Turnover was down by about 10%, she said, with the revenue figure down further than the volume decline. This is because of the fall in raw material prices in the second half of last year, she said.
According to Austin, a total of 1.24m tonnes of polyether foam was produced in the EU 28, Norway, Switzerland the Balkans and Turkey last year. ‘Despite all the drama and complaints and worries about the foam industry, the data we have collected suggest that [in these countries], production was only down by 3.7%,’ she said. ‘If Russia, Turkey and the CIS countries are included, it is down by 4%.’
The news for polyester foam was worse. Production fell by 7.4%, from 81 kT in 2017 to slightly over 75kT in 2018. The decline in Austrian, German and Swiss production was greater, at nearly 9%, after a fall in downstream markets. In Germany, for example, vehicle production was down 9%, mattress production by 2–3% and furniture by 5%.
Poland stalls
‘For the first time in a long time, there was no growth in Poland,’ Austin said, adding that the foam industry in Poland may be maturing. ‘There have been several years of strong demand, and there is a considerable volume of production capacity in the country. The market is highly competitive.’
Polish producers have reported a shift towards low density foam and away from products containing visco or HR foams, she added. In the Benelux market, manufacturers walked away from some business in 2018. This was to protect margins over volume, she said. Competitive foam products from Germany and Eastern Europe are driving this behaviour.
Despite Brexit uncertainty, lower consumer confidence and a weaker pound, polyurethane production fell by just 1.2% in the UK. There was a big increase in e-commerce and buying mattresses online, with the UK now being Europe’s second largest online market for mattresses, she said.
However, producers in the Balkans and Belarus bucked the trend. Austin explained that in 2018, the biggest winners were the Balkans, while Greece and Cyprus remained static. ‘With new equipment and latent demand, the Balkans have increased foam production,’ she said.
Regional variations
However, in Romania and Bulgaria, flexible foam production fell by nearly 5%. ‘In Bulgaria, smaller foamers opted to buy more foam rather than make it,’ she said. In Romania, production was flat.
In Russia, Kazakhstan and Belarus, there was a downturn of 3%. Russian flexible polyurethane foam makers also had to battle an increase in pocket spring mattresses in 2018. ‘Customers are looking for low density foam for competitively priced products,’ Austin said. ‘Russians look for a good deal.’
In Kazakhstan, foam production increased by 15% in 2018, she said, despite the country importing Russian furniture and flexible polyurethane foam. She added that new capacity in the country has ramped up and the market is doing well.
‘In the Ukraine, lower levels of disposable income are hitting consumers,’ she claimed. ‘Memory foam pillows have become luxury items.’ Consumers are looking for functional foam items, not high-quality products.
In Belarus, there was a 15% increase in flexible foam production in 2018, she said. This is because the heavily forested country has low labour costs, and has developed a furniture hub.
Furniture immobilised
The European furniture market was static in 2018, according to figures from CISL, Austin added. The EU furniture industry employs more than 1m people across 120,000 companies, making products worth €94bn. Most is for domestic consumption inside the EU, but some is exported to the US and China. The leading exporting nations are Turkey and Italy.
Demand in in the EU is important, but overseas trade discussions between the US and China and the US and the EU have been having an effect. ‘However, despite the many concerns and drama we have heard about in our research, the production of the EU 28, Norway and Switzerland has increased by 0.3%,’ Austin said. ‘Exports increased by 2.1% and imports by 1.6%. Overall it was a fairly stable market.’
However, she added, changes in furniture production varied from country to country – for example, down 5.2% in Germany, up 4% in Poland, and up 7.8% in Portugal. ‘It is not a consistent picture across the whole region,’ she said. ‘There are still challenges. There is a declining level of skilled labour, plus digital challenges, trade agreements and e-commerce.’ Globalisation is now reducing the differences in production costs between the US, China and Europe.
Sidestep that tariff
Tariffs are becoming an increasingly important feature of global trade, and therefore companies are trying to avoid them wherever possible. For example, in 2018, Ekornes was bought by Qumei Home Furnishings of China in 2018, and Healthcare acquired Max Colchon, a Spanish mattress retailer. In 2019, it also purchased a stake in Long Life Basics, a German bedding company. ‘The supply chain is changing,’ Austin said.
There is some evidence that polyurethane is being substituted with less expensive materials, she said. but, this is not supported by the numbers. A reduction in foam with the use of polyester fibres in more simple, rectangular cushions, reducing wastage, or even swapping a foamed back cushion with a number of scatter cushions may be happening at the lower end of the market.
Austin discovered a highly recyclable mattress that only had a thin layer of foam. ‘All these are possibly coming but have not arrived,’ she said. ‘We are not convinced that this is a long-term trend. But we have a trend to do more with less – a device that turns a bed into a coffee-table, a dining room or a work surface. This a trend for living in micro spaces.’
Looking at figures from CSIL for mattress production, Austin said that there had been a downturn in some established western markets. ‘Germany and Austria dipped, there was a little decline in Spain, but overall it is flat,’ she said. ‘There were only 200,000 fewer mattresses made last year than in 2017.’
Austin added that mattress makers have focused on price and meeting a price point for a specific market. ‘They have not been so interested in product innovation, quality or durability,’ she said. Hybrid mattresses, where a section of foam is replaced by pocket springs, were more obvious in 2018.
Huge effect
‘We are not sure if hybrid mattresses will continue or if they are a means of product differentiation, in a highly-competitive market,’ she said. But spring makers are reporting brisk business. ‘They are promoting springs on the basis that they are chemical-free, allow a lot of air circulation, and they are recyclable.’
E-commerce has had a huge effect on the mattress market. ‘People have been convinced that a very good quality mattress can be bought for a much lower price online than from their local retailer,’ Austin said. ‘This has had a downward pressure on the price of mattresses.’
Patrick de Kort, regulatory affairs manager at EuroPUR, added that CSIL figures show that e-commerce now accounts for 9% of European mattress sales. ‘Europe is second to the US, where this channel accounts for 16%,’ he said. ‘Within Europe, some markets have boomed. In the UK, it accounts for 15%, in Germany 11%, and in France 10%. This growth does not show any sign of slowing.’
Moving Target
EuroPUR tried to compile a list of all the e-commerce mattress sites in Europe, but it has proved to be a moving target, he said. ‘Companies are entering and exiting the market all the time. The definition of eCommerce continues to change,’ he said.
Many companies have evolved from online only to a brick-and-click business model,’ de Kort added. ‘In the “brick and click” model, companies have physical stores where customers can try out mattresses and then buy online,’ he said. ‘According to the Snooze Project, a German e-commerce company, €250 is the appropriate price for a mattress.’
And there is something of a race to the bottom in terms of price and limited product. ‘There has been a reduction in the density of foam, so less HR, less visco, and more lower density conventional foams. This has led to a decline in the total amount of foam produced by tonnage,’ Austin said. ‘There are French and Dutch manufacturers who are leasing mattresses. There is still some discussion about whether this is a viable business model.’
