Your Business Outlook - February 2003

Some injection molding companies expect the furniture market to awaken from its slumber in 2003, but others think it may take another year. Molders blame the flat or declining furniture market on production moving to Mexico, China, and Taiwan, where labor costs are lower. Overseas competition as well as low profit margins, stiff domestic competition, and economic uncertainty have caused several injection molders to get out of the furniture market.

Domestic injection molded furniture consumed an estimated 386.4 million lb of resin in 2001. With an average annual growth rate around 3%, this market could grow to 449 million lb by 2006.

Polypropylene constitutes around 80% of the resin consumed for injection molded furniture. HDPE is a distant second place at around 7%, and polystyrene is third at 6%.

The five primary categories of injection molded furniture are juvenile or infant furniture, public seating (school, lecture hall, stadium, and arena), home and office furniture, outdoor and patio furniture, and miscellaneous furniture parts. Outdoor furniture is the largest segment—44% of the total—and is also suffering the worst slump. Home and office furniture is the second largest area (25%) and is growing moderately. Juvenile and infant furniture represents 22% of the market, public seating is 6%, and the miscellaneous furniture segment represents 3%. This last category includes shower seats and hospital furniture.

 

Home remodeling may help

Much of the injection molded furniture market is directly related to the housing market. Changes in the level of orders for housing-related furniture products arrive about six months after any sharp changes in housing starts. Low mortgage rates have produced record levels of home sales and a renewed interest in home remodeling and improvement. According to the National Association of Home Builders, 11.4 million homes built in the 1970s now require improvements and repairs. Remodeling should encourage purchases of new and upgraded furniture.

In the office-furniture market, manufacturers are not expecting the building boom of the mid-1980s to return anytime soon. The biggest driver for growth today comes from corporate face-lifts aiming to replace aging cubicles with newer, open-style office systems. According to the Business and Institutional Furniture Manufacturers Association, 2002 saw a 20% decline in office-furniture shipments and new office construction will continue to decline through the first half of 2003. Modest improvement is expected by mid-2003,with nearly an 8% increase over 2002 shipments.

The trend toward home offices and telecommuting is also an important factor. Nearly 45 million households have home offices. Many of them include special furniture to accommodate computers. Plastic shelves utilized in the home or office are also increasing in growth. Average annual growth for home and office shelving is predicted to be 5%.

The school furniture segment is expected to grow as some states, like California, pass laws that mandate smaller classrooms for kindergarten through third grade. This will result in the construction of more schools or expansion of existing schools, requiring more production of school furniture.

In outdoor furniture, consumer taste at the moment favors cast iron rather than plastic. Outdoor furniture sales are also strongest in the first half of the year, during springtime, and are affected by weather conditions.

During 2002, Fiskars (Syroco, Inc.) was the largest U.S. producer of injection molded furniture, with a market share of approximately 21%. U.S. Leisure Furniture (Cutter Group) was the second-largest factor, with a market share approaching 8%. The third-largest producer was Home Design Products/Resin Partners (Cutter Group). The rest of the top-five companies are Grossfillex, Inc. and Graco-Century Children’s Products, Inc. (Newell Rubbermaid, Inc.). Collectively, these five companies control a market share of approximately 49%.

Mastio & Company, based in St. Joseph, Mo., is a well-known consulting firm specializing in industrial-consumer opinion research and market trends in the plastics industry. For more information, call (816) 364-6200 or visit www.mastio.com/pt/outlook.html.