Tough Market, But Still Growing

Some replacement companies logging growth and preparing for upturn
Christina Lewellen
FEATURE ARTICLE | Markets & Trends

Even a cactus can grow in a desert. The national headlines are trumpeting the existence of a recessionary period and industry headlines are more frequently announcing scale backs and plant closures, but there are also plenty of companies-particularly in the replacement market-that are bucking the trend. These cacti in the business are expanding their manufacturing facilities, growing their distribution territories and hiring new sales reps and production folks to keep up with demand.

The question is, how? In such a challenging market, how are some replacement window and door companies reporting growth and actually looking forward to the next 18 months? Differentiation is certainly the key, but there are different approaches to being differentiated. Some are positioned in market segments that serve higher-end demographics, others are growing thanks to truly unique product offerings and still others have streamlined product offerings to offer expertise in a narrower range of products.

Vinylmax points to a well-rounded product line, enabling customers to rely on one vendor instead of several, as a key to its continued growth.The thing they all have in common is that they're not waiting for the market to show signs of life. They're expanding in spite of the replacement market projections with the goal of being well positioned for the eventual turnaround. "I actually believe that when the market is so challenging, that's when you should do the most," says

Roy Anderson, president of Soft-Lite. "Last year, we spent $2 million in equipment alone. I think now's the time to invest in the future."
"It's going to turn around," agrees Alan Levin, president of Northeast Building Products, a Philadelphia manufacturer. "There's no doubt that the market will turn. It's been cyclical like this for years. When it turns, we have to be prepared for that growth."

Dealers, too, are expanding sales staff to be prepared for a future uptick in business. "Now is the time you prepare people and get them ready for when the market turns around," says Jason Yeomans, owner of Windows & More, a North Carolina Marvin Windows & Doors dealer. "It's tough to train them when things are busy and they need to be with the clients. Now is the time to do those things, in my opinion."

The home improvement market will likely see a decline this year for the first time since 1991. A February research report issued by Home Improvement Research Institute and Global Insight pegs 2007 with a 2 percent decline in sales and 2008 with a 1.5 percent decline. Companies playing in the home improvement arena may not see positive growth until 2009, when analysts say sales may climb nearly 3 percent to about $311 billion dollars. "What's happening with the market and the subprime mess that's unwinding and the decreasing values in homes is that people don't have a lot of equity in their homes anymore," Anderson says. "If they want to take money out to do remodeling or renovation, that's not as easy as it was before."

Soft-Lite credits its success in part to a new high end line, offering both high performance and numerous options.And while the remodeling market isn't as bad as the new construction market, companies serving all segments are struggling to survive the downturn, window and door professionals note. "It's a bloodbath," says Levin. "I've never heard so many people crying the blues. People are just dying. And they're all asking the same thing-'How are you guys doing so well?'"

The good news is that there does seem to be a turnaround on the horizon. The Global Insight report says the long-term outlook for the home improvement market still remains quite strong and is estimated to average growth of 6 percent annually over the next four years, eventually reaching $381 billion in sales in 2012.

In the meantime, there's still money to be made in the replacement market-consumers will spend more than $300 billion on home improvements this year and next. "I'm no economic guru-most of the things I do are just common sense," says Yeomans, "but the people with money have their money. There are still people with family money or businesses they're successful in. They not always interested in stock markets or interest rates. Last week, we closed a job for a famous author with a half-million dollars of [window and door] products in it."

So what exactly does allow some companies to continue growing while others are going out of business? There's no hard-and-fast formula but there are some common themes among those who are doing well.

Vinylmax, a Hamilton, Ohio-based manufacturer, kicked off this year by moving into a new, 150,000-square-foot production facility. Coming off a 2007 that outperformed 2006 by about 20 percent and expecting the same or a greater increase for 2008, the family-run company boasts a broad product line. "I would say it's probably difficult to find another window manufacturer that has a more robust product offering [than Vinylmax], says Laura Doerger-Roberts, one of five family members who run the company. "We have everything from high-end wood replacement windows to the down-and-dirty replacement work products. We don't pigeon-hole ourselves into one category."

Vinylmax achieves growth partially by two-stepping to distributors, many of whom have turned their attention to servicing new dealer accounts. "There are definitely [dealers] who are not satisfied with what they're getting already," she explains. "One of the things we're able to do with our robust offering is meet the needs they've been satisfying with three or four suppliers. When they cherry-pick a product line from three or four different suppliers, they never get good service."

Soft-Lite's Anderson also attributes his company's growth to a solid product line up, namely its Elements replacement window, which was designed to out-perform industry standards. "Last year, we came out with new products, a new Web site, new marketing collateral," he explains. "We've been very successful with them. For the first time, we have dealers calling us, which is kind of a nice position to be in. They see that our product is unique, and that they can get a better price for it. They want to have options that stand out from everyone else."

Anderson hints that his company will introduce another new high-performance product this year as well. "If you're a homeowner and you see a guy with something different, rather than the 'me too' product, you're going to go with him," he says. "That's why things like our color windows are still our fastest growing areas. We have to double our capacity on that again."

Northeast Building Products has similarly put its focus on expanding its unique lines. Marketed as the Crusader line, the windows use Sashlite's technology, eliminating separate IG unit construction and instead incorporates a vinyl sash with an integral spacer that two lites of glass are glazed to directly. The design is said to deliver superior warm-edge performance, as well as enhanced structural properties. "That's really our quickest growing line," Levin says. "That's what keeps doubling the business."

As a retailer, Yeomans says he's learned the value of focusing in on a few key products in order to maintain the level of service that many customers expect. When he and his wife founded Windows & More, the company sold hardwood flooring and did some painting jobs in addition to carrying its window line. Last year, he threw all of the company's weight behind window sales and was rewarded with even greater growth, he explains. "When sales got to the point where just windows and doors supported our company, we closed out everything else," he says. "We closed out those products and still ended up growing. We consider that to be a successful year. Growing anything last year was very good in our opinion."

Yeomans established his North Carolina dealership in 2002 in an area that didn't really have a dedicated Marvin representative. Offering Marvin's flagship line, as well as its Integrity by Marvin fiberglass window and door line, gives the Windows & More team the ability to value-add its window packages. "If you take a $50,000 window order and show the client different upgrades and add-ons, that order may go to $60,000. You took an order you already had and added 15 percent to it," Yeomans explains. "Just think about what that could do to your bottom line over the course of the year if you tried to do it to every order."

Growing might also come at the hands of targeting the right markets, says Doerger-Roberts. "I think that one of the important things we did this year to enhance our positioning is that we're constantly looking for the market segments that aren't in the dumps and looking for ways to satisfy the demands of those segments."

Northeast Building Products' Alan Levin attributes his company's continued growth not only to a unique product offering, but aggressive efforts to establish long term strategic alliances.IN IT TOGETHER
Growing companies also recognize that it isn't just good products and good luck keeping them afloat in challenging times. It's important, industry representatives say, to keep employee morale high as companies all around them are struggling to keep the doors open. "We don't have our head in the sand," Yeomans says. "We know what's going on with a lot of companies. We're upfront with our employees and tell them that other companies are struggling. We are the exception, and to continue to be that exception, we're going to have to continue to pound the pavement and get our hat in on every project."

Anderson makes a point to give Soft-Lite employees a regular state-of-the-company address to keep them posted on the company's standing. "We tell them which customers we're working on and we share the numbers," he says. "We have to make our employees feel like they're part of something bigger. We are in this battle together and we are going to win."

"They know we're doing well," Levin says of Northeast's staff. "We've been working weekends and overtime. They see the volume of business. We're honest with them that we're not hurting, but they know they're lucky to have a job in this economy."

If anything, Levin adds, the challenging external environment allows employees to "appreciate our customers even more than they normally do."

Opening a new plant and bringing on new production workers and independent sales reps keeps employees pretty confident at Vinylmax, Doerger-Roberts says. "They're not worried at all," she says. "I have not had a single question about how things are going."

Reflecting the fact that it's bucking market trends, Vinylmax, run by members, of the Doerger family, recently opened a new manufacturing plant.STAYING FLEXIBLE
These growing companies continue to work closely with suppliers and customers to keep relationships strong and flexible in the tough market. "You always treat people with respect and tell them you appreciate them," says Yeomans. "In 2003 and 2004, when everybody was booming, we were booming too. But we never ignored anyone. We'd go to houses and salespeople would say that out of three or four companies, we were the only ones who showed up. Everyone else told the customers they were too busy. I'm a firm believer that that could come back to bite you in lean times.

"When it gets to be times like these," he continues, "you've got to make sure the customer knows you're not just selling them product. You're selling them a company and a service."

Being differentiated also means staying away from the low-price game, Yeomans points out. "If you're a good price, you're only going to stick around as long as you're the best price," he says. "You have to do things that your customers can't put a price on."

Responsiveness and being able to quickly roll out new products also requires a team effort. Keeping close tabs on its customers and having good relationships with its suppliers like Veka, Vinylmax is able to remain flexible as the market changes, Doerger-Roberts says. "I think we'll be able to remain at the top of our game because we're a very responsive company," she says. "We're constantly spanning the market to look for opportunities and then going after those opportunities. We still have that small-business mentality. We have a small ownership group and we don't need approval for anything. We can put out a new product as fast as our extruder can get it to us."

Relationship-building and customer service is insulating Northeast Building Products from some of its competitors' fates, Levin asserts. "We've been more aggressive in putting together long-term strategic alliances with customers," he says. "We put a real emphasis on relationships. That's the key."

In fact, Northeast may continue to grow as Levin and his leadership team explore options to expand through acquisition. "We're still looking for opportunities like that," he explains. "I've been approached by six different window companies to have us buy a partial or the entire company. Everybody's looking to get out, and we're looking to grow."

These companies are certainly not saying that growth is easy. The leaders know that they can only keep the growth engine running with deep commitment to succeed. "We're planning on having another record year," Anderson says of Soft-Lite. "It's going to be hard but I'm going to do everything in my power to do that."

And, as the saying goes, the key might not be working harder. "We have to work smarter to get through this," Anderson says. "These are challenging times and it's tough for everybody. But like a lot of good companies, we will get through it."

Yeomans has recently broken ground on a new showroom for his dealership-one with a different marketing twist. He and several other independent home improvement businesses are teaming up to open up a high-end design gallery. The site will enable window and door shoppers to also explore other project options such as countertops or audio/visual systems. "This is the time to really gain somebody's confidence," he says. "In this market, you have to show them that you care about their project and that you'll adapt your product to fit their needs. We're ready to draw people with this new facility from a little bit wider radius. We're ready to grow into those markets not being serviced by Marvin."

Northeast Building Products is bringing on new dealers regularly but intends to stay equally committed to its current customer roster. "With some of these other window companies being questionable as far as surviving, we've had dealers who had never even given us a look now giving us a call," he says. "But it's important for us to remain loyal to our existing customers."

While the macroeconomic situation is not one to be ignored, Doerger-Roberts says she and her team will continue to keep the focus on the company's growth, not the state of the industry. "Everything I've seen says it's going to be a while before this turns, but we don't really look at any sort of long-term forecasting," she says. "We look at the previous year and make projections for the growth we want to achieve for the next year and then set our goals."