Whatts ahead for redwood?

IlJrrsour A DouBr, the past Y Y decade has proven to be one of the most challenging business environments that the redwood industry has ever faced. In addition to the headwinds created by the recent economic downturn, redwood products have faced increasing competition from composite offerings that have challenged its leadership position in key markets. These challenges have forced the industry to reevaluate its market position and create new strategies for remaining competitive in an increasingly crowded market.

Despite the inroads made by composites in the marketplace, natural wood still represents the lion's share of all decking materials (with approximately SOVo of the total market, primarily southern yellow pine). Redwood occupies a premium, niche segment of the total decking industry, with an approximate market share of lTVa west of the Rockies. Due to the economic pressures of the downturn, it is likely that the industry will experience consolidation within distribution and manufacturing.

Several key consumer trends are affecting the markets that redwood producers serve. Changing consumer needs in the outdoor living segment have created an environment in which consumers are much more careful in their purchasing decisions. Due to economic uncertainty and decreasing home equity, consumers are more price-sensitive and more likely to stay close to home.

With approximately one-quarter of homeowners facing a situation where they are "underwater" in their mortgages, many consumers are choosing to upgrade their current homes to make them more livable, instead of buying a new home. One of the most popular upgrades to achieve this objective is the addition of a deck or outdoor living space (approximately 82Vo of all homeowners desire an out- door living space to share with friends and family). The segment's growth has been focused primarily on smaller and less expensive projects than we witnessed during the housing boom.

How is redwood performing in these market conditions? Dealers report that redwood is in a "sweet spot" due to its superior performance, natural beauty, and excellent price position. Consumers who have navigated to "new" materials have come back to revisit redwood. It is certain that this has been partially price-driven (redwood is consistently less expensive than composite material, for example), but we also hear that consumers are coming back to redwood because it is a "tried and trued" material they can trust.

Research also consistently shows that redwood is perceived to be the most beautiful outdoor lifestyle material. Although consumers are price-sensitive, they still care very much about the aesthetic value of their outdoor living projects. Contractors report that redwood is increasingly popular in their projects because it can help create customized outdoor living spaces at an incredible value relative to other options.

Greg Vorce, Vorce Construction, Chula Vista, Ca., sums it up best: "As a third-generation craftsman, I learned the benefits of redwood at an earlv age: beautiful grain patterns, easy to work with, and long lasting. Redwood is my first choice for all exterior decking projects."

Even given the momentum that redwood is experiencing in the marketplace, how will the industry remain competitive in the future? The redwood industry cannot rest on its laurels and assume that the material will "sell itself." In order to successfully compete in a crowded market, redwood will have to continually improve and innovate its product offerings, product quality, and marketing communications. The industry will also have to create value-added support for its distributors, retailers, and contractors. Marketing campaigns must better communicate to consumers the benefits of redwood and support our channel partners more effectively.

And, finally, our industry must begin to effectively communicate our forest stewardship practices and the fact that natural redwood products are the truly sustainable and renewable material for outdoor living spaces. If we are successful, redwood will retain its legacy as a leader in the outdoor living category for years to come.