Ceramic Industry

Remodeling, New Construction Drive U.S. Sanitaryware Sales Higher

August 1, 2002
Town Square, from American Standard, is a new suite of bathroom fixtures, faucets and accessories designed as one complete solution for new or remodeled bathrooms of any size. Photo courtesy of American Standard, Piscataway, N.J.
According to the National Association of Home Builders (NAHB), new housing construction and remodeling activity have continued to drive the nation’s economic engine throughout the downturn. Sales of newly built homes hit an all-time record of 906,000 units in 2001—due in part to exceptionally strong activity at the end of the year. Government figures indicate that single-family home production hit its strongest pace in more than 20 years in February 2002 and remained strong throughout the spring months, surging to a record high seasonally adjusted annual rate of 1.03 million units in May.

As a result of the strong housing market, sanitaryware sales in the U.S. were mostly higher in 2001 and the first quarter of 2002. American Standard said that sales in its plumbing products division posted a 1% gain in 2001 over 2000 levels due primarily to increased sales in the U.S. retail markets and better productivity, particularly in Europe. First quarter sales increased by an additional 3%, driven by record sales in the Americas. “With bathroom spending growing by double digits in Europe and the U.S., and 40% of the world still without indoor plumbing, we see opportunity the world over,” said Fred Poses, chairman and CEO of American Standard.

Companies in other regions, however, aren’t quite so optimistic. Mexico-based Grupo Industrial Saltillo reported that its Bathroom Fixtures Business faced lower prices and demand contraction in both local and export markets, which drove sales volume down by 11.5% during 2001. The business sells 65% of its production to local markets. The company said that it expects the consumer product industries to remain “challenging” for the remainder of 2002, but forecasted higher growth for its Building Products Division as Mexico’s federal government is expected to construct more than 700,000 new homes by 2006.

Sanitec, one of the largest sanitaryware suppliers in Europe, was able to increase 2001 sales primarily through the acquisition of UK-based Twyford Bathrooms in January 2001. Aside from this acquisition, sales remained mostly flat. In the company’s major central European markets—especially Germany, which experienced both a sharp drop in new-building activity and a decline in renovation activity in 2001—the market situation was slow throughout the year.

To boost sales, companies are focusing on selling bathroom fixtures as high-end integrated systems rather than individual components. American Standard, for example, uses a “total bathroom approach,” in which it integrates its fixtures and faucets for kitchen and bathroom products. Through this approach, the company reports that retail customers often buy four or more items and spend 10 times the value of a toilet alone.

Other lifestyle trends also have the potential to increase sales of bathroom-related ceramics. Market studies and surveys of consumer tastes indicate that people want to be more self-indulgent, and this trend is increasingly turning the bathroom into a personally customized home retreat. As a result, consumers are expected to spend more money and invest more effort into their bathrooms.

However, not all of this investment will lead to increased use of ceramic products. According to Germany-based Villeroy & Boch, ceramic products account for only a 30% share of the Western European bathroom furnishings market. As a result, many manufacturers are seeking to diversify their product lines, with synthetic baths, bath and shower systems accounting for increasing market shares.

Editor's Note

The foregoing information was compiled from publicly available information in annual reports and news releases, as well as from interviews with companies listed in the 2002 Whitewares Giants.