As we roll into the new year, here’s a question I’ve pondered recently: what kind of window and door market will we see emerge after some significant consolidation throughout 2018?
Just a year ago, following a flurry of 2017 mergers and acquisitions, Window & Door forecasted 2018 to be an “open door” for some increased activity. “Consolidation in the fragmented window and door market is accelerating, in line with the broader building products industry, which has seen a record level of deals flow during the last 12 months,” wrote contributor Andrew K. Petryk of investment bankers Brown Gibbons Lang & Co. “Renewed optimism in the economy is fueling investor appetite, with acquisitive growth a primary strategy in value creation, driving an active M&A market.”
Those predictions largely bore out. A healthy economy buoyed the building and construction market throughout the year, though not without some unforeseen choppy waters relating to the ongoing trade war between the United States and China. And indeed, we saw some major M&A activity, not the least of which was the blockbuster merger between NCI and Ply Gem.
Beyond the financial particulars, I’ve been curious how increased consolidation in the window and door market will impact the level of innovation and new product introductions we’ll see in the coming months and years. Certainly, I think we’ll see some product repositioning as newly merged entities ensure they’re not selling against themselves, and work to make themselves more attractive versus new competitors. I dug up a paper from Duke University that examined how increasing market consolidation in the radio industry impacted product positioning—in this case, the types of music played on stations owned by a common entity after consolidation. The paper drew some conclusions about how those effects could be applied to other industries, including that “firms may prefer to make their products more similar to exploit economies of scale or scope in the development or purchasing of components.”
Can we draw similar conclusions for the window and door market? I think it’s probably too soon to say, but it’s worth keeping our eyes on.
Here are a few other product trends I’m watching for this year:
Impacted by slowdowns. It’s broadly expected that the economy could slow down a bit this year compared to 2018, so window and door companies may hedge their bets around new construction opportunities. Additionally, government drivers around new thermal efficiency haven’t gone in any new directions, so there’s less motivation on that kind of innovation at the federal level. I think this has already led to a bit of a lull in terms of new innovation, and it could continue this year.
Keeping up with color. I think color opportunities for window and door manufacturers continue to be attractive. Whether you’re painting, laminating or co-extruding, color continues to offer a way to differentiate and offer customers something unique, and I think more and more manufacturers will take advantage of the available options.
Incoming European styles. In the light commercial and high-end residential markets, I’m sensing that European-style windows and doors—broadly, projecting windows instead of sliding—will pick up more steam in the near future. They’re an attractive alternative to what most American consumers are traditionally used to seeing, and some European manufacturers are making more noise here in North America. We’ll see if this trend continues.
What do you expect to see in 2019? I’d love to hear from you.
