The Commercial and Industrial Insulation Market Has Grown
The latest NIA Industry Measurement Survey indicates that the commercial and industrial insulation industry has grown. A less formal survey exhibited several changes that influenced the overall market calculation.
For the overall industry, market revenue has grown 21.8 percent from 2000, the year last surveyed: 10.3 percent growth was realized from January 2001 through December 2003, and 10.4 percent from January 2004 through December 2004. NIA members are now participating in a market that exceeds $8.3 billion. Based upon the survey methodology, that number is probably conservative. Additional survey participation would have yielded a higher number; however, there is some comfort in the growth percentage for the survey methodology, and participation of larger manufacturers has been consistent.
Previous surveys exhibited modest growth: In 1998 it was
4.6 percent; in 1999 it was 1.6 percent; and in 2000 it was 3.1 percent. Surveys were not conducted for 2001 and 2002; however, it is believed that the market declined in 2001, possibly as much as 5 percent, and an additional 3 percent in 2002—before recovery began in mid-2003. Regardless of the decline percentages, there appears to be general consensus of a continued decline, general recovery time frames and that the industrial sectors lead the decline and have trailed in the recovery. Given this scenario, market growth from mid-2003 through 2004 would have exceeded 25 percent.
Did units or dollars drive the increases? The detail from the survey results cannot answer that question; however, it is believed that increased labor and material cost exceeded unit growth.
The data obtained from the informal portion of the survey exhibited several factors that do influence the overall market calculation: 1. The support of the distribution channel has increased; 2. The estimated “average” ratio of labor to material has significantly increased; and 3. Margins have increased and declined slightly in the distribution and contactor segments, respectively. The shift in the ratio of labor to material had the greatest impact and supports the theory that increased cost exceeded unit growth. The labor/material ratio shift could be due to actual increases in direct labor and related benefit cost, a different mix of type and size projects, shorter construction periods demanding increased manpower loading, and/or any combination of these or other factors.
When examining the impact of the labor/material ratio in combination with the increased support of the distribution channel and margin changes, the survey exhibits a decline in the overall material portion of the market of 8.1 percent from January 2001 to December 2003, with an increase of 10.4 percent in 2004. The survey does not provide data to distinguish the difference between unit or dollar growth or industry segments in either of these periods.
Surveys can be very useful in all facets of the industry. They can—depending upon the scope of the survey—provide a general or comprehensive view of the subjects being examined. The results can also provide benchmarks upon which to measure performance or to establish objectives; provide meaningful supporting data to shareholders, investors and the financial community; provide current and potential employees with meaningful information; be used in developing strategic or tactical business-sales plans; be used in reviewing historical and future trends; and for a large array of other initiatives.
The overriding goal of the 2004 NIA Industry Measurement Survey was to provide data related to market size and growth of the commercial and industrial insulation market in the United States. The survey does not include data related to metal building insulation, specific heating, ventilation and air conditioning (HVAC) products, such as duct liner, building insulation, OEM products, refractory products or other specialty insulations.
The value added by fabrication and lamination has not been included, but if it had been, the overall industry size would be significantly larger. Possibly, future surveys should include all of those products and more detailed data as to industry segments, unit versus dollar growth, geographical variances, etc. The results of such an effort would be rewarding, but the challenges would be great. As the old saying goes, if there is a need and a will, there is a way.
The commercial and industrial insulation industry—the NIA world—has confronted many obstacles since January 2001: most notably the impact of 9/11; the continual complexities of the general United States and global economies; and several significant industry events. The industry has rebounded and grown 21.8 percent from January 2001 to December 2004, and exhibited 10.4 percent growth from 2003 to 2004. In summary, the commercial and industrial insulation industry is growing.