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Chapter 5

5.1 Introduction

Most of the marketing factors relevant for accessing markets for tropical timber products are similar to those of timber products in general. Factors examined in this chapter are products, distribution channels, promotion and price. These are crucial elements of the marketing mix and in most cases will be strongly interrelated. The focus of the chapter is mainly on primary processed products - sawnwood, plywood and veneer.

5.2 Products

Design and quality of timber products is increasingly being associated as a means of maintaining or increasing market share. Generally, as markets mature the need for companies to improve quality increases and as competition increases, differentiation of a product and `branding' become important. Good product design and specification is seen as one area of particular importance where new products, e.g. `lesser known' or plantation grown hardwoods are to be introduced into a market, particularly so if they have no price advantage.

Recent investigations have attempted to gain an insight into the key product-related factors in successfully accessing European markets. Opinions of interviewees were sought on the importance and performance of tropical timber products on the following three sets of product-related factors. (Price-related factors were also examined - see below.)

Natural properties




Right sizes

Regular supplies

Colour consistency

Dimensional stability

Reliable supplies

Natural durability

Moisture content

Short delivery time


Consistency of grading

Minimum order size

Gluing and fixing

Low waste in use

Ease of buying

Dimensional stability


Honouring contracts




The natural properties required of sawnwood differ by end use. The most commonly mentioned properties were appearance, colour consistency and natural durability. Tropical sawnwood was generally reported to perform well in these respects. This is not surprising. The species bought by European end users are selected largely for their properties. For this reason there is a reluctance to experiment with lesser known species, or plantation timbers because of the uncertainties associated with their properties. Traditional trading links with specific countries of supply also influences choice of species. Table 5.1 illustrates the main species used in the manufacture of industrial joinery in Europe.

Table 5.1: Main species used in industrial joinery




Framiré, Sipo, Sapele, Iroko, Limba, Longhi, Méranti


Tauari, Curupixa, Pau amarello, Moabi, Movingui, Niangon, Méranti

United Kingdom

Acajou (African and Brazilian mahogany) Afrormosia, Sipo (Utile) Keruing, Ramin, Sapele, Teak


Meranti, Merbau, Angelin, Doussié


Framiré, Méranti, Merbau, Sapele, Sipo


Sapele, Jatoba, Tatajuba


Sapele, Jatoba, Tatujuba

(Source: NU Comité du bois 97 - Reported by Eric Boilley, FFD Id Bois Tropical, 1997)

With regard to the specifications of tropical sawnwood, respondents rated performance as poorer compared with natural properties. Of the factors listed, consistency of grading/quality was cited as the single most important element, followed by sizes and dimensional accuracy of sawing. Grading consistency was considered better from Brazil, Malaysia and Indonesia than from Africa. Respondents emphasized that quality consistency often differed between suppliers within a country and for this reason buyers often favour purchasing from specific mills from which they have come to expect quality consistency.

Supply related factors were those where respondents reported that tropical timber performed worst in comparison with natural properties and specifications. The key elements here are regular and reliable supplies and honouring contract terms. It is the negative view of traders and users on these matters, which together with price factors (see below) has stimulated the use of substitutes. Again some supplying countries and companies have better reputations than others which further strengthens links with exporters who are seen as reliable suppliers.

Plywood and veneer

Fewer respondents expressed views on these products compared with sawnwood.

With respect to natural properties, appearance and colour consistency are of overriding importance for veneers, while for plywood the natural durability of the face veneer is important for external applications.

In relation to specifications, important characteristics for plywood are the type of glue used and the strength properties of boards aimed at the construction industry. Quality consistency is also important.

As far as supply factors are concerned, the position is the same as for sawnwood and again it is in these respects that tropical plywoods are often seen in a worse light than boards from European and North American suppliers.

5.2.1 Substitutes and alternative species

When considering the factors which effect the access of tropical timber products to markets the competition from alternative species and substitute materials should be considered. There are very few markets, where tropical timbers are unique and cannot be replaced by other species or materials. Alternative species can be other tropical hardwood species, temperate hardwoods or softwoods. Substitute materials include added value solid wood products, wood-based composite panels such as MDF, particle board and oriented stranded board (OSB) through to metals, plastics and concrete, etc.

In the sawnwood market, the increasing use of laminated scantlings in Germany (imported mainly from Indonesia and Malaysia) is reported to have significantly reduced the demand for rough sawnwood in Germany. Window manufacturers use laminated scantlings as an alternative to solid sawnwood. ITTO report that between 1991 and 1995 the share of laminated scantlings increased from 42 percent to 73 percent in the manufacture of windows from tropical timber while consumption of rough sawn wood decreased accordingly.

The uses of laminated scantlings highlights some of the reasons why manufacturers and end users switch to alternative materials. These include:

One of the major concerns by nearly everyone contacted during the course of this study was the substitution of tropical timbers (and wood in general) in window manufacture by alternatives such as PVC. Undoubtedly, the success of PVC in this market has been heavily dependent upon the marketing and promotional campaigns that surround it. PVC has been promoted on the basis of price (generally 10-20 percent cheaper), no maintenance requirement, fast delivery (the materials are pre-cast in a variety of profiles and just require cutting to length), less skilled (and therefore cheaper) instalment required.

Interestingly, views on the `no maintenance' performance of PVC windows are now starting to change, and differ between different countries. From opinions gathered during this study and from other reports, it is clear that the German and the United Kingdom markets have regarded wooden windows as high maintenance while in the Netherlands and Denmark this has not been such an important purchasing consideration. In the Netherlands, tropical timber is the favoured material for window manufacture but due to environmental pressures substitution with treated softwood has been increasing. This is one market that would undoubtedly benefit from the expansion of certificated tropical timber to counterbalance the environmental concerns of the end user.

Over the last decade there has been a switch in fashion towards paler coloured temperate species and a move away from red/brown tropical timbers. Some of the companies interviewed during this study reported that they are now beginning to see an increasing interest and trade in `red species' and away from the very `pale featureless hardwoods'.

Tropical plywood is in competition not only with softwood and temperate plywood but also other wood-based materials such as MDF and OSB. Japan is a prime example of substitution of tropical plywood by other materials. The reasons for substitution of plywood include price, properties and promotional activities by suppliers of alternative materials.

5.3 Channels of distribution

Channels of distribution of tropical hardwoods can be considered in two forms: (1) channels of marketing (through which information flows and sales of products are made); and (2) channels of delivery (through which products flow). Many companies are members of the distribution channel in both its senses (as defined above), such as importers and timber and builders merchants, while others (e.g. some agents) are only members of the marketing channel as they never take ownership of the product. In the latter case, the product passes directly from the overseas producer to timber importers and merchants or sometimes directly to end users.

Research undertaken for this study showed that there is very little quantifiable information on the amount of tropical hardwood (in the form of logs, sawnwood, veneer or plywood) flowing along the various channels of delivery in European countries. However, from interviews carried out for this survey and other research, it is clear that the traditional importers and traders are still the main companies dealing with tropical exporters. The agents and importers contacted all emphasized the changing nature of the channels of distribution and the need to adapt to these changes.

A key trend within the timber industry is for supply chains to be shortened. Some importers are by-passing agents and buying directly from shippers and exporting countries while some manufacturers of finished products are also sourcing timber directly from exporting countries without trading through agents, importers or merchants. In response to this changing trade environment some agents are responding by trading directly with manufacturers and even end users, increasing processing, building up large stocks and increasingly relying on just-in-time deliveries. Direct trading with end users by the large agents and importers is at present fairly limited but those spoken to felt that it was an increasingly important part of their business and likely to become even more so in the future.

Some indication of the importance of direct trading between first-time buyers (frequently timber importers) and end users can be seen from a study on end users and supply channels in the United Kingdom (TRADA). In the case of sawn hardwood (temperate and tropical) 80 percent of the imported volume of 605 000 m3 in 1995 was sold directly by the agent, importer or importing manufacturing company to end users (e.g. joinery or furniture companies). Only 20 percent was sold to intermediary timber/builder merchants for ultimate resale to the end users. By contrast with sawn softwood, the share flowing through merchant intermediaries was almost 50 percent. This difference illustrates the more dispersed nature of softwood end users (i.e. many thousands of builders) who are best served by local outlets and the more specialist and smaller number of manufacturers using sawn hardwoods (e.g. furniture and joinery companies).

Consolidation of businesses into larger companies is another distinctive trend and is regarded by many as a necessary step if industries are to remain competitive in the future. Larger companies offer some economies of scale over smaller ones, e.g. reduced overheads, diversity of products, etc. Whilst consolidation of industries has occurred in some areas, the hardwood sector is regarded by some to be slow to change, many older (often family-owned) business simply ceasing to trade. For instance, in the United Kingdom the hardwood sector continues to be dominated by smaller companies and there have been few moves towards consolidation. In part this reflects relatively low profitability acting as a disincentive to external investors.

In the case of value-added products the channels of distribution, both marketing and delivery are changing. Whilst the development of e-commerce will undoubtedly become increasingly important, particularly to the channel of marketing and for finished value-added products, the delivery channel will also be influenced as goods cannot flow via the internet so distribution channels are required. The emergence of home delivery of goods could well add another level to the channel of delivery.

5.4 Promotion

Low profitability of the industry is one of the possible reasons why marketing in general and promotional efforts in particular are regarded as being poor. However, the industry is starting to realize that the large losses in market share in certain areas, e.g. windows, is due in part to the highly successful promotional campaigns undertaken by the substitute material manufacturers.

The timber industry in general, including the tropical hardwood industry, is starting to realize the importance of promotion of their product. Many realize that they have been slow in responding to the changing market and, without a tradition of having to promote its products, have been slow in adapting.

The American Hardwood Export Council (AHEC) is one organization that many people, interviewed during the course of this study, regard as being highly successful in promoting timber in Europe and which has increased the market share of American hardwoods considerably over the last few years. In many cases this has been at the expense of other timber species. The AHEC has also undoubtedly benefited from the change in fashion within Europe to lighter coloured timbers, which has favoured many of the species imported from America. The Malaysian Timber Council (MTC) has also undertaken promotional campaigns to promote Malaysian species. They commented that early attempts to introduce `lesser' known species by promoting them under umbrella names, for instance grouping species together under the title `red merantis', failed as end users became disappointed in the variability in properties.

A recent study by the Belgium Timber Importers Association was carried out to ascertain how people were influenced in their decision to choose different building materials. They found that approximately half had already made up their minds about what they were going to buy while the remaining proportion were influenced by building merchants and architects. This highlights two areas where promotional campaigns/literature should be concentrated - education of and information for (1) building merchants; and (2) architects. On the positive side the survey also indicated that the end users thought that wood had a very good `environmental image' compared to alternative materials - again this is something that the industry is just starting to promote more effectively.

The Belgium Timber Importers Association survey found that the major reason end users were reluctant to use wood was the perception that it was a very high maintenance material. This objection (to maintenance) was reported to represent the single most important argument to decide to purchase PVC joinery for new buildings. Solutions to this situation were suggested as, the development and promotion of high quality coatings for timber, "combined with guarantees of maintenance free sales-terms". In the United Kingdom the environmental pressure group, Greenpeace, mounted a campaign to look at the issues surrounding the use of PVC windows - not just the short-term cost but also looking at the long-term environmental, maintenance and disposal issues. They recommend the use of timber for windows, as it is repairable, adaptable and durable. TRADA in the United Kingdom, amongst others, have also been working for several years to improve the design and quality of timber windows, coatings and finishes and to encourage good working practices to promote the product.

The environmental perceptions that surround a product should be taken into account with promotional campaigns. A strong desire is emerging in some European countries to `go back to nature' which ultimately drives consumers to purchase responsibly produced natural products. While this is generally good news for timber products, and despite the efforts by the timber industry to inform the public, tropical timber remains generally perceived as the symbol for destruction of tropical rainforests. Certification of forest products may go some way to address this issue.

Views of people contacted during this study on the issue of certification of tropical timbers and its importance to the promotion of tropical products in the future differed. Generally, it was perceived that certification of tropical timbers was a minor issue - except in the United Kingdom. The United Kingdom was regarded by people both within and outside of the United Kingdom to be a special case for certification of products and for it to be a more important issue, in certain markets, than in other countries. The most common reason for this was not the greater environmental consciousness of the buying public (although environmentalist campaigns have been highly successful) but the demand being generated at corporate level with the introduction of `green' timber buying polices by large DIY outlets for promotional reasons. It should be noted however that the appeal of product based certification schemes (such as FSC) is considerably less outside the retail sector - notably in the construction sector. In the construction sector price and availability remain the overwhelmingly dominant factors in determining the buying decisions of this sector.

A consumer survey (Pajari et al., 1999) of people's willingness to pay more for a product made from wood produced from a sustainable forest management system, (SFM-wood), i.e. certified timber, was conducted in 1998. The survey found that 43 percent of people in the main European markets (defined as Germany, France, Italy and the United Kingdom) were not willing to pay more for SFM-wood while 57 percent stated that they were. This survey found that the willingness to pay more varies with country, Germany (66 percent), France (51 percent), Italy (58 percent) and the United Kingdom (42 percent). Willingness to pay was also found to be dependent on age group (those over 60 being rather unwilling to pay more) and social class, but no difference was found between the responses of men and women.

Feed back during fieldwork for this study indicated that targeting architects in promotional campaigns was where current and future promotional efforts would be concentrated by a number of different companies and federations. Increasing awareness amongst this group is seen as a prime way of increasing demand for, not only tropical timbers, but also timber products in general. A campaign of this nature is currently under way in the United Kingdom.

There is a widespread view in the European timber industry that the timber industry in general has been very poor at promoting its products effectively. Market knowledge is lacking but the importance of it is now starting to be appreciated in some areas, however, many companies believe that they are too small to be able to afford to collect such information. Companies are also concerned that if they spend money on promoting a new species or generic product (such as flooring) for instance, they will be unable to recover their costs before other companies start trading in that species and benefit from their publicity. Many therefore feel that it should be the responsibility of the exporting countries or regions to promote different species, the success of the American Hardwood Export Council (AHEC) is quoted by many as a good example of this. Tropical producer countries such as Malaysia, Indonesia and Ghana have also established promotional campaigns but many other producer countries are thought to lack the resources to follow their example.

Some companies in Europe have favoured promotion of the image of their company rather than a particular species that they are selling. In doing so, they try to concentrate on the quality and service that they offer and so develop their own trade mark which distinguishes them from their competitors, and ultimately the products which they sell (which may be the same or very similar).

5.5 Price

Price is a key factor influencing the purchasing of tropical timber products. However, as many studies of industrial purchasing have shown, price is seldom the sole buying criterion and in most situations is one of several considerations. This view was supported by companies contacted for this study. A recent ITTO survey compared the relative importance of price as a factor in the purchasing of tropical timber products and summary results are shown in Table 5.2.

Table 5.2: Relative importance of factors influencing
consumption of tropical timber products









A lot








A little




Not at all








The results indicate price has a major influence on buying decisions but it is seldom the sole criterion. Other factors which are of particular importance are the availability of the required product in the specifications required and thirdly, the supply of suitable alternative products.

Price clearly has a major influence on buying decisions but has to be seen alongside the availability of products with the right specifications and the supply of suitable substitutes.

In Europe, as in other Western economies, the price of tropical timber products is ultimately determined by the forces of supply and demand. However, the process of price formation is complex. On the supply side, exporters' European prices are influenced by their costs of production and ex-mill price, any export taxes imposed by their governments, freight and insurance costs, import tariffs levied by the European Union, distributors' margins, discount structures and exchange rates. The exporters supply price to Europe will also be influenced by the state of the market and prices in other export markets, e.g. in Asia, Southeast Asia, Japan and North America.

On the demand side, the buyer's willingness to pay is influenced by the strength of demand for his end products; the prices of substitutes, i.e. other species (tropical and temperate), other wood-based products and non-wood based materials; the costs of conversion to different materials.

Published prices can only give broad indications of trends as most are either compiled from trade statistics which usually aggregate groups of products (e.g. different species, grades and other product specifications) or are based on regularly published guide prices which may again aggregate or represent some broad average price of a group of suppliers.

Some comments are made below on the relationship of prices to the substitution process and the criticisms made by tropical timber buyers about exporters pricing policies. Before this it is useful to review general trends in prices of tropical sawnwood and plywood.

Figure 5.1 shows ten-year trends in the export price of tropical sawnwood from the major exporters to Europe: Malaysia, Indonesia, Cameroon, Côte d'Ivoire and Brazil.


Figure 5.1:Tropical sawnwood export prices from leading exporters, 1990-1999

It is emphasized these price trends are for all sawn species and specifications from each country sold to world markets. The figures therefore ignore the considerable price differences between species such as African mahogany on the one hand and obeche on the other. Local currencies have been converted to US dollars at prevailing market rates.

The following points are highlighted:

Figure 5.2 illustrates the trend in tropical plywood prices from Indonesia, Malaysia and Brazil. Brazil's exports are of tropical hardwoods and softwoods and the trend line is an average covering both.

Figure 5.2: Tropical plywood export prices from leading exporters, 1990-1999

Here there has been a more distinctive downturn in prices since 1997 compared with sawnwood and the influence of the Asian crisis in 1998/99 is clearly seen. Plywood prices have been squeezed more than sawnwood prices because:

The collapse of plywood prices has caused some contraction of the industry in Southeast Asia.
Veneer price trends are shown in Figure 5.3 for Ghana, Côte d'Ivoire and Cameroon, the main exporters to Europe.


Figure 5.3: Tropical veneer export prices from leading African exporters, 1990-1999

Here also real prices in dollar terms have fallen since the mid-1990s. However, these trends are strongly influenced by exporters' currency movements against the US dollar which over the last few years has strengthened against virtually all currencies. This in turn has depressed prices in dollar terms.

The sensitivity of demand to price changes is measured by elasticity. Research carried out for European Timber Trends and Prospects V calculated price elasticities for the main categories of forest products in selected European countries. Table 5.3 presents selected figures from this research related to import price elasticity.

Table 5.3: Import price elasticity for selected European countries for sawn hardwoods, sawn softwoods and plywood


Sawn hardwood (1)

Sawn softwood


















United Kingdom (tropical)




(1) Tropical and temperate sawnwood

The following conclusions can be drawn from the data:

It is emphasized that these figures relate to all supplies of these products and do not represent the price elasticity facing an individual exporter.

Of critical concern to an individual supplier is the role of price in the materials' purchasing decisions of tropical timber users. As mentioned above, price will almost never be the only criterion but its significance varies according to the sort of buying decision being made. Table 5.4 presents a generalized picture of the importance of price in different types of buying decisions involving the purchase of tropical sawnwood. The table suggests the relevant time span for the different types of buying situation, indicates the likely level of the price elasticity of substitution and comments on some of the factors influencing these types of substitution. The general nature of this model is emphasized and there will be practical examples of substitution which do not fit these scenarios.

Table 5.4: Substitution scenarios for tropical sawnwood

Types of substitution for an established tropical species

Time horizon

Short-term price elasticity of substitution (1)

Other non-price determinants and considerations

1) Alternative supplier of same species



Delivery, quality consistency, confidence in supplier

2) Alternative established tropical species



As above plus end user acceptance. Confidence in long term availability

3) Temperate hardwood species



As above plus consumer acceptance. Promotion and fashion are important drivers

4) Lesser hardwood species



As above plus substantial investment by distributors in stockholding, increased risks

5) Composite wood product e.g. MDF



As above plus major implications for product design, production planning and capital investment. Substitution unlikely to be reversed

6) Added value wood component, e.g. furniture component

Year +


As above. Requires high level of confidence in security of component supply and quality

7) Non-wood material, e.g. PVC

Year +


As above. Has major marketing implications. Can mean permanent loss of market for wood products

(1) % change in proportion of tropical sawnwood used per item

% change in price of tropical sawnwood relative to substitute material

General points to be made are as follows:

This generalized analysis overlooks price volatility. From the interviews carried out for this study it is clear that many distributors and end users believe that tropical timber prices are more volatile than most substitute materials and that this undermines the competitive position of tropical timber products. This is a particularly difficult aspect of pricing for suppliers to control as CIF prices in Europe are affected by freight costs and currency movements as well as world market price fluctuations.

5.6 Conclusions

In summary, all four elements of the marketing mix are important in developing and maintaining European markets for tropical sawnwood, plywood and veneer. The four main requirements of tropical timber users are familiar:

Successful substitution of tropical timber by alternative materials has often been driven by the relative weaknesses of tropical timber products in these four respects.

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