Published in November, 2017
Every industry has a business cycle that lasts a few years before external events and circumstances transform it beyond recognition. We are not referring to the ups and downs of economic cycles in which the companies of an industry grow in size and make healthy profits during the boom years and then, inevitably, go through tough times when there is an economic slowdown, when there is a serious decline in demand. The external circumstances referred to here can involve significant technological developments leading to serious disruption in the way an industry works, and to this one must add the multiple uncertainties of the globalised world we already live in, and the constant struggle to adjust to it.
Briefly, the existing model in the natural stone industry, when examined from the point of view of those involved principally in mining and processing activities, and which has existed for the last 20 to 30 years, is now undergoing serious stress.
Some aspects of the natural stone industry today
Consider the following aspects of the industry today-
1)Most natural stone factories, after having made huge and risky investment decisions, are no longer obtaining satisfactory returns. (By the way, the world economic crisis is over in most countries of the world).This is something that is by and large true for companies working with all kinds of stones. and for all types of processing units, big, medium sized, or small. There are exceptions, of course, but what percentage of total number of companies would be doing well- 5%, 10% ? Surely, no more.
2) The bargaining power of intermediate products manufacturers like slabs and tiles has been reduced to zero, or is negligible. Even though the industry can rightly claim it is working with a unique and unrepeatable product, most of the time business transactions with their buyers take place on an assumption that natural stone is a commodity. Price seems to be the only criteria that matters, from the point of view of the suffering factory owner.
3). When financial returns are negligible or negative and the only driving force that predominates is to reduce costs so as to be able to give an even lower price than the competition, then there is little scope for genuine innovation and the financial resources available for developing new products or doing something really new are also be very limited.
4). Most of the mining people tend to focus only on getting enough blocks out and dealing with environmental issues and the constant bureaucratic hassles from the authorities- it is difficult to imagine them becoming significant centres of innovation. Moreover, this situation assumes there is already a demand for their material in the market.
5) The wholesalers, almost indispensable in most markets, big and small, by and large, have little incentive or even ability to innovate in new or better products, and many of them do not even make efforts to reach new kinds of customers. Increasingly, they do not even seem to show much commitment to sell natural stone, just look how fast so many have replaced natural stone with artificial stone in their product line. Their business model, especially when the owners do not also own stone quarries or factories, means they can easily shift to competitive artificial products if they can make more money there, if these new alternative products are in demand. One does need to acknowledge here that most wholesalers in the industry genuinely love natural stone, it is what they would prefer and love to stay with. But as businessmen, however, they need to be practical people. They cannot afford to go against market demand and trends.
6). Architects, yes, they mostly like natural stone, even if some consider natural stone to be somewhat outdated. In any case, how many natural stone companies have made serious and sustained efforts to reach architects, understand their needs, and offer complete and correct information?
7) Most of the innovation in the industry is being done by machinery manufacturers, be it in CNC machines offering amazing possibilities, in developing new finishes, or in productivity enhancing production lines. The natural stone industry has, by and large, failed to take advantage of the new possibilities, possibly because apart from serious money they would need to spend on acquiring these new tools, they probably recognise it also needs a much bigger effort in marketing and involves doing a lot of new things they are not used to. Over the years most stone industry companies have lost the drive and push to constantly innovate and experiment.
8) The new artificial products. This topic deserves an article by itself. Seemingly, artificial stone is like a nuclear missile aimed at the heart of the natural stone industry threatening to wipe it out of existence within a few years. The huge marketing budgets and modern approach to selling by artificial stone companies as compared to the near zero effort by the natural stone industry people is a contrast that speaks for itself. Artificial stone, be it quartz or big format porcelain, has already taken over a huge market share of the kitchen countertops market in many countries ( a major application for granite during last 3 decades), and is now expanding fast in decoration and other applications. Artificial stone has its weaknesses, and they are considerable, but it will take time before its limitations and problems become more widely known by the industry people and by the end buyers. For now their flashy marketing and smooth talk is being effective. Technological change will continue to take place, like it or not, and artificial stone will also evolve in ways we cannot predict today.
To summarise, clearly there is clearly an urgent need for a serious rethinking of the natural stone industry, the old model of the last 20 to 30 years now looks very outdated. The market trends and new realities will, in any case, turn the natural stone industry upside down, whether the people of the industry do something or not.
What would a different natural stone industry be like?
So what can a new and more promising stone industry of the future look like? Are we condemned to an irrevocable decline, perhaps existing as a niche product with limited demand, and a much smaller sized industry?
It is hard, perhaps impossible, to predict the future. And possibly foolish too. But there are several aspects we must not forget and consider deeply.
A). In spite of the Ginghez Khan type rapid conquests made by artificial stone at the cost of natural stone in several markets in recent years, overall, everywhere, people all over the world long for natural products and authenticity in their life. Synthetic products just do not have that appeal, probably never will. This yearning for nature and natural things is a deeply ingrained human need, which has become even more acute, as the world urbanises and people live in big cities, surrounded by cement and everything artificial around them. Organic food, clothes made of natural fibres, weekends in rural surroundings, a natural look even in appearance…… these are the mega trends in the modern world and they are not going away anytime soon. Natural stone fits in perfectly with this very basic and strong human instinct. Artificial, copycat stone does not. There will always be a certain superficiality about it and people will instinctively recognise this lack of authenticity, and will possibly never accept it fully.
B). An industry model which depends heavily only on big size squared blocks as its basic raw material cannot be sustainable in the long run, neither is it desirable. This model of business inevitably means considerable waste in the quarries, leading to all kinds of problems of disposal etc. But it also means a huge wastage of opportunity since the industry is not making adequate use of the huge amount of raw material that exists at its disposal.
C) A new modern natural stone industry, tuned to modern times, will, therefore, not be so only in the aspect of respect for environment, but it will also be one that finds a way to make new high value, commercially viable products, based on the raw material that is not just used in gangsaws, multiwires or even the rudimentary blockcutters. Creative and out of the box thinking by people, not necessarily from the stone industry, will be needed for this purpose. It may also mean new products will need to be made somewhere close to the quarries so as to reduce transport costs.
D). A new inventive and creative mindset will be the key to developing new applications and new products with high component of design, which will, moreover, need to be marketed in new distribution channels that may have nothing, repeat, nothing, to do with the existing ones.
E).The new mind set will think differently in the sense it goes beyond analysing in the current mind deadening manner- this is what we have always been doing , this is what we make.
F). A new redesigned and modern industry will also be one that has a modern sense of marketing. It will be very much at ease with the new digital world where most information is acquired by people, where new trends are created, new products are presented and commercialised. A new younger generation, very much at ease with this new digital world, needs to step forward and have the authority to make decisions involving the digital world, even if it may not be ready yet to take over a stone company.
G). A new emphasis on marketing does not mean taking part in more of the same industry fairs, simply with a bigger ( and higher)stand than the competition. That in any case, is now beyond the financial resources of even the biggest companies of the natural stone industry. An emphasis on marketing means not just attending more to the direct customers of the company. It means, for example, that stone companies make their own individual efforts to reach out to architects and decorators informing and educating them and offering them different possibilities in natural stone, and abandoning the mentality that it is the job of “someone else” to do it. It means new applications and new products presented to new and different type of customers. It could mean attending completely different kind of trade fairs, if at all, with different and new products, creating a new distribution network, and developing new sales channels.
H). A new stone industry is one which will not only be run by a new generation, but by new people from outside the industry. Difficult to imagine? The future always is!