DISTRIBUTING snow removal equipment has always been a competitive business. Today's business trends in the distribution of snow and ice (S&I) removal equipment confirm that the industry will continue to remain competitive.
Several trends are fostering the increased competitiveness in the industry. According to the Trailer/Body Builders Snow & Ice Survey, three trends have been responsible for the increased competitiveness in the manufacturing and distribution of equipment: the increasing temperature bandwidth and unpredictability of winter weather patterns; the introduction of more S&I commercially contracted service providers; and the increased demand for better quality services in previously rural areas of many western states.
In Canada, these trends seem to hold true, with the addition of the increased emphasis on privatization by governmental agencies for S&I removal activities.
The good news is that the manufacturing percentages provided by the equipment manufacturers show that, by and large, they did grow their business last snow season. On the other hand, some distributors reported a mixed bag of results in their sales trends — primarily because of unseasonably warm weather in their distribution areas.
Weather or Not
“When there isn't a strong winter weather pattern that includes a lot of snowfall, you see some of that budget going towards updating the truck or possibly in other directions,” says Lonnie Stauffer of Monroe Snow and Ice Control. “Weather patterns and the intensity of snowfall can be an ingredient in the marketing picture for S&I equipment.”
Some distributors compare the distribution of snow removal equipment to the seasonal ups and downs faced in the farming business. A harsh winter usually brings a strong sales trend for snow removal equipment. That can be followed by a soft winter period and decreased next season demand for snow removal products.
The concept isn't new to the S&I industry, says Wade Madsen of Daniels Pull Plow. “When you get a harsh winter, you get a lot of buying pressure in the next year. It's the difference between the end user really using the equipment and possibly expanding business, or the equipment not being utilized to its full capacity.”
New Service Providers
More S&I removal services usually means more opportunities to provide equipment for the job. Nevertheless, more service providers in a crowded market can mean pricing pressure to get jobs, which in turn pressures distributors to provide lower priced S&I tools.
Two factors in the industry have increased the number of smaller S&I removal providers. Those factors were discussed by Laramie Brighton, a Saskatoon (Saskatchewan, Canada) S&I removal provider. “A guy can go out and hook up a snowplow to his everyday truck and do some small jobs,” says Brighton. “In prior times, you needed a truck that nobody really wanted to drive around on a daily basis.
“We are seeing the commercial contractors growing in size. Whereas it used to be a guy with a couple of pickup trucks available to him when he called his buddies. Sometimes they would show, sometimes not. Now to be competitive, you better have access to a great number of dedicated vehicles — of all different sizes and types. You continually need to get bigger to provide the services economically, when they're needed.
“The equipment has gotten better. The plows today allow you to do bigger or more numerous jobs without the plow maintenance problems of the past. In Canada, a business owner can clear his driveway himself, if he wants to. But he can now easily contract to clear ten others.”
Newer Tool Designs
Not only do chassis provide more comfort and drivability for smaller snow removal activities, but S&I tools provide more capability and efficiency for independent operators. Some of the improvements have surfaced in the hopper sand and salt spreaders, the tailgate spreaders, and the back plow arenas.
“It's probably safe to say people involved in the S&I removal business today wouldn't have thought about getting into it five years ago,” says Julie Page, snow and ice marketing spokesperson for Curtis International. “Part of the increase in our sales is from the sand and salt spreaders that are placed in the pickup box. It's the same with the tailgate spreaders. There has been a gradual change, but a change none-the-less when it comes to the type of buyer who is purchasing some of this equipment.”
Jay Truan, spokesperson for TrynEx International, agrees. Truan says that because a tailgate spreader is a relatively low cost product, it's affordable to a wide range of customers. Some business owners have the utility vehicles necessary to plow their own parking lots and sidewalks and are choosing to do this themselves to avoid the cost incurred by hiring a contractor. Typically, these spreaders offer easy on/off mounts, so a piece of equipment doesn't have to be dedicated to the application, as with larger truck-bed mounted spreaders and snow shovels.
Municipalities are beginning to show an interest in tailgate spreaders. Typically most interested in large, dedicated spreading and plowing trucks, some municipalities have found uses for the smaller pickup-mounted units. The main reason is convenience. Public works managers and supervisors find many problem areas when traveling from place to place in their city-owned pickup.
Instead of dispatching expensive heavy-duty trucks to handle these smaller jobs, they can take care of it with a tailgate spreader. They also can serve as supplemental equipment when snow and ice problems reach extremes.
“The commercial plower is very interested in tailgate spreaders,” said John Barkby, general manager of Monroe Truck Equipment in Joliet, Illinois. “But the opportunity is there to go after business owners and businesses other than commercial plowing. If we're doing our job — and doing it right — we're suggesting a tailgate spreader to every potential plow customer.”
New ice control practices are opening doors for more spreading business. For the most part, de-icing is the most common form of winter maintenance. But a relatively new concept — anti-icing — is gaining popularity. Anti-icing involves the application of a chemical freezing-point depressant onto the travel surface before the onset of precipitation. This inhibits the bond development between the snow and ice and the pavement surface. Though typically implemented for larger jobs and equipment, it is likely that anti-icing will gain popularity with smaller applications in the future.
Back plow manufacturers are reporting the same marketing information.
Lori Altheide, marketing manager with Snowman Snowplow, reports that some of the newer advances in back plows have made it efficient for new entrants to possibly do their own S&I removal. “The advances in many manufacturers back plows have made it advantageous to use this type of plow. In many instances, the back plow can be used without the need for shoveling the garage snowdrift line.
“The improvement has been in the lifting ability of the back plow and the down pressure that some back plows offer. This, coupled with the ability to mount the plows on a Class-four or -five hitch, has really made the plows available to many who wouldn't have opted for them earlier.”
Distributor Economics
According to Barkby, people are starting to find out the true benefits of spreading salt from a business point of view. “Customers are realizing more and more that spreading salt is very profitable,” said Barkby. “Although they may have started primarily plowing, they are finding that spreading salt is much more profitable than plowing snow.”
For example, consider a small, two-truck operation serving 25 to 30 small to medium-sized accounts. They would need at least one truck-mounted spreader, running anywhere from a $1,000 to $2,500 investment. As far as other materials are concerned, most mid-sized lots would require an average of three bags of salt or de-icer per application. Each bag usually costs three dollars or more, depending on materials, which is typically passed on to the client. Using conservative estimates, a contractor would earn $1,000 to $1,200 to salt 20 lots at $50 to $60 per lot. Multiply this by the 25 to 30 accounts and the possibility for 20 to 50 applications per account in a given season, and that same plowing contractor would net between $25,000 to $90,000 for the spreading operation alone.
But how does this information benefit the truck equipment distributor? Understanding how much can be made with a simple spreading operation translates into a strong selling point for the salesperson. If a contractor is looking for a plow, simply explaining that the addition of a spreader could increase profits by 100% to 200% may be enough to trigger an add-on sale. Given the low ticket price of the item, tailgate spreaders can be considered an impulse buy. Much like portable generators are to the general consumer, when the snow and ice hits, spreaders begin to disappear from truck equipment distributor inventories.
According to Barkby, Monroe Truck Equipment's Joliet location alone sells about 100 to 150 pickup-mounted tailgate spreaders in a given season. With profit margins considered fair to high, that translates into a nice piece of business.
Rodney LaCombe, manager of Monroe Snow and Ice Control, explains that many western states are experiencing an influx of population that is not indigenous to the snow country. “These people are moving from California or some of the southeastern states, and they are looking to participate in the western-mountain lifestyle. But they are demanding better snow and ice removal services from their local government. If a couple wants to take their Porsche to the ski resort 75 miles away, they expect the roads to be clear. Five years ago, you didn't have that type of pressure on the local authorities.”
Marketing for the commercial S&I company has become a niche market process in some areas. Jeff Ledson, principal of Tahoe Workz, markets his company as an environmentally low-impact snow removal company. “I promote my snow removal business as a low-impact snow removal company simply because of the equipment I use,” says Ledson.
Homeowners are concerned about the environmental effects of plowing and salt/chemical S&I removal, says Ledson. He utilizes a low impact method of snow blowing so that “melting and runoff will act more natural and have far less impact on the environment.”
Ledson says that his special approach to snow removal activities has attracted business from environmentally minded customers in the Lake Tahoe area. “That makes my equipment selection very important for me. I'm looking for equipment that is light weight and has a minimal environmental impact.”
Liability Concerns
So what is causing the increased demand for ice control services, which, in turn, is providing contractors with more business and inevitably generating more sales for the truck equipment distributor? Like it or not, liability concerns fuel the S&I removal business.
In many ways, business owners, facility managers, and municipalities don't have a choice regarding ice control. Each year more than one million Americans seek emergency room treatment for an accidental fall, 300,000 of which will suffer disabling injuries, and 12,000 will die. Among accidental deaths, slip and fall deaths rank second only to automobile accidents. With the more than 650,000 attorneys in the US and today's increasingly litigious society, these statistics do not bode well for the property owner — commercial or otherwise.
But the responsibility does not end with the property owner. For instance, if a lot is plowed but not salted or de-iced, on rare occasions the winter maintenance contractor can be found at fault for related accidents. Even worse, the contractor's liability is many times higher in this situation than if he or she didn't plow the lot at all. This alone could provide enough motivation for a plowing contractor to add spreading services.
According to Barkby, liability concerns tend to vary depending upon the location. “Liability concerns are definitely the driving factor behind the ice maintenance business,” said Barkby. “You especially find this in the metro areas. Out in the more rural locations, the concern of preventing lawsuits has not really hit home yet, but in the metro areas, there's no question.”
Though an added headache for most, these escalating liability concerns will only continue to provide more business to the winter maintenance contractor and produce more sales for the distributor.
The distributors and manufacturers of larger S&I removal equipment also face a privatization trend in city, county, and some state snow removal activities. This trend places very competitive pricing pressures on independent contractors who place competitive demands on equipment suppliers. That trend is expanding not only in the domestic marketplace but also in the Canadian marketplace.
“In Canada, there is a very distinct movement towards the privatization of S&I removal activities,” says Glenn Bornes, branch manager of snow and ice removal equipment, Fort Garry Industries, Edmonton, Alberta. “These are heavy road clearing jobs that require extreme-duty equipment. Alberta is moving towards more privatization of S&I removal. We are just now experiencing the second round of contract bidding. However, this trend isn't going to reverse. The contractors are putting pressure on the equipment providers to provide the best value for their dollars.”
Manufacturers of heavy S&I removal equipment were the big winners this past season, according to those who participated in the Trailer/Body Builders survey. Heavy wing plow and underbody plow manufacturers reported experiencing increased trends from large municipalities and other governmental entities. Contacted manufacturers in this arena reported strong sales growth from the following snow season, with strong demand carry over expected for this season. Forecasts predict strong growth in this area.
Hopper spreader manufacturers received the biggest increase in sales, reporting an 11% increase for the last snow season. The majority of manufacturers in this business feel that the market will soften for this product in the next snow season; nevertheless, there should be at least a 3% to 5% increase in sales over this already unusually high season. Sales increases were reported in all subcategories of models, from ultra low profile to the larger capacity products.
In 2001, the manufacturers of combination dump bodies and spreaders reported a 7% increase in their business and are expecting a 7% increase in 2002. Several manufacturers of this product report that municipalities and other governmental agencies have been a driver of this market.
Light snowplows had a 4.5% sales increase compared with the previous snow season. Manufacturers indicate that this business has been soft in some geographic areas due to several years of light winter conditions. Manufacturers believe that any increase in the manufacturing rates will be very dependent on the upcoming winter snow patterns.
Manufacturers have stated that they don't expect a lot of replacement buying for next season, except in areas where extremely heavy winter snow patterns take place. Therefore they are predicting a relatively flat upcoming season. However, most manufacturers agree that in the light snowplow industry, unseasonably harsh winters at the beginning of a season can produce immediate shortages of product at the distributor level.
Tailgate spreaders were the surprise of the group this year. With a sales increase that scarcely broke 3.75%, many manufacturers felt surprised by the lackluster performance. Light snowfall was again blamed as the culprit. However, one manufacturer stated that a trend of consumers moving up to a larger hopper spreader was experienced by several of the distributors that his company serves.