The European wood-based panel and decorative surfacing value chain is highly complex with a large number of players, different business models and levels of profitability. Although there is a number of exceptions, the industry as a whole is not as profitable as, for instance, tobacco or pharmaceutical industries, to name just two.
With an average return on capital employed (ROCE) of 5% over the last five years, the segment appears not to be an attractive investment target.
Additionally, the wood panel and decorative surfacing industry, apart from equipment manufacturers, does not invest enough of its turnover in research and development (fig 2) which becomes a huge growth inhibitor.
Times were better before the 2009 financial meltdown when the sector enjoyed an average ROCE of 10% (fig 3) accompanying a 5% annual demand growth. Can these good times come back? If so, under what conditions?
This was the main theme of the Executive Session organised by Pöyry Management Consulting as part of the 15th TCM Decorative Surfaces Conference held in Munich in March. As always, the event gathered almost 200 participants from across the industry value chain.
Pöyry created a discussion panel with the aim to give perspectives from different parts of the value chain to answer the pertinent questions: “What will drive the sector’s evolution and growth in Europe? What needs to change?”
After an overview of the key challenges and issues for the wood panel and decorative surfacing industry in Europe, outlined by Tomi Hartikainen, senior consultant at Pöyry Management Consulting, Matthias Krull, sales director at Munksjö, offered strategic insights from the decor paper producer point of view.
This was followed by Andreas Dörfler, managing director of Impress Surfaces, who shared his views as a decor paper printer and surfacing materials manufacturer.
Naci Güngör, marketing manager from Kastamonu Entegre, presented the views of a wood-based panel and surfacing producer, while Anders Pettersson, foiI and melamine materials manager of Ikea, represented the views of the leading furniture manufacturer and retailer integrated into wood processing and panel production.
The answers to questions posed by Pöyry about major value chain developments, current operating models, new winning strategies, product maturity, level of innovation and key opportunities, were diverse.
Ikea’s wood-based panel division, despite being called Category Flatline, is part of the company’s meteoric growth curve and ambition of doubling the 2012 sales and reaching €50b by 2020.
The company’s credo is ‘more with less’ and it translates itself into the focus on panel lightweighting which encompasses resource efficiency, cost savings and making the lives of Ikea customers better. It is evident that behind Ikea’s unrivalled success is its focus on innovation and consumer needs.
Kastamonu Entegre’s recipe for spectacular growth is the Turkish and Eastern European growth capture, focus on the consumer trends such as preference for high gloss surfaces and e-marketing – communicating with consumers via Twitter, Facebook and other social media.
Impress Surfaces was successful in attracting a private equity investment due to its strategy of the value chain capture – impregnation – extending its expertise from decor paper printing to surfaces manufacture – finish foils – and geographical expansion into Eastern Europe.
Munksjö’s focus in recent years was on growth through acquisition and efforts to maintain a competitive edge through operational excellence with huge focus on capacity utilisation in order to deliver value for money.
A lively debate on the future of printing methods was initiated by the conference audience, largely giving a green light to inkjet printing, while putting a question mark over direct printing on wood panels. The panelists and conference audience agreed on the urgent need of the value chain participants to communicate better in order to create win-win solutions and to improve the industry performance as a whole. The industry must become more innovative and responsive to consumer trends.