As long as there are pools and spas, there will be chemicals to help treat them.
However, while the category enjoys a certain insulation against the recession, it has felt the pinch. Here, manufacturers discuss the high and low points of the chemical market, and touch on some top-of-mind issues regarding their products.
Taking the temperature
Because of their status as a staple among pool and spa users, chemicals sold steadily last year, with manufacturers reporting improvements in the single to low double digits.
“The pools and spas that are out there are still being used,” says Mark Ridpath, sales and marketing for CAPO Industries Ltd. in Burlington, Ontario, Canada. “I would say our sales have been stable the last two or three years, which I think is more than we can ask for.”
Patterns were very similar to those in 2010, with Texas remaining strong because of its relative economic stability, and the high-foreclosure states of California, Arizona and Nevada still challenged. Manufacturers conflicted on accounts of Northeast sales, with some saying that sales lost from a wet spring couldn’t be recovered, and others finding that the numbers generated from a warmer late summer were enough to make it a respectable year.
That’s not to say the chemical industry hasn’t felt the pinch of the economy. Existing pools have kept it in better shape than other segments of the industry, but it’s not like it was before. Some owners aren’t purchasing the same quantities of chemical products as they did — or should.
“A lot of homeowners are just letting their pools go,” says Evangelina Serrano, president of EZ Care Products in Fresno, Calif. “They can’t afford food, so they’re not going to buy pool chemicals.”
Chemical producers also are feeling the squeeze from the shrinking “new water” market.
“Chemicals only exist because water exists,” says Scott Newton, brand manager for Pro brands with BioLab Inc. in Lawrenceville, Ga. “So [the lack of new pools and spas] affects the overall chemical market. We liken new pools to the freshman class, and older pools to the senior. You always want your freshman class bigger than your senior class.”
But there are some bright spots. Some of that “new water” did come in the form of small splasher pools, which continue to sell. Not only has this resulted in chemical use, if on a smaller scale, but it also holds the potential for homeowners to trade up for larger abovegrounds or even ingrounds.
“We still see that as a great opportunity to make sure that those people have a good experience,” Newton says.
Additionally, sales are increasing from an unexpected source — banks. Manufacturers report that financial institutions are becoming more aware of the need for proper pool care on foreclosed properties, causing them to invest in chemistry.
Producers have higher hopes for 2012, after a strong early-buy season, a fairly mild winter, and reports from retailers, service firms and builders who have seen an upsurge in activity at the start of the year.
Bumps in the road
Unfortunately, one challenge that doesn’t seem to be easing off lies in the ability to control prices. While squeezed by raw-material suppliers, chemical manufacturers also feel pressure from the international market, with countries such as China making products available at lower prices.
Producers are dealing with these increases in a couple of ways. Several have had to pass the costs to distributors and dealers. For instance, phosphate removers have seen an average price hike of 20- to 30 percent in approximately 18 months, says Steve Zarucki, the TropiClear and Lo-Chlor brands manager for HornerXpress of Fort Lauderdale, Fla.
“That, by far, has been our biggest challenge — finding suppliers for the raw ingredients to our products, where we don’t have to raise prices,” he explains. “It’s definitely something we’ve worked on on a daily basis. I think any manufacturer has to be open to any international or domestic market to purchase quality ingredients, as long as the product is quality and it can be had at a better price. I think all manufacturers are looking to the entire world market.”
Producers continue to keep a watchful eye on what trajectory costs take. “You have to stay on top of it and know which way prices will be leaning so that it doesn’t catch you off-guard,” Ridpath says. “You plan for it and start planting a seed with your customers [to indicate] which way the pricing might start going the next year or the next quarter.”
Producers also are finding ways to streamline costs. For instance, CAPO regularly revisits energy efficiency. “Every year we pick a specific area of our plant where we want to reduce our energy costs,” Ridpath says. “Everybody knows the goal and is in tune with it and has been doing their part.”
Like retailers, manufacturers also must be smart about inventory — walking the line between purchasing and carrying too much while prices are high and getting caught short when demand picks up.
New school vs. old
Though the chemical category enjoyed steady growth throughout the recession, some say that specialty chemicals are seeing higher percentage increases than traditional treatments. This comes partly from the fact that many specialty products are newer on the market, so they’re closer to the start of their growth curve.
But a philosophical and practical conversation persists regarding the so-called “problem solver” specialty chemicals vs. relying solely on a well-implemented sanitization program.
Some believe that all problems can be prevented by staying on top of the essential parameters of sanitizer level, alkalinity and pH. They believe more consumers feel the same way, and are going “back to basics” in order to cut costs and streamline the number of products they must purchase and store.
“Your chlorines are your drivers — your everyday sanitizing of the swimming pool to your shocking products,” says Art Harre, president of Haviland Pool and Spa Products in Grand Rapids, Mich.“Algaecides also are always popular — the basic products like that.”
Others, however, believe the current climate actually is more friendly to problem solvers. It’s true that, in a desire to cut household budgets, pool owners are trying to minimize chemistry purchases. But some also contend that many homeowners don’t keep up, and need help correcting when they fall behind.
“I think with some neglected pools, maybe the problem-solving products come across as more appealing,” says Lori Brumagin, vice president of Bio-Dex Laboratories in Phoenix.
Specialty chemical manufacturers also say their asking prices haven’t been as affected by the economy as those of traditional treatments because they already saw higher margins. These products don’t have the economies of scale or endure the competition of chlorine-based products, so their retail prices can stand to carry reasonable mark-ups. Because of this, some say, the price gap between traditional and specialty chemicals is shrinking.
“The [thinking] used to be, ‘OK, it’s a luxury to have specialty chemicals,’” says Ken Breau, owner/president of Eclipse3 in Brantford, Ontario, Canada. “Now it’s not a luxury, because the base chemicals have gone up.”
The penchant also may be regional.
“Specialty chemicals thrive in markets with a stronger independent-retailer presence, especially the Midwest and Northeast,” says Michael Moore, president/COO of API in Jupiter, Fla. “They offer a nice opportunity for independent retailers to differentiate themselves. Commodity chemicals tend to do better where there are higher concentrations of pools and spas. For example, cal hypo and trichlor would be higher-volume markets overall in Florida, Texas and Southern California.”
Some retailers see specialty chemicals as a way to help differentiate themselves from the big-box stores and Internet sellers, and not just by carrying the products. These dealers demonstrate their expertise by listening to customers’ problems and directing them to the right solution.
“Anytime we can find a specialty chemical that can solve a problem, that’s an added opportunity to help,” says Howard Weiss, president of Contemporary Watercrafters in Gaithersburg, Md. “And the more the customer sees you as an expert, the less likely they are to go to the big-box store.”
But others still align with the “back to basics” mentality.
“I use more specialty chemicals than in the past, but I’m starting to second-guess that because the less the better,” says Steve Gorlin, president of Gorlin Pools and Spas in Lakehurst, N.J. “It’s more philosophical. I haven’t been dissatisfied with specialty chemicals, though they didn’t always meet my expectations. I just think the less you do, and the simpler it is, the cleaner the pool. Why was I able to keep pools clean 15 years ago if we know so much more today?”