR BRICKS, BLOCKS AND CONCRETE GOODS	68
CHART 21	MIX OF BRICKS, BLOCKS & CONCRETE PRODUCTS BY VALUE 1998 MERCHANT SELLING PRICES	69
TABLE 22	PRODUCTION, STOCKS & DELIVERIES OF ALL BRICK TYPES (MILLIONS) 1990-1999	70
TABLE 23	PRODUCTION, STOCKS & DELIVERIES OF ALL CONCRETE BUILDING BLOCKS (000 SQ. METRES) 1990-1999	72
TABLE 24	THE UK MARKET FOR CEMENT AND PLASTER MATERIALS 1990-2000	74
TABLE 25	PRODUCT MIX OF CEMENT & PLASTER PRODUCTS 1998	75
TABLE 26	CEMENT AND READY MIXED CONCRETE PRODUCTION 1990-1999 (‘000 TONNES)	76
TABLE 27	PRODUCTION OF AGGREGATES IN GREAT BRITAIN 1990-1999 (‘000) TONNES	77
TABLE 28	UK TIMBER PRODUCTS - 1992-2000 (£M MERCHANT SELLING PRICES)	79
CHART 29	TIMBER SALES BY MAJOR PRODUCT GROUPS 1999 BY VALUE	80
TABLE 30	THE PLUMBING MATERIALS MARKET 1990-2000	83
TABLE 31	PRODUCT MIX - PLUMBING MATERIALS 1998	84
TABLE 32	THE UK DECORATING MATERIALS MARKET 1992-2000	89
TABLE 33	PRODUCT MIX WITHIN THE DECORATING MATERIALS MARKET 1999	90
TABLE 34	THE UK SPACE & WATER HEATING MARKET 1990-2000	93
TABLE 35	PRODUCT MIX WITHIN THE HEATING PRODUCTS MARKET BY VALUE 1998	94
TABLE 36	PRODUCT MIX - SPACE HEATERS 1998 BY VALUE - £M MERCHANTS SELLING PRICE	97
TABLE 37	THE UK FURNITURE MARKET BY VALUE (£M MERCHANT SELLING PRICE)	102
TABLE 38	DISTRIBUTION OF KITCHEN FURNITURE - 1998 BY VALUE	103
TABLE 39	MARKET FOR IRONMONGERY AND MISCELLANEOUS PRODUCTS 1999 £M MERCHANT SELLING PRICE	106
CHART 40	UK VAT REGISTERED BUILDERS 1999	113
CHART 41	UK VAT REGISTERED PLUMBERS 1999	115
TABLE 42	HOUSING COMPLETIONS 1990-2000 GREAT BRITAIN ('000)	119
TABLE 43	HOUSING STARTS 1992-2000 GREAT BRITAIN (‘000)	120
TABLE 44	VALUE OF NEW UK HOUSING OUTPUT AND RMI OUTPUT (£M)	121
TABLE 45	NUMBER OF PROPERTY TRANSACTIONS IN ENGLAND AND WALES 1990-1999	122
TABLE 46	CONTRACTORS OUTPUT - NEW WORK AND RMI NON HOUSING - CURRENT PRICES (£M)	123
TABLE 47	NEW ORDERS OBTAINED BY CONTRACTORS 1990-1999 CURRENT PRICES	124
TABLE 48	CONTRACTORS OUTPUT - COMMERCIAL SECTOR NEW WORK - CURRENT PRICES (£M)	125
CHART 49	INTEREST RATES AND INFLATION (RPI) FROM 1990-2003	126
CHART 50	PDI & SAVINGS RATIO	127
CHART 51	AGE DISTRIBUTION OF THE RESIDENT UK POPULATION JUNE 1998 (‘000)	128
CHART 52	NUMBER OF EMPLOYEES IN EMPLOYMENT GB - JUNE 1981-98 (MILLIONS)	129

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Last updated by Jacob van Eldik 6th February 2001

AM52001 AMA BUILDERS AND PLUMBERS MERCHANT MARKET JANUARY 2001

Contents

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Tables and Charts

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