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Anonymous

Former Commercial Director at Benchmarx Kitchens & Joinery, Travis Perkins

Competing with Howdens Joinery

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:21} Scott, I’d like to start on the UK market structure. Could you segment it between retail, trade and project work? Or do you go towards the end kitchen work? 

{audio:0:00:53} Inevitably, there is a divide between a number of different areas, whether or not it’s contract, trade or an end-user or consumer in the retail market. Each different part of the market has got their major big player who has a big part of each one of those spaces. In that, you split it up between Howdens, Wren, Wickes. There are also brands that aren’t as well known, such as Symphony and Moores who do a lot more contractor work with major housebuilders.

{audio:0:01:43} In terms of segmenting it, there are very different levels of each pie, in terms of who has got what. It’s very hard to go after that particular one. With Howdens, they are huge in trade and do a fair bit of project work as well and it is very difficult to win that business away from someone who is so well established. For the most part, retail is the one that is easiest to get into. The average person buys a kitchen every 10 or 15 years, rather than that person that buys one every two weeks.

{audio:0:02:21} Can we look at the trade segment which is the segment that Howdens, obviously, operates in? How do you look at the end job that the builder is serving? 

{audio:0:03:02} When it comes to the trade part of the market and the tradesperson being the go-to to get all your bits and bobs off, Howdens has done an awful lot in that market. They were once called Howdens Joinery and they have rebranded it fairly recently, but they still do joinery, in terms of the internal doors and the rest of the timber products. As a business, they way they split that internally – as they target themselves to be 80% kitchens and the rest on joinery – says a lot about who their key tradesperson is and how that tradesperson gets into the market.

{audio:0:03:46} In terms of homeowners doing refurb work, someone who has bought a property to flip it or someone who has bought a house and they wish to construct on it and make the footprint bigger, the thing that Howdens has, more than anyone else, is the ability to say, we’ll do your kitchen, we’ll do your internal doors and your timber. Most of their accounts are general builders, so it goes on a trade account. They can get the work done and pay for it in 60 or 90 days, get your bill settled with your customer and, whilst you’re at it, we can even put something in it for you. It is your account and you can dictate what additional value you want to add to that quote, whether that’s putting an extra 5% on for damages and so on. They own so much of that market.

{audio:0:04:50} At the same time, you keep pushing out a little bit. They’ve taken the market for the retail customer who wants to buy a kitchen because, all of a sudden, they are endorsing some celebrities; they are endorsing the really popular TV programs in the UK; your end user, who is on Instagram or Facebook, sees something. You then get the general tradesperson that has always dealt with them, because they get all their bits off them. There is then the buy to let guy that has 10 properties or has bought a big build and converted it to five flats. Go in there; get it done fast and get the remedials very quickly. They are a really solid business, with one customer.

{audio:0:05:41} In that trade segment, could you estimate a breakdown between the different type of end jobs?

{audio:0:05:48} In today’s world, the retailer customer is massive, especially given house prices going through the roof. If we go back a few years, it was cheaper to extend than it was to sell and buy somewhere else. The reality is, newer houses have got smaller footprints, in general. We all know that newer builds don’t always come with that one-size-fits-all room; it is not necessarily the social space you may want it to be. The function of a kitchen is so different today. With that, the customer loves their house, loves the area – they’ve been there for 30 years – and they choose to build an extension, find themselves a general builder. That builder has got an account with Howdens and, before you know it, you end up at that door, because you naturally searched for a builder first.

{audio:0:06:45} What do you estimate is the percentage of kitchens that are refurbed, in the trade segment, that are actually having extensions or plumbing work done, as well, as opposed to just a pure kitchen refurb?

{audio:0:06:57} If you are talking about plumbing work which is beyond a standard kitchen, where you would normally do some plumbing work, at this moment in time, we are seeing more and more of that big build going on. I would struggle to put a percentage on it because I think a lot of the numbers would be skewed, just because of what is called a project. It would be very easy to say that someone has built an extension – that’s a project – but at the same time, it could be an extension that is for other reasons.

{audio:0:07:35} With regards to a like-for-like pull out and push in, more and more customers are house-proud; they have been stuck in their house for two years and have decided to change their kitchen. Today, we are seeing more people replace like-for-like than we normally would have done. On that basis, I think it probably slightly outweighs the project work, as compared to two years ago. Before, the consultative, big decision to build an extension and go with a big project was far more thought through. In today’s world people are saying, I’ve lived in this kitchen for two years, I’ve homeschooled in this kitchen for two years and I need to see change. There was some extra money in people’s pockets and it has made them look at like-for-like changes, more than previously.

{audio:0:08:27} Everyone knows that Howdens has the builder as the customer but that builder has many different customers. They have a homeowner that is doing a straight dry-fit kitchen, pull out, push in. The have homeowners that are doing extensions and bigger project work that also involves the kitchen. Additionally, there are the buy to let landlords and tenanted housing that equals quite a big part of the business. I know it’s difficult, as there is no data out there on that market but, from your estimates, what do you think is the biggest part of Howdens’ end customer? 

{audio:0:09:21} In my experience with the kitchen trade, at the moment, the majority of customers are pull out, pull ins. We’ve seen so much more of that; getting rid of the old kitchen and having a facelift. If we go back to 2008, to the last recession, it came off the back of the incredible housebuilding that went on. There was a large amount of people that bought new houses, in 2008, at incredibly high prices and it all went wrong. Those houses are now 13 or 14 years old and they require some form of updating. With that, are you going to go and pull down walls on 14-year-old houses? Not really; you are going to pull out and put back in. You will have a really straightforward dry-fit kitchen.

{audio:0:10:11} With a Howdens general builder, they way they work is also quite different. A builder’s trade might be kitchen fitting or carpentry and he will have someone that works alongside him, as a plumber or an electrician. Before you know it, you have got three or four tradespeople, continually referring each other. An end user could have gone for an electrician, found one, and that electrician referred his carpenter; when the carpenter went and got a job, he referred his electrician. That family ethos, between these people, keeps going and going. Take it out and put it back in; we’re not banging down walls and it’s not structural. It’s five days, in and out. For the guys, on the floor, doing the fit, it’s strong money. 

{audio:0:11:11} It’s continual work; it’s easy to book in. With a Howdens doing that work, you can quite easily book weeks and weeks in advance, without worrying about materials. If the builder is building something bigger, you might have a situation where the slate got stuck at a port, bricks weren’t available in quite that color or the lintel didn’t come in on time. There is so much more involved in that. For a Howdens general builder, pull it out, push it in.

{audio:0:11:43} How exposed do you think Howdens is to the buy to let landlord and tenanted housing business? There are roughly 1.4 million refurb kitchens a year, in the UK. Obviously, a portion of those are going to be just straight pull out, push in. Some are going to be extensions and construction work. Additionally, a portion of that pull out, push in is going to be the buy to let landlords who are not actually homeowners. 

{audio:0:12:19} I think is a really important part of the business for them. The way they scale that, as a business, is very different from a depot locally, as opposed to the way they manage it centrally. When it gets to anything over, I think, six kitchens, they take it internally, to a regional or divisional depot, that manages it centrally. They have a separate team that targets that. That buy to let rental market is huge. The reality is, they are going to be very straightforward kitchens. You’re not going to invest huge sums of money in that kind of kitchen. 

{audio:0:12:58} You want a kitchen that is, firstly, going to come on time, because that is really important. You want it to come complete and, ideally, you want it to be built, because that saves my builder time. There are not many places in the UK you can go and get yourself a budget kitchen, with a rigid cabinet, with delivery in five days. As a buy to let owner or someone who is going to be flipping property, if you’re looking for the place that has the strongest reputation, for that, in the UK, with the best-stocked holding, the easiest place to access, it’s very simple to pick Howdens. 

{audio:0:13:44} I don’t think it’s a risk for them at all. If anything, it’s one of their USPs. If you’re going to be doing that kind of project, Howdens is probably your first stop. By the time you’ve made the decision, if you’re a big enough customer or you’ve got enough potential, nine times out of 10, they’ll make it really favorable. It’s very different when you get to contract levels, with 100, 150 or 200 houses, but in the buy to let market, pull it out and push it back in, I think it’s a huge market for Howdens and a difficult one to take away from them.

{audio:0:14:20} How competitive do you think Howdens is on the bigger 100 or 200 unit builds?

{audio:0:14:26} Not very, is probably my honest answer. It is one of those things where, as a business, you’ve got to be geared to know what you are going to take in that market. People have cemented their place there, for a long time, with very low margins and very high volume. At the same time, it comes with a certain element of risk that is involved in doing business that way.

{audio:0:14:48} When you generate your business model to generate a certain amount of profit percentage, that is where you target your entire team at. To go after that home-build market, I’d be surprised if they would be getting 20% of that margin number.

{audio:0:15:10} Who is competitive in that space, in the UK?

{audio:0:15:13} With the housebuilders, the really big players are Symphony and Moores. The housebuilder will get a contract where the fit is very basic and very simple. The kitchen range is also basic and simple. You get a tradesperson and pay them, on a day rate, to deliver 30 kitchens and get them fitted over 15 days.

{audio:0:15:49} Can we take a step back and discuss your time at B&Q? Can you share some context to your role and responsibilities there and what the strategy was for kitchens at B&Q?

{audio:0:16:02} I worked for trade, in my local area. I did some work where we delivered some new product. We went after trade customers. How do we make life easier for a tradesperson, with regard to kitchens? Kitchens became the thing we went after, really heavily. My role was, how do we get more trade customers buying our kitchens? How do we integrate the showroom’s proposition more strongly? B&Q went through a whole heap of work, with a different planner, which they still use now, that made it simple enough for fitters to plan kitchens; that was the ethos back then. Can we make it easier for a fitter to buy a kitchen, almost hoping that you could push that work onto someone else, rather than have it left in your shop? 

{audio:0:16:56} What do you mean by a planner?

{audio:0:16:57} You would have kitchen designers in stores and their job is to plan and sell kitchens. I can alleviate that additional step and the fact that I am going to have to pay that guy some commission by making the tool free of charge, to you. You plan it yourself; you go to your customer’s house. You order wherever you want, sell it yourself; just don’t buy it off me. The reality of that is, you are asking somebody to do something they probably don’t want to do. If they wanted to do it, they would already be doing it. We pushed that really heavily, with the ability to have their trade discount on it, to give their customer a retail version of that quote. 

{audio:0:17:43} We also made what we called a click cabinet. You are trying to compete with rigid carcasses, which is a really basic USP in today’s market. But if I go back a few years, when flatpack furniture was what you were seeing, more and more, the idea of getting it rigid, to save your builder time on site, therefore saving your end user some money, was a really big USP for Howdens. B&Q were flatpack, so we made this click cabinet which came flatpack in a box and it could be clicked together. There was a promotional two-minute challenge idea, getting trades to put it together as fast as possible. The reality of it was, people wanted rigid.

{audio:0:18:27} How important is the planning part of the kitchen buying process?

{audio:0:18:31} Massive. In my opinion, the planning part of it is probably the most important aspect. It is very easy to get swayed, in the kitchen market, on price and even product. 

{audio:0:18:42} How does it work? If I’m a homeowner, I get my local builder and go into Howdens. What is the actual planning process?

{audio:0:18:54} It depends on the business you are working with. That is one of the unique balances that Howdens have, that is very different from anyone else’s. If I’m a retail customer and I say, I’m going to buy a kitchen and I’ve made that decision, if you were to walk into a Howdens today and say, I want to buy a kitchen, they would tell you that they service tradespeople; you are not one of their customers. Here are a couple of fitters; give them a call. You will have to go down that route.

{audio:0:19:22} With Howdens, the way the model works, there is a fitter triangle. There is an account holder – the customer of Howdens is the fitter – then the end user and the supplier, which is Howdens. The end user, the person paying the money, the person who is going to experience this product for 10 years, they are left quite far out in this triangle, even though the decisions that are being made are for them. Fundamentally, the designer is going to design what you ask them to, but the fitter is going to dictate your price by asking the depot to add on a percentage. Or not, in some cases; they don’t all do that. But that is one of the biggest things that Howdens has.

{audio:0:20:13} In this triangle, you may find that kitchen designers and planners will be reverting back to the fitter telling them it’s coming up at £5,000; what shall I tell your customer? The fitter may say, tell them it’s £5,500. You have to liaise with your account holder first.

{audio:0:20:35} If you go into a retail business, such as Wren, Wickes or Magnet, it is a very different kind of process. You can go in, off the street, with zero knowledge, and they will attempt to educate you as much as possible. There are varying levels of success and methods in how people do that. The big one being in Wren, where their growth over the last 12 or 13 years has been crazy. Their showrooms are unique, in terms of the way they look and perform.

{audio:0:21:12} The customer journey, in Wren, is not hugely different from how it is anywhere else. However, what they can showcase to you is extremely different. You walk into any one of the 100 Wren Kitchens now, you’d be faced with over 60 displays; an incredible selection, from cost-effective to, show me what all the celebrities are buying.

{audio:0:21:37} In terms of that planning process, I’m thinking about dimensions and measuring the kitchen up?

{audio:0:21:43} Once you’ve done the initial part with the retailers, someone will then come to your property. Depending on the brand, it could be an actual surveyor – someone whose job it is to do surveys – and they won’t sell you anything. They are purely there to provide a service that says, this is accurate; go back to the retailer again and get your kitchen plan. Other retailers do it very differently and the designer – who walks you through the showroom and helps you make the decisions – will also be the person that comes to your house. In my opinion, that’s a preferable service as people buy from people. You can grow that relationship and bond on a one-to-one basis.

{audio:0:22:37} I think Howdens hires 1,500 kitchen planners. How much of an advantage is that, really, in the trade business?

{audio:0:22:50} Howdens’ biggest advantage is that they have 800 depots today. From wherever you are in the UK, you are not going to be far away from a Howdens depot, no matter what it looks like. That works to the advantage of, not just a tradesperson, but also to an end user. You have the ability to go into a branch where, effectively, you are the end user. At this point, you have a fitter and you know that you have got a designer that is going to come to your house and measure your kitchen, showing you products and giving you a plan. That plan will go to the fitter that you also know buys and fits Howdens kitchens daily. That is a huge reassurance when you are investing so much money; I know this person knows this product, very well. I know the person who came and measured and designed it for me and who also knows the fitter well. In that sense, it’s almost seamless.

{audio:0:24:00} How did you look to compete with Howdens when you were at B&Q?

{audio:0:24:04} It was really difficult. What you always go at is ease of sales. One thing that Howdens is not so good at is their operating hours. They don’t open all day Saturday; they’re not open on Sundays. They don’t open past 5:00 or 6:00 on a weekday. If you ever got a phone call after 6:00, who is going to help you? No one, because it’s closed. At B&Q we said, we’ll help you in the evening; we’re open longer hours. We also have a warehouse full of stock.

{audio:0:24:41} Going back to B&Q in 2015, 2016, the square footage of the shops was massive. You can go there and buy a kitchen or I could buy a door, with architrave and some other timber materials. Product availability is really strong. Having a one-size-fits-all trade deal with B&Q, with TradePoint, was a really strong message.

{audio:0:25:08} They are doing a big relaunch on it. Did it work? I think it worked for what it was. I think the problem was, people who specialize in certain things are generally better than those that try a one-size-fits-all. Toolstation and Screwfix, ultimately, were better at small box items. Better price, better service and easier to park outside; I didn’t have to park and walk 10 minutes to the aisle I wanted to go to. Those buildings changed the way we buy stuff, especially for builders and tradespeople. The idea of going to a B&Q car park, finding a parking space, walking into the entrance which, generally, is one side of a 100,000 square foot building, finding the aisle, finding the one little item and paying is probably a 15 to 20 minute journey. Whereas, you stopped at Screwfix and you are in and out in three minutes. They gave you a free cup of coffee and off you went.

{audio:0:26:10} Howdens do that, with kitchens, really well. Drop into a smaller format depot, get what you want pretty efficiently and get out of the door very quickly. There are swings and roundabouts to each journey. As an end user, it’s a more enjoyable journey to go to a Wren Kitchens, for example or even a B&Q about five years ago. But if we’re being honest, with the people they go after – Howdens want tradespeople – that model is very efficient for them. It is very difficult to take it away from them if you’re not making someone’s life easier in some way.

{audio:0:26:45} What could be the risk of Howdens losing the builders?

{audio:0:26:49} You see lots of change in building suppliers plus there’s been a change, in the general market, in terms of product availability with raw material cost price increases, across the board. It’s not just wood; it’s bricks, steel lintels and slates. Is there a risk of Howdens losing accounts? There is always a risk. I believe the rules in Howdens are, if you don’t use anything in 15 months, your account drops off.

{audio:0:27:26} That’s slowly declining. I think they’ve had 1% decline in active accounts.

{audio:0:27:31} We live in a world of Instagram, TikTok and Facebook. If I’m sat in my house today and I want to buy a kitchen, I go online. Who shouts the loudest? Who shows the prettiest pictures? Who inspires me the most? Howdens gave that a go, recently, with the whole rebrand of their logo and doing some celebrity endorsements. But there are brands out there that have done it a bit harder, for a bit longer and that has seen them grow in their sector.

{audio:0:28:04} Account wise, for their core customers, who buy kitchens week in and week out, that is going to be hard to win. The big win is going to come from your end user understanding about buying a kitchen from Howdens. Again, with the triangle, my experience of buying a kitchen in a Wren would be far nicer than buying one in a Howdens.

{audio:0:28:29} You’re saying that Howdens are not at risk of losing their core builders, but the end customer is the one Howdens could lose because they could be going to Wren for the better experience?

{audio:0:28:42} Yes. If we go back 15 or 20 years ago, kitchens were usually one of the smallest rooms downstairs, when you built a property. If I look at today’s world, they are generally an open-plan room, with a dining room attached to them. Over the last 15 years, they have become a larger footprint room, as we integrate our social spaces. The way that kitchens and houses have been designed and the way that people are now buying products by looking online, trends take over.

{audio:0:29:24} Is that a risk? One of the big questions I have, when looking at Howdens is, potentially, the internet has changed the way people shop. Even if I’m shopping for a kitchen, I go online, I find the kitchen. Let’s say I’m looking online and I’ve found a kitchen. Firstly, Howdens don’t really advertise much, although they are trying to increase it, so you are likely to find Wren or another retailer. Howdens would argue, you still have to go through the builder and we have the builder. How do you see that breaking down? Do you see the consumer having more power to actually direct the builder to Wren?

{audio:0:30:07} This is a really interesting question and it’s hard to answer cleanly, due to Covid. It comes down to timeframes, driven by external factors, such as Covid. If we go back five or six years, the way that someone bought a kitchen back then wasn’t necessarily driven by someone fitting it. It wasn’t necessarily a do-it-for-me world. People had different elements that were fashionable, different inspirations, different celebrities; reality TV has changed to where you have individuals on social media and influencers.

{audio:0:30:55} Over the last two years, what changed the market so hugely was that lots of education and training stopped, so you have seen an even bigger decline in skilled tradespeople coming through colleges. A lot of employers didn’t recruit, based on the fact that the economy was so questionable, and people were stuck in their houses, wanting to do stuff, because they couldn’t go to work. Inevitably, all that happened was, my holiday got cancelled in 2020, I had £5,000 back from my holiday; what am I going to do with it? I can’t see us going away next years so let’s do my bathroom or kitchen. It drove timelines for skilled tradespeople beyond levels that we’d seen before.

{audio:0:31:50} If I go back through all my years of experience in kitchens, the longest lead time you would expect to see would be 12 to 15 weeks. Today, that’s normal. The national average is between 16 and 20 weeks. If I think I am going to buy a kitchen today, Wren have got the inspiration, the online marketing and the celebrity endorsements; they’ve got all the bits that look amazing. Howdens is stood in the corner, laughing, because they’ve still got the builder.

{audio:0:32:29} In today’s world, the builder’s control is really strong; he can say, I’m blocked for the next 20 weeks and I only fit Howdens’ kitchens. He has used them forever, he knows how the service works, he knows the person who designs it and he trusts it. His business runs on the reliability of his supplier. As a customer, you are going to go, I really want this Wren kitchen; I also really want this fitter that was referred to me by my mate, who said he did an amazing job.

{audio:0:33:03} I can find a kitchen retailer on any high street. If I go online and search for kitchens near me, I will find 10 people that want to sell me a kitchen. I’m probably not going to find 10 fitters that will fit one for me.

{audio:0:33:20} Do you think the fact that, potentially, there is a lack of fitters around gives them even more demand?

{audio:0:33:25} I think the Howdens demand is heavily based on that, yes. I think in the retail world, with Wren, Wickes and Magnet, a customer that knows what they want will stick to your timeframes. I know I’m buying this as a true ‘want’ product; I really want this particular thing, wherever that might be. They will wait and they will buy from that retailer. If it is something that is based on a need, as well as a want – I want this kitchen but I really need it by X – that will go in the favor of Howdens.

{audio:0:34:07} Can we walk through the process again? I’m a homeowner and I want to do my kitchen. I shop online, see Wren with a wide range, great products, high quality. I then need to find a fitter but, as you said, the fitters prefer Howdens because it’s quick, more efficient and more profitable for them. What if Wren finds a way to solve the fitter problem?

{audio:0:34:31} Most of the nationals have got their own installation service. The reality of transactionable installations with a retailer is that it’s more expensive. You are going to have to pay for that service to come from somebody. The difference in value and cost can, sometimes, be unfeasible for people.

{audio:0:34:50} How much is the difference?

{audio:0:34:51} In today’s world, if I went to find a builder, an average kitchen fit would be around £3,000. If I went to a transactionable retailer, that’s probably more like £4,000. 

{audio:0:35:04} Yes, just the fit cost, not including the kitchen. An average kitchen, in the UK today, would cost about £3,000 to fit; it you bought it from a retailer, that fit cost would be about £4,000.

{audio:0:35:14} Yes; it’s a 25% difference.

{audio:0:35:17} How many days work is that?

{audio:0:35:20} It depends on the size. For that average kitchen, you’re probably looking about five days to a week, but you will obviously be getting additional contractors in for various parts of that work, such as plastering and electrics.

{audio:0:35:31} Is there not a way for Wren to shorten the lead times by training the fitters themselves and having much more supply fitters, exclusively for Wren?

{audio:0:35:38} There are a number of businesses doing that, right now, in the UK. There is an institute, in the UK, called the BiKBBI, who are doing a lot of work with skills shortage. The work they do is really good, they publish it really well and they also push it out into the market well. The reality is, if I’m a kitchen fitter today and I’ve got Wren on my door and I’ve previously signed up with them, and I have fitted Wren kitchens, they are going to pay me X amount to fit it. It might cost £4,000 in a shop but, by the time you take VAT, administration costs and a bit of profit off it, it is probably going to be half; it’s probably about £2,000. If I do the same fit privately, it’s worth £3,000. With the demand for these fitters, it’s quite easy to fill yourself up with private work as opposed to doing it with the continuous workload you may have had from the retailer. Wickes are doing something with apprentices at the moment to try and bring on apprentices themselves, to help with this skill shortage.

{audio:0:36:53} They prefer to do private work, with Howdens, rather than retail work?

{audio:0:36:59} It depends on which way you look at the market. People don’t like change and we’ve seen a lot of change over the last two years. If you have, reliably, used Howdens for a number of years, changing from that would be quite difficult. There would have to be a catalyst for change and sometimes price isn’t always that catalyst. If someone says, I can do this for 5% cheaper, if I’ve reliably worked with someone for 10 years, with no issues, that 5% almost becomes meaningless. That means changing everything I do – and there is some risk in that – when it wasn’t broken.

{audio:0:37:33} What could be the catalyst that would make them change?

{audio:0:37:37} I think the biggest thing is, there has to come a time in the future when this lead time drops. It can’t continue, as it grows. Either people stop buying products because they can’t find a fitter or something major happens. Everyone talks about an economic reset but, at some point, something has to change. If that is that someone stops buying stuff or the house market collapses and there are a number of repossessions on the market, at some point, the workload for tradespeople will dry up. The demand cannot continue. People can’t continue to spend what they do and the lead time cannot stay as it currently is. 

{audio:0:38:19} When that comes down to a more sustainable number, I think we will then see a big change. Right now, account holders are very busy people; they will be booked up for a large number of weeks. The people that work with the retailers and subcontract to them full-time, will be equally as busy. Currently, a Howdens account holder could, quite easily say, chuck a 5% levy on top of that charge because I don’t want the work, because I’m so busy, and they’ll still get the work because the demand is that high. At some point, that will change. 

{audio:0:39:04} When we do see a reset, what do you think the change will be, when we have more stable lead times? What are we going to see that’s different?

{audio:0:39:11} The biggest thing will be the way we dictate value. Do we dictate value by products or price? A want/need purchase will become clearer. The buy to let person will continue to use a Howdens because they know what product they are buying and they know the price level, based on its quality. The retail end user, if they are in the market for a well-specced kitchen, which you generally do see in the retail market, then there will be a place to buy that and they will be able to get a fitter to fit it, in a reasonable amount of time. They will have a number of fitters that fit whatever they need, because the demand will be that much less.

{audio:0:39:57} On that retail customer, specifically, you mentioned want versus need, is there a risk to Howdens that we are seeing more wants, with customers seeing the Instagram kitchen and going to Wren and using Wren’s fitter, focusing on the range more than the fitter?

{audio:0:40:16} I think we’re already seeing more of that today. You mentioned Howdens’ marketing earlier; they have never done much marketing, have they? You see more and more of a response to ads on Facebook today than I’ve ever seen before. This January, especially, you saw it. Last year, the fact that they provided the kitchens for the Great British Bake Off was quite heavily published online and it is one of the most watched programs. When you start to do that kind of thing, it says an awful lot. 

{audio:0:40:50} Additionally, there have been celebrity endorsements. I saw one very recently, with an Olympian, where Howdens has done their kitchen and reality TV shows where you’ve seen a Howdens designer.

{audio:0:41:00} I think Howdens are realizing they have to start marketing?

{audio:0:41:04} The way that people buy stuff and understand about things today is not the same as it used to be. Gone are the days of brochures. Yes, you can have a brochure; you need to be able to offer something with some imagery in. But at the same time, the days when people went to collect six brochures from six people and actually looked at them, are gone.

{audio:0:41:26} As you said, that journey before was more about, I need a kitchen and I get a referral from a local builder. He says, you can buy from Howdens. He gets the brochure, comes back and we talk about the kitchen we’re going to get and then get the builder to go and order it. That was the old journey. This new journey is a bit different where it is much more about inspiration, the kitchen is more important in the house and it’s a higher value purchase. You then maybe have Wren, which is marketing more, and throws a spanner in the works for Howdens?

{audio:0:42:02} Wren Kitchens are a phenomenal example of the change in the market. You could even say that they are a catalyst for driving change in the market today. They have been in tune with the way that the digital world changed to a tee. When you look at their most recent Christmas advert, where they got a producer or director from The Greatest Showman to do a TV advert for them, spending millions of pounds, what a great advert it was. That, in itself, would have made a number of people look at them for kitchens. 

{audio:0:42:37} If we just forget kitchens for two moments and say, no matter what we buy, whenever we buy something high value, whether it be a trip to Disney or a car, who are your real competitors when you are spending £15,000? Is it another kitchen supplier? If I’m in Wren, is my real competitor Howdens, for a £15,000 kitchen? Or is it Disneyland Florida? Is it a Mercedes? When I walk into a Mercedes dealership, it is a lovely experience. I go into this beautiful bright building, I sit down, have a nice cup of tea or coffee. It’s luxury.

{audio:0:43:24} If people do start spending more on kitchens that is going to be a bit more difficult for Howdens too?

{audio:0:43:29} That’s the thing. We can look at the average order values between the two businesses. If we look at pure turnover numbers what Howdens sell through 800 depots versus what Wren sell through 100, that is a giveaway straightaway. 

{audio:0:43:47} I think, at Howdens, it’s an average of £3,000 for a kitchen. 

{audio:0:43:53} At Wren, it’s probably £10,000; it’s significantly different. Again, there’s different clientele, different customers and different repetition of purchase. But if I go and market to 60 million people in the UK, by putting it on ITV, on an advert, that’s a lot more people than my 1,000 accounts.

{audio:0:44:15} Looking at the risk to Howdens, I’m going through the journey, I’m shopping on Instagram, I’m really convinced I want the Wren £10,000 kitchen and I still have my friend referring the local builder. How do you see consumer behavior changing? Do you think we’re going to see more consumers going with Wren regardless and saying, I just want Wren; I want this kitchen, I trust their fitter and it’s a decent lead time? Or do you still think they are going to trust the builder?

{audio:0:44:46} Again, it’s timeline driven. The reality is, if a fitter really wants a job, he’ll fit whatever it is, because it’s blocks of wood that go on a wall. If it’s favorable to them and they want the job, they’ll do it. As a customer, you need to make a decision that this is definitely the kitchen I want, and only this place sells it. In Wren’s favor, they sell about 1,000 colors of kitchen; you can pretty much pick what you want. Howdens don’t do that.

{audio:0:45:18} If I get my builder referral and I wanted a Wren kitchen, could he go to Wren?

{audio:0:45:25} Wren have stepped out of the trade market although they do have trade accounts, today. They pushed it really heavily, before Covid. I think Covid put a pin in that for a little while and they’ve gone back at it. You can quite clearly see where they are doing the trade business; they have put trade desks into shops. It will be interesting to see where they try to win the business from Howdens.

Former General Manager at Wren Kitchens

Howdens: UK Kitchen Demand and Supply

Fitter supply is tight due to lack of training and new recruits entering market during covid 

HWDN has advantage in that builders are booked out in advance and they earn more fitting for HWDN vs Wren

The internet has changed the shopping experience for kitchens and favors retailers like Wren

As kitchen demand and fitter supply normalizes, we will only then see the change in the relative competitiveness of HWDN vs Wren

Even if HWDN maintains volume, it may have to extend the range and improve product to stay competitive with Wren

Howden Joinery, Wren Kitchens, and HWDN in France

Former Product and Marketing Manager, Howden Joinery Netherlands

Howden Joinery: Netherlands History & EU Growth Opportunity

Wren Kitchens, Howden Joinery, & the UK Kitchen Market Structure

Howden Joinery Group PLC

Founded in 1995, Howdens is the number one trade kitchen supplier in the UK. The company has ~800 depots in the UK and ~50 in France and Belgium combined. Howdens is a trade-only business serving local builders with a focus on high product availability, generous trade credit terms, and high depot density to save builders time and money completing jobs.

Howdens is vertically integrated and manufactures all worktops and ~30% of frontals in the UK. Depots are located on inexpensive industrial real estate and only require £350k capex and £350k of inventory cost to open. At maturity, each depot earns ~£2m in revenue and ~20% EBITDA margins.

Howdens has compounded FCF per share over 12% for 20 years and consistently earns ~50% ROIC. The company’s founder stepped down in 2018 and the Former Screwfix CEO now runs the business. Howdens believes they can reach 900 depots in the UK and is now expanding to France and Belgium which is the potential growth opportunity.