Dick Titus, executive vice president of the Kitchen Cabinet Manufacturers Assn., says that the current state of cabinet manufacturing is still good, though the market is definitely softening.

 

"The real driver of our market remains new housing," says Titus. And projections from the National Assn. of Home Builders show that new housing starts are going to continue to decline up until at least the third quarter of 2007, possibly longer, he says.

 

Most of the members of KCMA are expecting a soft landing that isn't as dramatic as the drop in 1990 or 1991. Although they are expressing caution, they are not expecting a total meltdown, says Titus. There is some concern that the backlash from the creative financing used by some consumers to purchase new homes hasn't been seen yet. But overall demand for homes is still high, he says.

 

Cabinet manufacturers have had a year-to-date overall sales growth between 9.6 and 9.7 percent, instead of the double-digit growth the industry has seen in the past few years. In September 2006, cabinet manufacturers were seeing a total growth of 2.4 percent compared to 13.5 percent for the same period in 2005.

 

The remodeling effect

Although remodeling is not the driving factor in the growth of the cabinet manufacturing industry, it often picks up some of the sales slack that results from a declining building market. Some of the larger KCMA members sell to both builders and big-box stores. When builders reduce the number of orders, consumers may make up the difference at the big-box stores, including do-it-yourselfers and smaller shops. It is not uncommon for remodeling to experience growth of 3 to 4 percent when new housing cools, says Titus.

 

Although stock cabinets only saw a 0.9 percent growth this past September, custom cabinets were down 10.6 percent in September. The strongest segment is the semi-custom cabinet market, which in September saw 6.8 percent growth.

 

Imports do not seem to be having a significant impact on the cabinet industry. There are more products coming in from Canada, and import growth from Asia is coming mostly in the area of components.

 

Dealing with the slowdown

The biggest concern of manufacturers appears to be getting stuck with excess inventory. Efforts to improve production efficiency are still being put in place and the expectation of slower growth is leading companies to implement some creative measures to keep employees working and production in place. For some companies, it means reducing hours or cutting back on shifts. Some are talking about extending holiday periods.

 

Some manufacturers are looking to build other channels or strengthen other marketing possibilities, says Titus. Production schedules may change slightly to adjust to lesser demand. With the lack of skilled workers still a big concern, many of the manufacturers want to retain their skilled work forces while in this softened market. "There are creative things going on to keep a skilled workforce in place," says Titus.

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