David Pinder and Andy McDowell of Pilkington set out the roadmap for the introduction of their new soft coated product to the UK market at a glitzy launch at Altitude 360, Millbank Tower on the banks of the Thames near Westminster on the 11 October.
The new soft coat is reputed to be better performing that Planitherm Total Plus, whilst also being more durable and allowing a much longer hiatus after toughening and before it needs to be made into units. The main commercial advantage Pilkington will have is that their product is automatically substitutable for Total Plus or Climaguard A without any further simulations due to its superior performance.
As previously discussed, St Gobain has made millions in profits from its Planitherm Total Plus which has had no equivalent until now. Unfortunately, despite this success there have been no major profits for the processors and distributors of Total, mainly due to the heavy discounting by Solaglas which benchmarked the stock, single toughened and IG unit prices at unsustainably low prices.
Pilkington is likely to win significant market share for Pilkington K Glass S from St Gobain and generate good profits without the need for major discounting. It is likely that prices are going to be similar across the board and that Pilkington is going to sell on better durability and shelf life. My prediction is that this is going to drive Solaglas’s downstream prices even lower as they lose more work to features and benefits.
Although Pilkington has a healthy downstream operation it is fair to say that the average service levels are far superior to those of Solaglas, so there will not be a need to erode prices. However, they are unlikely to walk away from any fight with Solaglas and this is likely to precipitate a further erosion of the second line prices.
The independent Merchanting sector needs to be worried because Pilkington’s depots have been emasculated for some time and will be trying to make up for lost ground. The independents will lose volume and margin as a consequence of Pilkington Distribution’s ‘feeding frenzy’ and desire to convert all Total into K Glass S sales.
There is a slightly more positive prognosis for single toughened glass due to Pilkington’s lack of toughening capacity. This should give the independents a chance to pick up KS toughened work at Solaglas’s expense, although there is little prospect of achieving a premium for the superior product. Similarly, Pilkington is already selling Total units so there is unlikely to be much price change with the introduction of KS. Pilkington only has about 5% of the UK IG Unit market so there will be plenty of opportunities for independent unit manufacturers, albeit at the rock bottom prices set by Solaglas.
The independent sector is now absolutely dependent on Pilkington for its survival. With Pilkington’s better Merchanting capability, prospects are bleak for the independents unless the independent sector is nurtured and respected as a valued route to market.
Predatory pricing is currently a reality with Solaglas selling certain products to small users cheaper than St Gobain sells the same products to direct accounts. St Gobain’s standard defence is that the two compares are run independently, but Pilkington does not have that defence. Pilkington must carefully restrict its routes to market and ensure that there is sufficient profit for every link in the supply chain, for us all not to be ‘out of the frying pan and into the fire’.