Trends in the Insulation Industry
It’s got some of us scared silly — the slowing economy of 2001. The news media sends out horror messages daily, but despite the obvious difficulties, most insulation contractors are remaining fairly optimistic about the future of their market.
Tom Hayes of Hayes Insulation in Kansas City, Mo., has an especially bright outlook for the future. “I can only speak for my business,” he clarifies, “but I think my second half of the year is going to end up better than the first half of the year. I think that 2002, in spite of what we read, will be an OK year. I’m certainly not dooming and glooming it.”
Others remain positive, but are starting to see the sluggish economy reflected in the number of jobs they are receiving. Merrill Wolff, owner of Wolff’s Insulation Service in Oakford, Ind., relates, “We’ve had work, but we’re not covered up like we have been for the last two or three years.” He says that this slowing can have some nasty after-effects. “When the economy slows, it tends to get a little ugly with contractors trying to gain business — they want to gain market share with pricing rather than with quality, so sometimes you get into an ugly situation with pricing,” Wolff explains. “We try to hold our line and say we really want to be a quality-conscious contractor that’s going to be competitive. I think pricing can be a nasty issue if we’re not careful.”
So what do contractors say the future holds in store? Ray Usher, vice president of Superl Inc., Fridley Minn., laughs and says, “If I had a crystal ball, I wouldn’t be working for a living.” But asked to speculate, he ventures out on a limb and says, “My long-term outlook is a little dip for a year or two, and then it will come back again, maybe not as strong as it was but it will be healthy.”
Labor PainsEven though it’s a source of frustration in many ways, the slowing economy has actually helped some insulation contractors in one way: It has increased the pool of often-hard-to-find potential employees. “We’ve had more applicants in the last six months — people coming to us looking for work — which is both good and bad,” Wolff explains. “That means the economy isn’t as strong as I’d like to see it or they’d already be working. But the good side is that we’re able to better our employment picture now if we want to.”
Usher agrees that the labor shortage has let up a little bit recently. “Finally, after a couple of years, there’s been a little relief on the labor front. But in the past two previous years, it had been a struggle,” he says.
Other contractors report that the braking economy hasn’t alleviated their labor shortage yet — they’re still looking for new and creative ways to entice new employees and keep the old ones on board. Dave Eckley, president of Carlisle Insulation Inc., Omaha, Neb., was kind enough to share some tactics that his company uses to hang on to good talent. “To keep our people, we’ve gone to offering free health insurance, paid holidays, paid vacations, employee parties and that sort of thing,” he relates. However, he says, “It’s hard to get new employees. The best way to get them is if one of my employees has a friend who needs a job — that’s about the only way we can get them anymore.”
Mel Tabor’s company, Tabor Insulation Inc. in Salt Lake City, has begun offering referral bonuses to encourage current employees to bring in new faces. “They normally won’t bring someone in unless they’re serious and that person is a good worker, because it’s a reflection back on them if that person doesn’t work out,” he says.
High Prices HelpOne aspect of the recent economy —high gas prices — has hurt nearly all of us in one way or another. And as winter and its inflated heating bills prowl around the corner, we are reminded that the damage to our pocketbooks brought on by the recent energy crisis is far from complete.
However, the same augmented prices that are a burden to most of the general public are bringing work to some out there: the insulation contractors. Many insulation contractors — especially those involved with residential work — are discovering that the present energy situation is prompting some of their customers to examine the energy efficiency of their buildings. Lucky for the insulation contractors, this assessment often leads them to look closely at the structure’s insulation.
Wolff, whose Midwestern company does approximately 85 percent residential work, says his customers are definitely worrying more about energy efficiency nowadays. “More homeowners are more concerned with energy bills than they have been in the past,” he observes. “These homeowners are asking, ‘How much is my energy bill going to be?’ so they’re taking more of an active roll in making the insulation decisions. That’s especially the case in new custom homes.”
Builder customers aren’t the only ones worrying about the insulation in their homes, though. Retrofit applications are becoming increasingly popular with energy-savvy homeowners. Eckley, who works in Omaha, Neb., where winters can be harsh, says, “Retrofit applications are going to go up. It’ll probably amount to 25 percent of our business in September and October.”
Hayes agrees with Eckley. In his Kansas City, Mo.-area market, he says he’s seen about a 10 to 15 percent increase in demand for retrofits, which may increase as the winter approaches. “We’re going to do a little more gearing up for retrofits in the fall season,” he explains. “Unfortunately, retrofitting is always perceived as a winter item, particularly because we’ve had our gas prices double or triple.” Hayes plans on letting his customers know that his company is out there to help with retrofit applications. “I’ve revamped my Yellow Page ad and will probably do a little bit more major newsprint advertising in anticipation,” he says.
Commercial building owners also are starting to pay more attention to retrofitting. Bert Geiger says that his company, Insulation Contracting Co., in Portland, Ore., is “very strong in the retrofit market right now.” While most of this retrofit work is residential — he estimates that it makes up an impressive 55 percent of the company’s work — nearly 20 percent of the company’s work deals in commercial retrofits.
Tabor says he expects more and more commercial buildings to undergo retrofits in the future. “I think that the commercial retrofit market will probably increase because of higher utility bills. There may even be more actual building tenants willing to spend money [on retrofits] to lower utility costs, where before they may not have considered doing that,” he speculates.
Whether working with retrofit or new construction, residential or commercial applications, contractors seem to be fairly confident that the insulation market will weather this recent economic slowdown. Tune in next month to find out what new products and services the contractors are offering to keep up to speed in these potentially trying times.