The Stars Aligned!
By Bill Sendelback
The stars aligned in 2014, creating one of the most remarkable, and best, years for hearth products since the resurrection of the industry in the mid-70s. Many in the industry are still searching for the reasons WHY?
It wasn’t just one thing that caused consumers to rush to hearth shops with wallets open and a strong desire to buy. It was a combination of key factors, chief among them being the emotion called fear.
Through the years fear has been a pal, a buddy, a friend of the hearth industry. In the ’70s, it was fear of a fuel shortage caused by Arab embargos. In other years, it was sharp increases in the price of heating fuel that triggered the fear among some consumers of not being wealthy enough to make it through the winter.
At times – such as the first quarter of 2014 – the trigger is the fear of death from freezing temperatures and power outages. Many hearth products are viewed as protection against such a situation.
That was a key – and negative – factor in moving consumers to purchase hearth products in 2014 (given the weather so far this year, 2015 likely holds a similar scenario). But without corresponding positive factors, the year would not have been anywhere near as strong.
First, the economy, in general, was stable and strong enough to engender confidence in consumers. That was key. The steady, if not spectacular, growth in new construction was also reassuring, as was pent-up demand for home improvements and, of course, the decline in unemployment numbers meaning more people were at work.
So these negative and positive factors exerted a push-pull effect on consumers and the beneficiaries were hearth products – in particular, pellet and wood stoves. That’s despite continuing challenges from government regulations and environmentalists.
“If you did not have a good wood stove sales year last year, you might try another industry,” says Dave Kuhfahl, president of HearthStone. “All of our excuses for a poor wood stove year went away in 2014.”
Even as heating fuel prices dropped dramatically late in 2014, wood stoves continued to sell well through the first quarter of 2015 due to exceptionally cold weather in much of the country.
Wood stoves and fireplace inserts had a fairly good 2013 with wood stove unit sales in the U.S. up five percent and inserts up 14 percent; both were up six percent in Canada, according to industry figures. And after a slow start to 2014, wood stoves ended last year up 18 percent and inserts shot up 15 percent in the U.S. Inserts in Canada were down 31 percent, and wood stoves were down five percent north of the border.
Steel stoves and inserts continue to dominate in both countries, capturing 66 percent of U.S. unit sales and 88 percent of the Canadian market over cast-iron models.
“Wood stove sales have been unbelievable,” says Alan Murphy, vice president of Business Development for Blaze King. “2013 was a very strong year, but 2014 was one of our best years and off the charts. 2015 started incredibly strong because of pent-up consumer demand and an empty supply chain.” Like many others, Blaze King expanded its production, and even while operating at full capacity was back-ordered for two months earlier in this year.
“Last year was excellent, a record year for us,” says Mark Freeman, president of Kuma Stoves. “Our wood stove sales were up 29 percent.” Kuma, with most of its sales in the West, expects a strong 2015 as it expands into new market areas. The consumer is “starting to have more interest in products made in the USA,” says Freeman, “and they now will spend more to get it.”
|FlexBurn Encore in Twilight Blue from Vermont Castings Group.|
“2014 was a very good year for our wood stoves and inserts, our best year since 2010,” according to Jess Baldwin, senior vice president of Sales and Customer Service for Vermont Castings Group. “The growth has been phenomenal, very strong in stoves and up double-digits in inserts.”
Baldwin says 2015 started out a little slower, but if the company dating orders are any indication, this year also will be strong. “We don’t think the sales growth in 2015 will be as strong as 2014, but we’re optimistic about this year,” he says.
“For us, it was a great year for wood, with more growth than our other product categories,” says Glen Spinelli,
president of Regency Fireplace Products. “We saw a huge increase in sales of our wood inserts. We’re planning that this year will also be strong because it has been so cold for so long in the Northeast and Midwest, but we don’t see 2015 being as strong as 2014. But, heck, if we see any increase over 2014, it will still be a strong year.”
Hearthstone has seen “fairly steady growth” since 2008, with a double-digit sales increase in 2014, says Kuhfahl. But he’s concerned about where 2015 is headed. “The year did not kick off like last year,” he says, “but dealers are still busy.” Sales of larger stoves had been on the decline at Hearthstone, but while small units are still strong sellers, larger models have made a recent comeback. “We’re seeing more conversation from consumers and dealers about efficiencies,” he says. “Ten years ago that was irrelevant.”
“We’re seeing the building of consumer perception of wood stoves as clean-burning and of wood as a clean, renewable fuel,” says Blaze King’s Alan Murphy. New from Blaze King, one of the few manufacturers to offer new models because of the uncertainties concerning the NSPS, is its Sirocco 25 flush insert. A catalytic model taking 24-in. wood and touting a 25-hour burn time, the Sirocco 25 is available with the traditional steel look of its Sirocco wood stove. Two other fronts will be available in 2016.
Despite its total wood stove unit sales growing eight percent in 2014, Jøtul North America saw its dollar volume increase by 12 percent, indicating the company was selling more expensive models. That trend continues for 2015, says Jøtul president Bret Watson.
“Cold weather, power outages, pellet fuel shortages and a better economy are all market drivers. But we’re not anticipating a booming wood stove market this year. The continued cold weather has kept us up somewhat this year.” In fact, Jøtul is planning on a sales slide for its wood-burning products. In 2008, 70 percent of Jøtul’s sales were wood-burning models. Now wood-burners are 35 percent of Jøtul’s sales, and Watson sees the company’s sales soon rebalancing to 70 percent gas and 30 percent wood.
|F 305 wood stove from Jøtul North America, not available until 2016.|
Continued cold weather is helping larger wood-burners to sell well for Jøtul, like its contemporary F370 which doubled in sales in 2014. But new from Jøtul is a medium-sized wood stove, its cast iron, modern F305, a 50,000 Btu landscape-style model that accepts 17-in. wood.
Its “Cash for Clunkers” program has aided the company’s sales; it offers a $300 voucher to consumers trading in an old gas or non-EPA wood stove. The program recycled 1,500 units in 2013 and 1,000 in 2014.
Like many wood stove manufacturers, small models have been big sellers, but Kuma has seen its medium-sized models “almost catch up” with its smaller units, says Mark Freeman. Helping Kuma’s sales is its “100 percent satisfaction guarantee,” a unique promotion that allows consumers to return a Kuma product within 30 days; the manufacturer gives the dealer 10 percent of the retail sales price that allows him/her to resell the now-used stove without sacrificing profit margin.
Although Regency continues to sell far more traditional-styled wood stoves, the company sees growth in its more modern models, says Glen Spinelli. “We’re adding more transitional models to our line to appeal to a wider range of consumers,” he says.
In 2014, wood stove sales at Vermont Castings Group grew at a greater rate than any other of its product categories, says Jess Baldwin. Medium-sized traditional models are still the big sellers for the company, but transitional, clean-faced models introduced in late 2014 already represent 18 percent of the company’s wood stove volume. “The Millennials of today are looking for less traditional styling,” he says.
Interesting consumer research by Pacific Energy Fireplace Products indicates that 70 percent of wood stove sales are made by or approved by women. So the company is designing its new products to “meet the woman’s eye,” according to Shannon Sears, general manager.
|Neostone from Pacific Energy.|
New from Pacific Energy are two versions of its Neo line of wood stoves, both available in a 1.6 cu. ft. firebox producing 3.9 gph of emissions and a 2.5 cu. ft. firebox producing 2.8 gph. Both are more contemporary models featuring very wide styling with large glass.
The Neostone is faced with 35 mm natural Brazilian soapstone panels, bull-nosed so no steel shows. Side panels weigh in at 110 lbs. each, and the unique soapstone varies in color from grays to blues. The Neoceramic model features colored ceramic panels produced by Piazzetta, an Italian marketing partner of Pacific Energy.
Cautious Optimism for NSPS
The uncertainty surrounding the Environmental Protection Agency’s (EPA) New Source Performance Standard (NSPS) has kept many wood stove manufacturers from developing new models. But even though there are some NSPS details yet to be determined, most manufacturers are relieved that the standard finally has been revealed. Most are pleased that the NSPS is not as damaging to the wood stove industry as it might have been.
“We’re happy everyone has more time to comply,” says Regency’s Glen Spinelli, “but we’re concerned about the to-be-determined test methods. If we have to test with cordwood, it will add more costs, and we’ll have to have a facility just to house cordwood at the required moisture content.”
Although Regency has introduced its own hybrid catalytic technology, the company is concerned about the Step 2 emissions limit of 2.0 gph. “Step 1 is not a problem,” says Spinelli, “but catalytic may be the only way to achieve 2.0, and Step 2 will increase the price to consumers. The question is: Will they spend more money?”
“We held off on our R&D pending the NSPS,” according to Vermont Castings Group’s Jess Baldwin. “We’re pleased that Step 1 is 4.5 gph and that the EPA is treating all technologies the same. But our long-term concern is what the EPA will do about efficiencies and carbon monoxide limits since the EPA will now require that they be tested for and reported. This gives them an opening for future rules. But it could have been a lot worse, and our industry has risen to every challenge.”
“The NSPS will hit us hard,” says Jøtul’s Bret Watson. “We’re pleased there is no Step 3, but with Step 2 at 2.0 gph, we will probably have to use catalytic combustors on all our models, costing us more than $1 million. Adding that increase to our most popular F500 model will add 15 percent, or $375, to the retail price. Let’s hope the industry can compromise with the EPA.”
|Grandview 230 wood-burning stove from Innovative Hearth Products.|
“We took our foot off the gas about wood-burning, not knowing what the NSPS would be,” says Michale Lewis, Branding director for Astria and Ironstrike (Innovative Hearth Products). “Now that we know the target, we’ll put more emphasis on our wood-burning models. The Step 2 limit of 2.0 gph will be difficult to get to, and it may put larger wood-burners at risk.”
“We’re generally thankful at how the NSPS is working out,” says Kuma’s Mark Freeman. “The biggest concerns for us were possible changes in test fuel or test methods, the blanket coverage of EPA-certified models for Step 1 and that dealers can sell through their existing models. We’re not terribly concerned about the 2.0 gph limit in Step 2, but we’re not happy about having to go back to retest. Our biggest frustration was not knowing what the NSPS would be so we could develop and test new models.”
Freeman has been working with his U.S. Senators from Idaho to push through the Senate two little-known bills that have already passed the House; they could affect EPA’s future actions. H.R. 4012, the Secret Science Reform Act of 2014, amends the Environmental Research Development and Demonstration Authorization Act of 1978 “to prohibit the EPA from proposing, finalizing or disseminating a covered action unless all scientific and technical information relied on to support such action is specifically identified and publically available,” according to the congress.gov website.
“In short, the bill says that the EPA cannot make a law without the science to back it up,” Freeman explains. The bill was passed in the House on Nov. 19, 2014, but was referred to the Senate Committee on Environmental and Public Works where it has stalled.
H.R. 367, the Regulations from the Executive in Need of Scrutiny Act of 2013, “increases the accountability for and transparency in the federal regulatory process by requiring Congress to approve all new regulations and include in the definition of ‘major rule’ any rule that implements or provides for the imposition or collection of a tax on carbon emissions,” according to the congress.gov website.
“This bill brings Congress into the loop on regulatory efforts as a check-and-balance,” adds Freeman. Passed in the House on Aug. 2, 2013, this bill is also stuck in the U.S. Senate, having been referred to the Committee on Homeland Security and Government Affairs.