TIME TO INVEST HAS COME
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Published on Tuesday, 02 July 2013 12:57
What does wholesale market of natural stone look like? What kind of tendencies can be seen? And, finally, what is the condition of companies operating in Poland? Like every year we have asked those questions to a group of entrepreneurs. Most companies can see their chances for success in economic slowdown. In longer term we may expect consolidations and, possibly, elimination of weaker players.
Again, the representatives of wholesale market said that the biggest challenge for them is rationalisation of company management processes, cutting costs and, on the other hand, an effort made with the intention to improve comfort and quality in business relations. It is now much more common to hear comments that the most important factor reducing the natural stone demand is the lack of effective lobbying for stone industry. What is worse, we are to blame for this situation.
– Unfortunately, we are losing the battle with the competition if it comes to the quality of services. This is a belief that we have about ourselves and in this we cannot compete against ceramic branch – concludes Piotr Wysocki, the president of Interstone, which owns a few stone warehouses in Poland.
– It is much easier, then, for an architect to use other materials than stone, because it just leads to fewer problems. What is the most irritating for our customers, I think, is the time spent on business talks. This is a sad conclusion because we are better served in any ... car salesroom. Yes, you are better served in a car salesroom than at a stone wholesaler’s, despite the fact that the customer is often willing to spend much more money on stone.
What is worse, most architects prefer trusted materials, and it is true that problems with quality guarantee can be quite often found in our wholesalers. Generally speaking, then, it does not matter if it is an architect or investor, everyone wants to work with a well-known material which has expected technical values. Do you need evidence? It is a common knowledge that at sea ports loads with stone catch our eyes the most. The last remark, then, does not concern regions where the activity of stone wholesalers includes also being active in educational field.
– Architects and designers from Tri-City are knowledgeable about stone. Their knowledge is huge and they simply know why it is worth using natural materials and how to apply them – says Mariusz Łeppek from the Gdansk-based wholesaler owned by Levantina company.
What is the conclusion? If only such challenges can be expected by natural stone wholesalers, then the only thing that slows down the development of companies is our own mentality. Generation change, promotion of IT solutions – the reality will force changes.
Being marginalised
The branch press remains the most important source of information and communication. Stone is completely absent in scientific studies in Poland. It is impossible to find, for example, diploma papers in which our branch would be treated as a subject of interest. In economic studies we are treated either as a part of construction branch or we are totally marginalised. We should not have any doubts – who is promoting stone in Poland? Promotion is commonly associated with sales growth and profits and is carried out by companies which promote their goods, says Jarek Świadek, the owner of Hermes Gabrostone, which deals with importing natural stone which is available in six wholesalers in Poland.
– Today stone cannot defend itself, it is replaced or even forced out by latest technology products (conglomerates, sinters, exquisite ceramics, panels made of plastic, etc.). The lack of effective lobbying for stone industry in Poland can be clearly noticed. Apart from stone branch, no one is talking about stone. This is not only our local problem. There are, of course, associations which are fighting to change this situation. They feel the need to reach the public with reliable information and to reach people who make decisions about the use of stone.
If we are talking about money spent on promotion, the people we were talking to said at the start that the margin they get from selling natural stone is not high and does not let them invest in big advertising campaigns (in contrast to building ceramics manufacturers), so the guarantee of competence will be the biggest advantage in building long-lasting relations with customers.
– The customers can see it and, if the price difference is not significant, they are willing to pay more for a high quality product delivered on time, says Bram Callewier, a member of the board of Beltrami Polska Sp. z. o.o.
Long live the King!
Wholesalers are working in the atmosphere of complaints and grumblings about falling demand on stone. Who is going to win on the market of wholesale stone if the price does not rule the demand and, in longer term, the viability of the firms which deal with wholesale sale of stone? This is an important question because competing by means of price is not a reasonable thing for any players on stone market, especially in the situation of a still present economic slowdown, that we are coming away unscathed from.
– Looking at the last few years, sales and production are constantly increasing. The interest in stone is still getting bigger and it is becoming more and more popular, says Marcin Kaczorowski from Globgranit, which has its warehouse also in Czech Republic and this year is going to open two more warehouses in Poland.
– This is the best time to develop a company. Prices of lands and services are falling, so you are saving at the start and it is true that the season is going to be good and busy.
The time for implementing plans is perfect – hardly anyone has doubts about it. Making the hall bigger, building a customer service office? Yes! Like in 2007 there is a time for building projects and it is true that some wholesalers are taking advantage of it.
– If in two years’ time the market bounces back, it will be more expensive, so it is better to implement more ambitious plans right now, because cash credits are very cheap, adds Piotr Wysocki from Interstone.
It is a good time for a credit only if a company is in a good financial condition. Falling prices, which is no surprise, is not a favourite subject for our interviewees. For many years we have been hearing that stone is just too cheap! There is no good price for stone and today it is as cheap as coal or wood. What are the reasons for it?
– I think it is a result of price war. Surprisingly low prices result from the fact that the same kind of stone can be bought in a perfect or extremely low quality, says Piotr Wysocki from Interstone.
– Ceramic tiles are a different story – they are first choice or secondary choice and business talks are easier. In stone branch there is no such clear division, and there can be as many as ten quality groups. It leads to misunderstandings, in most cases to the disadvantage of a stone wholesaler, because talks almost always start with asking about the price. The buyer is interested in the lowest price possible. Only after negotiations the customer starts talking about the quality of stone as a building material.
We can imagine what could happen next during such talks. Finally, when the customer starts complaining about the quality of the stone, the wholesaler ... reduces the negotiated price again. Selling below the break-even point still happens too often, says another interviewee.
– Prices are unlikely to increase much in the short to medium term because of the fierce competition going on in the market. The supply is higher than the demand which causes a price war on cheap products. Apart from that, Indian & Chinese are flooding the market with cheap prices and bad quality. Consumers have an abundance of choice - Bram Callewier, a member of the board of BELTRAMI Polska Sp. z. o.o.
– This is not a problem in itself but becomes a problem when customers remain picky about quality and have unrealistic expectations about the product they buy compared with the price they are willing to give. Next to that, bad payment behaviour makes it even harder for wholesalers to continue to sell at these low prices.
No words starting with “cr”…
Most of our interviewees confirm that there is no crisis, though the year is not so busy. We are pleased with the fact that the word “crisis” does not appear in the opinions of stone wholesale owners. The situation is good as compared to what is going on in Europe. The most urgent need will be, of course, to catch up with sales, because of the stone season which started extremely late.
– The problem of financial liquidity of companies is noticeable. Deadlines for meeting payment obligations are prolonged, which implies actions aimed at enforcing obligations. Another very important, especially recently, factor is weakening of the value of zloty, just like in previous year, says Michał Nowak, the president of M+Q Polska.
– Sudden fall in the value of zloty is leading to customers’ mood changes, atmosphere of expectation which, in turn, leads to temporary sales drop. Winter? In my opinion, it will not be possible to level up the sales. If it was like that we would have had a sales boom as early as in May, after taking into account extremely unfavourable April.
All our interviewees agree that we have to react to market needs very flexibly and more quickly. Competition between wholesalers is so big that we are left with fighting only by professionalising contacts and service quality.
What is going to happen to the wholesale market in the nearest future? We may expect consolidation of smaller players and elimination of weaker ones. Even today we can feel the atmosphere of expectation. How is competition going to react to the deficit of granites from India? This question is justified because since arrests that took place almost a year ago, the extraction of stones which are badly wanted in the stone market has been decreasing.
What about India?
Kashmir Gold, Madury, Ivory Fantasy, Multicolor Red – those granites are already missing in some warehouses in Poland.
– As it is commonly known, the situation taking place in India made the continuity of supply of many very popular materials more difficult to meet. Many pits are still closed which results in dramatic rise of prices, says Marcin Kaczorowski from Globgranit.
When the material is missing, the price goes up, and there are still shortages. The price of Kashmir has increased by about 25%. Necessity is the mother of invention and it is true that many wholesalers took advantage of this situation introducing alternative materials to their offers. For example, Globgranit is promoting its materials (granites) from Ukraine. Interstone, on the other hand, introduced ... quartz sinters to its offer. The product complements the offer with large-sized slabs, which can be, of course, processed by traditional stone machines. It is also worth to mention an interesting example: are gang saws going back into favour and is cutting of blocks going to be profitable again?
– As we all know, the company owned by Mr. Grzegorz Sadek is based on, unprofitable as it may seem for many, cutting and polishing blocks and we still stick to it. We just occasionally import finished slabs, notices Marcin Kaczorowski from Globgranit.
Blocks or slabs – many economic publications in Swiat Kamienia discussed this question. Recently the import of semi-finished products has become more profitable than transport of blocks. This trend can be seen in the whole world. It is reasonable to cut blocks close to a pit, otherwise the costs rise dramatically and the margin gets smaller.
– This year blocks have become more popular and this is also an interesting alternative. This is a result of rising transport costs of stone from China or India. Working costs have got higher there – informs Mariusz Łeppek from Levantina.
–The Chinese want to make money – I have heard that the national minimum wage is not much lower than in Poland. There is still an issue related with the risk of buying blocks. In spite of many variables, the profitability of importing and cutting blocks is still growing in Poland!
Others are not so optimistic about the chances to develop their production (block cutting) in Poland.
– When taking stone as a raw material that undergoes processing which, in turn, requires a lot of energy, we can reach the conclusion that the fewer energy-consuming operations are done on a bought semi-product, the more energy can be saved. The trend we are talking about is the effect of calculation – it is not profitable to use a lot of energy for processing such a “primitive” product. We think that developing countries are today main exporters of energy in the form of semi-finished products, says Jarek Świadek from Hermes Gabrostone.
Wholesalers had different opinions when asked about the stone volume. Neither Beltrami nor Interstone deal with selling stone for tomb industry. The sales volume at Levantina is 70:30 in favour of thick slabs. In Globgranit, on the other hand, the production level of tombstones is about 60%, with construction constituting the remaining 40%.
– We may observe an uptrend as regards thin slabs and we are still thinking about widening our offer – adds Marcin Kaczorowski from Globgranit.
In previous years we were observing the shift (as regards the amount of stone used in Poland) from tombs to stone used in construction.
– If construction generated bigger demand, ready-made elements from China would be of no use. To be honest, we are pressed by Levantina from Spain to make sales in construction higher and, consequently, to make our margins bigger, says Mariusz Łeppek from Levantina.
Companies which are owned by large corporations can afford the biggest flexibility.
– It is true we are famous for blocks and slabs. Our customer can always choose if he wants to cut blocks on his own or to buy a semi-finished product or a final one, for example tiles. I cannot judge which one is better because we are cooperating with most Polish entrepreneurs, who invested their knowledge and money into the machine park: gang saws, multi-saws, multi-wires. I am observing their accomplishments in the branch with great admiration. Because of a long-term policy of the company which exists in B2B, it is very important for us to act in a proper way in order to eliminate unhealthy competition and to ensure the growth both for us and for our customers, emphasizes Michał Nowak, the president of M+Q Polska.
– When adapting to the new market requirements, the company introduced marble, onyx and quartzite blocks to its offer. Customers who are looking for half-materials are also important for us. Therefore, we are looking for the top quality slabs for them. Interestingly, as a corporation, we are selling stone for the highest price in ... China under the M+Q Orient Wanli brand – this is an example of supporting our customers in Poland and the rising customer portfolio in Asia.
FAIR PLAY
During our talks we could hear again that the temptation of diversification spoils the market. What is it? It means that there are companies which, in order to improve their competitiveness, blur the division between a stone wholesale and a stone plant. They, as if additionally to their main activity, deal with wholesale sale of stone. Should we, and to what extent, treat this temptation (wholesales as an “additional” activity) as spoiling the market or perhaps as an interesting trend of diversification?
– A wholesale, by definition, is supposed to supply the market with raw materials and, this way, to support local manufacturers – customers of the wholesale, and not to compete against the customers of its own customers. Offering processing and installation services by a wholesaler is shooting in the foot! – says Jarek Świadek from Hermes Gabrostone.
The danger of being within the scope of wholesalers is quite real.
– Levantina Germany is a very good example here. The branch was closed because a powerful stonemason took the whole market within four years and was able to present an offer comparable to the wholesale’s one. This tendency can be noticed in Poland, too, says Mariusz Łeppek from Levantina.
– I agree with the call addressed by Michał Nowak last year. In Tri-City market we stay out of the way of stonemasons because we have clear principles here: we deal only with wholesale sale, because we play fair.
Distributors of natural stone promise to keep the division and they expect something similar from their customers – stonemasons.
– A stone wholesale is attractive because it offers many kinds of stone available all the time in the offer, quick order processing, and even stones available for immediate delivery. – Those advantages of wholesales are quite costly and, to some extent, affect the final price, says Michał Nowak from M+Q Polska.
– In case when an entrepreneur who runs a stone company and employs a few people starts distributing goods, he competes with the wholesale which employs dozens of people, spends money on buying professional warehouse equipment and keeping attractive stock.
Certainly, competition in the market is getting stronger. Increasingly, companies specializing in stone so far in the processing and assembly of stone begin to import goods independently. It’s inevitable that some companies will disappear or that some consolidation will happen. The market is too crowded with too many competitors + stone companies are importing on their own directly, disturbing the market supply chain. The crisis is forcing new business models and consolidation to be introduced to come to a new equilibrium. Balance sheets need to become healthy again so that the market can thrive once again. Both stone companies and wholesalers will need to become stricter towards providing credit to customers – the current situation with run-away investors and customers severely delaying payments need to change dramatically in order to bring some breathing space back to the market. Polish market will have a lot of potential if those two points mentioned above occur. The survivors of this crisis will no doubt seize many opportunities.
Rafał Dobrowolski
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Again, the representatives of wholesale market said that the biggest challenge for them is rationalisation of company management processes, cutting costs and, on the other hand, an effort made with the intention to improve comfort and quality in business relations. It is now much more common to hear comments that the most important factor reducing the natural stone demand is the lack of effective lobbying for stone industry. What is worse, we are to blame for this situation. 
The branch press remains the most important source of information and communication. Stone is completely absent in scientific studies in Poland. It is impossible to find, for example, diploma papers in which our branch would be treated as a subject of interest. In economic studies we are treated either as a part of construction branch or we are totally marginalised. We should not have any doubts – who is promoting stone in Poland? Promotion is commonly associated with sales growth and profits and is carried out by companies which promote their goods, says Jarek Świadek, the owner of Hermes Gabrostone, which deals with importing natural stone which is available in six wholesalers in Poland. 
– Looking at the last few years, sales and production are constantly increasing. The interest in stone is still getting bigger and it is becoming more and more popular, says Marcin Kaczorowski from Globgranit, which has its warehouse also in Czech Republic and this year is going to open two more warehouses in Poland. 
Most of our interviewees confirm that there is no crisis, though the year is not so busy. We are pleased with the fact that the word “crisis” does not appear in the opinions of stone wholesale owners. The situation is good as compared to what is going on in Europe. The most urgent need will be, of course, to catch up with sales, because of the stone season which started extremely late. 
Kashmir Gold, Madury, Ivory Fantasy, Multicolor Red – those granites are already missing in some warehouses in Poland. 
– When taking stone as a raw material that undergoes processing which, in turn, requires a lot of energy, we can reach the conclusion that the fewer energy-consuming operations are done on a bought semi-product, the more energy can be saved. The trend we are talking about is the effect of calculation – it is not profitable to use a lot of energy for processing such a “primitive” product. We think that developing countries are today main exporters of energy in the form of semi-finished products, says Jarek Świadek from Hermes Gabrostone.
During our talks we could hear again that the temptation of diversification spoils the market. What is it? It means that there are companies which, in order to improve their competitiveness, blur the division between a stone wholesale and a stone plant. They, as if additionally to their main activity, deal with wholesale sale of stone. Should we, and to what extent, treat this temptation (wholesales as an “additional” activity) as spoiling the market or perhaps as an interesting trend of diversification? 
We are pleased to announce that Świat Kamienia has already received first applications which are going to compete for the main prize in the prestigious Kamień 2013competition. Only the objects which were built with a significant use of natural stone may compete for the “Kariatyda” (Caryatid) statuette.
