Over the past few years, the U.S. stone market has defied overall economic trends, as it has continued to grow despite a recession, an unstable stock market and uncertain times on the international front. Citing increased consumer awareness, design trends and growth in housing construction, U.S. fabricators believe that business will increase in 2004 and beyond, according to an exclusive market study conducted by Stone World's market research department.

Of those who responded to the Stone World survey, which was sent primarily to stone fabricators, a solid 81.0% expected the stone market to increase in 2004. Virtually all of the other respondents (18.2%) felt that business would hold steady this year, and a very small portion (0.7%) predicted a decline.

Those predicting an increase for 2004 feel that growth will be relatively significant. A total of 87.9% of respondents predicted that business would increase over 10%, and over half (51.5%) said growth would be over 16% in 2004. In fact, over one out of five fabricators (22.2%) said business would increase by more than 25% in the coming year.

Respondents cited several specific reasons for their optimism. Most often, they cited current trends towards the use of stone as well as increased customer awareness of general stone. “Recent trends in design and education of clients” has increased stone use, stated one respondent. Another participant noted the “growing affordability of stone.”

Speaking in more general terms, fabricators also cited an economic upturn and increased housing projects - both new construction and renovations - as boosting the market for stone. “The economy is starting back up after 9/11,” remarked one respondent, while another cited “increasing demand [for stone] in remodeling projects.”

Definitive growth

Another factor for optimism has been the success fabricators enjoyed in 2003 despite turmoil on the international front and an economy that is still easing its way back to prosperity. Over two-thirds of respondents (66.9%) saw their business increase in 2003, and 24.8% saw their trade remain the same in 2003. Only 8.3% of respondents saw a decrease in business last year.

The percentage of business increases last year were significant, with well over half of those seeing an increase in 2003 (57.7%) noting growth of 16% or more. And further boosting the optimism of respondents, a total of 38% of respondents saw their trade increase by more than 20% last year.

Looking at some specific obstacles for the stone trade in 2003, a total of 67.4% of respondents said that the international political and military conflicts did not adversely affect business in 2003. And even among the 32.6% that felt international strife hurt business, less than a third (32.6%) said it affected business by more than 10%. And it is believed that uncertainties abroad will be even less of a factor in the coming year, as only 28.9% of respondents expect international conflicts to hurt business in 2004.

Given the international flavor of the stone industry, an additional challenge for American stone fabricators has been the weakening value of the U.S. dollar versus the Euro. With so much stone material, fabricating machinery, accessories and related products coming into America from Europe, the decreased buying power of the U.S. dollar cannot be ignored. In the end, though, this factor only hurt 31.3% of respondents to the survey. To combat this issue, respondents had a number of solutions - both temporary and long term. Some fabricators said they looked toward alternatives to European suppliers, such as Brazil and China. Many others said they raised prices to maintain profit margins. And others said they still bought stone from Europe, but they watched their purchases more closely and negotiated better prices for their slab imports.

Long-term optimism

Even after several years of solid growth, there is still much room for growth in the U.S. stone marketplace, and the fabricators who responded to Stone World's survey are astutely aware of this fact. Per-capita stone usage in the U.S. is still relatively low when compared to many countries overseas, meaning that growth can continue well into the long term. “The U.S. is still in the neophyte stage regarding stone,” stated one respondent. Another predicted “better market penetration” over the next decade.

Overall, a total of 83.2% said they felt the stone market would grow over the next 5 to 10 years, and 15.3% said it would remain the same. Only 1.5% felt business would decline over the next 5 to 10 years.

Once again, the predictions for growth are impressive, as over half of respondents (51.3%) calling for growth of over 20% over the next 5 to 10 years. And almost a third of respondents (30%) feel that growth will be over 30% during that period.

Future investments

Given the optimism for this year as well as the long-term, it is not surprising to see that most fabricators are planning to increase investments in their operations in 2004. A total of 70.0% of those polled said they will increase their investments in machinery this year, and a significant number will also be upgrading their overall fabricating facilities (43.6%). In addition, many respondents also said they will invest more in personnel (39.3%) in 2004.

Demonstrating the fabricators' increased contact with consumers, many survey participants planned on increasing their spending on marketing and on their showrooms in 2004 (39.3% in both areas).

Equipment purchases are being made with an eye on the residential market, especially for fabrication of granite countertops. Hand tools were the most prevalent common area of investment, with 86.5% of respondents indicating they will invest in this area in 2004. Following the trend toward machinery used for custom residential work, other common choices were polishers (35.7%), gangsaws (27.8%), shapecutting machines (21.4%) and cranes (12.7%). Block processing remains minimal in the U.S. marketplace, as only small percentage of respondents were planning investment in gangsaws (4.0%), tile lines (1.6%) or blockcutters (0.8%).

Given the small size of the typical U.S. fabricator, overall capital outlay in 2003 was expectedly moderate, according to the survey. A total of 54.3% of respondents budgeted $250,000 last year, while 27.1% invested between $250,000 and $500,000. However, there are some firms who underwent relatively major investments this year, with 9.3% investing $500,000 to $1 million, and another 9.3% investing more than $1 million in 2003.

Capital outlay this year will be quite similar, with 58.3% of respondents planning to invest under $250,000 and 20.9% planning to spend between $250,000 and $500,000. Larger investments should increase somewhat, as 10.8% of survey participants said they expect to spend between $500,000 and $1 million this year; and 10.1% said they would invest over $1 million.

As usual, the survey demographics show the survey participants to be well-established firms - matching the trend of the industry. A total of 66.4% of respondents have been in business for over five years, a figure very comparable to those given over the past few years. Also, a total of 41.6% of participating firms have been in operation for more than 10 years, and 19.0% have been in business for more than 20 years.

Overall, the stone industry is comprised of relatively small businesses, as 40.3% of respondents had only 1 to 5 employees. Also, 64.9% of the firms responding had 10 employees or less, and 88.1% had 25 employees or less.

But despite the relatively small size of stone fabricators, their annual revenue was notable in 2003. Over half of those participating in the survey (51.9%) had gross annual sales of over $500,000 in 2003, and over a third (34.3%) had over $1 million.