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July 07, 2005

Professional Remodeler

Decking Supplement

Cheryl Dangel Cullen

Is It Your Imagination, Or Is There a Boom in Decks?

Our ancestors lived outdoors in the hot summer months, rocking back and forth on long verandas or romancing in a backyard gazebo. Then came air conditioning, and everyone retreated inside.

As they say, everything old is new again, and we’ve rediscovered the pleasures of the great outdoors. Just as the verandas and gazebos of old provided a cool escape in the hot summer months, today’s homeowners have rediscovered the value of the deck. These buyers are adding additional living space via “outdoor rooms” that provide an escape – not so much from the heat, but from the stress and tension of everyday life.

Booming Business

Principia Partners, a leading international business-consulting firm with extensive experience in the building products and plastics industries, has completed 12 studies related to decking in the past six years. In its Composite Decking & Railing 2004 study, the Exton, Pennsylvania-based company reports that the number of decks built on residential structures in North America reached over 4.3 million units in 2004. The construction of decks on homes has grown at roughly 5 percent per year since 2000, continuing the trend toward integrating outdoor spaces into homes.

To keep up with this demand, the study notes that over the past four years, the number of North American suppliers who fabricate composite decking and railing has more than doubled – from approximately 15 to more than 30 companies. Many of these companies have been active in the business for a number of years, and at least 11 new firms entered the decking products market in 2004.

Composite Materials Make Headway

Marketing efforts by leading suppliers have helped increase awareness of composite decking and railing among builders and homeowners, who see the value of longer service life and lower maintenance compared with traditional wood products. As a result, composite decking has grown at an impressive rate and now represents 10 percent of the market volume, up from 4 percent in 2000.

An increasing number of producers are offering new and improved decking and railing products with distinct brand names to distinguish them from their earlier lines. These new “best-in-class” products use premium materials, more realistic color styles and versatile design patterns on the deck-board surface, reports the study.

Jim Morton, a senior partner at Principia Partners, says: “Composite decking producers are competing to develop the most effective channel to the end consumer, providing that channel with a differentiated product and increasing service and support. Competition for distributors and dealers is intensifying at every step. Only those suppliers who develop both a desirable product and an effective distribution strategy will ultimately succeed in this hyper-growth industry.”

“Composite decking is picking up on the greater industry trend toward aesthetic building products, low maintenance, and generally higher cost,” reports Lou Rossi, another senior partner at Principia. “Most think composite decking is lower cost, but in fact this material is usually two to three times the expense of traditional, natural materials. There are some exceptions, like manufactured stone.”

Given the boom in decks and the sudden popularity of composite decking materials, you would think that the traditional wood decking markets, such as pressure treated materials, would be fearful. That’s not the case. These manufacturers view the current boom as an opportunity, not a threat.

“While composite materials are taking business from the pressure treated market, it is such a large pie that the latter will still be three times the size of composite decking in five years,” says Rossi.

Another upside is that all the talk about composite materials is heightening the awareness of decking materials in general. Although homeowners may be initially interested in a composite deck, once in the purchase process, they are often made aware of all the choices available, including traditional wood materials.

Long-Term Investments

Whatever the material used and whether installed by a homeowner or a contractor, a deck enhances the overall property value – although not in the way a kitchen or bathroom upgrade does, Rossi cautions. However, a deck does provide a level of investment return. In addition, the homeowner also receives a level of enjoyment from outdoor living.

“The trend line for decking since 2000 has been up,” says Rossi. The market has risen 4 percent on all decks, while demand for wood plastic composites should grow 40 percent between 2004 and 2009. In 2009, the wood plastic composite market is projected to be more than one-third the size of the pressure treated lumber market, which is consists of traditional pine or fir.

Why has the decking market grown with such speed? “Since the stock market took a hit, people are putting more of their money into their homes,” Rossi remarks. “A redistribution of personal wealth has led to upgrades in new homes and existing homes.”

With the boom in business, everyone has been jumping into the market. It is the gold rush phenomenon, says Rossi, which “will serve us in the early days. But as the business matures, a more discriminating consumer will emerge. Either the installer or the homeowner, this buyer will demand better product performance, both mechanical and aesthetic. Whatever you can get away with in these early days, you won’t be able to in the future.

“Currently, companies are focusing on local or regional markets, because they’ve been able to capitalize on the pent-up demand,” Rossi continues. “As the market achieves a degree of saturation, it will come down to the big players in the industry, like a Trex, who was able to make a market, build a brand and build they category. This company is the benchmark for branding and profitability.”

Other major players include Alcoa, Weyerhaeuser, and Certainteed, among others, according to Rossi. “You have some venerable names here. They all have what is key – customer relationships and market access.”

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