For 15 years, Jim Stone Jr.’s small retail store, Sunshine Pool Co. in Pembroke, Mass., sold the same brand of chemicals. Then two years ago, the manufacturer with whom he did business approached him and said that prices would be increasing by 30 percent.
“They said it was going to be across the board for everyone from Wal-Mart to us. But people were holding out at the lower levels, so we did as well. It hurt our business,” says Stone, who took over ownership of the 35-year-old company from his parents four years ago.
Last year, the manufacturer again boosted prices 30 percent. “At that point, we started looking elsewhere,” Stone says. “It was a difficult, gut-wrenching decision for us. We were loyal to our suppliers, and they were dedicated to us, but we couldn’t shake our nose at a $25,000 difference in chemical purchases.”
Stone’s situation is not uncommon. As chemical prices increase and big-box retailers continue to dominate sales, pool and spa industry professionals find themselves entering uncharted waters. Today’s chemical sector is fraught with challenges, but it is equally blessed with a number of opportunities. Here’s a look at six forces shaping the market.
1 Steady, organic growth continues.
Manufacturers say pool chemicals experience an annual growth rate similar to that of new pool and spa installations. SRI Consulting, a Menlo Park, Calif.-based research and consulting firm, forecasts that sales of pool chemicals will grow at a rate of 3.5 percent per year from 2005 to 2010.
“Increases in the number of swimming pools, along with weather patterns, tend to impact chemical sales,” says Charlie Schobel, vice president of global affairs for Lawrenceville, Ga.-based BioLab Inc.
He predicts the next few years will see an extra jump in sales. “The effects of Hurricane Katrina are still impacting sales of pool chemicals,” Schobel says. “Because of the time it will take to restore all the pools in that area, the consequences of Katrina are expected to last for several seasons to come.”
Others believe the single greatest influence on increasing chemical sales is the retailer. In fact, pool and spa retailers generate about 15 percent of their revenues from chemical sales, according to a 2005Pool & Spa News survey.
Those retailers report that trichlor is the No. 1 chlorine sanitizer nationwide. It’s followed closely by sodium hypochlorite, which is used heavily in the West, and calcium hypochlorite, which is a Southern favorite.
“The consumer is visiting the specialty retail store looking for direction and advice,” says Michael Moore, vice president of marketing at Advantis Technologies in Alpharetta, Ga. “The specialty retailer has credibility that exists from the moment the customer walks through the door.”
2 Skyrocketing prices are squeezing retailers.
Despite the growth, a number of retailers and service technicians are concerned about the steady spikes in chemical costs.
“Pricing of various disinfectants has risen dramatically over the past two years, following the price of oil, which has an impact on raw material and energy costs,” says Jim Glauser, a senior consultant at SRI Consulting, citing a recent report on hypochlorite bleaches.
Jeffrey Sloan agrees. “It’s been a tough market. The cost of products has definitely gone up, the biggest reason being the high input costs,” says the director of the disinfection program at the Chlorine Chemistry Council, a division of the Arlington, Va.-based American Chemistry Council.
“There’s also some competition from overseas importers — China, in particular,” Sloan adds. “It makes it challenging to be in the pool industry.”
According to manufacturers, anti-dumping duties imposed on trichlor and dichlor in summer 2005 have increased the price of many sanitizers. Yet they say those hikes were necessary to sustain business.
In the meantime, many seek to mitigate end-of-the-line costs for family-owned retailers or one-person service shops.
For those companies, the price increases have required advance planning. “We have to buy in bulk to save on shipping,” Stone says. “We’ve had to spend time forecasting how much we’ll sell this month or next. It’s been difficult making the adjustment. We must store more in our warehouse now, too, so we had to find additional warehouse space.”
Bob Fowler isn’t convinced that buying large quantities early in the season is the best bet. “I did an early buy of $20,000 worth of tablets in January 2006, and the cost of those tablets just went below what I bought them for,” says the president of Fowler Pool Service & Supply Inc. in San Diego. “My wholesalers haven’t given me any good reason why. The only tip I’ve gotten is that 2007 may be a good year not to do an early buy.”
That frustration has companies such as Classic Pool & Spa searching for new suppliers. “Our costs increased 40 percent in the last two years,” says Suzanne Heim, marketing director of the Gladstone, Ore.-based firm. “We were told the imports from China and all the regulations are costing more. We had to eventually change chemical lines to get a better price.”
3 Loyalty almost always comes first.
Still, situations such as Heim’s or Stone’s are rare. It takes a lot for a small, family-owned operation to switch product lines. That’s because for most professionals in the pool and spa industry, loyalty is nearly as important as price when it comes to chemicals.
“Even though brands are national these days, it’s about what dealers grow up with,” Moore says. “You find some who are loyal to a brand, some who are loyal to a certain type of chemical, such as trichlor or dichlor. You still find many in this industry who are loyal to their individual supplier.”
For instance, throughout the ’70s, bromine sanitation prevailed in the Midwest, while liquid chlorine was popular in the Sunbelt. Most folks say that hasn’t changed much in the past 50 years. Advantis’ GLB brand, which was developed in Milwaukee, continues to have a strong following in the Midwest, while Atlanta-area manufacturer BioLab has a high concentration of Southeastern dealers.
The same level of loyalty exists at the consumer level, retailers say. “I’d say 80 percent of our business is from 20 percent of our customers,” Heim says. “You see them year after year. They buy their chemicals from us and, if they move, they’ll make a point of still coming to us for their new patio furniture or hot tub.”
Fowler says that many of his best clients are those who once attempted do-it-yourself chemical care using products purchased at big-box stores. “We get a lot of frustrated people who come in with bags of unnecessary products,” he says. “Unless you’re on site and able to analyze the whole backyard, it’s difficult to do.”
4 Alternative systems drive innovation.
Driven in part by the price increases of traditional sanitizers, a number of builders and retailers opt to promote the benefits of alternative systems to their customers.
Ozone is particularly popular with hot tubs, while mineral-, ion- and enzyme-based products draw some clients as well, according to the Pool & Spa News survey. Sloan of the Chlorine Chemistry Council believes UV disinfection systems are becoming popular in the commercial pool segment.
The increase in attention to these products has led to an abundance of other ones that enhance their qualities. For instance, a number of manufacturers have introduced “saltwater kits,” which bundle together the products needed to supplement a salt-chlorine generator at start-up.
“Innovations are always driven by the needs of the consumer, which usually come down to a desire for simplicity,” Schobel says. “The developments of alternatives in technology are driven by those same factors. As companies gain an understanding of how to satisfy those consumer needs and align their products accordingly, that will drive future innovation in our industry.”
5 Multiuse specialty chemicals are more popular than ever.
Schobel adds that multiuse products are a growing category. Also called multiaction or multifunction, these are specialty chemicals that treat a variety of water conditions with a single application.
Examples of these multiuse products include combination shocks and algaecides, or solutions that clarify and introduce enzymes. Some all-in-one products can even shock, buffer, clarify and kill algae in a few hours.
More than 95 percent of retailers use at least one specialty chemical. “With the multiaction products, as we educate people and they use it more, it will become more prevalent,” Heim says. “Each year, they grow in popularity.”
Moore agrees. “It’s about value and time,” he says. “They’ve always been available, but their effectiveness and popularity has increased over the past three to five years.”
Still, Fowler is skeptical. “I have little interaction with the multiaction products,” he says. “I like to leave the expertise to the service tech in the field. What if the customer doesn’t need a lot of clarifier? When they’re bundled together in a single product, I may be getting more clarifier than algaecide, and that may not be as effective.”
6 Future chemicals will be safe and environmentally friendly.
As the chemicals industry continues to evolve, manufacturers say products will become more user-friendly, safer to handle and better for the health of the environment and swimmer.
“There’s been a move from Class 3 chemicals to less volatile products,” Moore says. “That’s coming from retailers. They don’t want to store or handle these chemicals anymore.”
Stone and Fowler agree. Fowler avoids the risk associated with storing cal hypo altogether by not offering it to his clients. Meanwhile, Stone is bracing himself for stricter storage safety codes that his distributors are already taking on.
Part of the push for such products is the public’s perception of chlorine. “There’s negative marketing about the potential concerns with chlorine, and that’s a challenge,” Sloan says. “There’s a perception that chlorine can be an irritant — the smell, the burning eyes, the itchy skin — which is more related to improper pool maintenance than the chemical itself. But that’s pushing companies to switch to something else.”
Heim hopes that a line is drawn at some point. “There is so much to choose from out there,” she says. “I’d like to see fewer, more effective chemical choices. Let’s get one product on the market that can do it all. I think it’s possible.”
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