onb webinar - opportunities for atlantic canada building products in east coast us and caribbean
TRANSCRIPT
Opportunities NB Webinar Series
Opportunities for Atlantic Canada Building Products in East Coast, US,
and the Caribbean.
Hosting: Suzanne Turmel
Opportunities NB
Client-focused, proactive, professional and accountable, Opportunities NB is the first point of contact for local and foreign businesses looking to grow, expand or locate. We are focused on performance, high growth opportunities and growing New Brunswick. Opportunities NB is poised to:
• Support business development inside New Brunswick, including business support services for small, medium-sized and large businesses;
• Proactively pursue high growth opportunities through exports and foreign investment; and
• Work with industry partners, economic development stakeholders and public sector partners to identify, build and support a portfolio of significant high growth opportunities both within and outside the province!
We will offer you the ideal operational expansion and labour solution tailored to your needs to grow in New Brunswick. We will go above and beyond to ensure your success in the province.
New Brunswick is built for business. We look forward to working with you to grow your business.
US East Coast and Caribbean
Export Opportunities for Atlantic
Canada Building Products
OPPORTUNITIES NEW BRUNSWICK and BEYOND VENTURES GROUP
Today`s Presenter
Glenn Traylor
US Building Industry Consultant specializing in structural building components
30+ years comprehensive construction knowledge
Former District Sales Manager for leading US building products company
Assisted Atlantic Canada building products companies with 1-2-1 virtual consultations during 2015 Building Products Roadshow
Glenn will be in Orlando to support companies attending the IBS show
Contact:
https://www.linkedin.com/in/glenntraylor
Raleigh, North Carolina, USA
I. US new build market overview / trends
II. Building products market structure / supply chain
III. Target market: US East Coast
IV. Target market: Caribbean
V. Opportunities for Atlantic Canada
VI. Routes to market
VII. Issues to be aware of
VIII. Leveraging IBS as a place to promote
Agenda
Pre-IBS webinar for Atlantic Canada building products exporters
US market overview
Home sales continue to
recover • New home sales
+13% YTD over 2015
• Currently at the highest level since 2007 although still below pre-recession peak
• Commercial building industry slowing somewhat while residential is speeding up
Construction spend also
growing
The market by building
permits
Key takeaways: • Market driven mostly by single family builds • South is the strongest regional market, led by a shortage of housing in Florida
Industry trends
Housing shortage: abating
Labor shortage: increasing
Still a trend toward more modular components
Large tract builders taking up more of the market
Canadian truss still shaking up the West Coast
Consumer trends
Personalization and customized design
Sustainable/green features
Smart home technology
Growth is in the middle of the market
Better insulation needed
Supply chain
Market structure The builder of today is more of a project manager...
• Rather than building, builders today will subcontract most of the work
• Example: Carpenter Contractors of America, $100 million company
• Sub-contractor will tend to source all building components directly from the manufacturer
• This model is more common for larger projects, which are increasing
...but retailers remain a major factor • Will be supplying to consumers and smaller
independent homebuilders (thousands throughout the country)
• Home improvement chains have largely pushed out traditional hardware stores– big boxes now account for nearly 50% of home improvement sales
The building product journey
Distributor
Building Products Supplier/Manufacturer
Building Products retailer (e.g.
Lowe’s, Home Depot)
Large contract builder (e.g.
Contractors of America)
Internet portal (for individual
homeowners as well as builders)
Building Construction Independent Builders
US east coast
market
2016 building permits by state...
- 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000
RHODE ISLAND
VERMONT
WEST VIRGINIA
NEW HAMPSHIRE
DISTRICT OF COLUMBIA
MAINE
CONNECTICUT
DELAWARE
MISSISSIPPI
KENTUCKY
MASSACHUSETTS
ALABAMA
MARYLAND
PENNSYLVANIA
NEW JERSEY
NEW YORK
VIRGINIA
SOUTH CAROLINA
TENNESSEE
GEORGIA
NORTH CAROLINA
FLORIDA
• The top six East Coast markets are all in the Southeast
• Southeast lean even more dramatic when considering permits as a % of each state’s population
• Highlights strength of the southern markets
Top 10 metro areas*
NYC/Northern NJ/Long Island/PA (26,832) 1
2 Atlanta/Sandy Springs/Marietta GA (25,191)
3 Washington DC/Arlington-Alexandria VA/MD (16,825)
4 Orlando FL (14,270)
5 Nashville/Davidson/Murfreesboro TN (13,375)
6 Charlotte/Gastonia/Concord NC/SC (13,042)
8 Tampa/St Petersburg/Clearwater FL (12,080)
7 Miami/Fort Lauderdale/Miami Beach FL (12,786)
9 Raleigh/Cary NC (9,197)
Philadelphia/Camden/Wilmington PA/NJ/DE/MD (7,899) 10
*By total # of building permits in 2016
Fastest growing* *Based on YTD building permits, 2016 vs. 2015
+11%
+10% +9% +8% +7%
+38%
Kentucky
+21%
Maine
+16%
Georgia Tennessee
Rhode Island Delaware Florida North Carolina
2016 permits: 8,542 2016 permits: 2,822 2016 permits: 34,629 2016 permits: 25,425
2016 permits: 689 2016 permits: 3,921 2016 permits: 75,627 2016 permits: 38,353
A closer look at Maine • A small market but proximity could
make it worthwhile
• Home values and # of sales also up over 2015
• Building permit growth is being driven by single family (+36% YTD); single family building permits in MA (+16% YTD) and NH (16% YTD) are also strong, possibly justifying a regional strategy
• Many distributors service NH and ME from a base in Massachusetts, which could be a way to consolidate the market
Words of caution Don’t get too excited about New England…
Total building permits 2016
12,179
Total building permits 2016
148,609
GA and NC have each issued 3x as many building permits as all of New England so far in 2016. FL alone has 6x as many.
Caribbean market
The Caribbean • Building products sector tends
to be driven by tourism and hospitality, with lots of construction companies active from US, Europe, and China
• Tourism tends to mirror the US economy, is strong at the moment
• Opportunity to enter the market for general building materials via distributors, but would probably need to price competitively
• Residential construction is slow on a regional basis
Caribbean Economy:
Infrastructure Project Value % by Sector Source: BMI Research
Construction in the Caribbean
Fastest growth rates for the more tourism-dependent economies • Continued expansion in construction activity is primarily led by the private sector
• Growth related to tourism and other commercial development, particularly in Anguilla, Antigua and Barbuda, The Bahamas, Belize, Guyana, St. Kitts and Nevis and TCI
• Development is driven by foreign direct investment (FDI) inflows, largely from US, Europe, and China
Mix of Commercial and Residential • Significant domestic private sector investment in commercial developments in Trinidad
and Tobago, including several hotel and shopping centres
• Strong residential building growth in Anguilla, Belize and Guyana
• Growth in construction is also stimulated by public sector capital investment in Belize, Dominican Republic, Guyana, Haiti, Suriname and Trinidad and Tobago
Caribbean hospitality industry
• 2015 across 1,922 hotels: • Occupancy was up 3% • Average daily rate up 4% • Revenue per room up 8%
• June 2015, the Caribbean had 44
hotels with 9,382 rooms under contract • 14 hotels with 4,240 rooms
under construction
• Continued investments in infrastructure to improve competitive position (airports, ports and roads)
Tourism Share Change: 2007 to 2013
Green building activity and
trends • Still an emerging trend in the
region • Expectations for more green
building across the region are high
• Individual markets within the region have unique triggers and obstacles
• Commercial construction is a critical sector
• Critical challenges to be overcome are lack of public awareness and public support
Construction costs
• Construction costs 2015 increases: o 2-3% Antigua, Cayman,
Grenada and Haiti o 4% Cuba o 5% Dominican Republic
• On average, Bermuda
continues to have the highest construction costs
• Dominican Republic and Haiti have the lowest costs
Other opportunities
• Public-private partnership projects, infrastructure projects and value-added products
• Relief works and weather-related solutions: Haiti suffered hurricane damage this year equal to 75% of its GDP
• Cuba – the next tourism frontier?
• Export higher value solutions and expertise to less developed markets • Pre-election spending: elections slated in 2017/2018 in Aruba, Bahamas, Barbados,
Bermuda, Cayman Islands, Grenada, and the US Virgin Islands
• Direct routing for goods i.e. Jamaica, The Bahamas, Dominican Republic, Panama
• However… the market is still small, esp. when compared with the competing scale of the US Southeast market
Opportunities for
Maritimes exporters
Main sector exports in US
Low Interest Rates
Framing lumber Trusses, wall frames, etc. Competitor markets: Chile, Brazil, USA
Copper Much of US copper for wiring originates in Canada Competitor markets: Chile, USA
Flooring Tend to prioritize higher quality wood Competitor markets: USA, lower value flooring from Asia
Gypsum Sheet board for ceilings and walls Competitor markets: Mexico, USA
Source(s): National Association of Home Builders; Kohler & Kohler; World of Tile; Arrowhead Carpet Tile Interiors; Glidden Paint
The general opportunity Either… Better/Faster/Cheaper
• Growing labor shortage + current building pace means there is more pressure to projects done faster, with less people, in order to save time and money
• New products that save time/labor or improve an existing process will be looked upon favorably in the US market
Or… Higher up the value chain
• Trend toward custom made, personalized interiors means a greater demand for sophisticated materials and design features
• Smart home tech: better energy effiency and management, technologies to control the in-home environment
• Non-chemical/environmentally-
friendly materials
• Improved air circulation/HVAC
Wood products
Exports Imports
Sawmill Products 427,536 3,905,414 Reconstituted Wood Products 163,543 1,161,411 Miscellaneous Wood Products 124,485 315,378
Engineered Wood (exc Truss) 79,691 291,315 Softwood Veneer & Plywood 60,287 219,344
Wood Windows & Doors 69,869 191,643 Hardwood Veneer & Plywood 110,908 145,008
Other Millwork (including Flooring) 68,779 96,534 Treated Wood Products, Nesoi 87,379 63,652
Wood Containers & Pallets 54,493 61,876 Prefabricated Wood Buildings 19,235 55,915 Mobile Homes & Trailers 5,408 1,091
YTD through August 2016 Source: US Census Bureau
Net-zero energy homes
Canadian Firm Proving Feasibility of Mass-Produced Net-Zero Homes
(SBC Magazine, Sept 2016)
• Example of going up the value chain
• The US tends to lag behind when it comes to energy and environmental solutions, presenting a great opportunity for exporting innovative technology as well as knowledge and expertise
• Ask questions! Look for ways in which your product may solve a need that is not currently being met in the market
Routes to market
E-Commerce
Three main sales channels
Building Product Distributors
Contract Builders
• Will be selling to retailers, reaching independent builder segment as well as individuals remodelers and hobbyists
• Geographically spread out, probably the best general entry point into the regional markets
• A game of margins…
• Economies of scale – these are big companies doing large projects and sourcing product directly from the manufacturer, cutting out the middle man
• Bigger components and larger-scale orders
• A growing factor both at the business-to-business and business-to-consumer level
• Individual homeowners can do everything from ordering a new kitchen to designing a new home via the internet
• Less likely to be represented at IBS
Case study: E-commerce
Consumer-facing business, but other websites like Build.com cater to builders (more of an online hardware store)
Competitor RTA Cabinet Store also sells kitchen accessories, bathroom features, and flooring
• Customers choose a new set of kitchen cabinets via internet portal that displays how they will look in the customer‘s actual kitchen
• TheRTAStore sources cabinets and delivers with minimal overhead
• Main supply market has been Asia, but the company has launched another brand with North American supply base
• Opportunity to leverage this type of business model for higher value products from Canada
Contract builders 2016 Housing Giants Rankings ProBuilder.com • Top 40 builders controlling more of the
market; vertical integration increasing
• Tend to source their product directly
• Visit website and click on names to see units closed per state for each company, can focus on those in Southeast or elsewhere on East Coast
• Many will be represented at IBS, scan through attendee list to find targets
See also: List of US modular home manufacturers (Modular Homeowners)
Distributors • Primarily a regional business
• At IBS: Look for distributors covering key states or regions
• Many distributors for Caribbean are based in/also serve South Florida
Builders First Source, Carter Lumber, BMC, ABC Supply, 84 Lumber, G Proulx Building Products
Beacon Sales, Britton Lumber, Huttig, Guardian Building Products, Applicators Sales
Caribbean Building Supplies, Tropic Building Supplies, Triangle Exports, CMS International (also serves South FL) Wholesale Building Products (also serves South FL)
A few key names:
Southeast New England Caribbean
Issues to be aware
of
Odds and ends Local Code Approvals
• Will need to submit reports and go through a process to get new building products approved
• Some places will recognize Canadian approvals, some will require local approval process
Sales Taxes
• Each state in the US levies its own sales taxes
• State and Local Sales Tax Rates in 2014 (Tax Foundation)
• Most states do not pursue tax collections unless the business has a physical presents in their state
New Energy Code?
• Looking at improving building methods and technology
• Nothing approved; only proposed – but tells us where things are headed and why
Payment Terms
• Typical building industry trade terms are 30 days
• 1 percent discount offered if payment is made within 10 days
Mechanic Lien Laws
• Protect suppliers by making land owner/developer legally responsible for payment from any contractors to material suppliers
• Most markets offer similar supplier protections
Leveraging IBS
Pro tips Remember… it’s only the first date
• Keep expectations reasonable
• It’s not about closing deals; it’s about developing relationships
• Focus on qualifying, cultivating, getting a second meeting
Make it about the customer! • People are looking to solve their problems
• Be a good listener and make sure to focus the conversation on their needs rather than your product
• IBS is an opening salvo – once you’ve established a connection, there will be plenty of time to sell
Additional resources From the IBS website… • Attendee lists segmented by which
products registrants want to see during the event
• Can also get lists of all pre-registered attendees for 2016 as well as attendees from last year’s show
• http://www.nahbclassic.org/entry/3649/ProductFocusedIBSAttendeeDirectMail?channelID=26081
• $450 for an email list
Thank You
Mercí
Q&A / Q&R
Upcoming webinars
November 17th, 2016: In the Cloud and on the
Ground: Tax Implications for the U.S. and Canada
