Oh Canada! It Could Be Better
By Bill Sendelback
Photo: ©2019 Luke Potter Photography. www.lukepotter.ca.
Hearth product sales in Canada are good – not great, but good. They’re not growing as well as hearth product sales in the U.S. Most manufacturers attribute the weaker sales in Canada to a weaker Canadian economy, and a big slowdown in Canadian new-home construction.
While current 2019 manufacturer shipment numbers are not available, the most recent data shows that sales of wood-burning hearth products in Canada last year were down 7% while U.S. sales were up 10%.
Sales of gas hearth products in Canada also were down 7%, but flat in the U.S. Pellet stove sales were up 26% in Canada, and up a whopping 45% in the U.S.; both totals were most likely a shock to manufacturers, contradicting their more optimistic reports.
“The Canadian economy overall is steady,” according to Laura Litchfield, executive director of the HPBA Canada, “but varies per region. Our economy today is a little off after a strong 2018. Ontario’s economy is strong, but the economies of Alberta, Nova Scotia, and New Brunswick are down. Alberta has not recovered from a decline in its oil industry, and, unfortunately, in our urban areas, buying a home is out of reach for many young people.
“We’re hoping hearth product sales will be up next year,” she says. “There is little negativity in the marketplace, dealers are doing well, and many are weeks out on installations. But we’re concerned about the slowdown in new-home construction and, equally important, the decline in the incident rate of fireplaces in new homes.”
Regulatory Issues Continue in Canada – and the U.S.
“The EPA’s New Source Performance Standard (NSPS) has created confusion among Canadian dealers and consumers because each province is free to establish its own different standards,” according to Litchfield. “Our national building code says that provinces may go with the NSPS or our CSA B415.1 standards, or not require any standards at all.
“Some areas, such as towns on Vancouver Island, are actively trying to ban all wood-burning. These actions are scary messages that are not based on the facts of our new wood-burning products. We’re working with the municipalities to educate them about our new clean-burning, very efficient wood-burning products.” Litchfield also points out that a recent amendment to the national Energy Efficiency Act will eliminate standing pilots on heater-rated gas fireplaces with a minimum efficiency of 50% and manufactured after Jan. 1, 2020.
“The impact in Canada of the NSPS 2020 Step 2 standard and deadline are not as cut and dried as in the U.S.,” says Adam De Caire, director of Public Affairs for the HPBA Canada. “Most provinces require either certification to the NSPS or CSA B415.1, but some only require certification to the Step 1 of the NSPS which would still allow products with a maximum 4.5 gph emissions rate.
“As an example, Ontario’s building code allows certification to either CSA B415.1 or to the NSPS as it was in 2013! We are discussing with the CSA about aligning its B415.1 with the NSPS Step 2.”
The City of Vancouver has been very aggressive about reducing or eliminating the use of natural gas with its City of Vancouver Renewable City Strategy, says De Caire, “but as a result of our ‘Save My Natural Gas’ campaign, the city has softened its stance. As of the updated Vancouver Building By Law (VBBL) regulation, new multi-family buildings of six stories or fewer, and single-family homes greater than 3,500 sq. ft., would have an energy consumption budget that allows some gas fireplaces within that budget.
“We believe that the proposed revised VBBL likely will soon affect single-family homes of less than 3,500 sq. ft. with provisions similar to the provisions for large single-family homes and accommodating at least one gas fireplace in the baseline regulations.”
“In short, this new greenhouse gas ‘budget’ will allow some natural gas usage,” adds John Crouch, director of Public Affairs for the HPBA. “This budget includes typical gas appliances such as furnaces, water heaters, and one-each gas fireplace or cooking appliance. So if you want two gas cooking appliances, including grills, or two gas fireplaces, including one outside, you have to drop one of the other items. Could this be a trend that will extend farther than just the City of Vancouver? Yes, but we have not yet seen that – so far.”
SimpliFire Scion clean-face linear fireplace from Heat & Glo.
Hearth product sales in the first half of 2019 were up mid-single digits in the U.S. for Hearth & Home Technologies (HHT) but not so in Canada, according to Alan Trusler, senior vice president of Business Development. “The overall economy in Canada is not as robust as in the U.S. It is struggling, and we see that trending down,” he says. “Some of that is because new-home construction in Canada is off 20% and down 40% in the greater Toronto area.
“Toronto had strong growth in the past but has been off since 2017, and the greater Toronto area is where Canada has its largest concentration of hearth product dealers.” Trusler attributes some of that decline to the fairly recent 15% tax on real estate sales to foreign buyers in effect in Vancouver and Toronto.
Trusler also maintains that Canadian hearth product dealers have a greater percentage of their sales in new-home construction than dealers in the U.S., with some Canadian dealers showing 60% of their sales in new-home construction.
HHT is committed to the Canadian market and more focused on it than ever, says Trusler. While HHT expects “nice growth” in mid-single digits in 2020 in the U.S., the company expects sales growth in Canada to continue to be a challenge.
“Electric fireplace sales are certainly up in Canada, since Canada has a greater percentage of new multi-family homes where electric models are more easily installed,” says Trusler. “And outdoor fireplaces are doing well in Canada.” But HHT sees sales of gas fireplaces down in Canada due to the softness in new-home construction. However, sales of more expensive, luxury fireplaces are selling well since they are not tied to the new construction of tract-type homes.
“There is a lot of trepidation regarding sales of wood-burners among dealers on both sides of the border,” says Trusler. “Most dealers are not bulking up on their inventory of wood-burners as they are concerned about the possible dumping of pre-2020 models at discounted prices.”
Canada has always been much more accepting of contemporary and European styling, and that trend continues, says Trusler. “There continues to be growth on both sides of the border in clean, modern, minimalistic styling, and that trend is more popular in urban areas.”
The exchange rate has not had much effect on HHT’s sales in Canada, Trusler says. “We’ve developed exchange rate programs with our Canadian distributors to help underwrite some of that affect.”
After a “good” 2018 hearth product sales year, ICC/RSF also is seeing a “good” 2019, up 5% in the U.S., and even with 2018 sales in Canada, says Dan Bonar, vice president of Residential Sales and Marketing. Sixty percent of ICC/RSF sales are in Canada, and 40% are in the U.S.
“We have a full line of 2020-certified models in our RSF and Renaissance lines” says Bonar. “With our loyal dealer base, we expect 2020 sales, too, to be strong. It took us five years to modify our existing models to meet the 2020 standard, and there may be some price increases.”
The Uptown fireplace by Renaissance Fireplaces.
With each Canadian province able to set its own emissions regulations, a lot of Canadian homeowners are confused and don’t know what to buy as the 2020 NSPS deadline approaches, Bonar says. Heater-rated wood-burner sales in Canada are down 15% with ICC/RSF as dealers sell-off their non-2020 models, according to Bonar. ICC/RSF’s sales of decorative models, however, account for half of the company’s appliance sales and are up 15%. Sales of more modern-styled products are growing, but 75% of ICC/RSF’s sales are traditionally styled.
“Anyone not concerned about our environmental regulation challenges doesn’t know what is going on,” Bonar emphasizes. “And people pushing these environmental issues don’t know about the very efficient, clean-burning hearth products the industry offers. They are not aware that today we can heat a 3,000 sq. ft. home with a renewable fuel like wood while producing less than one gram per hour of particulates. We’re not dealing with people who are logical, but the HPBAC and the HPBA are doing a good job of educating regulatory folks.”
Hearth product sales are up slightly overall for Napoleon Fireplaces, according to John Czerwonka, vice president of Hearth Sales. “Our sales increase is being driven by our U.S. sales being up, while our hearth sales in Canada are down slightly after having been up for the last three years. We think our Canadian sales are off in part because of the decline in new-home construction in Ontario where the economy has been hit hard.” Some dealers specialize in new-home construction, and they have been hit hardest. But most specialty retailers are heavily into remodeling which is still strong, says Czerwonka.
While Napoleon’s sales of gas and electric models are up in Canada, sales of wood- and pellet-burners are down with pellet sales off more than that of wood-burners. However, the sales growth of both electric and gas fireplaces is “faster” in the U.S., says Czerwonka. Napoleon is seeing a “nice uptick” in sales of its new linear gas fireplaces and gas fireplace inserts.
“Our dealers are waiting for 2020, and many still have inventories of non-2020 wood-burning models. By the end of this year we will have five 2020-certified wood-burning fireplaces,” adds Czerwonka. “We expect solid sales in the U.S. for the next three years, but we’re a little less optimistic about Canada.”
Traditional styling is still number one with Napoleon, “but transitional and contemporary styling continues to chip away at the market with more clean-faced models featuring modern ember beds and a variety of new modern refractory options.
“We in this industry all share the same concerns over the environmental and regulatory challenges,” says Czerwonka, “including the bans on natural gas to new-home construction in some Northern California cities. We believe in gas, and we’re focused on vigorously lobbying to keep gas, but we’re beefing up our offering of electric models as an option. Homebuyers still want hearth products.”
Czerwonka points out Napoleon’s new Commitment Campaign to continue strong support for our industry, the HPBA, the HPBAC and specialty hearth dealers. This program, or commitment, recently was introduced with the naming of brothers Stephen and Chris Schroeter as co-presidents of Napoleon.
Sales growth percentages are “pretty even” between Canada and the U.S. for Pacific Energy Fireplace Products, says Cory Iversen, North American Sales manager. “Sales have been better than expected on both sides of the border, especially in the face of the dumping of non-2020 wood-burners, mostly by U.S. dealers. In both countries, sales are up in the East but down in the West.”
Sales of the company’s Town & Country line are “up a little” in Canada but “down a little” in the U.S., and sales of the company’s high-end Architectural Series are growing and selling “very well,” says Iversen. Even though Iversen sees fewer low-end wood-burning models being sold, the company’s economy True North brand is seeing a “good sales surge.”
Iversen thinks Pacific Energy’s sales will do well in 2020. “Our entire wood-burning line is 2020 certified, non-catalytic, and already being shipped. Because of the upcoming 2020 standard, a lot of low volume products will be off the market because of the costs of recertification, and catalytic combustors will drive up prices for some manufacturer’s models.”
Transitional styling continues to gain sales for Pacific Energy on both sides of the border, “but our new transitional-styled Neo line is not poaching sales from our regular lines,” says Iversen.
This year’s hearth product sales started in a “phenomenal” way for Regency Fireplaces, according to Glen Spinelli, president. “After slow-going into the summer, we’re seeing good sales in both Canada and the U.S. considering how warm it has been. We’ve made up in sales growth of gas products for our losses in sales of wood-burners.” Sixty-five percent of Regency’s sales are in the U.S. with 35% in Canada and Australia.
Fireplace sales are up overall for Regency with its high-end gas fireplaces selling “very well.” Wood-burner sales are down slightly, and pellet stove sales are flat, but electric fireplaces, a new category for Regency, are “going crazy,” says Spinelli. Although wood-burner sales are off, Spinelli says those sales are now increasing as dealers purchase and put on display new 2020-certified models.
Regency made changes to “every one” of its models with a “huge” investment in R&D, particularly to meet the 2020 NSPS deadline. “Even so, we expect sales in 2020 to be ‘status quo’ with this year’s sales,” he says. “Our biggest concern is manufacturers dumping non-2020 wood models. In Canada, there is confusion among dealers as to whether they can continue to sell non-2020 wood-burners, and some don’t care. We have to focus on Canadian and U.S. dealers to get them to sell-off their non-2020 models.
“We have to continue to be vigilant about the environmental and regulatory challenges,” says Spinelli. “We are concerned about the possibility of individual provinces, states, and municipalities coming up with their own regulations, as we have already seen.”
Hearth product sales are up 5% for SBI – Stove Builder International with most of that increase coming in Canada. “Many of our customers in the U.S. are waiting for 2020-certified products,” according to Marc-Antoine Cantin, president. “Our new 2020-certified models are now being shipped, so we expect sales in the U.S. soon to get back to normal.
“The hearth market was robust last year, and we had our best year ever on both sides of the border. We expect this year to beat 2018, but not by a huge margin. We now only sell wood- and pellet-burners, and for 2020 it is difficult to estimate the impact on our sales of other manufacturers discounting and dumping non-2020 products. But we remain confident because that dumping will be done this year or early next year.”
A big surprise for SBI is how “keen” many Canadian hearth product dealers are to switch to 2020-certified models, even though Canada is not necessarily affected by the NSPS because of Canada’s CSA B415.1 standard that is accepted throughout Canada.
Trends in hearth products are very similar on both sides of the border, Cantin says. “The major difference is fireplace inserts. For some reason, the market for inserts in the U.S. is always a lot more robust than in Canada. More than 75% of the inserts we manufacture go to the U.S., even though the U.S. is less than half of our business.”
Wood-burning builder box fireplaces are different in Canada than in the U.S., says Cantin. “There is only a very small market in Canada for large wood-burning builder boxes with no glass doors and that produce no heat.”
Traditionally styled products are the bulk of SBI’s sales, but contemporary styling has a higher percentage of sales growth. “We don’t do ‘transitional’ because, from a design standpoint, we don’t think there is much of a market for products with styling that is ‘stuck in the middle.’” With the increase in contemporary styling, Cantin sees a trend toward all black in wood and pellet stoves. “Plated doors and plated leg options are clearly not as popular as they once were.”
Cantin points out that with the arrival of European hearth product manufacturers, new designs have been introduced, mostly “exempt” models with a single-burn rate, allowing the manufacturer a wider variety of design configurations. “But these products remain very expensive because of the overseas freight costs and distribution markups. This will continue to limit their market penetration,” according to Cantin.
Supreme’s Novo 24.
SBI mainly is concerned about the “extreme” measures in environmental regulations that attempt to ban all wood or gas hearth products regardless of the performance of those products. Included in Cantin’s concerns is the proposal of a so-called “eco tax” on wood stoves proposed by the Association des Professionnels du Chauffage, a Québec hearth products organization.
SBI is ready for the 2020 NSPS deadline, says Cantin. “We have complete 2020-certified product lines available. Our prices have not been affected too much because we are strictly non-catalytic and we do not offer single burn-rate products.” But the big news from SBI is that it will introduce gas hearth products in 2020 in Canada.
Supreme is having a very good sales year, up 35% overall. “Sixty percent of our business is in Canada, and we’re up 40% here,” says Anastasia Marcakis, Sales manager. “Our sales are up only 30% in the U.S., but our business is growing there.” Marcakis, too, is concerned about the possible discounting and dumping of non-2020 models, especially since Supreme’s only products are wood-burners. “We’ll see some small sales growth next year because of our new products,” she says.
The Canadian economy is “shaky,” but the hearth products market is strong, according to Marcakis. “We’re seeing more consumer confidence, and it has been a nice year for dealers. Gas has taken more of the hearth products market, but that seems to have stabilized now.” Unlike most manufacturers, Supreme is experiencing growing sales in the West with slower action in the East.
Contemporary-styled wood stoves are a trend for Supreme. Introduced in August, the company’s new Novo series includes three sizes of contemporary wood stoves that can be set on the floor or on a podium with a wood storage area. “Some regions of Canada still want traditional styling, but contemporary is growing,” she says.
Supreme is ready for 2020 with most of its line already certified to the 2020 Step 2 standard without catalytic combustors.
Marcakis is concerned about the confusion of consumers with wood-burning. “They are hearing the message that wood-burning is not good for the environment and will be banned,” she says. “We have to be more aggressive about telling the story of our clean-burning, very efficient products.”
In 2018, Travis Industries saw its Canadian sales up 8%, and this year those sales are up another 5%, according to Perry Ranes, vice president of Sales. “Overall, our Canadian sales are doing better than in the last few years,” he says, “but our sales growth in the U.S. is substantially better than our Canadian growth.”
Ranes says Travis’ Canadian sales struggled a few years ago, but now the company has a “lively” business in Canada. “We’re particularly pleased that our Canadian dealers are selling more high-end products. Canada’s economy has slowed, but remodeling is very strong. That’s the reason our sales are up,” he says.
Travis is anticipating another good year in 2020. “Dealers are adding products, and that is very encouraging,” Ranes says. “Canadian dealers are making room in their showrooms for more wood stoves. We’re looking for solid sales growth next year on both sides of the border.” But Ranes is concerned there may be a “blood bath” in the hearth market with dealers selling off non-2020 models into next year on both sides of the border.
Sales of gas products are up for Travis, and wood-burner sales are off “some,” while pellet stove sales are flat in Canada as well as in the U.S. Travis’ entire wood-burning line is now 2020-certified to the cordwood standard.
The “lion’s share” of Travis’ sales have traditional styling, says Ranes. “But contemporary styling is still growing fast in Canada, and dealers want more modern products. The Canadian market in gas hearth products always seems to be the trendsetter in design.”
Ranes does not see the exchange rate having much effect on sales. “Canadian dealers are selling higher-end products, and they are selling value, so concerns about price disappear.
“We’re battling environmental issues and regulatory challenges everywhere,” says Ranes. “Those pushing these issues know so little about our new products, and they are talking from emotion rather than facts. Dealers need to take a more active stance on local affairs. That will have a great and positive affect for our industry.”