Hi everyone, just a quick note from the moderator here: the trouble with long posts such as these is that the 'Comments' link is a long way down (ie at the bottom) - but there again, the idea is that you read it all before you comment anyway! If you want to jump straight in to comment, this will take you straight to the comments page, but you still have to scroll down to the bottom for the comment box (but newest comments get displayed on top!):
MIKE RIGBY, MRA: I think Alan talked about perceptions and the need to convince. Martin's point was absolutely right, that if the Victorians did have PVC then PVC would be what we have because the material almost speaks for itself. Almost. It doesn't actually speak for itself, and I think the problem that the industry faces - again, linking back to the very low profitability - is that we end up with the question: what will we be using in the future? I think there isn't one material which does everything; it will be a mix but the mix may be different.
I think the industry is doing sterling work in correcting the in-built bias that is coming out in BREEAM, but when you look at all the materials, the timber industry I suppose had a pasting for a longer time, but having lost a lot of share the industry got its act together. They put a lot of effort into changing perceptions.
I think when we get equality so that the facts are right and PVC isn't penalised when it comes down to it, perceptions count for an enormous amount. Martin just referred to GRP being listed at 35 years, I think he said, and people are stating as a fact that GRP is much more sustainable, in fact very much everything all down the tick list, than PVC. I thought, "Blimey, I don't know where to start really. I'm not technical". I think it's a measure of the perception that the industry has been complacent, perhaps. The swing towards PVC seemed inevitable and it kept on going. But nothing's inevitable and fact doesn't carry the day always. Conviction carries the day, and perception, and I don't see much effort from the industry. I think at the top people are doing some good work at the BPF and so on, but further down the tree I don't see any effort being made to sell the material.
So, back to what we will be using in the future, unless somebody actually gets together and puts a case so that all of those untrained guys at the coalface - Kevin's and Alan's customers there - are actually making the case strongly and clearly with confidence, I think there will be a steady drift from PVC-U. I don't see anybody doing anything.
KEVIN HILL, JOHN FREDERICKS: Martin's point was intriguing that if these new values move up to the numbers that you quoted, we won't be able to sell anything or make anything to comply with those standards. So, on that basis there, what is it (the window) going to be? What is it going to look like? Is it going to be a kind of plastic composite or a wood aluminium or an --
SAM KENNEDY, SPECTUS: It's not the frame, it'll be the glass.
MARTIN ALTHORPE, BPF: No, the 0.9 and the 0.7 is a discussion document. I don't think it's going to go down that far. But the thing that people always hold up is the German Passive House system where Passive House is a whole house ethos for low energy usage. Some people call it the three-litre house; it uses three litres of fuel per square metre per year. So, it's a very, very low energy consuming designed house.
That particular design was brought about in conjunction with the German government, and BASF, I think. The windows that they use are a very particular design: very high insulation frames; triple glazing; it buries the edge inside the frame to probably a depth of about 50 mm so you don't get the edge effect; triple seals, all the rest of it. They typically achieve a u-value of about 0.85, so a considerably different design of product.
The only way I know to get down to below 0.7 is to use the Scandinavian method of having two windows: one on the outside of the building that opens outwards and one on the inside that opens inwards. So it's actually two double-glazed windows. Now, I don't think the government's suggesting in any way that it's that extreme, but as you say, the idea's there and it's not going to go away.
DAVID RUZICKA, SASH UK: Martin, who actually wants it at the coalface, though?
MARTIN ALTHORPE: Nobody. You go to a household and --
KEVIN HILL: But that almost misses the point, doesn't it? If you have a look at the insulation lobby where in the mid-1980s I think you got away with 50 mm of insulating in your loft, which was like cobwebs, not much effect at all, the manufacturers, distributors and the trade boys were very good at convincing government and working with government that, "Yes, you need to have more thermal efficient homes" and, "Yes, there are ways of doing it with double-glazing or draft excluders" or whatever it was. Now you can't get away with more than 200 mm. That's great news if you're making insulation; fantastic news if you need two windows for every opening, ideal. Embrace it, twice the frames. Everybody's happy.
DAVID RUZICKA: But that's what happens when you've got legislation that says you've got to have that.
KEVIN HILL: Exactly, and government legislation is a fantastic pump-primer for the businesses that are on the ball for it.
MARTIN ALTHORPE: The problem with legislation at the moment is it only addresses the people that have a mind to do something anyway, so it only addresses the people that are actually going to put new windows in, for instance. It doesn't address the people that aren't going to put any windows in and don't care about how many times they want to paint the windows because they don't do it anyway.
Now, there's actually millions and millions of properties still out there. I know we talk about replace the replacement and the market's sort of peaked. There's actually millions and millions of properties out there that haven't had anything done to them and won't have anything done to them because it's not seen as any sort of issue. The only way that that's going to change is if the government introduces some kind of legislation that encourages people to actually carry out energy improving renovation to their houses.
Now, it's a very contentious thing to say but I think the government - if they've got any sense - will use the HIPs system for doing energy ratings to houses. They'll use the council tax. They'll use a combination of the energy rating on your house and your council tax banding to say, "Well, if you've got a poor energy rated house, actually you pay a bit more council tax". I don't know but it would make sense to me, something like that.
ALEX MAIN, PROMAC: It was buried in the pre-budget report that there was £4 billion set aside for improvements in the existing housing sector as well, so whether that would contribute towards bringing that up a bit more. It's a point that David made earlier - just going back a couple of steps - again, it's a different perspective from myself and Phil, on the machinery side, but we look at it with the same concern because our markets are shrinking as well and the profitability.
We feel that over the next 12 to 18 months there's going to be a big shake-down anyway; the cake's going to get slightly smaller but there'll be a hell of a lot less fabricators out there. Most of the guys round the table who do fabricate are at a professional level in terms of the people at the top end of the company and also the level of machinery that they use. If we could take the profitability out of it, there is an increase in the improvement across the business which would lead to more money being generated. If the rubbish is going to filter out, surely that gives the businesses more ability to generate the profit to contribute towards sustainability as well because if it doesn't, it's going to be difficult.
SAM KENNEDY: We've been talking very much about frames, PVC, aluminium, etc, but, Ron, on glass itself, the glass industry's gone through quite a dramatic time as well, hasn't it?
RON HAMILTON, PILKINGTON & GGF: Yes, it's interesting the whole issue of sustainability because certainly it's a major issue within our own organisation and within the GGF. It goes through from sustainability of organisations to survive, the personnel and certainly the cost of waste, which was factored in before.
The glass is re-used within sustainable buildings. Obviously triple-glazing isn't bad news for everybody, I've got to say, but we're actually driven by markets and some of the happy coincidences that we've made in developing products to satisfy consumer demands moves into completely new products for the industry: photo-voltaics, water heating systems which use glass.
Actually, I'd agree with you, Sam, when you said we're actually embarking upon a very, very exciting time for the industry if we decide to embrace the changes and actually be at the forefront of the changes in legislation, which I would agree with you needs to be in. We saw that with double-glazing units, didn't we? Until Part L came in nobody really changed and Part L brought value into our industry, without doubt.
So, influencing legislation, how we do this now and get the right level of legislation so that the industry is sustainable and can grow and develop with the legislation is quite interesting. In terms of glass products, I feel confident that the industry can actually supply the products that are required, ranging from coated products to different base glass compositions.
SAM KENNEDY: Going back to your earlier comment as well, David, right at the very beginning of the industry about salesmen and installers coming in and starting companies, etc, we all know that over the years the product they're producing now as an industry - whether it be glass, hardware, machinery or even the frame itself - it is much more sophisticated now, isn't it, as a product?
DAVID RUZICKA: Yes.
SAM KENNEDY: But you're not getting the return on it. One of the questions I was just going to ask to finish off this section is you've got Brent crude hitting $84 a barrel yesterday, you've got all the problems with regard to energy costs, etc. Can we get a reasonable return on our investment in this industry now?
DAVID RUZICKA: We can get a reasonable return on it, yes, but unfortunately we have to have a major cull first before we start to get any profit at all, and that starts right at the top. It's a conversation I had with you yesterday evening, that some of the system companies have got to look at each other and seriously start to talk to each other. You look at some of the big electronic companies out there like Panasonic who have their own Panasonic brand but manufacture for other people, if you look at the capacity in the UK of the extrusion companies probably realistically they're only running at maybe half capacity, all of them if they tell the truth.
Now, to me, unless it starts right at the top, we're never going to be able to filter down that profitability back to fabricators, back to installers; we're never going to be able to do it. So, it's really got to start right from the top. For me, we're lucky, I suppose, because we have two extrusion companies that we deal with, extremely good companies, but you know what, none of them have got money for investment. That's a worry and concern for me when I'm looking at putting another £2 or £3 million investment in and my key suppliers are not profitable themselves. So, it really does start from right at the top and until we do that we're not going to be able deliver a price.
I looked at a window the other day - I was going to bring the details here - and it was a fabricator that's been in business probably about 20 years. He'd produced a quotation for a trade guy to go and fit these for a consumer. There were five windows and a French door or two, residential doors. He was selling that - bearing in mind that this is one of the most technically advanced secure products that you can buy today - at £729 plus VAT. The guy said to me, "If you can beat that price, you can have the deal" and I said, "I don't want the deal, there's nothing to do a deal on". So, when I got back I took my costs; took all labour out of it and I just looked at material costs. There was £96 between my material costs and what he sold it for. That's the industry. We can all talk about sustainability, u-values and what have you: it's a load of bollocks because I'm telling you out on that coalface, for me, unfortunately, that's our industry. £96 and he's got to manufacture that, make profit out of it and invest? That's the sad thing about it.
MICHAEL NAGLE, PROFITMAKER: Yes, but it's ease of entry and low intelligence; that's what you're up against.
DAVID RUZICKA: You know what, this guy has been in business probably 15 to 20 years and I would have probably said it was a reasonably well-structured company, but unfortunately even the well-structured companies are getting forced now to cut and do things that they wouldn't necessarily do. We've had a terrible year last year for the first time in 20-odd years, and some of it is possibly down to us but a lot of it is down to the fact that the industry is cutting each other's throats because there's too many people there. As I say, it starts off right at the top.
ALAN BURGESS, MASTERFRAME: I have to take the opposite view; I think it starts at the other end. I think it starts on the street. Frankly, people, we are reaping the reward of high-pressure sales that we've had for the last 35 years. If you have been pressurising people to buy a product and you've also educated them to say, "By the way, do make sure you get three quotes", all the television programmes, Watchdog, etc, "Make sure you get three quotes", all you're doing is educating someone to say, "If you can do the deal cheaper than the next guy, you can have it". They have been educated that way for so many years; now it's just about price. If you cannot differentiate your product from somebody else's product, if the only thing that's going to differentiate it is the price, that's a really simple equation to do. That one's cheaper than that one and because it's the same I'll have that. That is fundamental.
Okay, my part of the industry may be different but I've got the big nationals probably putting in sash windows for £600 a time. I have a network of installers and some of the best ones are getting £1,600, £1,700, £1,800 a window. It's the same customer but they understand what the buying needs are and they are convincing somebody that it's not about price, it's about the value of your property.
For years we've been saying to people, "Has your house gone up in value last year?" "Well, yes, it's gone up 10%" or whatever. "Well, are you relating the price of your window replacement to the value of your property because it's an investment?" "It is a cost because I've got to do it because the damn windows are falling out because they're rotten and I haven't painted them for 10 years", that's a knee-jerk purchase.
DAVID RUZICKA: But nobody sees the value in a PVC window any more. Twenty years ago you were sold the idea of what PVC would bring to you thermally, no maintenance, secure. Today, I don't think anybody sells that product any more. We don't sell it. You walk into a brand new house today and the consumer will look at bathrooms, kitchens, the flooring, timber floors that they have now because most of them don't bother putting carpets down any more. Who looks at the windows? Nobody. Because it's got no value to it; as an industry it's got no value.
MARTIN ALTHORPE: You're absolutely right.
ALEX MAIN: It is the perceived value of the customer that is the biggest single issue as far as I'm concerned.
MARTIN ALTHORPE: I went to look at a house a few months ago and the salesperson that was showing me around spent more time telling me about the alarm system than they did about the windows. I said, "Yes, PVC double-glazing" and they said, "This is the bathroom". I said, "Are they internally beaded?" and they said, "Well, it's PVC and it's double-glazed" and that was it. That was it. But what I was saying earlier about it coming down from the top in these purchasing organisations, new build buys down to a price, not up to a standard.
SAM KENNEDY: Correct.
MARTIN ALTHORPE: We know they build down to a price, not up to a standard as well. We shouldn't be surprised.
MIKE RIGBY: I think it's both at the front end and at the top end, but we've all agreed that it's not being sold; it's not being communicated; the case isn't being made for it; the benefits aren't being pushed at the front line. Martin's experience in going round a new build house pretty well mirrors the discussion going on in the industry.
Where are the discussions going on in the trade press about the benefits of PVC-U? It's taken for granted that we all speak the same language, we all accept that's the case and the guys who are at the front line, if they read the trade press, that's what they'll pick up as well. So, the whole thing creeps down.
When I got into the industry, page 1 of any salesman's brochure started off making the case for what you were selling, but if you look at what people are actually taking out on a pitch now there's hardly any of that. It's just disappeared because that's how windows come. If you want a window, for the most part, PVC-U is what you get offered.
I think that that's what happened to timber 30 years ago. You want a window, it's timber. It's crap, so what? That's what it is. Well, these aren't crap; these are highly engineered but nobody's making that case.
I talked to a guy who was quite a big direct seller who kept his records very, very tightly and wanted to educate me and he just showed me his records since he began. He got in in secondary glazing and he said, "If you adjust this for inflation, I'm selling at exactly the same price now that I sold secondary glazing. Then I got into aluminium and then I got into thermal break aluminium, then I got into PVC and then I added shoot bolts and K glass", all the way through. He had this all beautifully done and he was making no more money than when he was in a garage with some crimpers to pull his secondary glazing together.
Maybe this is getting into the next question - but if you don't make the case at the front end, that's where your profit goes and gradually it pulls it down. As Giles started off by saying, this multi-billion pound industry, there's no profit being made.
GORONWY JONES, WINDOWMAKER: I think one way one sees that the case is not being made is when we're supplying software to all our customers in Germany, France and so on, the first question they ask is, "What do your quotations look like?" In the UK, hardly anybody uses quotations, they use order forms, and on those quotations the Germans and French have about 20 lines of text describing what the customer is getting and it has got the u-values and decibel values and so on, on it.
MIKE RIGBY: If you look at the timber guys who are doing well in retail, if you look at some of their quotations they will blow your socks off. Talk about making the case. It reminds me of how upmarket conservatories are sold. You are getting a nice drawing and good presentation and you think, "Blimey, this has got value", instead of which the old joke about salesmen being order takers actually has come to pass. You place the order, bang, bang, scribble it down with little tick boxes here and a tiny little diagram there and sign here. It is a price thing.
MICHAEL NAGLE: Do you not think just as an observation that the package conservatory has done more damage to this industry than anything else, that you can see them in B&Q for £4,000? That is mind-blowing stuff. To think that when somebody will put it in, you cannot even get one chair inside it, that has done more damage to the industry than anything else because you have a low intelligence guy selling it, who is organising building work, moving drains, incredible, and we allowed it to happen.
KEVIN HILL: Isn't it almost uncharted territory? Again, being a newcomer into the industry and looking at it both from within and without, the industry started, what, 25 years or so ago. There are a lot of companies that were early adopters and a lot of people over a period of time made a lot of money, whether they were installing, selling, manufacturing, fabricating or supporting the industry, and over that period of time prices and margins had the normal lifecycle effect. I guess a lot of people have aspirations today for hankering back to those high margin, profitable days. But in many respects we are seeing for the first time, as I see it, the slowing or falling off of demand for the products, or stabilising of price or share, so in some instances prices might be falling, demand might be falling, and at the same time everything that we buy, including labour, to make a window has gone up. I don't see a concerted effort from the industry to seek to pass those on, with the exception of the glass people and to some extent the profile people, and that is fine. If you are a distributor in any business you like price rises because you just pass those on straight away. We have an inability it seems as an industry through the value chain to pass those very observable, very, very real cost of material increases on to our customer base. A couple of profile people have said to me in the past that they fear for the liquidity of some of their customers throughout the next six months. I think it's a big deal. But your point about easy entry; it is easy to go down, but it is very easy to come back again because the barriers to entry are very --
MICHAEL NAGLE: If you look at the price of wooden windows now coming in from Scandinavia, from the continent, they're three times the price of PVC windows and people are buying them.
DAVID RUZICKA: Yes, I agree. You have only got to look at aluminium. Again, I went to buy some product for a customer of ours and I went to buy two sets of double doors for industrial use. They were not big, maybe 1800 or 1900 wide. They cost me £2,300 to buy two sets of double doors.
MICHAEL NAGLE: And you paid it?
DAVID RUZICKA: Yes, and the customer paid it. You would have bought four - at least - PVC ones from anybody; any manufacturer. There is something fundamentally wrong at all levels.
To me, I would love to see an extrusion company go back to the days of making not obscene profits that you made before, but to make profit, because without profit there is no investment. With no investment there is no future for the product. That is another argument that I have, that if you look at the kitchen manufacturers, you go and try and sell a kitchen to someone now that has had a kitchen in for ten years, it is quite easy because there are lots of sexy things to sell. Basically, it is still a carcass with a door on the front of it, but you have got something to sell. You go and ask somebody who put PVC windows in ten years ago to change. What are you going to sell them? Really, what are we going to sell them; the same?
KEVIN HILL: Aluminium or wood.
DAVID RUZICKA: Sell them aluminium or wood, and that is sad, though, that we have not developed, and we have not developed because there's no money. We're an industry without it.
SAM KENNEDY: It is a different version of recycling, isn't it? I think we are moving on to the next subject
I am really enjoying reading this debate, and look forward to hearing others comment to the statements being made by such learned and indeed senior individuals.
Two very important comments I would like to make which relates to the size of the market and how we now sell compared to how we sold 10 – 15 years ago.
Size of the market – New build is primarily driven by demand and legislation to a large degree dictates what product is specified. Domestic has the trade side one man band type business which is driven mainly by referrals, and then there is the big wide world of direct sell.
Questions for debate:
• How big is this market if you measure the difference between passive and proactive enquiries?
• How different is the sales process between companies who apply themselves to large lead generation and so have a large marketing spend to balance in their structure,compared to the companies who achieve the majority of their business passively through show site, press and referrals.
Selling to the customers who had windows 10 years ago, at the coal face, a term being used in this debate, there is a lot of difference between what is available now to what was installed 10 years ago.
i.e.
• Better extrusion 5 chamber system instead of 3 and a better mix in the compound for colour stability (look in our skip and see all those creamy, grimy, discoloured units).
• Full steel reinforcement.
• Internal beading.
• Vastly improved security, mutli point and better locks (Police Secure by Design).
• Better double glazing, more efficient through warm edge technology, bigger air gap and low e glass.
• BFRC energy rating efficiency – Energy Savings Trust
• Insurance backed guarantees.
• FENSA.
I could list a lot more, however, the point is the products that can now be made available are a better investment even if the customers has the old fashion type of PVCu windows and doors. O.K. spoken like a salesman but that’s who gets the orders isn’t it!
Posted by: David Bown, Sales & Marketing Director Finesse Windows. | November 09, 2007 at 12:49 PM