LOS ANGELES - The Cabinet and Vanity Manufacturing industry has fared poorly in the five years to 2013 because of shattered consumer confidence in the economy and slow residential housing expenditures due to the recession. Additionally, the steadily strengthening Canadian dollar made it cheaper for consumers to purchase imported cabinets and wood furniture products, which lowered domestic demand for manufactured products.
"Canadian wood furniture manufacturers have faced increasing competition, particularly from countries with low labour costs, such as China and Mexico,” IBISWorld industry analyst David Yang says. As a result, even when residential housing expenditures started to recover from the recession, demand for industry products continued to slow. In the five years to 2013, IBISWorld expects industry revenue to fall at an annualized rate of 1.7% to $2.6 billion. Industry profitability has also contracted during the period due to import competition, stagnant domestic demand and rising input costs.
The Canadian dollar is expected to slightly depreciate in 2013, making domestic products comparatively cheaper to purchase than imported cabinets and vanities. “Consumer confidence is also anticipated to pick up this year, which will bolster consumer spending on home-improvement investments,” Yang says. On the other hand, the housing market is expected to slow due to rising fears of a real estate bubble. Therefore, despite strengthening economic growth and favourable exchange rates, revenue is estimated to increase only 1.0% in 2013.
The Cabinet and Vanity Manufacturing industry is highly fragmented and, therefore, has a low level of market share concentration. In 2013, IBISWorld estimates that the top four largest industry manufacturers are Fortune Brands Home and Security, Decor Cabinets Company, Downsview Kitchens and Superior Cabinets Ltd. There are a number of large enterprises that earn significant revenue through selling kitchen cabinets and bathroom vanities. Some of these companies manufacture under multiple brands, to varying degrees of quality.
In the five years to 2018, revenue is projected to grow due to recovering residential housing expenditures. In particular, home renovation and home-improvement spending are anticipated to strongly increase during the period. Industry growth will, however, be constrained by rising levels of imports, especially as the Canadian dollar strengthens. Imports are forecast to increase during the period, making up an increasing share of domestic demand. Consequently, exports' share of industry revenue is anticipated to fall. On the other hand, cost-cutting efforts are anticipated to marginally bolster profit margins in the five years to 2018, though this growth will not be enough to prevent long-term industry decline.
Have something to say? Share your thoughts with us in the comments below.