By Larry Thomas, Editor at Large
Shortages of key raw materials, difficulty finding space on shipping containers and unprecedented order backlogs have plagued the home furnishings business since last summer, and it’s no different for their brethren in the grill and fireplace industries.
Executives of these two key segments of the indoor and outdoor living business say the pandemic has proven to be both a blessing and a bit of a curse. A significant spike in demand has led to booming sales, but supply chain issues have left many companies unable to meet the demand as quickly as they would like.
They say demand has been driven largely by consumers opting to upgrade living spaces while they were forced to spend more time at home. But spending more time at home hasn’t necessarily meant transmitting an order to UberEats at mealtime.
“If you’re going to stay at home, you’ve got to learn to cook,” quipped Jerry Stone, business development manager at Big Green Egg, a producer of upper-end charcoal grills. “The stay-at-home consumer has definitely increased sales in the grill industry overall.”
Short on supply
But Stone and others say supply chain woes have made the spike in demand difficult to navigate.
“The grill and fireplace industries are, along with everyone else, seeing challenges in obtaining raw materials and components promptly,” said Jack Goldman, president of the Hearth, Patio & Barbecue Assn. “I am aware of a few plants that have had to temporarily suspend operations due to the unavailability of raw materials or components, … but I don’t think supply chain issues have adversely affected sales.”
Goldman said the two industries have “experienced a surge in sales” since last spring, shortly after many states and cities began implementing stay-at-home orders.
“With all the time at home, people are experimenting with grilling and other outdoor cooking options to expand their horizons,” he said. “This has led to an increase in demand for all outdoor products.”
Goldman remains confident that sales will remain strong for the foreseeable future but thinks it will be sometime in 2022 before there’s a noticeable improvement with the supply chain.
“These issues cropped up quickly and will take some time to unscramble, especially for shipping,” he said. “There’s a shortage of drivers domestically and a misallocation of shipping containers globally.”
Stone agreed that the “new normal” won’t return quickly, and he said Big Green Egg is already ordering components and materials needed for 2022 because the company expects robust sales to continue into next year.
“We anticipate that consumer behavior will begin to reset to a more normal pattern in the U.S. market by the third quarter. … But sales will continue to grow, and logistics challenges will continue across the world.”
Source country matters
One major advantage for Big Green Egg, according to Stone, is that the majority of its components are not made in Asia. The company’s proprietary ceramics are produced in Mexico, while other key components such as cooking grates and air vents are sourced in the U.S.
He said accessory items such as cooking tools and wooden tables are sourced from Asia, but delays in receiving some of these products hasn’t resulted in many out-of-stock issues.
“We have experienced delays from Asia with a few vendors due to unavailability of containers and congestion at ports,” he said. “It has required longer lead times to be built into the purchasing and logistics process, but our operations team is keenly focused on that process.”
He said the company has increased direct shipments to its network of distributors in recent months, who have, in turn, replenished inventories for its roughly 6,300 independent dealers worldwide.
“We have been able to maintain the stock of our best-selling Eggs in all markets,” Stone said. “This strategy allowed us to optimize delivery to the dealer and the consumer. It was a big win for us in 2020 and continues into 2021.”
Strong outlook ahead
The only thing that wasn’t a “win” was the increase in prices of raw materials such as aluminum, steel, iron ore and electronics.
Stone said those price increases forced Big Green Egg to hike its prices on a handful of its finished products in March, but that hasn’t dampened demand thus far.
The company wouldn’t disclose sales figures, but Stone said the company has about 4,450 U.S. dealers, including 522 that were added in 2020 as the country was in the throes of the pandemic. He attributed the increase to the company’s ability to keep best-selling products in stock and its commitment to limit distribution to independent retailers such as hardware stores and fireplace dealers.
“We realized years ago that the reliance on Asia for OEM components was a bottleneck in the supply chain and production of finished products,” he said. “We developed a strategy to move away from Asia where possible, and that has paid off in product availability for our dealer network during the COVID-19 crisis.”
HPBA’s Goldman said all of his members have had to devote an inordinate amount of time to logistics and supply chain issues, which has led many to look at other suppliers for the first time in recent memory.
“Our members have been working hard to get their established suppliers to ship their raw materials and components as soon as possible, and also looking for other suppliers, as needed, to supplement what their established suppliers can’t provide,” Goldman said.
But despite all those issues, Goldman and Stone remain bullish for 2021 and 2022. Even though they expect travel to gradually increase in the coming months — which could channel consumer discretionary spending away from the home — they believe consumers have come to love their outdoor living spaces even more and will continue to invest in them.
“It’s a fun product,” said Stone. “And with people continuing to show more interest in live-fire cooking (as opposed to gas), we think demand will remain high.”