Gomposite Profiles Trends in composite and plastic decking

tlaHE recent. meteoric rise of composite and plastic deckI ins can be traced to a conversence of f-actors-con,rr.ri' preferences for higher qritity and lower maintenance, product improvements, the hysteria over pressure treated wood, the growth of the overall deck market.

Now, with the phase-out of CCA treated decking, are plastics and composites braced fbr an even higher surge? Or, will the arrival of new manufacturers result in oversupply, depressed prices and eventual consolidation?

We asked some of the largest composite and plastic deck manuf'acturers where the industrv is headed.

Rob Long (LP Corp./lVeatherBest composite)

"Demand has been very strong for composite wood decking over the last few years. Production has grown commensurately by both additional capacity and increased efficiencies at established manufacturers and the entrance by new manufacturers. We see it growing about I5Vo per year over the next few years."

Ludwig Furtner (Weye rhaeuser/ChoiceDek composite )

"Market demand for Weyerhaeuser ChoiceDek products has grown significantly over the last couple of years. Consumers, d-i-y customers, professional deck builders, and repair and remodel contractors are embracing composite decking products based on increased advertising and on a track record of good performance for our products. We expect sales to continue to grow at the same rate as the last couple of years, if not stronger."

Kevin Brennan (TimberTech/composite )

"You had the explosion in '98, '99, 2OOO, and then you had 4 zillion competitors get into it. We had a good year. The industry is growing at l5vo to 25Va, and we expect to exceed that rate."

Samantha B. Goes (Nexwood Industries Ltd./composite)

"In the last year there has been a huge increase in the demand for composites. We attribute this partially to the increased exposure of composites in the marketplace, as well as the acceptance of the benefits of composites at all levels of distribution. With this increase in demand, however, has also come an increase in competition. Many new players have entered the market within the last two years.

Mark Shaner ( Epoch/Evergrain composite)

"Demand has been excellent. As composite decking has grown so has the consumers expectation for a better looking product and that's where we come in. It's been a lot of fun and hard work. Our business has been very strong and we expect it to get even better. We expect to be able to satisfy the rapidly growing demand."

"We expect demand for Evergrain decking to grow dramatically over the next five years, in part because of the success of the category but in a larger sense because of the product's differentiation from other composites. Our compression molding technology allows us to achieve new levels of realism, detail and quality."

John Long ( Kadant Composite s/Geodeck composite)

"Demand is growing dramatically. We began with two extrusion lines in year 2000 and are now installing lines eight and nine. Our lead time in the early spring was extended to l0 weeks. We expect 2003 to be a breakout year and anticipate doubling our 2002 revenues."

"In the short term, we expect that the increased demand is going to allow for many new players. States thet have not been exposed to composites in great volumes are going to be introduced to many more manufacturers than were in the market even as few as two years ago. with a wide range of product offerings. The huge increase in demand has qbvious implications for an increase in production, and rnany composite manufacturers are feeling the effects of this rapid growth.

"In the longer tenn, we expect this already growing demand for alternative products to increase exponentially, triggered by CCA restrictions and the growing concern for the hazards posed by some chemically treated lumber."

Maureen

"Demand for Trex decking and railing has been very strong. (Third quarler 2002 revenue rose ffiVo to $49.5 million, with net income up 79Vo to $6.1 million.) You can extrapolate that the category has done well, largely based on Trex decking and railing having an e$tirneled 55.M*, market share. The alternative decking market (cq{spqsjtss and plastic products) has an estimated 6-BVo sf the- errtire decking market. Although it is difficult ta ps*-$ct growth rates of alternative lumber sales, it appears the industry will at least continue its 25-30Vo historical growth."

Dick Gauth ier ( U n iv e r s al F o re st P roduct s/Ev e rX c o mpo s it e )

"Demand for composite decking is estimated to be $480 million for 2002. The expected growth will be slightly less than 207o next year-about $570 million for 2003. An annual growth rate of about l87o is expected through 2006. We estimate demand to be $900 million by 2006."

Martin Grohman

(Correct Building Products/CorrectDeck composite)

"As a small manufacturer, we were warned that the big companies like CertainTeed and LP were going to come in a turn this into a commodity. We haven't seen that at all. The products are getting better. People are looking for more bang for their buck."

John Pruett ( C e rt ainTe e cl/B o erdw alk c omp o s it e, Ev e rNew and Bffiech vin.,"l)

"The overall decking market has been growing slightly; the composite decking market is growing exponentially. Boardwalk's sales doubled in the last year."

Lynn Goode ( Mikron Industries/vinyl)

"I see that the demand will just continue to skyrocket. From 1997 to 2001, the overall decking industry grew at about 87o per year. During the same period, alternative decking grew at 857o ro 95Vo a year. There's been a huge shift in marketshare-and that was prior to the CCA issue. Alternative decking now has its foothold. In 1997, it had less than 5Vo of the overall decking market. Within the next four to five years, I wouldn't be surprised ifit had 40-507o.

"The motivator of the growth has been the consumer, who is concerned about maintenance issues. About 637o of decks are made from pressure treated southern pine; it's cheap and it's abundant, but it warps and checks."

John Robinson (The Plastic Lumber Co./plastic)

"Despite a softening economy in the third and fourth quarters, demand was off projections but still strong. Plastic lumber decking boards posted a l5vo gain over the past year, as consumers and contractors became more comlortable with the product. We anticipate a surge in demand, barring a war with Iraq. We feel many consumers have been cautious about making significant expenditures for the past two seasons, and there is pent-up demand."

Mfke Moseb y (RPM/DuraBord plastic)

"Demand and production have been increasing at a rate of approximately 5OVo per year. Our growth in DuraBord plastic lumber is expected to expand by approximately 15/20 times for 2003 and double that in 20&t. We are just getting ready to bring on a second line in 2003. Our emphasis in the past was to sell to local retail lumber yards, deck builders and the general public via the Internet. Our current plan is to sell our plastic lumber products via wholesale distribution in the Western states."

Rick Wier (Kroy Building Products/vinyl)

"Decking in general is expanding about 77o annually; however, alternative products to wood are growing over 25Vo. About 900,000-plus new decks were constructed this year, and almost 3.5 million replacement projects were undertaken in 2002. Replacement decks are 20Vo larget than the original deck. Composite or alternative deck material is expected to grow well into the double digits as far out as the research projects project. Through 2006, the growth is expected to continue rnthe257o range."

Dave Stamm en ( Dat t on Tec hnolo gie s/vinyl )

"Demand fbr plastic/composite decking has been steadily growing, with the marketplace becoming more aware of, and more comfortable with, these materials. Production definitely appears to be increasing, from what our competitors have advertised. We anticipate the same growth through 2003 as was in 2002. Market share will continue to be taken by plastics and composites, but the overall decking market will remain steady."

Derek Morin (CPI/Eon plastic) r How much of an effect has the phase-out of CCA treated products had on plastic/composite decking demand and production, and what do you see happening when the CCA ban hits in 2004?

"Our 2001 sales were $14 million, 2002 sales were $20 million, and in 2003 we budgeted for $30 million."

Goes (Nen'vood)

"With the phasing out of CCA, we expect to see a variety of alternative treating methods that may or may not perform as well as CCA. As a result, homeowners are going to be looking for decking alternatives that outlast haditional lumber, and new treating methods. By 2004 we think that dealers and deckbuilders who haven't been exposed to composite decking products are going to find themselves scrambling for an alternative to treated lumber."

Brennan (TimberTech)

"The effect it's had is making people investigate other options. A lot of yards are still selling CCA, and it sounds like many will until the last minute. We didn't see much effect in 2OOZ, Uut expect to in '03 and especially in '04."

Gauthier (UFPI)

"The robust sales growth in composites began long before any perceived safety concerns occured regarding CCA, so we don't see the CCA ban as a significant driver of composite sales. Demand for CCA is still high, and we predict will remain strong for its successor preservatives in 2004. Since the new chemicals will drive up treated lumber costs by anywhere from l5-25%o, however, that may help steer some consumers-for whom price is the primary decision driver-toward composites."

Furtner ( Wey e rhae us e r)

"It is very difficult to quantify the impact of the treated lumber situation on composite decking, especially when ChoiceDek sales growth is as strong as we have seen recently. I feel that the confusion that generally accompanies the phase out of CCA combined with the uncertainty about the cost and reliability of alternative treated products will very likely result in additional growth in the sales of composites. The new treated products are more expensive than those being replaced. The cost differential between treated and composites is lessening."

Long(Kadant)

"Certainly the phase-out fiom a public awareness point of view will give us some additional opportunity, but, keep in mind that all of the treaters are converting to other chemicals, so they will still be around and will continue to hold market share in the deckins arena."

Shaner (Epoch)

"In part, it depends on who you listen to. There is general agreement that, as the price gap closes, more people will switch to composites. Price is important, but it is too simple an excuse for not converting sales from wood to composites. There is another dynamic involved and it's fundamental. Face it, Americans have never been afraid of paying more for quality. But how America defines quality is a question we, as an industry, need to ask. The stakes are higher than a few years ago. Today, low maintenance and high performance is what gets you into the game not price."

Fred Costelf o (Fiber Composites/Fiberon composite)

"Difficult to measure. It can only strengthen the trend toward wood substitutes over time."

Long(LP)

"It will have a significant effect. Consumers and municipalities are already concerned about the potential environmental and health effects of CCA treated lumber and are seeking alternatives. And while there are alternative treated wood products they are more expensive than CCA treated wood. This drives the price of the wood products higher and closer to composite wood."

Grohman (CorrectDeck)

"Pressure treated wood is the 800-pound gorilla. Yet, CCA treatment is rot preventive. It doesn't do anything to warping, cupping or checking. In l0 years-or less-it's time for a CorrectDeck."

Murray (Trex)

"Many lumber distributors and dealers have already begun to offer alternatives to CCA-treated lumber, in anticipation of the ban. We think that the phase-out of CCA has caused many contractors and homeowners to consider alternatives. Anecdotally, we've seen more of our TrexPro contractors doing remediation, also known as 'tear-offs."'

Pruett (CertainTeed)

"The ban of CCA has only accelerated the acceptance and growth of wood plastic composite decking. And, it's helped support our price point because ACQ and other alternatives are l0qo to 207o more expensive."

Morin (CP1,)

"Some of the players are making a big deal out of it, but ours is a premium product that's less likely to compete witl pressure treated wood. We're another upsell on composite decking. Certainly, the change will positively affect (plastic decking) demand, but treated wood still has to be used for the understrucfure."

$tammen (Dayton)

, , "!Jp to this point, we have not seen a dramatic 4pswing due to the CCA ban. It allows for big points in literature, but wood is still being used more than we anticipnied,il r,,,,, ' i, it itiil i' r, r ' l

Wier (Kroy)

"There are a couple of things going on here. CCA has been very good for composites, particularly in marine applications. Surface deck board is on the rise because of this. Everyone is scrambling right now to come up with a load bearing composite piling and substructure for the remainder of the deck system. Most thought the answer was ACQ, however, ACQ may attack galvanized hangers on docks, requiring the use of expensive stainless steel hangers. Nobody has the perfect answer...yet! Kroy is actively on the hunt for the right combination of products. So are others. When the products are identified the market for marine and other EPA effected areas is so big, I'm not sure we can measure the size of the market."

Goode (Mikron)

"Absolutely it has had an effect, but not a striking effect. It's the perception; building material companies are staking their claim to fame by advertising their eco-friendliness. Dunn Lumber in the Seattle area has done a great job spreading the word and creating a captive market. The CCA ban will add to the momentum."

Robinson (Plastic Lumber Co.)

"We expected the CCA backlash to hit last season, but it had little effect. We expect to feel it strongly this season, as the media begin to track the story more and awareness grows."

Moseby (DuraBord) r Over the last year or so, many large pressnre treaters have begun evolving into more generic wholesalers by beginning to stock alternative products. What are your thoughts on this phenomenon? Has your company worked with pressure treaters?

"We feel that this will help the sales of plastic lumber and composite lumber. Treated lumber accounts for 85Vo of the decking market, with cedar/redwood l}Vo and plastic/ composite 5Vo. We expect plastic/composite products will grow 50Vo per year. We also feel that plastic products will grow at a faster growth rate than composites as the endusers becomes more educated to the advantases of olastic."

Long(Kadnnt)

"We currently distribute Geodeck through four different treating companies in nine different locations, throughout the U.S. Their sales are growing at the same Face..bs.,our forest product and building material wholeqalers."

Gauthier (UFPI)

"Many pressure ffeaters see market share slipp riliiliiiV and have chosen to embrace, rather than fight, the evolution in both alternatives technology and consumer tastes. UFPI treats lumber, distributes several brands of composite decking and manufactures its own brand."

Moseby (DuraBord)

"I have had numerous talks with treaters, and they have shown interest in our products. There is a lot of confusion as more composite manufacturers come on line so it will be a learning process for some of them to understand the differences between the various composite lumber products and plastic lumber products."

Brennan (TimberTech)

"Yes, we have been working with treaters for several years. I think they saw composites eroding into their business and also a way to make more margin than with wood."

Furtner (W ey e rhae use r)

"We supply a lot of lumber products to treaters. It makes complete sense that treaters may want to supply composite decking with their treated lumber products. Remember, composite decking products still use treated or other decay resistant framing for joists, girders, and posts."

Goes (Nexwood)

"Nexwood has not worked with pressure treating companies. We try to focus on a clean distribution channel to dealers/lumberyards through wholesalers/distributors."

Shaner (Epoch)

"No we haven't, though we have had conversations with several over the past few months."

Murray (?"rex)

"As more and more consumers recognize the benefits of alternatives to wood for their decking needs, it is natural that more businesses will take notice and try to supply that need. Since the combination of a pressure treated framing system and alternative decking surface and railing makes an ideal deck, it is not surprising that wood treaters are distrifuting -the complete package. Trex is not currently di$tributed through any treaters.

Wier fKroy)

, 1:Yes, many wood treaters are beginning to stock altgna: tive products to wood. More for their own,lorlg,.term preservation as wood becomes less desirable Gvef the-next t0 years. lt will be a huge conversion. Kroy has not worked with pressure treaters, however we have been approaehed by very large deck and dock builders who are *re treaters' direct customers."

Long(LP)

"We have not."

Costello ( F ibe r Compo s ite s )

"New, late enffy manufacturers find that traditional lumber and building materials distributors are already carrying at least one composite and are not available to them. Treaters, who are losing market share to composites, are the only viable distribution channel remaining to these smaller manufacturers because of their ability to top-load regular deliveries to the retail yards."

Morin (CPl)

"Because we do so much business with Home Depot, they like that we are distributed through some of the largest pre$sure keaters*-€reat Southern, Rocky Top, MacFarland Cascade-because they're at the stores all the tirne."

Stammen (Dayton) '':

"We have not worked with pressure treaters; however, we have seen the same with the larger lumber distributors opening their doors to plastic/composites.'o at your company?

Robinson (Ptastic Lumber Co.)

"We are a regional decking manufacturer and focus on small distributors that can sell the added value of plastic as well as educate homeowners and contractors on proper installation. We have not developed a relationship with any pressure treaters."

Murray (Trex)

"Last year, Trex changed its product name to Trex Decking and Railing, to emphasize is full line of railing components. This railing component line continues to expand in 2003, with several new railing products debuting at the International. Builders Show. A thinner baluster profile will be introduced in all five Trex cotot$. And, abeauti. fully crafted, new style of chamfered handrail, along with a pyramid-style post cap and a post skirt to finish,off,the:base of the railpost will be offered in 2003. tn 200?; $addle, a deep tan color that lightens only slightly, was added."

Long(Kadant)

"We are adding several new trim pieces to the Geodeck line, including a decorative post cap and b&se, as well as a fascia board and starter trim piece for our T&G decking."

Grohman (CorrectDeck)

"We have introduced the Correct-Deck Signature Series, a 'groove-and-groove' deck board that features a hidden fastener system and a quick, easy installation method."

Brennan (TimbeiTech)

"We just introduced a decorative rail system, the Ornamental Railing System, in 6-ft. and 8-ft. kits, in four colors-cedar, gray, redwood and natural."

Furtner (Weyerhaeuser)

"We just introduced the new ChoiceDek Decorative Handrail line of products. Our handrail has been fully test-

(Please turn to page 21) , :::iI I

THE most successful businesses I regularly review the quality of their professional relationships.

"But this is so obvious," people say. "We understand what we have to do to be successful." Even though the basics may be obvious, how many of us are 1007o successful? Are you reviewing the basics to ensure your success?

Let's see if your business is sweating the basics. If you purchase products for your business, it's a good idea to regularly review the quality of the relationships with your suppliers, making certain that they are closely aligned to your needs. In the quest for more business, you need to state the obvious to your vendors, telling them specifically what you expect from them. It doesn't hurt to emphasize how you plan on measuring their performance. This means that you should be having regular conversations with your vendors about the basics-are they meeting your requirements and making you happy?

Here is a basic seven-point measuring tool for evaluating a supplier's performance:

1. Quality products. This is a top priority and is the most important component. "Well, that's obvious," many of you will say. However, are we consistently obtaining this objective? If the goods you've purchased break or don't live up to your expectations, you are likely to disappoint your customers or your co-workers. So, you must review the quality of the merchandise your vendors are shipping to you.

2. On-tim" delivery. Vendors must deliver exactly when you need it