Stone Industry Forecast: Success will continue in 2001

By Michael Reis

After nearly a decade of prosperity, the stone industry is still predicting increased success for both the short-term and the long-term. An overwhelming majority of respondents to Stone World's recent market study predicted that the industry will continue to grow in the coming year. This -- coupled with the increased popularity of natural stone among consumers -- will result in significant investment by fabricators in 2001.

Of those that answered the survey, which was sent primarily to stone fabricators, 77.8% expected the stone market to increase in 2001. Only 3.0% predicted a decrease for next year, and 19.2% said that business stayed the same. Looking down the road, respondents were even more confident -- as 83.2% predicted an increase in business over the next 5 to 10 years. Only 4.2% of those polled felt the market would decrease over that period, and 12.6% predicted that it would hold steady.

Of those respondents expecting an increase in business, most feel it will be relatively significant -- in 2001 as well as over the next few years. Looking at the upcoming year, a total of 85.5% said business would rise more than 6%, and nearly half (48.6%) said it would leap more than 11%. A similar outlook was shown for the next 5 to 10 years, with 85.5% expecting a jump of at least 6% and over half (51.3%) calling for a rise of more than 11%. Moreover, more than one out of five respondents (21.7%) expected growth of over 20% in the next 5 to 10 years.

A variety of reasons were cited for this optimism. Many of those polled cited the economy, along with increased interest in natural stone, specifically by homeowners. "More people are being educated about stone, and are aware that the costs are equivalent to Corian, etc.," stated one of those surveyed. Another respondent commented: "Customers have been noticing that stone is more durable. Corian is not the answer. People who want luxury prefer no maintenance."

Also of note, many respondents believe that increased competition in the stone industry will lower prices, making stone even more attractive to consumers over the long term. Additionally, new stone varieties and applications will boost interest in natural stone over the coming years, according to the respondents, which stated: "People are learning the possibilities of using natural stone in new ways every day." and "The U.S. is an undeveloped market just beginning to grow. I expect granite usage to reach within 50% of Europe."

Of those who saw a potential decline in 2001, most of those polled cited a new presidency in the U.S. and the cyclical nature of economics, without mentioning any factors that would affect the stone industry in particular. While some respondents mentioned solid surfaces such as Corian as a potential obstacle, the general feeling among stone fabricators is that the aesthetics and competitve costs of natural stone will give it the edge over a man-made material.

Definitive growth

Moving beyond predictions and theories, it appears that the industry's optimism is based on the success of the previous year. A total of 83.7% of companies responding said their business increased last year, while a mere 1.5% saw a decline.

And the increases were heavy last year. Nearly all of the companies showing an increase (88.1%) saw a rise of more than 5% -- and perhaps more importantly -- over half (52.2%) saw their business increase by a factor of over 16%.

Keeping the long-term optimism in mind, fabricators are planning to increase investments in 2001. A total of 79.95% of those polled said they will increase their investments in machinery in 2001, while 48.8% said they will invest more in personnel this year. And a significant percentage of respondents are not only purchasing new equipment, but they are also upgrading or expanding their fabricating facilities (43.5%). Also of note, a total of 32.5% of respondents said they would be establishing or updating showroom facilities in 2001, which underscores the growing connection between fabricators and homeowners.

Equipment purchases

For those planning to purchase new equipment, investments are being made to meet the needs of the residential market -- particularly fabrication of granite countertops and vanities. Hand tools were the most common area of investment, as 83% of respondents indicated they will invest in this area in 2001. Other popular choices were polishers (46.8%), bridge saws (31.4%), shapecutting machines (21.8%) and cranes (12%). The work in U.S. fabricating shops is overwhelmingly slanted towards slab fabrication, as only 3.7% (or less) of respondents are planning investment in blockcutters, tile lines or gangsaws.

But while spending will increase in 2001, the industry appears to be approaching the coming year with some caution as well. Overall capital outlay in 2001 will be moderate, according to the survey. A total of 56.0% of respondents have budgeted $250,000 or less in 2001, while 23.7% are planning to invest between $250,000 and $500,000. However, there were a number of respondents that are planning relatively major investments, with 9.2% planning to invest $500,000 to $1 million, and 11% planning to invest more than $1 million next year.

Judging by the demographics of the survey, the companies that participated seem to be well established. A total of 75.6% of respondents have been in business for over five years, and nearly half have been operating for more than 15 years. Overall, the stone industry is comprised of relatively businesses, as 69.3% of the firms responding had less than 20 employees and 91.4% had less than 50 employees.

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