Future development of the furniture industry A look at the next 3-5 years

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1 Tappi-Symposium at interzum 2007 on May 7, 2007 Future development of the furniture industry A look at the next 3-5 years Dirk-Uwe Klaas - Managing Director Hauptverband der Deutschen Holzindustrie e.v. Verband der Deutschen Furniture Industry e.v.

2 Contents Furniture industry data Economic trends for the next 3-5 years Strategies for the future

3 Furniture Industry Data

4 The Furniture Industry worldwide Sales growth increasing worldwide European furniture production 2005 at 93.8 billion Euro plus 1 percent International furniture trade 2005 at 82 billion US$ 2006 at 87 billion US$ Prognosis 2007 at 92 billion US$

5 Furniture Industry worldwide Emerging Markets stimulate demand Forecasted 2007 furniture consumption Russia China India Malaysia Ukraine Near East plus 8 percent plus 7 percent plus 6 percent plus 6 percent plus 6 percent plus 4 percent

6 German Furniture Industry 2006 Suppliers Production Commerce Size about 1,000 firms, 60,000 jobs about 1,080 firms, 103,000 jobs about 10,000 Shops, 130,000 jobs average 100 employees Export quota 34 percent in 2006

7 The German Furniture Industry 2006 Return on sales Bankruptcies Job reductions Population Consumers 1.7 percent 500 firms over the past 10 years 70,000 over the past 10 years about 83 million in 37.5 million households plus exports

8 Sales, firms, and employees in the German furniture industry (1995=100%) 120% 100% 80% 60% 40% 20% 0% Sales Firms TAPPI-Symposium Employees zur interzum Mai 2007

9 Sales trends of the 2006 German furniture industry plus 7.2 percent 3.5 percent through growth of domestic demand 15 percent through growth in exports

10 Sales in the 2006 German furniture industry by segment Adjusted values (total 18.4 billion ; +7.2 % of previous year) Cabinet furniture 63 billion (+75%) Mattresses 0.9 billion (+3.0%) seating furntiure, adjusted 4.7 billion (+2.7%) Kitchen furniture 3.9 billion (+11.2%) Office and shop furniture 2.6 billion (+11.0%)

11 Furniture Trade Abroad

12 Italy Furniture industry sales in EU - compared to 2005 in billion Euro (not adjusted) Great Britain France Spain Poland Denmark Netherlands Austria Belgium Sweden Czech Republic Portugal Finland Hungary Germany

13 German furniture commerce in billion Euro, (preliminary) Furniture exports Furniture imports

14 Top 10 German export countries in Netherlands Switzerland Austria France Great Britain Belgium Spain USA Italy Czech Republic Exportwert in Mio. Veränderung zum Vorjahr in %

15 Top 10 German import countries , ,600 1, , , , Poland Italy China Czech Republic Austria Slovenia Hungary Denmark South Africa Switzerland -2 Importwert in Mio. Veränderung zum Vorjahr in %

16 German International commerce with China in million Euro Export Import

17 German International commerce with Russia in million Euro Export Import

18 Csil Milano CANADA +2% MEXICO + 3% Size of country s furniture market Above US $ 10 billion DENMARK + 3% NETHERLANDS+ 1% BELGIUM -LUX + 2% SWITZERLAND + 1% AUSTRIA + 2% % Between US $ 5 billion and US $ 10 billion Between US $ 2 billion and US $ 5 billion Between US $ 1 billion and US $ 2 billion Below US $ 1 billion Not considered WORLD FURNITURE MARKET OUTLOOK 2007 IRELAND+ 6% USA +3% FORECAST as of April 2006 Real Growth of Furniture Consumption PORTUGAL + 2% ITALY+1% SPAIN +2% CHILE+ 4% FRANCE + 2% ARGENTINA NORWAY + 3% FINLAND+ 3% SWEDEN + 2% UK +2% GERMANY 1% +4% BRAZIL+ 3% GREECE +2% % CROATIA +4% BULGARIA +4% SERBIA MONT. +3% UKRAINE +6% ROMANIA +5% SOUTH AFRICA+ 6% in 60 Countries LITHUANIA +6% POLAND +4% ESTONIA +5% CZECH REP. +3% HUNGARY +5% SLOVAKIA +5% LATVIA +6% SLOVENIA +3% MALTA +2% CYPRUS +3% INDIA CHINA+ 7% RUSSIA + 8% EGYPT + 4% ISRAEL +4% LEBANON +3% KUWAIT + 3% SAUDI ARABIA + 3% UN.ARAB EMIR. + 4% TURKEY +3% Copyright CSIL 2006 CSIL Milano tel: fax: e -mail: csilmilano.com +6% JAPAN +1% HK +3% INDONESIA +4% MALAYSIA +6% PHILIPPINES +4% SINGAPORE +4% S.KOREA +3% TAIWAN +4% THAILAND +5% VIETNAM +6% AUSTRALIA +3% NEW ZEALAND+ 2%

19 Economic Trends

20 Economic Trends over the next 3-5 years Globalization Market polarization Demographic development Furniture lifespan Individualization Staying home in the West Trademark process more worldwide demand lower intermediary prices fewer people in Europe shorter than ever before requires variety of offerings feeling safe at home guaranteed quality

21 Globalization increasing demand for furniture Per-person expenditures for furniture Europe Germany 370 Italy 202 France 204 Austria 370 USA 210 Russia 20 China 5 India 2 Worldwide

22 Market Polarization - in percent High-value topquality products Mid-range price segment Low-cost products

23 Graue Revolution Demographic Development

24 Graue Revolution The population is aging Median Life Expectancy in Germany Years of life Women Men Prognosis > Source: Statistisches Bundesamt

25 Graue Revolution Demographic Development

26 Graue Revolution Demographic Development

27 Median lifespan of furniture in Europe today Living-room furniture 9 Years Upholstered furniture 7 Years Beds Mattresses Children Kitchen 12 Years 8 Years 6 Years, then passed on 15 Years

28 Median Lifespan of furniture in Europe, tomorrow and later Living-room furniture minus 3 to 6 Years Upholstered furniture constant 7 Years Beds minus 4 Years to 8 Years Mattresses minus 3 Years to 5 Years Childrenmöbel minus 2 Years to 4 Years Kitchen minus 5 Years to 10 Years

29 Individualization requires a variety of offerings Variety is important to today s customer Everyone wants to decide for him/herselfcolor, pattern, quality level There are no longer any general trends Theme Identification with one s own living space and individual self-realization

30 Staying home in the West Feeling safe at home In unpredictable and uncertain times, citizens of industrial nations are more concerned about their home. Retreat into one s own Refuge is indicated

31 Trademark process guaranteed quality Trademarks are an anchor of trust they reduce the risk of making the wrong purchase. They provide a guarantee in advance of assurance of the expected product performance. Trademarks provide security Trademarks provide a touchstone, and are an aid in recognizing a familiar product in a world rife with information overload, they increase the efficiency of the purchasing decision-making process Trademarks give meaning in a world where we are searching for meaning, the use of a trademark becomes ever more important

32 Strategies for the Future

33 Strategies for the Furniture Industry Considering the shrinking domestic market, even more energy must be invested into the securing of Export Markets We must market the quality level and the Design of our furniture more aggressively and emphasize the advantage over cheaper products The industry must clearly step up the Trademark process for furniture

34 Strategies for the Furniture Industry and Commerce New sales concepts must include the entire home experience so that the German customer is again interested in new furniture Price-cutting must stop. Customers want price security, not constant special offers and discounts.

35 Strategies for Furniture Industry und Commerce The value of furniture as a growth culture must be brought back into focus... The President of Germany, Horst Köhler, says: Since we are more expensive, we must be even better

36 End

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