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Upper-end market continues to drive grill category

Economy, technology, rising prices challenge industry optimism

 

The grill category has had manufacturers and retailers scratching their heads over the last few years, wondering just how long and if the category will stay afloat. It seems the industry may have achieved a balancing act, and it's within the high-end market, complete with built-in barbecues and islands that don not only kitchen necessities but, thanks to technology, anything a consumer could possibly desire for an outdoor cooking area.

Cal Spas has catered to the luxury market with its Cal Flame brand of products, everything from outdoor microwave ovens and barbecue islands equipped with iPod docking stations and DVD players (see below).

According to Shiva Noble, executive vice president, Cal Spas, convenience, technology and just the plain old outdoors are driving the category's growth today. “We're finding that people just want to spend more time outdoors,” Noble said. “So, any features or products that make it more enjoyable to be outside are going to be popular.”

Cal Flame barbecue hardware sales have tripled each year over the past five years, while sales of the company's barbecue islands have doubled, according to Noble.

“Through its research and development department, Cal Spas continues to build and market products that are cutting edge,” she said. “We have taken the backyard home resort concept to a new level. We firmly believe the home resort product market has barely been scratched.”

According to Napoleon's National Sales Manager Ted Scott, there is certainly money to be made in the grill segment. The company's expansion into “strategic markets” in North America and Europe helped boost its business last year, Scott said. The outdoor room and “summer kitchen” trends have promoted the grill category as a lifestyle, “and we are very focused on offering many features on our grills that allow consumers to use them 12 months of the year so we're not just looking at seasonal product.”

Grill accessories within Napoleon's collection help support the category throughout the year. The Patio Flame brand of fire pits, patio heaters, waterfalls and outdoor fireplaces are just a few products the company offers beyond grills.

“Accessories are huge for us,” Scott said. “Part of how we see growth is we offer products the big box stores don't carry. It allows the specialty retailer to actually have high margins because it is not sold at the mass merchant, so it's actually more profitable – we're actually gaining some market and some market share.”

Modularity and versatility also play important roles today. If a manufacturer can offer add-on components such as sear burners, charcoal trays or rear rotisserie burners on one grill, it allows the consumer to have an all-in-one package instead of buying parts and pieces.

“All of these things are adding to the ticket item for the consumer looking at the outdoor cooking area,” concurred Jerry Scott, vice president of sales and marketing for Robert H. Peterson.

Weber-Stephen Products Co. had a quieter year in 2007 when it came to its accessories line, mostly because the company spent a great deal of time with repackaging to make it more environmentally and user-friendly for retailers. Weber also redesigned its entire gas grill line-up.

“2007 actually was a good year for us; it was a very ambitious year for Weber, but we had very few issues overall,” said Ernie Boys, vice president of product management.

Weber turned its focus toward products it will introduce this month at the Hearth, Patio & Barbecue Expo in Atlanta, with additional grill series, add-on features and more, all attributed to the company's annual research, the GrillWatch Survey, which keeps a pulse on what consumers desire.

Included in the new line-up is the Summit 470 and 670 Series which incorporates a sear station capable of reaching up to 900 degrees, an optimal temperature for searing steaks and thin meats. Also for Summit, Weber will expand its color offerings to include black and a new copper not only on the grill lids, but door panels as well. The Weber Q portable grill line will now include a charcoal version – the Weber CharQ grill. A side burner also was added to the SP-320 in the Spirit Series, and finally, within the Ducane brand, the Affinity S line is now offered, a mid-level line that retails from $699 to $1,000.

“We're trying to give consumers more choice within the Ducane line,” Boys said.

Despite a rocky year for the housing market, including remodeling and landscaping, Jerry Scott said R.H. Peterson did “surprisingly well” in 2007. The company rebranded and reengineered its FireMagic line into two levels – Echelon and Aurora – and had early buys that have been outstanding. “Excitement was created with the changes and the market was excited,” he said.

Minden Grill Company, manufacturer of gas grills and grill accessories, is thought by many as the new kid on the block. Founded in 2005, the company has made a name for itself by offering a grill that can be customized by the end consumer.

“In 2007, we were able to make some real progress in expanding the brand and our presence within the industry,” said Shannon Johnson, director of sales and marketing, Minden Grill Company. “With such a short track record, we expect every year to be better than the last.”

As a company that caters to the mid-market, Johnson acknowledges that the upper-end of the grilling market seems to be growing faster, but attributes it only to trend. Minden Grill is responding to the needs and wants of the marketplace in its own way.

“The trend of creating more elaborate outdoor living spaces is driving more elaborate gas grills, which is why Minden Grill decided to make a more European-style grill that didn't have the same look and feel of the other grills in the market,” Johnson said.

Addressing challenges

The same conveniences and technologies propelling the barbecue category forward, however, may also pose a threat in the future. Although homeowners want the best of the best when it comes to purchases, they do not want products that are hard to operate.

“Grilling is meant to be a casual, laid-back way to prepare food,” Noble said. “(Consumers) are interested in models that are as easy as possible to ignite and to use. They're also interested in easy clean-up.”

Adds Johnson, “We believe many folks desire a grill that is easy to set-up, maintain and function with excellent results … Grilling isn't just a man's job. Rather, it's a family job and more and more women are taking a vested role in picking those outdoor features that will work for the entire family. Many of our clients are women, and they appreciate that the Minden Grill is user-friendly, easy to assemble and built to their cooking style.”

Jerry Scott, however, doesn't see technology as a threat. “It doesn't complicate the product in terms of operation,” he said. “It actually makes cooking easier – igniting the grill, cooking and maintaining a temperature – the nice thing about higher-end grills is you don't need to babysit the grill.”

Instead, Scott mentions the home building market as a challenge. Because the remodeling business is struggling, “a lot of people are concerned about the added value to their property,” he said. “Homeowners become less interested in remodeling because they are concerned they aren't going to get their value back.”

The rising cost of steel is a continuing issue, one that many believe the consumer will have to pay for in the end. If a consumer still wants stainless steel, they'll end up paying either top dollar or a lesser amount but will risk lower quality.

“Many manufacturers will be forced to find new ways to get their models to the marketplace at a price point that's appealing to the storeowner and consumer,” Johnson said. “You will see a gradual transition from stainless steel to other forms of steel to help keep manufacturing costs down.”

“Stainless steel is the one in the spotlight in terms of increases,” Boys added. “The challenge is managing these cost implications while not compromising quality.”

Imports continue to be the buzz as more and more companies look overseas to soothe rising costs. “The largest challenge is low quality, low price import product,” Ted Scott said. “With more and more product coming in from offshore, there is less and less tech support. For a consumer, (the challenge is) long-term support for parts and service. It's the old thing, 'you get what your pay for,' and the consumers need to do their homework.”

Saturation a problem for retailers

A problem many have faced over the past decade is an oversaturated grill market, making it difficult for manufacturers and retailers to stand out from competitors. Product introductions have become as important as ever to keep the market fresh, new and different. While some, like Weber, Minden and Napoleon, have focused on colored grills made from porcelain-coated steel to differentiate from a sea of stainless steel, others like Cal Spas are offering additions to its barbecue cart line as well as a “build-your-own” option for its gazebos, spa wraps and surrounds for homeowners.

“Porcelain enamel is one of our core competencies that we produce here,” Boys said. “We will continue to capitalize on porcelain because it allows us to utilize color and some of these other things that consumers are wanting.”

“The specialty stores are hashing it out for a very small piece of the market pie,” Johnson said. “In today's consumer market, those looking to buy a new grill aren't educated on what they should or shouldn't buy. Most consumers focus on the price tag. The best thing a specialty store can do to increase their revenue is to educate their customer on what to buy.”

“(Larger retail outlets) initially attract the homeowner with their potentially lower priced products, but it's usually at the cost of mediocre quality and service,” Noble added.

Education, up-selling with barbecue accessories or advanced capabilities and PR/advertising programs are all options a specialty retailer has to gain advantage over the mass merchants. “Customers who visit a specialty grill retailer are looking for conscientious sales people to take the extra time with them,” Noble said.

Outstanding customer service continues to be at the forefront for specialty retailers as well. “It's repetitive, but I really can't stress that enough,” Boys said. “We need them to present themselves as the experts in the category … and it's really incumbent upon us (the manufacturers) to do the necessary training so they can present themselves as the experts.”

Special events also attract customers. Ted Scott said it is important for retailers to be associated with a manufacturer for training, such as Napoleon's Barbecue University, help in bringing in specialty chefs, co-op marketing and advertising.

“It's all about the lifestyle, the customer care, the support,” he said. “That's really what makes the specialty retailer unique.”

'Green' grilling

As the green trend seeps through most of the furnishings industry, both indoors and out, many are wondering if it will trickle into the grill category as well. According to the 2007 Barbecue Attitude and Usage Study, gathered by the Hearth Patio & Barbecue Association, LP gas grills continue to be the most widely owned grill type (64%). And even though 2007 marks the first year charcoal grill ownership stopped declining, it is still at its lowest level since measurement began at 37% (although according to Weber's GrillWatch Survey, consumers said charcoal ownership is on the rise) natural gas and outdoor electric ownership, at 5% and 2% respectively, remained steady in 2007, despite the fact that natural gas may appeal to consumers who are on board with the green trend and are environmentally conscious.

“We have seen an increased demand for natural gas in the marketplace, as many new homes offer a natural gas connection, making it easy to add a natural gas grill,” Johnson said. “Additionally, with the green act weighing heavy on the mind of consumers, burning with natural gas is much cleaner and better for the environment.”

R.H. Peterson is perhaps best known for its gas logs, and Jerry Scott said there are issues in terms of gas versus wood logs, and similar challenges with grills. “We've been a company that's been concerned about (the environment) for some time and we are refocusing our efforts,” he said. As an example of this, brochures are printed on recycled paper using a printer licensed by the Forest Conservation Service.

Though Ted Scott said he hasn't heard more about the green trend, he did say being environmentally concerned starts from the original manufacturer. “We're always looking at (being green),” Ted Scott said. “When you look at infrared bottom burners, the heat-up time is zero to 1,800 degrees in less than a minute. If your grill heats up faster and you can cook quicker, you use less fuel.”

Nonrenewable options such as charcoal and wood chunks also attract consumers who want to go “totally green” as well. “Carbon intake and outtake is exactly the same if you're cooking with charcoal,” Ted Scott added. “It's actually a cleaner product.”

Looking ahead

Despite a plethora of challenges and expected struggles this year, from the economy and housing market to a looming recession, many manufacturers are positive about 2008.

“One of the things we've seen here at Weber is that we've fared well over some of the tougher times,” Boys said. “As consumers actually spend more time at home, they're not buying cars and certain things like that with the disposable income that they do have available, but they do support purchases of products that complement their home life, so we're optimistic, but there are some challenges, no doubt about it.”

“We're very optimistic for 2008 based on some of our strategic programs we have in place – our early buy programs and also our pre-Christmas program – if there's any indication we have the right product for 2008,” Ted Scott said. “We're very excited with our new products – we have an extensive lineup of infrared products and an expanded lineup of built-in and kitchen components.”

Jerry Scott added, “We're cautiously excited about 2008 because we understand there are going to be challenges. I'm by nature optimistic. I think the economy – the forecast for housing and remodeling would allow you to think it may be a struggle – but because of the consumer base we have, which tends to be the upper-end, they tend to be less impacted with these economic factors. It's not going to set any records, but I expect the enthusiasm and the acceptance we have seen in early buy will carry out through 2008.”

Weber
Weber's four-burner Summit E-420 gas grill is available in black or copper porcelain-enamel finishes with polished trim. Below, the company's new Summit S-670 features Sear Station technology and lighted control knobs.

Napoleon
Napoleon's new bronze mist finish, constructed of porcelain enamel, provides a choice for consumers against a sea of stainless steel.

Built-in beverage carts, like the one above by Robert H. Peterson, and other outdoor kitchen add-ons allow consumers to purchase outdoor kitchens in one stop or return for repeat business and buy pieces and parts at a time.
Built-in beverage carts, like the one above by Robert H. Peterson, and other outdoor kitchen add-ons allow consumers to purchase outdoor kitchens in one stop or return for repeat business and buy pieces and parts at a time.

Cal Spas
Cal Spas' U9100 is just one of the company's islands to feature not only a barbecue, but rock accents, a refrigerator component, fireplace, television and more.

A waterfall garden by Napoleon is just one of several accessories lines the company offers, which helps support the grill category thoughout the year.
A waterfall garden by Napoleon is just one of several accessories lines the company offers, which helps support the grill category thoughout the year.

Minden will introduce a pizza stone during the Hearth, Patio & Barbecue Expo this month.
Minden will introduce a pizza stone during the Hearth, Patio & Barbecue Expo this month.

 

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