Solid surface fabricators have been diversifying into other surface materials for several years and it appears this trend will continue, although most likely at a slower pace. New dynamics are becoming apparent in our markets.
Our company was inspired to diversify when we saw DuPont launch its Zodiaq business. Yet for us, as was the case with many other fabricators, it didn't stop with quartz surfacing. Our strategy shifted to include a more complete offering to our customers in order to keep them from shopping elsewhere. Thus, a focus on granite fabrication was added to our product line.
This has been an effective plan, but I'm not sure I would risk the same amount of capital in today's highly competitive granite and engineered stone market. The cost of entry into this business is large and growing, as high-volume fabricators expand and lower their prices to gain market share. As the prices for granite and engineered stone go down, fabricators are forced to use more highly automated equipment in order to meet the demand of the market and continue to be profitable.
Our company is not alone in its move to diversify. DuPont Corian is now DuPont Surfaces. Most solid surface distributors now carry a line of engineered stone or granite. Home centers offer a full spectrum of counter surface options. Even granite distribution companies are carrying lines of engineered stone.
Many fabrication companies that were once all solid surface now claim granite as their largest volume product. In each case, diversification for the sake of reducing risk by selling multiple products has not been the only reason for this marketing shift. Consumer demand and purchasing behaviors of many of the market segments has forced each of the members of the supply chain to operate differently in order to remain competitive.
The strategy to offer multiple products is now entering the next phase. Larger, more diversified companies than what we once thought of as typical countertop businesses, are now offering their customers an entire interiors package. The start of this is being seen in large markets in the U.S., such as those in Texas. This same phenomenon has been present longer in the European market, especially in France and Germany.
A company that sells almost all of the products used for interior finishes can afford to sell countertops to a builder at, or below cost as a means to obtaining the contract for an entire subdivision. These interiors contractors make their money on a limited number of the products involved in the project. Solid surface, or even granite, become just another line item to increase the bottom line gross profit for a house or commercial up-fit. This evolution of the route to market has resulted in even lower prices for countertops than were possible with large-scale, highly efficient fabricators.
Diversified or not, in order for medium to small fabricators to compete, it will require an even greater commitment to offering the highest levels of customer service and product quality. If the interiors company trend continues, production builder work might quickly become worthless to pursue, unless we can find a way to charge for the significant value we supply as part of our service to this market.
About the author: Jon Lancto is president of Solid Surface Products in Cornelius, N.C., and has extensive experience in solid surface fabrication. He is a founding member of ISSFA, and served for four years as the fabricator association's first president.