At the start of this week, Everest announced a new supply deal with VEKA. This has come hot on the heels of another supply deal with the UK Windows and Doors Group after they decided to shutter the Duraflex brand for good.
Many will have failed to notice the reaction to that first deal, and I have no doubt that there will be further commentary on this new supply deal with Everest. But as we are all fully aware, the world of business does not stand still, and the status quo never lasts forever.
There is a new race for market share and it’s going to get competitive.
The right to win new business
Not long after it was announced that VEKA were to supply UKWDG after the decision to close Duraflex, Modplan, a VEKA client, issued a statement to say that it would continue with business as usual, but not without having its own two penneth on the supply announcement.
This new supply deal with Everest is likely to draw new commentary not only from the wider sector but perhaps some existing VEKA fabricators as well. The company appears to be on an aggressive path to increasing market share during this downturn and is perhaps looking at areas of the sector that it would not normally look at. The likes of UKWDG and Everest are not traditionally parts of the market VEKA would be involved with. The former is known for very cheap pricing and being at the “value” end of the market. Yes, VEKA had an existing supply deal with Evolution, but until was not involved with any other parts of the business.
Everest is very much a volume-driven business, with a model typical of previous-era double glazing. A business that competes on price more than anything else. After having financial trouble in previous years, it’s likely VEKA has secured its new business with good levels of protection.
I can see why existing fabricators of VEKA may not be too happy with these two new supply deals. These are businesses that are competitors and not part of the usual higher-end part of the market. Some will feel loyalties are being tested.
But, and this is perhaps one of the most fundamental elements of business, VEKA has the right, just as anyone else does in any business in any sector, to fight to win new business. We often tout friendships and partnerships in this sector and business in general, but the hard reality is that where there is new business to win, that comes first. It really is as simple as that.
We have seen other examples of the very same thing over the last few weeks. Glazerite has added Deceuninck’s 2500 series to its product portfolio, which is a win for Deceuninck. Eurocell has also won a supply deal with Polyframe which is also a major win for Eurocell. These companies are in the business of winning business and nothing else. Whilst competitors will not like it, it is the nature of the beast.
Market dynamics changing
I believe what we’re seeing is the start of some major changes within the upper levels of the supply chain. The market has slowed down considerably and we are beginning to see the number of casualties mount up. There is a need for companies to increase their market share and revenues so we are moving from the phase where companies were more than happy with their business levels during the pandemic to one where they really need to get a shift on.
The PVCu part of the market is one where margins are already pretty thin. It has been hit with a number of issues all at the same time. Price inflation, although that seems to have calmed significantly, has eaten into those margins. Labour costs have also risen. The slowdown is now hitting hard too. But another factor I think we need to consider is the move to aluminium. Installers and fabricators are rushing to residential aluminium to find new revenue streams which in turn will take their focus away from PVCu somewhat. The PVCu part of the market is going to have to work harder to keep the attention of installers and fabricators to prevent margins from being hit further.
Although the decision for a fabricator to change systems supplier is a big one, I do expect one or two more changes to be made over the next few months. I have written before that the market does feel rather unstable right now due to a number of issues that are all happening at the same time. Instability brings change, and after a pretty long period of little change in terms of systems company supplier deals, this looks like we’re entering a period of transformation.
Don’t rule out some aggressive acquisitions either.
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