Plumbing & Mechanicalrecently interviewedMichael Werner, CEO and president of Gerber Plumbing Fixtures, to discuss issues facing the plumbing industry. Before coming to Gerber in 2002, Werner was an investment banker. He previously had run his then family-owned business, Werner Ladder Co.
PM: How have the needs of Gerber’s contractor customers changed in the last three years?
MW:Performance has become even more critical for contractors because they don’t have the luxury for callbacks. They don’t have surplus labor sitting around to fix the problem.
Contractors are shifting from new construction to repair and remodel. In new construction, plumbers could do 50, 100 or hundreds of tract houses. When they do repair and remodel, it’s much more complicated and more things can go wrong than can go right. As a result, the business has just gotten tougher.
Because of the shortage of demand, contractors really need to find ways to differentiate themselves. One way they can differentiate themselves is through the products they offer. If you are a plumber and can carry a brand like Gerber, which is very selective in its distribution, then you have the opportunity to differentiate yourself.
PM: What have been the primary drivers of these changes?
MW:The economy is the single largest factor, particularly the new construction housing market. Beyond that, we’ve seen tremendous inflation in raw material costs and tremendous pressure on labor and health-care costs. So, the transition of our economy from manufacturing to service and now to an internet economy has made it much more difficult for people in the trades to do well.
Our approach has been very simple: How do we help our customers be more successful? We call it “customer delight,” which has three pieces. First, how do we help our customers sell more and better products and up-sell? Rather than sell someone an inexpensive kitchen faucet, sell a faucet that has more design and value to it. Second, how do we help our customers make more money? We do that through offering products they can set and forget. Third, we try to be really easy to deal with. We help them run their business better through the training we provide and through our customer care center that has very long hours.
PM: What trends do you see in the plumbing industry?
MW:Water conservation started in the 1990s when toilets went from 3.5 to 1.6 gallons, unsuccessfully at first. But water conservation will pick up steam as municipalities, state and federal governments start to mandate new requirements, not just for toilets but for faucets and showerheads as well.
The bathroom really is back in Victorian-era plumbing. So, one of the trends we see is the digitization of the bathroom. As the bathroom becomes digitized, manufacturers who have made the appropriate investments to have the right innovation capability will create a wonderful market opportunity. The keys will be to have the right products that work well. As the technology gets better, the products will be better.
As a result of high raw material costs, there’s going to be a significant change in products going forward. Some companies will take the approach of taking out materials and cheapening up the products. Other companies, like ours, are focused on trying to find innovative ways to change product construction while adding new value.
PM: How does Gerber balance customers’ demands for product performance and water savings?>
MW:When we talk about water conservation products, we don’t use the term “low flow.” We use the term “high performance.” It’s a distinction worth making because these are high-performance products that work better in many cases than their counterparts did.
PM: If you had only one message to give to plumbing contractors, what would it be?
MW:As a plumbing contractor today, I would definitely focus my business on repair and remodel. If you look at the U.S. housing stock, more than 40 percent is more than 30 years old. Those homes have kitchens and baths that haven’t been remodeled recently. There are currently more than 100 million toilets out there that are 3.5 gallons or greater. When you look at the need to conserve water and how much money people spend on their water and sewer bills - and at the fewer homes being built - there will be a great pent-up demand for repair and remodel. If plumbers can focus on delighting their customers, they’ll be able to build a stable and healthy business.
PM: What’s your outlook for the plumbing industry for the rest of this year and in 2012?
MW:From a macro standpoint, we think it’s going to be another two to four years before the economy really picks up. Our country has significant macro headwinds. Our corporate debt crisis is equally significant to our government debt crisis. Our health-care and pension unfunded liabilities are other macro issues.
But when you look at the U.S. housing market, based on the studies that the Joint Center for Housing at Harvard did, the demand for new housing is 1.2 million to 1.6 million units a year. At some point, there’s going to be a large pent-up demand for new houses. So, short-term, we have headwinds and a lot of things have to happen to get our country on the right track again. Long-term, our view is bullish; we believe our country is capable to get on the right track.
PM: What can plumbing contractors expect to see from Gerber in the near future?
MW:They’ll see a couple major trends from us. Conversion of 1.6-gallon toilets to high-efficiency toilets, which flush 1.28 gallons, will continue. We are offering both 1.6 and 1.28 products because we’ve had a number of our customers tell us they were unhappy with what happened in the conversion from 3.5 to 1.6. They would rather not go cold turkey, and they’d rather have the choice of using 1.6 or 1.28.
On the faucet and showerhead side, we have brought out new faucet aerators that reduce the water flow from 2.2 to 1.5 gallons. We also are introducing new families of shower products, particularly showerheads that go from 2.5 to 2 gallons to 1.75 and even 1.5 gallons, depending on the requirements of the user.
Gerber also has been very involved in helping our customers sell in different vertical markets. We believe it’s a manufacturer’s job to go out and help the wholesaler generate business. So we have added a significant number of people to areas such as hospitality, new construction and commercial construction. We’re now working to partner with the professional plumber as well and bringing him more into these projects. So, we are creating a partnership between the plumber, the wholesaler and Gerber as the manufacturer.
PM: What has Gerber done to grow the faucet side of your business?
MW:We developed our product portfolio. We’ve brought out 600 faucet SKUs that are true to the Gerber product tradition of classic good looks. They can go into virtually any condo, apartment or nice home. We are getting the support of our key plumbing wholesaler partners through a faucet showroom program so plumbers can buy them. And we’ve been giving these products to our specialty sales force that focuses on getting specifications from hotels, new construction builders, apartment builders and other specialty markets. So, you need the product line, the distribution and create demand.
PM: When a contractor thinks about Gerber, what is his (or her) perception?
MW:“Gerber is my brand.” Gerber is an 80-year-old company that understands the professional contractor. We’re focused on making the professional plumber successful. We’re not over-distributed, so you don’t see us in all the big boxes. We make products with the best performance and classic styles at pricing the contractor’s customers can afford.
PM: What prompted Gerber to re-launch www.GerberOnline.com earlier this year?
MW:We want to be an informational source for anyone in the industry looking for anything. It’s an open site but we have designated resources for the target groups we’re trying to reach: plumbers, wholesalers, remodelers, hospitality people and other vertical groups. We do have a log-in capability for plumbers if they want to join our site and be on our locator.
More contractors are starting to use mobile technology, and our strategy is to be there with the tools they need to conduct their business more professionally. As we look to the future, we’ll have mobile websites that will work well on an iPad. So, if they’re in someone’s home and want to show products, we’ll have the tools to do that.
PM: What has been Gerber’s experience with social media platforms such as Twitter and Facebook?
MW:We have three principle strategies when it comes to Gerber and the internet world: provide a superior level of information so that any professional plumber and other people can find what they’re looking for; help our customers find and bid projects in content-rich electronic forms; and help our customers get more intimate with their customers. We’ll roll out strategies in the next 18 months to help them do that.
With some of the advances in pressure-compensating aerator design, you can go from a 2.5-gallon showerhead down to 1.75 and get a better shower. Low-flow has allowed us to redesign the engines inside the showerheads to provide water differently. The same thing happens with toilet technology when you redesign bowls to go with low-flow tanks to clean the bowl and provide the line carry to get the effluent out of the house.