Positive growth prospects in the medium term for European Builders Merchants market

The total European builders merchants market grew by around 4% in 2015 with further growth of 2% expected in 2016, according to a newly released report by AMA Research. This new report reviews the builders merchants markets in 12 European countries (excluding the UK) and looks at construction and economic indicators, as well as identifying the key merchants groups/organisations operating in each of the 12 countries. Estimated at around €109bn in 2015, growth of around 2% is currently indicated for the European builders merchants market in 2016. However, there are significant differences between the 12 countries in terms of the merchants market structure, as well as distribution of lightside and heavyside building products.

In terms of contribution to GDP, construction output varies considerably between the countries reviewed - ranging from as low as 6-7% to highs of around 16-18% - with a typical overall average of 8-10%. Construction output has been extremely volatile in some countries over the last decade - notably Ireland, Spain and Portugal – and, in overall terms, has not recovered to 2007 levels across the leading 12 EU countries reviewed.

Growth in the overall builders merchants market across the 12 countries is forecast to be slightly lower in 2016-17. Though the market size has increased year on year since 2013, it is still below the peak achieved in 2007-08, and while the above figures at an overall level indicate a degree of stability in recent years, this conceals a relatively high degree of volatility at individual country level.

Germany has provided one of the more stable construction sectors in recent years avoiding the significant swings in activity levels that have typified market performance in many other countries. In addition, Germany also has high specification standards in most products, which has helped underpin the €30 billion building merchants market. France and Italy have performed less well in recent years, but remain significant markets - France underpinned by a strong housebuilding sector, while Italy has a stronger refurbishment market.

In recent years, there has been significant activity among buying groups with expansion and mergers/co-operations within national boundaries, as well as the development of pan-European links and some consolidation amongst the merchants. Three key multi-national groups are significant in the overall European market: Saint-Gobain, whose building materials distribution division claims to be the European leader in building materials distribution; Wolseley the UK based company which claims to be the world’s largest specialist trade distributor of heating and plumbing products and CRH, the Irish building materials group.

“Despite the current difficult climate, the 12 markets under review are also likely to see further rationalisation over the longer term, though inevitably further consolidation in some countries is likely to come up against competition barriers” said Andrew Hartley, Director of AMA Research. “As well as structural changes in distribution, the markets are also likely to see further rationalisation of supply chains, as major international groups expand their building material interests across different products and markets.”

2016 is expected to be a relatively difficult year, with many countries experiencing marginal growth at best. Government spending levels across most EU countries are still under pressure to keep within EU guidelines and, inevitably, public sector construction works are a target for budget cuts and this will continue to feed through into the builders merchants markets in some countries. In addition, new housing output is likely to be impacted as consumer spending and confidence levels fall. Repairs/maintenance works typically also depends on consumer confidence which remains relatively fragile across most major European economies in late-2016. However, into the medium term, prospects for growth are more positive.

The ‘Builders Merchants Market Report - Europe 2016-2020 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The full report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724. In addition, also on offer are reviews of the 12 individual countries and a separate review of the builders’ merchants market is also available by contacting AMA Research directly.

Electrical Wholesale Market Report Western Europe - Key Facts

Did you know that...

1. The European Electrical Wholesale Market is worth around £20 billion.
2. Germany is the largest market, with France and the UK accounting for a combined share of over 30%.
3. The market in Germany is influenced heavily by Buying groups, such as MITEGRO, Fegime etc.
4. Sonepar and Rexel are dominant suppliers in France, Belgium and Netherlands.
5. Growth prospects are cautious in most markets.

These facts have been extracted from AMA Research's report 'Electrical Wholesale Market Report - Western Europe 2015-2019 Analysis', available from www.amaresearch.co.uk or by calling 01242 235724.

Consolidation activity continues in the Western European Electrical Wholesale market

The overall electrical wholesale market within the EU (excluding recent accession countries) is estimated to be worth around £26bn, with the market value having remained at a similar level since 2012 - though there have been significant changes within individual markets.

AMA’s new report focuses on developments in Germany, France, Belgium and the Netherlands and, while the EU economy as a whole is currently experiencing a difficult period, some of the largest electrical wholesale markets in Europe have generally performed reasonably well over the last 5-6 years. Germany is the largest market accounting for over 30% of sales in ‘Western Europe’, reflecting high specification standards and a strong manufacturing base requiring electrical components.

A key trend in the electrical wholesale market is ongoing rationalisation of wholesaling, with further acquisitions consolidating the dominant positions of Rexel and Sonepar across the major markets. It is becoming ever more difficult for the smaller, independent companies to compete in the market, with a high dependence on buying groups and few new entrants to the sector.

Positive influences in this market include growing investment in IT, growth of renewable energy initiatives. In particular, the increase in online activity is changing the electrical products distribution sector, as companies develop more of a multi-channel approach to targeting customers. However, in comparison to other sectors, E-commerce is underdeveloped in this market, though changing as electrical contractors overcome their traditional approach to product selection and ordering processes.

The electrical wholesale market in France is mature and the dominance of the two leading players means that major developments in market structure are unlikely, at least in the short term. Future prospects for the construction sector are not optimistic in the short term, but our forecasts are for a slight improvement in the electrical wholesale market value, based on some positive effect from legislation and the development of more complex technologies. Beyond 2015, a steady increase in the French electrical wholesale market is forecast as the construction market slowly begins to recover from the recession.

The German economy entered 2015 positively and our forecasts for the electrical wholesale market are for growth of around 2% in 2015/16, and beyond that even higher, assuming that the recovery in the economy is sustained. Sonepar, the market leader in Germany, continues to grow and to make acquisitions internationally. However, there is scope for further growth within the German electrical wholesaler market and it would seem likely that further acquisitions by nationals will continue to be made in coming years.

Our forecasts for 2015-17 for the electrical wholesale market in Belgium are for low levels of growth, reflecting the relatively flat economy and construction industry in general. The market has a dual structure, with two internationally active players accounting for around 70% of the market, and the remainder made up of independents. Although the regional split in the market is likely to continue, international groups will seeks expansion through acquisition and developing more formal cooperative groups between them.

The electrical wholesale market in the Netherlands is highly consolidated, with the leading international groups accounting for well over 70% of the market. In general terms, the market appears to have remained flat over the last 5 years, though this conceals several years of volatility – particularly in 2012/13 when there was a significant decline. Given a positive general economic background, with GDP growth rates of around 2% forecast respectively for 2015/16, prospects for construction markets are better than they have been for some time.

In summary, while 2015-16 is likely to be a difficult period for most European electrical wholesale markets, medium term prospects are generally relatively optimistic. Broadly, forecasts indicate modest recovery, reflecting a combination of increases in new housebuilding levels and a steady recovery in consumer spending feeding through into rising demand for electrical products in the medium term. New market opportunities are also emerging, with the electrical sector adopting variable levels of involvement in renewable energy, home automation etc., while IT/communications also continues to attract significant investment. Conversely, external threats to the sector have grown with a switch to offsite manufacturing in some countries and a growing focus on modularity in areas such as wiring and circuit breakers for example, which may impact on the role of wholesalers in some countries.

“A relatively low key but important development in the last year is that Sonepar have entered the UK market with the acquisition of Routeco in 2014” said Andrew Hartley, Director of AMA Research. “While this acquisition gives them only a small share at present, it seems likely that this will be a platform for further acquisitions in the medium term, and probably represents a key growth opportunity given their high shares in other EU markets.”

It is forecast that acquisitions will continue across all European markets, though at a slower rate than over recent years.

The ‘Electrical Wholesale Market Report - Western Europe 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.