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KEY NOTE REPORT REVIEW : DIY and Home Improvements Industry : May 2004

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This report covers:Trade and consumer exhibitions, UK events, European events, US events, paint, woodcare, emulsion, gloss, interior finish, masonry paints, primers and undercoats, speciality paints, aerosol spray paints, woodcare, varnishes, wood effects, wood preservers, wood fillers and hardeners, furniture care, wood dyes, eradicators, wall coverings, wallpaper, flat vinyls, blown vinyls, sidewalls, borders, ceramic tiles,drills, screwdrivers, decorating tools, multifunction power tools, power tools, power-tool accessories, hand tools,

Companies covered include: DIY, B & Q, Focus Wickes, Homebase, Wilkinson Hardware Stores, Screwfix Direct, Topps Tiles, Robert Dyas Holdings, Dickens, Glyn Webb Wallpapers, ICI Paints, Kalon Decorative Products, Ronseal, CWV, Graham & Brown, H-A Interiors, Walker Greenbank, Fine Décor Wallcoverings, H & R Johnson Tiles, Pilkington's Tiles, British Ceramic Tile, Black & Decker, Robert Bosch, Alba, Makita, Earlex, Stanley Tools, Stanley UK Holding, Spear & Jackson, LG Harris & Co, Hamilton Acorn, Robert J Hall, Kingfisher,

TABLE OF CONTENTS

Executive Summary 1

1. Industry Overview 15

REPORT COVERAGE 15

REPORT BACKGROUND 16

ECONOMIC TRENDS 17

Population 17

Table 1.1: UK Resident Population Estimates

by Sex (000), Mid-Years 1999-2003 17

Gross Domestic Product 17

Table 1.2: UK Gross Domestic Product

at Current Prices (£m), 1999-2003 18

Inflation 18

Table 1.3: UK Rate of Inflation (%), 1999-2003 18

Unemployment 19

Table 1.4: Actual Number of Unemployed Persons

in the UK (million), 1999-2003 19

Household Disposable Income 19

Table 1.5: Household Disposable Income

per Head (£), 1998-2002 19

MARKET SIZE 20

Consumer Expenditure at Current Prices 20

Table 1.6: Consumer Expenditure on DIY Products

at Current Prices (£m at rsp), 1999-2003 20

Consumer Expenditure at Constant 2000 Prices 20

Table 1.7: Consumer Expenditure on DIY Products

at Constant 2000 Prices (£m at rsp), 1999-2003 21

Annual Expenditure per Person 21

Table 1.8: Sum Spent on DIY Materials in the

Last 12 Months (% of adults), 2003 21

MARKET SEGMENTATION 22

Table 1.9: The UK Retail Market for DIY Products --

Five Key Sectors by Value (£m at rsp), 1999-2003 22

INDUSTRY STRUCTURE 23

Concentration 23

Number of Businesses 24

Employment 24

Distribution 24

MARKET POSITION 25

KEY TRENDS 25

DIY as a Proportion of Household Spending 25

Table 1.10: Consumer Expenditure on DIY Products as a Proportion of Total Household Spending at Current and Constant 2000 Prices (£bn, £m and %), 1999-2003 26

Seasonal Trends 26

LEGISLATION 26

KEY TRADE ASSOCIATIONS 27

British Hardware & Housewares Manufacturers' Association 28

British Hardware Federation 28

British Home Improvement Retailers Association 28

European Associations 28

Association of European DIY Retailers 28

Federation of European DIY Manufacturers' Associations 28

2. PEST Analysis 29

POLITICAL FACTORS 29

Out-of-Town Developments 29

Environmental Policies 29

ECONOMIC FACTORS 29

The Rising Cost of Professional Services 29

Table 2.1: Consumer Expenditure on Maintenance Services

for the Home and on DIY Products at Current and Constant 2000 Prices (£m and price indices 2000=100), 1999-2003 30

Interest Rates Expected to Rise 30

The Property Market 30

Output of New Housing 30

Table 2.2: Output of New Housing by Value

at Constant 2000 Prices (£m), 2000-2003 31

Home Ownership 31

Employment 31

Table 2.3: Total Number of People in Employment

in the UK (000), Fourth Quarter 1999-2003 31

SOCIAL FACTORS 32

Number of Households 32

Television DIY and Gardening Programmes 32

Ageing Population 32

TECHNOLOGICAL FACTORS 32

Use of the Internet 32

Product Innovations 33

3. Key Note Primary Research 34

INTRODUCTION 34

PENETRATION OF DIY ACTIVITIES 34

Table 3.1: Penetration of Selected DIY Activities

(% of respondents), 1997-2004 35

By Sex 36

Table 3.2: Penetration of Selected DIY Activities

by Sex (% of respondents), 2004 36

By Age 37

Table 3.3: Penetration of Selected DIY Activities

by Age (% of respondents), 2004 37

By Social Grade 38

Table 3.4: Penetration of Selected DIY Activities

by Social Grade (% of respondents), 2004 38

By Region 39

Table 3.5: Penetration of Selected DIY Activities

by Region -- South (% of respondents), 2004 40

Table 3.6: Penetration of Selected DIY Activities by Region -- Midlands and North (% of respondents), 2004 41

By Housing Tenure 42

Table 3.7: Penetration of Selected DIY Activities

by Housing Tenure (% of respondents), 2004 42

By Working Status 43

Table 3.8: Penetration of Selected DIY Activities

by Working Status (% of respondents), 2004 44

Other Factors 45

STORES USED TO PURCHASE DIY SUPPLIES 45

Table 3.9: Stores Used to Purchase DIY Supplies

(% of respondents), 2004 46

By Sex 46

Table 3.10: Stores Used to Purchase DIY Supplies

by Sex (% of respondents), 2004 47

By Age 47

Table 3.11: Stores Used to Purchase DIY Supplies

by Age (% of respondents), 2004 48

By Social Grade 48

Table 3.12: Stores Used to Purchase DIY Supplies

by Social Grade (% of respondents), 2004 49

By Region 49

Table 3.13: Stores Used to Purchase DIY Supplies

by Region -- South (% of respondents), 2004 50

Table 3.14: Stores Used to Purchase DIY Supplies by Region -- Midlands and North (% of respondents), 2004 51

By Housing Tenure 52

Table 3.15: Stores Used to Purchase DIY Supplies

by Housing Tenure (% of respondents), 2004 52

By Working Status 53

Table 3.16: Stores Used to Purchase DIY Supplies

by Working Status (% of respondents), 2004 53

Other Factors 54

4. Competitive Structure 55

THE MARKETPLACE 55

MARKET LEADERS 55

Table 4.1: Selected Leading UK Retailers of DIY Products

by Turnover (£m), 2002/2003 56

B&Q PLC 56

Financial Results 57

Focus Wickes Ltd 57

Financial Results 57

Homebase Ltd 57

Financial Results 58

Wilkinson Hardware Stores Ltd 58

Financial Results 58

Screwfix Direct Ltd 58

Financial Results 59

Topps Tiles PLC 59

Financial Results 59

Robert Dyas Holdings Ltd 60

Financial Results 60

Dickens Ltd 60

Financial Results 60

Glyn Webb Wallpapers Ltd 60

Financial Results 60

Other Companies 60

OUTSIDE SUPPLIERS 61

MARKETING ACTIVITY 62

Main Media Advertising 62

Table 4.2: Main Media Advertising Expenditure

by DIY Retailers (£000), Years to December 2002 and 2003 62

Trade and Consumer Exhibitions 63

UK Events 63

European Events 63

US Events 63

5. Paint and Woodcare 64

DEFINITION 64

Paint 64

Emulsion 64

Gloss and Interior Finish 64

Masonry Paints 64

Primers and Undercoats 64

Speciality Paints 64

Aerosol Spray Paints 64

Woodcare 65

Varnishes 65

Woodstains 65

Wood Effects 65

Wood Preservers 65

Wood Fillers and Hardeners 65

Furniture Care 66

Wood Dyes 66

Eradicators 66

KEY TRENDS 66

MARKET SIZE 67

Table 5.1: The UK Retail Market for Paint and Woodcare

by Value (£m at rsp), 1999-2003 67

MARKET SEGMENTATION 67

Paint 67

Woodcare 68

Table 5.2: The UK Retail Market for Woodcare by Sector

by Value (%), Year to February 2003 68

SUPPLY STRUCTURE 69

Number of Companies 69

Employment 69

Distribution 69

Trade Associations 69

British Coatings Federation 69

MAJOR PLAYERS 70

ICI Paints (ICI PLC) 70

Financial Results 71

Akzo Nobel Decorative Coatings Ltd 71

Financial Results 72

Kalon Decorative Products (Kalon Ltd) 73

Financial Results 73

Ronseal Ltd 73

Financial Results 74

Other Companies 74

ADVERTISING AND PROMOTION 74

Paint 74

Table 5.3: Main Media Advertising Expenditure on Paint

by Manufacturers and DIY Superstores (£000),

Years to December 2002 and 2003 75

Woodcare 76

Table 5.4: Main Media Advertising Expenditure on Woodcare (£000), Years to December 2002 and 2003 76

BUYING BEHAVIOUR 77

Paint 77

Penetration of Paint Use 77

Table 5.5: Penetration of Paint Use in the Last 12 Months

by Sex, Age, Social Grade, Region and Household Income

(% of adults), 2003 78

Profile of Users 79

Table 5.6: Users of Paint in the Last 12 Months

by Sex, Age, Social Grade, Region and Household Income

(% of users), 2003 79

Volume Used in the Last 3 Months 80

Table 5.7: Volume of Paint Used in the Last 3 Months

(% of adults and % of users), 2003 80

Types of Paint Used 81

Table 5.8: Types of Paint Used in the Last 3 Months

(% of adults and % of users), 2003 81

Woodcare 81

Penetration of Woodstain/Varnish and Wood Preservers 81

Table 5.9: Penetration of Woodstain/Varnish and Wood Preservers in the Last 12 Months by Sex, Age, Social Grade, Region and Household Income (% of adults), 2003 81

Profile of Users 83

Table 5.10: Users of Woodstain/Varnish and Wood Preservers

in the Last 12 Months by Sex, Age, Social Grade, Region

and Household Income (% of users), 2003 83

Volume Used in the Last 12 Months 84

Table 5.11: Volume of Woodstain/Varnish Used in the

Last 12 Months (% of adults and % of users), 2003 85

FORECASTS 2004 TO 2008 85

Table 5.12: The Forecast UK Retail Market for Paint

and Woodcare by Value (£m at rsp), 2004-2008 86

6. Wallcoverings 87

DEFINITION 87

Wallpaper 87

Flat Vinyls 87

Blown Vinyls 87

Expanded Vinyls 87

Others 88

KEY TRENDS 88

MARKET SIZE 89

Table 6.1: The UK Retail Market for Wallcoverings

by Value and Volume (£m at rsp and million rolls/coils),

1999-2003 89

Foreign Trade 89

MARKET SEGMENTATION 90

Sidewalls and Borders 90

Table 6.2: The UK Retail Market for Sidewalls and Borders

by Value and Volume (%), 1999-2003 90

By Substrate 91

Table 6.3: The UK Retail Market for Wallcoverings by Substrate by Value and Volume (%), 1999-2003 91

SUPPLY STRUCTURE 92

Number of Companies 92

Table 6.4: Number of UK VAT-Based Enterprises Engaged

in Wallpaper Manufacturing by Turnover Sizeband

(£000 and number), 1999-2003 93

Employment 93

Table 6.5: Number of UK VAT-Based Local Units Engaged in Wallpaper Manufacturing by Number of Employees, 2003 94

Distribution 94

Trade Associations 95

Wallcovering Manufacturers' Association 95

MAJOR PLAYERS 95

Table 6.6: Selected Leading UK Suppliers of

Wallcoverings for the Retail Market, 2004 96

CWV Group Ltd 96

Financial Results 97

Graham & Brown Ltd 97

Financial Results 98

H-A Interiors Ltd 98

Financial Results 98

Walker Greenbank PLC 98

Financial Results 99

Fine Décor Wallcoverings Ltd 99

Financial Results 99

ADVERTISING AND PROMOTION 99

Main Media Advertising 99

Table 6.7: Main Media Advertising Expenditure on Wallcoverings (£000), Years to December 2002 and 2003 100

Other Activities 100

BUYING BEHAVIOUR 101

Ownership of Wallpaper 101

Table 6.8: Ownership of Wallpaper (% of adults), 2003 101

Purchasing of Wallpaper 101

Table 6.9: Purchasing of Wallpaper in the Last 12 Months

by Sex, Age, Social Grade, Region, Household Income and Number of Children (% of adults), 2003 102

Profile of Purchasers 103

Table 6.10: Purchasers of Wallpaper in the Last 12 Months

by Sex, Age, Social Grade, Region, Household Income

and Number of Children (% of purchasers), 2003 104

Sum Spent in the Last 12 Months 105

Table 6.11: Sum Spent on Wallpaper in the Last 12 Months

(% of those purchasers who said how much they spent),

1999, 2001 and 2003 106

FORECASTS 2004 TO 2008 106

Table 6.12: The Forecast UK Retail Market for Wallcoverings

by Value and Volume (£m at rsp and million rolls/coils),

2004-2008 107

7. Ceramic Tiles 108

DEFINITION 108

KEY TRENDS 108

MARKET SIZE 109

Table 7.1: The Total UK Market for Ceramic Tiles

by Value and Volume (£m at msp and million square metres), 1999-2003 109

Table 7.2: The UK Retail Market for Ceramic Tiles

by Value and Volume (£m at rsp and million square metres), 1999-2003 110

Foreign Trade 110

SUPPLY STRUCTURE 110

Number of Companies 110

Employment 111

Distribution 111

Trade Associations 111

The Tile Association 111

MAJOR PLAYERS 112

H&R Johnson Tiles Ltd 112

Financial Results 112

Pilkington's Tiles Group PLC 112

Financial Results 113

British Ceramic Tile (BCT Ltd) 113

Financial Results 113

ADVERTISING AND PROMOTION 113

Main Media Advertising 113

Table 7.3: The Leading Main Media Advertisers of

Ceramic Tiles (£000), Years to December 2002 and 2003 114

Other Activities 114

BUYING BEHAVIOUR 114

Ownership of Ceramic Tiles 114

Table 7.4: Ownership of Ceramic Tiles (% of adults), 2003 115

Purchasing of Ceramic Tiles 115

Table 7.5: Purchasing of Ceramic Tiles in the Last 12 Months

by Sex, Age, Social Grade, Region and Household Income

(% of adults), 2003 115

Profile of Purchasers 116

Table 7.6: Purchasers of Ceramic Tiles in the Last 12 Months

by Sex, Age, Social Grade, Region and Household Income

(% of purchasers), 2003 117

Sum Spent in the Last 12 Months 118

Table 7.7: Sum Spent on Ceramic Tiles in the Last 12 Months

(% of those purchasers who said how much they spent),

2001 and 2003 118

FORECASTS 2004 TO 2008 119

Table 7.8: The Forecast UK Retail Market for Ceramic Tiles

by Value and Volume (£m at rsp and million square metres), 2004-2008 119

8. Power Tools and Accessories 120

DEFINITION 120

Drills and Screwdrivers 120

Sanders 120

Saws 120

Decorating Tools 120

Multifunction Power Tools 121

Other Power Tools 121

Power-Tool Accessories 121

KEY TRENDS 121

MARKET SIZE 122

Table 8.1: The UK Retail Market for Power Tools

and Accessories by Value (£m at rsp), 1999-2003 122

SUPPLY STRUCTURE 124

Number of Companies 124

Employment 124

Distribution 124

Trade Associations 125

Portable Electric Tool Manufacturers' Association 125

MAJOR PLAYERS 125

Black & Decker 126

Financial Results 127

Robert Bosch Ltd 127

Financial Results 128

Alba PLC 128

Financial Results 129

Makita (UK) Ltd 129

Financial Results 129

Earlex Ltd 129

Financial Results 130

Other Companies 130

ADVERTISING AND PROMOTION 131

Main Media Advertising 131

Table 8.2: Main Media Advertising Expenditure on

Non-Garden Power Tools by Manufacturers and DIY Superstores (£000), Years to December 2002 and 2003 131

Other Activities 132

BUYING BEHAVIOUR 132

Ownership of Power Tools 132

Table 8.3: Ownership and Purchasing of Selected Power Tools and Separate Attachments (% of households), 2001-2003 133

Purchasing of Power Tools 133

Table 8.4: Purchasing of Selected Power Tools and Separate Attachments in the Last 12 Months by Sex, Age, Social Grade and Region (% of households), 2003 134

Profile of Purchasers 135

Table 8.5: Purchasers of Selected Power Tools and Separate Attachments in the Last 12 Months by Sex, Age, Social Grade and Region (% of households purchasing), 2003 135

First-Time Purchases and Replacement Purchases 136

Table 8.6: Purchasing of Selected Power Tools and Separate Attachments in the Last 12 Months -- First-Time Purchases and Replacement Purchases (% of households), 2003 136

Sum Spent in the Last 12 Months 137

Table 8.7: Sum Spent on Selected Power Tools and Separate Attachments in the Last 12 Months (% of those purchasers who said how much they spent), 2003 137

FORECASTS 2004 TO 2008 137

Table 8.8: The Forecast UK Retail Market for Power Tools

and Accessories by Value (£m at rsp), 2004-2008 138

9. Hand Tools and Decorating Tools 139

DEFINITION 139

KEY TRENDS 139

MARKET SIZE 139

Table 9.1: The UK Retail Market for Hand Tools

and Decorating Tools by Value (£m at rsp), 1999-2003 140

SUPPLY STRUCTURE 140

Number of Companies 140

Employment 140

Distribution 141

Trade Associations 141

MAJOR PLAYERS 141

Stanley Tools (Stanley UK Holding Ltd) 141

Financial Results 142

Spear & Jackson PLC 142

Financial Results 142

LG Harris & Co. Ltd 142

Financial Results 142

Hamilton Acorn Ltd 143

Financial Results 143

Robert J Hall Ltd 143

Financial Results 143

ADVERTISING AND PROMOTION 143

BUYING BEHAVIOUR 144

Purchasing of Non-Electric Tools 144

Table 9.2: Purchasing of Non-Electric Tools in the

Last 12 Months by Sex, Age, Social Grade and Region

(% of households), 2003 144

Profile of Purchasers 145

Table 9.3: Purchasers of Non-Electric Tools in the

Last 12 Months by Sex, Age, Social Grade and Region

(% of households), 2003 146

Sum Spent in the Last 12 Months 147

Table 9.4: Sum Spent on Non-Electric Tools in the

Last 12 Months (% of those purchasers who said

how much they spent), 2003 147

FORECASTS 2004 TO 2008 147

Table 9.5: The Forecast UK Retail Market for Hand Tools

and Decorating Tools by Value (£m at rsp), 2004-2008 147

10. A Global Perspective 149

DIY RETAILING GROWS AND CONSOLIDATES IN THE US 149

KINGFISHER: THE WORLD'S THIRD-LARGEST DIY RETAILER 149

THE MARKET IN WESTERN EUROPE 150

POLAND: HIGH UNEMPLOYMENT BUT CONTINUED ECONOMIC GROWTH 151

JAPAN: ECONOMY SHOWING SOME IMPROVEMENT 151

CHINA: RETAILERS HURRY TO TAP A VAST POTENTIAL MARKET 152

SUPPLY FROM CHINA THREATENS EUROPEAN PRODUCTION 152

WORLD POWER-TOOL MARKET TO SHOW GRADUAL GROWTH 153

11. The Future 154

INTRODUCTION 154

Inflation 154

Table 11.1: Forecast UK Rate of Inflation (%), 2004-2008 154

Trends in Housing 154

FORECASTS 2004 TO 2008 155

Table 11.2: Forecast Consumer Expenditure on DIY Products

at Current Prices (£m at rsp), 2004-2008 155

Table 11.3: The Forecast UK Retail Market for DIY Products -- Five Key Sectors by Value (£m at rsp), 2004-2008 156

FUTURE TRENDS 156

12. Further Sources 157

Associations 157

Publications 158

General Sources 158

Government Sources 159

Other Sources 160

Bonnier Information Sources 160

EXECUTIVE SUMMARY

In 2003, consumer expenditure on DIY tools and materials in the UK reached £10.84bn -- an increase of 9% over the previous year at current prices. This report focuses on five major product sectors, which together accounted for an estimated 24.3% of the market in 2003. These sectors are: paint and woodcare, wallcoverings, ceramic tiles, power tools and accessories, and hand tools and decorating tools. Garden products and furniture are not included.

The strong housing market and the high level of home ownership were important drivers of the market between 1999 and 2003. Low interest rates in 2002 and 2003 helped home buyers to afford mortgages and encouraged consumers to spend, rather than save. Other economic trends, including rising household disposable income and modest levels of unemployment, were also favourable to the market.

Television home and garden `makeover' programmes have exerted a strong influence and have encouraged people to be more adventurous in their choice of décor. They have also helped to convince inexperienced amateurs that home improvements are within their capabilities.

The strong competitive pressure in the DIY market, the power of the DIY superstores and the availability of low-cost imported tools have kept prices down, and overall price inflation for DIY tools and equipment between 1999 and 2003 was almost nil. Product subsectors showing strong growth in 2003 included emulsion paint, cordless power tools, ceramic flooring tiles and garden woodcare.

Key Note expects that a slowdown in the housing market and more cautious spending by consumers will result in a reduction from the very high levels of growth seen from 2001 to 2003. Nevertheless, annual growth rates of 5% or more are forecast for the DIY market over the period to 2008.

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Last updated by Amanda Porteous June 2004