RESIDENTIAL ROOFING Four Key Insights Into Demand & Distribution

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1 Four Key Insights Into Demand & Distribution

2 Overview This brief overview highlights four key insights regarding product demand and distribution from our Residential Roofing 2014 report. Key insights include: Roofing demand profile Factory gate and installed costs Distribution channel map Contractor views on dealer selection criteria The industry report provides an outlook of the market through 2016 and is supported by more than 600 interviews with suppliers, distributors, industry associations, homeowners and roofing contractors who have extensive experience in working with these products. In addition to this overview the report reveals detailed information focused on brand awareness, industry trends, market demand as well as voice of customer feedback. Contact the Principia team at to purchase or learn more about the findings from the Exterior Railing 2014 report. 1

3 Demand Profile In 2013, total demand for residential roofing in North America reached million squares valued at $12.3 billion. New housing starts in North America accounted for 19% of both volume and value in 2013 while roof replacement and roof repair accounted for 81% of the roofing volume and value in Asphalt shingles continued to dominate the residential roofing market, accounting for 85% of the total market by volume and 67% by value. Metal roofing was the second most popular, accounting for 7% by volume and 16% by value. 2

4 Factory Gate Pricing vs. Installed Cost Installed cost is most critical when considering the competitiveness of roofing products. Most roofing products are installed by professional contractors who typically quote on the full job without breaking out material costs vs. labor. Asphalt shingles, which have the lowest factory gate prices, also have lower installed costs due to the wide availability of contract labor familiar with the installation process. Additional factors keeping installed costs low include ease of shipping and installation due to relatively lightweight and installation methods. Slate requires skilled craftsmen for installation and may exceed $1,000 per square on an installed basis. In addition to these costs, reroofing could have additional charges of between $50 and $150 per square in tear-off and disposal fees for asphalt shingles and wood products. Factory Gate Pricing and Installed Costs by Product,

5 Distribution Majority of roofing products including asphalt shingles, tile, metal, and polymer roofing use specialty one-step distribution which accounts for 69% of roofing volume and 67% of roofing total value. These share percentages are down slightly from 2011 levels with one-steppers losing approximately 2% of distribution share to big box retail. Two-step distribution channel is a distant second in terms of sales with 15% volume share in the market valued at $1.6 billion. Outlets for two-step distribution include lumberyards, retail, and one-steppers, which account for 11%, 3%, and 2% of the volume respectively. Big box and other retail accounted for 9% of demand by volume and 8% by value while direct from manufacturer accounts for 4% of the volume and 9% of the value. Residential Roofing Channel Map 4

6 Contractor Views on Dealer Selection Market share of mixed materials rail systems has grown from about 10% of the total demand volume in 2008 to 20% in Consumer desires for styles that are more contemporary and a personalized look have driven this trend. Mixed material systems have an infill material that is different from the post or post sleeve and the top and bottom rails. Common examples include aluminum balusters in a wood rail system or cable rail in a composite rail system. Dealers indicate the most common mixed material railing combinations are metal balusters with wood, composites, and vinyl railing. Metal balusters (aluminum and iron) continue to grow in popularity, but other infill such as cable and glass are also trending up. Statement Strongly disagree/ disagree Strongly agree/ agree If my current dealer no longer carried my preferred brand, I would find another dealer that did 6% 69% Free job site delivery would entice me to change dealers 15% 43% Incentive packages (trips) 28% 24% Manufacturer loyalty programs (e.g., contests, point awards) would entice me to change dealers 37% 31% Free product or installation training would entice me to change dealers 28% 21% If my key dealer contact left to work for another dealer I would change to that dealer 37% 21% If my dealer no longer carried my preferred brand, I would use whatever brand my dealer carried 55% 18% Contractors were most loyal to their preferred brand of asphalt shingles (53%) and tile (52%), followed by built-up roofs (41%), polymer composite (37%), and metal (37%). Wood shake (30%) and slate (22%) came in at the bottom of brand loyalty by material, with the average holding at 45%. 5

7 Principia is a leading research and consulting firm focused exclusively on the building materials and construction industry. For over 20 years, senior executives have trusted Principia for information, analytics and insights essential for better decision-making, faster growth, and greater profitability. principiaconsulting.com