IHA News Release

FOR IMMEDIATE RELEASE:
Contact: Deborah A.Teschke
Manager, Media Relations & Communications
847-692-0110

HOUSEWARES INDUSTRY MEETS FINANCIAL CHALLENGES IN 2005, ENTERS 2006 WITH CONSUMERS MINDS STILL IN SPENDING MODE

ROSEMONT, Ill., (January 2006)—Energy prices and transportation costs, on the rise throughout 2005, began to level off by the end of a roller coaster year. And consumers willingly went along for the ride, apparently still focused on spending for their homes, according to members of the Board of Directors of the International Housewares Association.
“ You would think that will all the increases in oil and natural gas, it would affect retail, but our customers are strong and business is good,” says Bruce Kaminstein, president of Casabella. “It’s difficult to consider price increases. There’s always the fear that taking prices up will cause sales volume to suffer.”

Linda Graebner, president & chief executive officer of Jarden Direct, echoes that statement, saying she is “cautiously optimistic” about the near future. “Although some measurements of consumer confidence are heading downward, consumers are still in a buying mood,” notes Graebner, who also serves as Chairman of IHA’s Board of Directors. “Retailers have been increasingly bullish about a strong holiday selling period. Retailers are looking for good value, not necessarily the lowest price. They support a good value product, with advertising and trade support, if they have a compelling story versus just promoting opening price point items.”

The housewares industry historically tends to keep growing even during economic downturns that impact other industries more adversely. While not recession proof, “even in a down economy you can grow if you’re paying attention to what you need to do in the marketplace and many companies are very successful regardless of the economy,” says Paul Mayer, president of Chaney Instrument Co. “For all manufacturers, it has always been whoever moves the fastest gets the most. Speed to market is probably single biggest advantage companies can bring to their customers. If it takes a year to develop a product, you’re lost.”

According to the IHA’s 2005 State of the Industry (SOI) report, U.S. consumers spent $65.2 billion on housewares at retail in 2004, up from $62.2 billion in 2003. “Given the historic pattern of consistent consumer spending on home goods, we expect our industry to do quite well even during a time of financial challenges that might be difficult to overcome in other categories,” says Phil Brandl, president of IHA.

Industry Consolidation, Consumer Attitudes, Baby Boomers Ongoing Challenges

“We expected that 2005 would wrap up on solid sales ground, and innovative companies are budgeting for 2006 sales increases,” he says. “We do see continued industry consolidation, particularly at the supplier level, as the result of retail consolidation and other internal and external pressures. Innovation and creativity are the words of the day if companies want to thrive. Consumers have shown that they are willing to trade up for innovation and features they want.”

Another IHA Board member notes that the health of the housewares industry also depends on ongoing attention to consumer psychology and an intimate understanding of how and why they choose what they buy for their personal sanctuaries.

When gasoline prices soared over $3 a gallon, for instance, in the aftermath of Gulf Coast production interruption, consumers were concerned that they would “have to spend their life savings” just to drive from one place to another, says Marsha Everton, president of The Pfaltzgraff Co. “Now people are smiling and are excited to pay $2.50 a gallon. This really plays out in the marketplace and you see it in stores. People were very excited about the holiday period this year. We saw an inordinate amount of spending.”

“ The thing about polling data [from consumer confidence surveys] is that it tells you what you knew yesterday,” Everton added. “Emotional content (in purchasing) is so much higher than most people take into account. No matter what, in all of these economic overviews, the important thing is to keep your eyes and ears on the consumer because none of our business happens until consumers make decisions.”

A well-documented huge swath of U.S. baby boomers, meanwhile, continues to provide openings for housewares categories at the retail level as their discretionary income increases with the flight of their children from the nest.

“ The mid-40s to mid-50s groups will continue to drive the economy in the next several years and then the challenge will be to appeal to the generation behind them,” says Chaney’s Mayer. He cites his daughter with three young children as an example of today’s time-pressed consumer. “Her microwave, stove and pots and pans aren’t getting used. Am I going to sell her a cooking thermometer anytime soon? Probably not,” he says.

“ Boomers want things they can use, that save time and allow more time for recreation,” adds Graebner. “With the kids grown and away, they have more time for entertaining with adults and displaying products with high design.” In the kitchen, she calls this “counterworthiness.”

The continued expansion of the housing market and low interest rates have allowed consumers to convert wealth in their homes into near-term buying power, Graebner notes, but interest rates are on the rise again and the housing bubble is slowing, while not yet showing signs of actually bursting.

“ Amidst all the challenges in today’s marketplace, we fully expect that the housewares industry will deliver on its historical pattern of growth in 2006,” Brandl concluded.