Future development of the furniture industry – A look … development of the furniture industry...

TAPPI-Symposium zur interzum 2007 - 7. Mai 2007

Future development of the furniture industry –A look at the next 3-5 years

Verband der Deutschen Furniture Industry e.V.

Dirk-Uwe Klaas - Managing Director

Tappi-Symposium at interzum 2007

on May 7, 2007

Hauptverband der Deutschen Holzindustrie e.V.

Contents

Furniture industry data

Economic trends for the next 3-5 years

Strategies for the future

Furniture Industry Data

The Furniture Industry worldwide

Sales growth increasing worldwide

European furniture production2005 at 93.8 billion Europlus 1 percent

International furniture trade2005 at 82 billion US$2006 at 87 billion US$

Prognosis 2007 at 92 billion US$

Furniture Industry worldwide

Emerging Markets stimulate demand

Forecasted 2007 furniture consumption

Russia plus 8 percentChina plus 7 percentIndia plus 6 percentMalaysia plus 6 percentUkraine plus 6 percentNear East plus 4 percent

German Furniture Industry 2006

Suppliers about 1,000 firms, 60,000 jobs

Production about 1,080 firms, 103,000 jobs

Commerce about 10,000 Shops, 130,000 jobs

Size average 100 employees

Export quota 34 percent in 2006

The German Furniture Industry 2006

Return on sales 1.7 percent

Bankruptcies 500 firmsover the past 10 years

Job reductions 70,000 over the past 10 years

Population about 83 million

Consumers in 37.5 million householdsplus exports

Sales, firms, and employees in the German furniture industry 1995 - 2006 (1995=100%)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sales Firms Employees

plus 7.2 percent

3.5 percent through growth of domestic demand

15 percent through growth in exports

Sales trends of the 2006 German furniture industry

Sales in the 2006 German furniture industry by segment Adjusted values (total 18.4 billion €; +7.2 % of previous year)

Mattresses0.9 billion € (+3.0%)

Cabinet furniture63 billion € (+75%)

Kitchen furniture3.9 billion € (+11.2%)

Office and shop furniture 2.6 billion €

(+11.0%)

seating furntiure, adjusted

4.7 billion € (+2.7%)

Furniture Trade Abroad

Furniture industry sales in EU - compared to 2005in billion Euro (not adjusted)

German

Great B

ritain

France

Poland

Denmark

Netherl

Austria

Belgium

Sweden

Portug

Finlan

German furniture commerce in billion Euro, 1995-2006

2.94 3.04 3.28 3.56 3.86

4.845.17 5.22

4.925.26

5.56 5.72

4.504.80 5.07

5.58 5.70

6.81 7.01 6.84 6.87 6.72 6.80 6.82

Furniture exports Furniture imports

Top 10 German export countries in 2006

631.2587.2

427.8 403.1

232.6199.9 192.3 188.5

Netherl

Switzerl

Austria

France

Great B

ritain

Belgium

Exportwert in Mio. € Veränderung zum Vorjahr in %

Top 10 German import countries 2006

1,584.0

551.5452.8 446.9

310.4 289.2 269.7 234.6 217.1

Poland Italy China CzechRepublic

Austria Slovenia Hungary Denmark South Africa Switzerland-2

Importwert in Mio. € Veränderung zum Vorjahr in %

German International commerce with China 1995-2006 in million Euro

3.4 5.2 5.4 8.6 8.3 14.4 14.938.8

93.4 104.756.0 64.0

34.5 45.4 57.0 73.0103.3

177.4202.8

460.5 463.2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Export Import

German International commerce with Russia 1995-2006in million Euro

88.8 83.5

64.076.2 71.5

76.988.0

16.2 11.7 13.217.9

24.733.6 35.7 34.0 34.3

47.1 45.6 48.9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Export Import

WORLD FURNITURE MARKET OUTLOOK 2007

Real Growth of Furniture Consumption in 60 CountriesFORECAST as of April 2006

USA +3%

MEXICO +3%

BRAZIL+ 3%

CHILE+ 4%

ARGENTINA

SOUTH AFRICA+ 6%

NEW ZEALAND+ 2%

PORTUGAL + 2%

FRANCE +2%

ITALYGREECE +2%

GERMANYUK +2%

SWEDEN +2%

NORWAY +3%FINLAND+ 3%

IRELAND+ 6%

EGYPT + 4%ISRAEL +4%

KUWAIT + 3%SAUDI ARABIA + 3%UN.ARAB EMIR. + 4%

SPAIN +2%

RUSSIA + 8%

JAPAN +1%

CHINA+ 7%

Csil Milano

LITHUANIA +6% POLAND +4%ESTONIA +5% CZECH REP. +3%HUNGARY +5% SLOVAKIA +5%LATVIA +6% SLOVENIA +3%MALTA +2% CYPRUS +3%

DENMARK + 3%NETHERLANDS+ 1%BELGIUM-LUX + 2%SWITZERLAND + 1%AUSTRIA + 2%

CANADA +2%

Above US $ 10 billion

Between US $ 5 billion and US $ 10 billion

Below US $ 1 billion

Not considered

Size of country’s furniture market

AUSTRALIA +3%

HK +3%INDONESIA +4%MALAYSIA +6%PHILIPPINES +4%SINGAPORE +4%S.KOREA +3%TAIWAN +4%THAILAND +5%VIETNAM +6%

LEBANON +3%

CROATIA +4%BULGARIA +4%SERBIA MONT. +3%UKRAINE +6%ROMANIA +5%

TURKEY +3%

Economic Trends

Economic Trends over the next 3-5 years

Globalization more worldwide demand

Market polarization lower intermediary prices

Demographic development fewer people in Europe

Furniture lifespan shorter than ever before

Individualization requires variety of offerings

Staying home in the West feeling safe at home

Trademark process guaranteed quality

Globalization – increasing demand for furniture

Per-person expenditures for furniture Europe

Germany 370 €Italy 202 €France 204 €Austria 370 €

Worldwide

USA 210 €Russia 20 €China 5 €India 2 €

Market Polarization - in percent

1973 1981 1986 1990 2010

High-value top-quality products

Mid-range pricesegment

Low-costproducts

Demographic DevelopmentGraue Revolution

The population is aging

Years of life

1880 1900 1920 1940 1960 1980 2000 2010

WomenMen

Graue Revolution

Source: Statistisches Bundesamt

Median Life Expectancy in Germany

Prognosis >

Living-room furniture 9 YearsUpholstered furniture 7 YearsBeds 12 YearsMattresses 8 YearsChildren 6 Years, then

passed onKitchen 15 Years

Median lifespan of furniture in Europe today

Living-room furniture minus 3 to 6 YearsUpholstered furniture constant 7 YearsBeds minus 4 Years to 8 YearsMattresses minus 3 Years to 5 YearsChildrenmöbel minus 2 Years to 4 YearsKitchen minus 5 Years to 10 Years

Median Lifespan of furniture in Europe, tomorrow and later

Individualization requires a variety of offerings

Variety is important to today‘s customer

Everyone wants to decide for him/herself-color, pattern, quality level

There are no longer any general trends

ThemeIdentification with one‘s own living space and

individual self-realization

Staying home in the West Feeling safe at home

In unpredictable and uncertain times,

citizens of industrial nations are

more concerned about their home.

Retreat into one‘s own Refuge is indicated

Trademarks are an anchor of trustthey reduce the risk of making the wrong purchase. They

provide a guarantee in advance of assurance of the expected product performance. Trademarks provide security

Trademarks provide a touchstone, and are an aid in recognizing a familiar product

in a world rife with information overload, they increase the efficiency of the purchasing decision-making process

Trademarks give meaningin a world where we are searching for meaning, the use of a

trademark becomes ever more important

Trademark process guaranteed quality

Strategies for the Future

• Considering the shrinking domestic market, even more energy must be invested into the securing of Export Markets

• We must market the quality level and the Design of our furniture more aggressively andemphasize the advantage over cheaper products

• The industry must clearly step up the Trademark process for furniture

Strategies for the Furniture Industry

• New sales concepts must include the entire home experience so that the German customer is again interested in new furniture

• Price-cutting must stop.Customers want price security, not constant special

offers and discounts.

Strategies for the Furniture Industry and Commerce

The value of furniture as a growth culture must be brought back into focus...

The President of Germany, Horst Köhler, says:

“Since we are more expensive, we must be even better”

Strategies for Furniture Industry und Commerce

Future development of the furniture industry – A look … development of the furniture industry...

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