August, 2007

In Depth: Engineered Wood Products

Suppliers look to expand market share in a housing slowdown as more builders recognize the benefits of these products and processes.

By Craig A. Shutt

Marketers of engineered wood products are finding a silver lining in the grayish cloud that has been the recent housing market. While their product category may not be growing, marketers are offsetting declines caused by a drop in single-family housing by making inroads with builders who historically have preferred dimensional lumber. Marketers say using the current slowdown to generate understanding of their products will bode well for the market when housing starts rebound.

"We continue to see a trend to growth in penetration for the engineered wood products we’ve been promoting,” says Brian Greber, vice president of marketing and technology in Boise, Idaho, for iLevel by Weyerhaeuser. "This industry changes slowly at times, but we’re seeing an adoption rate for these products that is slowly but surely gaining steam.”

Adds Robert Fouquet, vice president of sales and marketing in Toronto, Ontario, for Ainsworth Engineered, "Regardless of the significant downturn in the market, engineered wood is in the pole position in terms of use, and it is probably gaining market share, despite an initial higher price.”

Engineered wood represents about 45% of the current framing market, notes Bob Berch, national sales manager for engineered wood products at Roseburg Forest Products in Dillard, Ore. "The current market has taken the wind out of the builders’ sails, but they understand [our] product and it continues to grow.”

In fact, the downturn in the market has in some ways aided the engineered wood market, says Denny Huston, sales and marketing manager for Boise Cascade Engineered Wood Products in Boise, Idaho. "Profitability has become so squeezed right now for builders that they’re listening to what we have to say. They have time to discuss it because they’re not under the frenetic pace they set for the last three years. They didn’t need solutions then, and they didn’t have time to listen to them, anyway.”

The result is a different market that suppliers are responding to, he adds. "Any time we go through a market downturn like this, it creates opportunities. We have to use these opportunities to work harder to increase our share and increase our customer base because builders are questioning everything they are doing.”

Brian Ellenberger, vice president of operations at Universal Forest Products in Emlenton, Pa., agrees. "We look at this as an opportunity for a young product to get some attention,” he says. "Potential customers are available, and they have more time to learn and more interest in finding ways to cut costs in their homes. It’s a great time to get in front of them and show them how we can save them money.”

There is a difference between a down market and a product that isn’t selling, adds Sherry Walker, director of marketing and business development for Huber Engineered Wood in Charlotte, N.C. "The market is down overall, which certainly affects sales, not popularity. Because the market is soft, there is an increasing demand for products that perform, which has helped the popularity of our flooring products.”

Market To Remain Constant

A recent study by The Freedonia Group in Cleveland focusing on engineered wood products gives an idea of how the market is trending. The study focuses on wood panels, which typically are used for plywood, I-joists, and rim boards, as well as some floor-framing products. Demand for these panels is expected to decline less than 1% through 2010, it notes, owing to the drop in residential construction.

"Growth will be supported, however, by increasing penetration rates for engineered wood products,” the report says. "Engineered components will present particularly strong growth opportunities over the forecast period. For example, I-joists are rapidly growing as an alternative to solid-wood floor framing because of performance advantages.”

Marketers agree that the sales declines around the country vary by market and that no one can say when sales across the country overall will rebound. But they likewise aren’t worried that the market is headed toward a prolonged dropoff. "It’s a cycle, not a trend,” notes Weyerhaeuser’s Greber. "We think the future is very bright.”

But the market is causing companies to adjust. Ainsworth, for instance, had announced a new mill to come on-line this past June in Grand Prairie, Alberta, says Fouquet. It was to introduce a higher-performing version of the company’s Durastrand flooring product, but the market downturn caused a postponement. "We have to be cautious with our cash position, so we deferred opening the mill until next year,” he explains. The plant is ready but the market doesn’t need the extra supply. "When general conditions improve, we will complete our capital expenditures and have it on-line.”

Designs Foster Acceptance

When that turnaround comes, which marketers forecast will probably be in 2008, the product lines will take off, predicts Roseburg’s Berch. "We expect to see our products achieve 7-10% compounded growth in the future,” he says. "It’s getting harder to find good 2x10s all the time, and with home designs changing as they are, [it] encourages the use of more engineered wood products.”

Those design changes include such elements as two-story foyers, taller ceilings, wide-open interiors, and multiple windows in a wall. "You can’t frame some of these designs with traditional lumber,” says Boise’s Huston. "If you put in a $10,000 window, you don’t want to chance that studs will move and crack the glass.”

Other, more hidden costs also are creating interest. "Builders are looking for products that offer high quality with less waste and less work in the field, because time is money,” says Jim Enright, general sales manager for Rosboro in Springfield, Ore. "Using engineered wood products is becoming a more popular way of framing as compared to 10 years ago because labor is tight and builders are trying to save money.” Adds Huston, "Builders are looking more closely at reducing their costs and saving cycle time because they need to improve their profitability quickly.”

Objections Being Met

Marketers agree that the reasons why engineered wood products haven’t progressed more quickly boil down to two key elements: a higher initial price and tradition. "Years ago, builders thought engineered products meant they were inferior,” says Huber’s Walker. "But they have learned that engineered products can be better than solid wood or wood-veneer products.” Universal’s Ellenberger agrees. "These products are relatively new so there’s an issue of getting the word out. But builders are quick to grasp the benefits.”

The value of eliminating later, hidden costs also is becoming more apparent, says Ainsworth’s Fouquet. "Builders are understanding that on an installed-cost basis, engineered wood is cheaper and a cost-effective alternative. Its better performance provides end-users with benefits. The objections to the initial price are being heard less as builders become aware of the offsets in value that are provided.” Weyerhaeuser’s Greber agrees. "The pushback from the initial cost can be a problem but once [builders] understand the benefits, it usually goes our way.”

Acceptance varies greatly between regions, notes Huston. Denver and the Northeast, for instance, accepted I-joists early, but Chicago and the Southeast have been slower. Tradition plays a major role, even when current products don’t offer a full solution, he says. "Wood floor joists give builders problems but they accept that because they’re used to it.”

In some ways, acceptance is being aided by the consolidation that is occurring in the market among builders, with smaller local and regional companies being absorbed into large national firms, he adds. "The big builders accept the benefits of engineered wood products, and they use them,” he says. "As they buy smaller companies, those builders start using the products, too, and we get better penetration.”

"The larger builders are taking much more of a quality focus, especially as it relates to improving customer feedback, says Paul Watterson, general manager for engineered lumber at BlueLinx Corp., the Atlanta-based distribution arm for Georgia-Pacific. "Builders take customer-satisfaction surveys very seriously today and put a lot of weight into ensuring their flooring performs well. The biggest trend that is helping us is that builders get a happy customer when they create a stiffer floor, and they aren’t getting callbacks on squeaks or bounces. The top 10 to 20 companies are all the way there.”

Converting those companies offers greater bang for the buck, points out Greber. "It’s a lot easier to get to the big companies than to all of the many smaller builders, who also build fewer homes. Making them familiar with the products is a key hurdle.”

Commercial Market Growing

Marketers and dealers both are enhancing sales by turning to a market that hasn’t been hit quite so hard: light-commercial buildings. "We’ve seen more interest from the low-rise multifamily market, and we have looked to move into that market more as single-family homes have tapered off,” says BlueLinx’s Watterson. "And the products are well received, especially the deeper I-joists.” To that end, the company has created various educational programs aimed at architects and engineers, which provide continuing education credits accepted by the American Institute of Architects, which are required to maintain professional certification.

"Most companies are spending a lot of time and money educating the various markets, which today includes architects and engineers as well as builders,” says Ainsworth’s Fouquet. "That helps expand the applications.” Ainsworth has added a variety of trade shows targeted to architects and engineers to its schedule of events. "We need to supply our marketing representatives with more collateral materials that address the specific needs of architects and engineers to gain their attention.”

As the markets expand, so too do the types of products. In part, that’s because customers have accepted existing products, understand the benefits, and want to build on them. "The product life-cycle for I-joists and some other products has gone through its churning and its education process, and now they are becoming semi-commodity items,” says Roseburg’s Berch. "Engineered wood is becoming very popular, and we can build on that.”

I-Joist Applications Expand

Even I-joists, which are well accepted if not universally used, are seeing their applications expand. LVL boards are being used for truss chords, which can reduce the size of the chords or reduce the framing members or plate size, says Boise’s Huston. That creates new options for the basics. "I-joists still have a long way to penetrate into the market to reach their full capacity,” he says. They constitute less than half of the flooring market, he estimates. "That’s a huge opportunity to grow that market more.” The options are expanding at all levels: Roseburg recently introduced a lower-grade I-joist to provide a better price point for smaller builders, says Berch.

I-joists also are benefiting from new technologies that allow for open-web designs and precise placement of penetrations, reducing weight and making them more flexible. "Deeper I-joists are becoming popular due to design needs and the ability to use them with mechanical systems,” says BlueLinx’s Watterson. The company, with Georgia-Pacific, expects to introduce new I-joist products later this summer, he says. "There are significant trends occurring with creating holes in I-joists that are overcoming objections that builders have to running mechanicals through I-joists.”

The ease of using I-joists to create entire flooring packages is boosting their use. "When I-joists can come out to the site labeled for placement and end-trimmed, builders save time and don’t have as many labor problems,” says Huston. Builders report that these packages can take 40% less time to install, he notes. "That’s a huge savings.”

Universal’s Ellenberger agrees. "Open-joist designs are doing well because they offer flexibility for placing electrical and plumbing lines. And ‘trim-ability’ also creates extensive flexibility. Builders who use I-joists are definitely moving in this direction, especially for floor trusses.”

The products are benefiting as much from the engineering and customization as from the specific product advantages. "Floor solutions are about creating a product-performance standard and engineering the design to determine how well it will feel and perform,” says Weyerhaeuser’s Greber. The systems include joists, rim boards, and panels that are consistent and work together, he says. Because these systems are hidden from view, they often receive less attention from customers. "But when they walk across their new home’s floor, the quality is evident in every step.”

Other Products Gain Popularity

Rim boards also are growing in popularity as new products enter the market and builders see a greater range of applications, says Ainsworth’s Fouquet. The company promotes its OSL rim board for use as stair stringers for tall applications, and it has introduced a stair-tread panel to create a complete stair system for both residential and commercial applications.

Tall-wall framing materials also are gaining market share. "There are big opportunities available for products that can help frame two-story or higher walls, as well as walls where high-end cabinets are being installed,” says Boise’s Huston. Rosboro’s version alleviates the need to build up 2x10s to thicker widths, says Enright. "It provides dimensional stability and longer lengths, which are benefits.” Rosboro has even created a separate web site for its big-beam product, indicating its popularity.

Structural wall products also offer great potential, says Weyerhaeuser’s Greber. "We’re seeing more emphasis on engineered wood applications that move from floors to the walls,” he says. Wall sheathing provides greater lateral-load support, especially for homes with large window expanses in earthquake and high-wind zones.

Adds Huber’s Walker, "Our roof and wall systems are new to most builders but they are gaining popularity due to the benefits they offer the builder, framing crew, and homeowner. Both are being received well because they solve a number of builder issues: weatherability and moisture management, faster and easier installation, fewer hassles, and curb appeal.” The company’s products are designed with weather barriers in place, eliminating the need for felt on the roof and housewrap on the walls, she explains. Both combinations represent significant savings for the builder.

Such components will continue to grow as the housing market rebounds, notes Greber. "These products’ sales have been hurt by the housing slowdown but in areas where code, quality, and insurance concerns have grown, especially California and the Gulf Coast, they are growing. The need for superior wall solutions is going to gain traction.”

Engineered wood also is being used in outdoor applications, says Rosboro’s Enright. Two years ago the company introduced a pressure-treated glulam beam with long durability. "Not a lot of people are aware of it yet, but it’s taking off really well now as more people expand their decks and outdoor spaces; they want to provide better support for their composite decking.”

Combining products into bigger packages also has gained popularity, he notes. "We’re seeing more companies marry products into one solution that enhances the structure instead of looking at the latest sheetgood to come to market,” says Weyerhaeuser’s Greber. Jeff Key, senior marketing manager at Georgia-Pacific, agrees. "We’re definitely taking a more systems-based approach to the products, especially with flooring systems.”

Services Help Penetration

Those packages are going beyond the combination of products, says Boise’s Huston, "We’re focusing on value-added services today in addition to products. It’s more about the services that can be provided with the products. That’s what really is going to grow the business in a down market.” A significant thrust of those services involves software systems, online coordination of plans, and dealer-customization of components, he says. "These programs offer the best way for a retailer to take ownership of the process and offer builders value-added services.”

Weyerhaeuser’s Greber agrees. "It’s critical for dealers to offer state-of-the-art software and consulting services today, and having a suite of software solutions ensures that every dealers’ needs can be met. It’s much easier for builders to work with engineered solutions in a home, and these programs help them do that.”

That extends to computerized saws, notes BlueLinx’s Watterson. "Our big customers are getting into the saw business to cut holes in I-joists. Initially, they were scared of that approach. But everything is driven off the same software program, and it helps place holes right where they’re needed and even tells them if the joist will provide the needed support once it’s cut. People are getting more comfortable with holes in I-joists.”

That helps link the dealer with one particular supplier for all engineered wood, just as it links the dealer more closely with his customer, he notes. "The software works best with that one brand, so it makes it easier for them if they use the same components.” That approach also appeals to builders, adds Larry Kroh, national sales manager for Open Joist at Universal Forest Products. "Volume builders in particular like the systematized approach. That way, they are dealing with one source for all their systems.”

Most dealers have salespeople using laptops, so incorporating online plan reviews and other logistical software is easier to adopt today, Huston notes. "Exposure and training are needed for them to expand. Many aren’t aware of what’s available.”

Kroh agrees. "The software is powerful, but it’s easier to operate than most past programs have been. Most dealers have staffs that are used to using software today, and they recognize the way the programs operate quickly.”

Green Building Helps

The materials’ environmental benefits also are leading builders and homeowners to these products, marketers say. Because they are engineered, they use trees that are younger and easier to replenish, and they use them more efficiently. "The green movement is aiding sales,” says Roseburg’s Berch. "There’s nothing greener than a tree.”

Certified wood also is gaining a higher profile, notes Ainsworth’s Fouquet. "We are seeing some builders differentiating themselves on that basis, and there’s a percentage of homeowners who want to be responsible and reflect that in their home. Our forestry approaches and certification efforts have provided us with opportunities to talk to builders about green products. It has come to a head now as a viable model for building.”

These benefits are leading more builders to try engineered wood products—and at that point, they’re sold, marketers say. "Lumber is at historic low prices for 2x10s, but we see few customers returning to those products,” says BlueLinx Watterson. "They know that they can’t build a house as well or even the same way with 2x10s as with engineered wood.”

Roseburg’s Berch agrees. "The labor-saving and performance characteristics are so much better, and customer acceptance has grown. Once they use engineered wood and know its features and benefits, they never go back.”