SUMMARY OF REPORT CONTENTS

A number of factors influence the overall kitchen furniture market including the levels of consumer confidence, consumer spending and the amount of activity in the new house building and RMI sectors. In 2004, the overall kitchen furniture market in the Republic of Ireland, including worktops and sinks, was estimated to be worth around €633 million at manufacturers selling prices, with good prospects for growth over the next 3-4 years.

In terms of individual product sectors, the kitchen units and cupboards sector dominates industry sales in Ireland with an estimated 89% of the total kitchens market in terms of value - worth around €563m in 2004. The worktops sector was estimated to have around 7% of the Irish kitchens market and be worth around €42m in 2004 and kitchen sinks 4% of the market and worth around €25m.

The fitted kitchen sector has been "standard" for a number of years and accounts for the major share of the kitchen market at around 88% by value. Fitted kitchen furniture, together with associated lower costs, is also usually the preferred option of most house builders and developers for the house building market, which remains a significant factor underpinning growth in the fitted sector.

In Ireland, with the construction of smaller new builds and apartments, space is often at a premium and a fitted kitchen provides the best utilisation of space. Key issues of space and storage are likely to continue to support growth in the fitted sector in the longer term. Leading manufacturers of fitted kitchen furniture in Ireland include Brendan Butler Fitted Furniture in County Cork, Cliffoney Kitchens in County Sligo and Fitzsimons Fitted Kitchens in County Meath.

The non-fitted or free standing kitchen furniture sector currently accounts for only a small part of the overall kitchens market in Ireland, but growth rates have begun to accelerate in recent years as more home-owners are opting for free-standing hand-crafted, country style designs. Free standing units, rather than a fitted kitchen, are becoming more popular at the mid-premium end of the market. Many retailers have reported a growing trend towards free-standing kitchen furniture over the last couple of years and it is now estimated that this sector accounts for around 10-15% of the overall kitchen furniture market in the Republic.

An estimated 40% share of the Irish kitchen furniture market is comprised of flat pack models, with the remaining 60% rigid. At the mid-premium end of the market, rigid furniture continues to predominate, with many independent kitchen specialists producing handcrafted ranges. Builders Merchants and retail specialists also primarily supply rigid kitchens into the new housing market, for ease of installation, and this sector has benefited from the increase in new housing completions in the Republic in recent years. As a result, the share taken by flat pack is much lower in Ireland than the UK reflecting the high share in new housing.

During 2004, the new build sector for kitchen furniture was estimated to be worth €281 million at manufacturers selling prices and approximately 44% of the overall total kitchen furniture market. This share can be attributed to the increased level of new build completions and the general shift to better quality and slightly higher value kitchens fitted in new build homes.

Key drivers for the new build kitchens market include the current high levels of new housing completions, the higher specification of kitchens now being used by house builders both to add value and in response to consumer demand, the gradual decline in the use of formal dining rooms and a trend towards multi-purpose kitchen/dining areas in new build homes.

It is unlikely, however, that the current levels of new housing output in the Irish Republic can be sustained in the medium-term, and lower levels of housing supply forecast over the next couple of years will lead to a decrease in residential construction output and a gradual easing back of housing developments towards more sustainable levels of around 65,000-70,000 completions per year from 2006 onwards.

The replacement market for kitchens in Ireland is estimated at 56% and around €352m by value. It is estimated that whilst the average life-span of a domestic kitchen is normally around 15 years, the relatively recent age of most housing stock in Ireland results in a low replacement cycle to date. Around 44% of homes in Ireland have been built since 1981, which is reflected in the much lower replacement market share compared to the UK, for example.

One of the most significant factors driving growth in the replacement kitchens market is the current high level of house building, which has been taking place over the last 10 years, rising at an annual rate of between 5 and 25%. Such a high rate of new residential construction is now starting to feed through into the replacement kitchens market and is likely to impact favourably on the renovation sector as those properties dated 10-years plus now gegin to feed through into first-time replacements, a trend which is likely to continue whilst house-building levels are high.

The replacement market for kitchens has also been driven by relatively high levels of consumer confidence in recent years with consumer spending forecast to grow by 5.5% in 2005, the rise in popularity of home improvement programmes, a growth in consumer credit and rising house prices leading to more consumers using the equity in their homes to fund improvements. Furthermore, the maturity of Special Savings Investment Accounts (SSIAs) in 2006 will see the release of an estimated €6 billion of consumer funds into the economy, with many consumers using this money to remodel their homes with new kitchens.

Imported kitchen furniture (including cabinets and worktops, but not tables and chairs) was estimated to be worth around €23m during 2004 with exports worth around half the value of imports, accounting for just €2.6m in 2004.

Offsite manufacturing techniques in the Irish housing market have now risen significantly from just 2% of the total housing construction market to 16% over the past 10 years. The Kitchen Pod is already a growth market in Ireland and a number of house builders, including John Paul Construction, P J Hegarty and Pierse Contracting are now using pre-fabricated construction to install kitchens in apartments and smaller housing projects. Leading suppliers to the Irish kitchen pod market include Delta Off-Site Solutions, Fusion Building Systems, Polypod Ltd and Qpods Ireland.

The kitchen market in the Irish Republic is intensely competitive, driven by increased consumer interest in the kitchen as the central room in the home, a buoyant domestic refurbishment market and a high level of residential housing completions. The kitchen manufacturing sector is less structured than the UK market and is well served in all price brackets by a larger number of regional specialist independents, which are estimated to account for around 85-90% of the replacement market, with UK and continental suppliers such as Hygena/Schreiber, Second Nature Kitchens, Poggenpohl, ALNO, Bulthaup and SieMatic all of whom have appointed Irish agents accounting for the remaining 10-15%.

Leading Irish kitchen manufacturers include Nolan Kitchens, Fitzsimons, Craftsman Furniture, Cliffoney Kitchens, Glenline Fitted Furniture, Shannonside Kitchens and Stylewood Kitchens.

In terms of distribution, the Irish kitchen furniture market is dominated by the independent retail specialists with around 50% market share, which have proved to be the most significant channel for the distribution of Irish and overseas produced kitchens. There are estimated to be around 250-300 kitchen retailers in the Republic of Ireland and the majority of businesses are single unit outlets, with the exception of H-Line Kitchens, Houseworks and McNally Kitchens. Furthermore, the presence of foreign multiples such as Habitat have also boosted the distribution of kitchen furniture in the retail sector, and this is likely to be further strengthened if IKEA gain planning permission for its first store in the Republic.

The DIY sector is estimated to account for around 30% of kitchen furniture distribution in Ireland and has grown in recent years as a result of a buoyant house moving market and the kitchen replacement market. In addition, the wider availability of kitchens in all price ranges through the DIY sector has also supported growth. Leading DIY outlets include Homebase, B&Q, In-house at the Panelling Centre and B&G.

Builders’ merchants are less of an important source of kitchen furniture for both domestic and commercial purposes than they are for bathroom and sanitary ware products, being key suppliers to the house building sector. This channel of distribution for kitchen furniture is estimated to account for around 15%, with leading merchants including Grafton Group Plc, Wolseley Plc, Noyeks Newmans and Dublin Plywood & Veneer

The ‘others’ sector, including mail order, catalogue sales and direct supply from the manufacturer accounts for around 5% of the market in terms of distribution. The ‘others’ channels also includes the catalogue retailers such as Argos and online distributors of kitchen furniture such as Italian Kitchens Direct, one of Ireland’s leading distributors of high quality, handmade kitchens from Italy.

It is forecast that the overall kitchen market will continue to grow at a reasonably stable level in 2005 and 2006 at 4% per annum, and then by around 3% until 2009 to reach €749 million. The kitchen furniture market, as with most consumer durables, is highly responsive to fluctuations in the economic climate with consumer spending levels and confidence susceptible to interest rate rises and fluctuations in the economy.

A rise in earnings growth and consumer spending, low inflation and low interest rates will all impact favorably on the kitchen market over the next few years. However, with the current level of new build housing completions thought to be unsustainable in the medium term, lower forecasts for the residential construction over the next 4 years will impact upon the new build kitchens sector. Lower levels of house price inflation and potential interest rate rises may have a negative influence on both the new build and RMI sectors in the medium-term, and, together with the threat to low-mid skill jobs, largely in manufacturing and many firms transferring production overseas, these factors are likely to have a restraining effect on growth in the kitchen furniture market.