Retailer expansron

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ket? At the momenl the answer is competition. In recent months headlines have chronicled the growing power of the largest chains. They are expanding beyond metro markets into second-tier cities and moving inland from the Fast and West coasts into the nation's heartland.

As they expan( they face each other in the same markets, where some observers believe they cannot all survive. Some retail companies have left the markeq othen are successfully changing their competitive strategies, finding niches where they can shine against larger competitors.

Yet, as companies expand so does the hardware/home improvement market. There is room for many retail companies in this $113.4 billion market that is growing almost 7Vo alear.

Although the number of store units has essentially stabilized, we still count more than 46,000 home centers, hardware stues and consumer-oriented lumberyards in the primary hardlines channel of distribution.

The market continues to be dominated by independens. The top 25 chains, with approximately 3,000 store units, hold only 3l%o of tfu, toal dollar volume.

The most recent year for which we have statistics, 1992, proved to be a relatively strong one for U.S. hrdware/home improvement re0ailers. Housing starts and new home sales, each up neady 20Vo, generatad hefty sales of lumber and building materials, and sales at home centers and especially lumberyards reflected that demand.

As 1993 draws to a close, all signs point to ano&er strong performance. Despite nronthly ups and downs, the housing market is holding its own. While housing is not the only driver for hardware/home improvement sales, it is a sEong one.

As we look ahead to 1994,we see trends continuing that will benefit the home center market. As they grow into middle age, fanilies tend to settle in. The Baby Boom generation is no different. And when they sede in, they improve and upgrade their homes.

We see a steady trend to more installed sales and demand for professional help with home improvement projects - with consumers calling &e shots about products purchased and where. In our view, the home center industry is healthy. Competition makes it so - it sharpens management, marketing and merchandising skills and enlarges the narket for home improvement goods and services.

Aggressive attitude -r

EORGIA-PACIFIC will continlJue to be an aggressive competitor in the building products industry. We believe our millwork and specialty centers have tremendous opportunity. Millwork and specialty products, such as moulding, doors, windows and shutters, have grown in popularity with the boom in the remodeling market and the rebound in housing starts. Housing starts, as reported by the Westem Wood hoducts Association, are expected to be 1.35 million units for 1994, an 9Vo increase from 1993. There will be a growing need for building materials n 1994.

We will continue to introduce new products in 1994 and beyond. As consumer demand for attractive, low-maintenance building materials grows, we see significant increased demand for vinyl products, particulady vinyl siding.

We also see tremendous growti pot€ntial for engineered products, such as oriented strand boar4 laninated veneer lumber and wood I-beam joists. The majority of our new plant facilities on the drawing board will manufacture these types of engineered products. From an expanded wood I-beam manufacturing operation in Ocala, Fl., to a new engineered lumber facility at Roxboro, N.C., and a new oriented strand board plant at Mt. Hope, W.V., G-P is gearing up to be a major supplier of engineered wood products.

In addition to certain structural benefits, these engineered products also conserve our natural resources thmugh complete utilization of all parts of the fee. Wood I-beams, for example, which are used primarily as a structural component in roof and floor systems, use 507o less wood fiber than conventional sawn lumber.

Environmental concems, in fact, will continue to be on the minds of customers. Georgia-Pacific takes its concern for the environment further than just growing superior trees. In addition to producing commercial timber, our lands provide habitat for many species of wildlife and recreation for nearby residents. Our habitat conservation plan for the endangered red-cockaded woodpecker has been recognizedby the U.S. Fish and Wildlife Service as the potential model for corporate forestry.

I believe we will see cooperation like this with government agencies and environmental groups in the years to come. At the same time, our industry is facing everinoeasing environmental scrutiny and regulatory prcssures that are expected to result in increased expenses for protection of endangered species on private timberlands and more strict air and water pollution controls.