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close this bookBASIN - News No. 03 - January 1992 - Building Advisory Service (BASIN-GTZ-SKAT, 1992, 34 p.)
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FCR/MCR Tile production as a business

By Jill Wells

(FCR = Fibre Concrete Roofing, MCR = Micro Concrete Roofing, GCI= Galvanized Corrugated Iron)

Introduction:

As readers from Basin News are aware, significant progress has been made in recent years in transferring FCR/MCR tile making technology to developing countries. Good quality tiles are now being made in countries as far apart as Nepal, Kenya and Peru. But making the tiles is only part of the problem. If tile-making is to succeed as a business, the tiles have also to be sold. During the fourth FAS seminar in December 1988 it became apparent that a number of small businesses set up to produce FCR tiles, in various parts of the world, being forced out of business because of difficulty in selling the product. Yet in some other countries there wasn't a problem -the tiles seemed to be 'selling themselves'. Clearly it was important to know why ? In order to find out more about the factors furthering or hampering the sale of FCR tiles on the commercial market, SKAT initiated a 'questionnaire survey' in the spring of 1989. Some conclusions from this survey were published in the February 1990 edition of FCR News. But in view of the limited coverage (responses were received from only five tile producers selling tiles on the open market) these conclusions could only be tentative. A further survey was clearly needed Hence, in the summer of 1990, questionnaires were sent to a further 20 small businesses, producing FCR tiles for the commercial market in seven different countries (Nepal, Kenya, Peru, Nicaragua, Dominican Republic, Honduras and Ghana). The experiences of these 20 producers in selling and marketing their tiles, and the lessons that emerge, are summarised below.

Customers buy FCR tiles because they are cheaper:

Despite their many other advantages, there is little doubt that the majority of customers buy FCR tiles because a FCR tile roof is cheeper then the alternatives they are considering. In most cases, this means cheaper than GCI (Galvanized Corrugated Iron) sheets. The survey revealed that the largest number of producers selling tiles on the open market are currently in Nepal, where the selling price of 8 mm tiles is slightly more than half that of GCI sheets. Although there are some cheaper alternative roofing materials available in some parts of the country, such as thatch, timber shingles and clay tiles, these are generally of poor quality and frequently have other disadvantages, so that they themselves are replaced by GCI sheets.

In Honduras, FCR tiles are around one half, and in Peru they are one third of the price of GCI, and much cheaper than all other quality alternatives. In both countries producers, at the moment, seem to have no difficulty selling tiles.

In Kenya, on the other hand, roofing with FCR tiles is more expensive than with GCI sheets and FCR tile producers have had great difficulty in breaking into the market for GCI sheets. The vast bulk of sales of FCR tiles to date in Kenya have been to customers who would have used other kinds of tile (or asbestos cement sheets), to whom FCR offers a cheaper alternative. The fact that this 'middle-income' market is strictly limited in size outside of Nairobi could account for the severe marketing problems experienced by some small tile producers in Kenya. Of the seven who were trained by ITDG in the 1980s, only three are still in business. It should be noted that Kenya is not alone in facing a situation where FCR tiles are more expensive than GCI sheets.

This was also found to be the case in Zimbabwe; as well as in Haiti, where some FCR tile producers were forced out of business because they could not break into the market. Also when making cost comparisons allowance must be made for the fact that GCI sheets will tolerate a substandard roof structure, whereas FCR tiles will not. Where timber is scarce or expensive, it may be common practice to place GCI sheets on a bamboo structure. In this situation FCR tiles, although appearing to be cheaper, may in reality be more expensive to the customer than GCI sheets.

Even if cheaper, FCR tiles still have to be SOLD:

A low price may be regarded as a minimum requirement for selling tiles. Where there are no alternative roofing materials available, it may be all that is needed. Such was the situation in Uganda in 1989 and in Nicaragua in 1985. But this situation rarely prevails for long. We know that the market suddenly declined in Nicaragua. (We do not yet know how many tile producers are still in business in Uganda). In more normal circumstances, it would seem that FCR tiles do not 'sell themselves'. Potential customers have to be informed and persuaded that the tiles are not only cheaper, but also better than the alternatives. A certain amount of effort is required on the part of producers in order to do this.

Producers respond differently to this challenge. It is interesting that even in Nepal, where the market situation is extremely favourable, some producers were still unable to sell their tiles. According to Tom Moncrieff (see the BASIN News No. 1), "those that found difficulty continue to do so, suggesting that they have poor marketing skills -lack of ability to sell, lack of commitment, lack of motivation etc.". In other countries also, varying degrees of success among producers are apparent, and could be accounted for by differing degrees of commitment and 'entrepreneurial skills'. In most countries, the usual means of launching FCR tiles onto the market is by persuading friends, relatives and neighbours to buy. Hence personal contacts are vital. This is clearly demonstrated by the success of the product in Nepal, where there is a close network of family ties. Also by the case of a producer in Honduras who is also a restaurant and bar owner; he attributes the rapid take-off of his business to the fact that he is in the 'privileged position of knowing many people'.

One important consequence of this strategy of selling through 'informal' marketing channels is that the location of the FCR workshop is vital factor in the success of the business. Ideally the workshop should tee situated in a prominent position and be located in an area with sufficient purchasing power to support the plant. Many producers also offer inducements to initial customers, such as a favourable price and/or free tile-laying service. This is especially valuable if the customer is the owner of a prestigious building (e.g. a bank, church or government office). In all countries, the construction of such 'demonstration' roofs is the single most important marketing strategy employed.

Other more formal methods of marketing, (such as advertising on bill-boards, radio and TV; demonstrating at national shows etc.) are of course feasible and may be appropriate in some situations. In Peru, for example, Mateco prepared a pamphlet advertising the tiles and then made direct contact with materials merchants, architects and builders who now display and sell the tiles on his behalf. However, the launch of any kind of large-scale advertising campaign (or other attempt to win large orders) needs very careful timing; it is important to ensure that an adequate supply of tiles will be available to meet any expansion in demand, otherwise potential customers may be frustrated.

Consumer Resistance to FCR Tiles:

Even the most determined marketing efforts will not succeed if there are fundamental reasons why customers are reluctant to buy FCR tiles. Hence, knowing why people do NOT buy FCR tiles is even more important than knowing why they do. One of the most common objections to the tiles is that they are too thin. They are certainly much thinner than conventional concrete tiles, and probably thinner than any other kind of roofing material except GCI sheets. To most people thickness equal strength. In Kenya, potential customers have been known to jump on the tiles to demonstrate their fragility. To try to overcome this problem producers in most countries now only make 8 mm tiles; although still thin, they are recognisably thicker than the 6 mm tile. Underlying this specific reservation on the part of potential customers is a very real fear as to how the product will perform -particularly its durability. This is an entirely reasonable reaction. The purchase of a roof represents a very substantial capital outlay. No rational person will buy any kind of roofing material unless he/ she is reasonably sure that it will provide a roof that doesn't leak and will last for a minimum number of years. GCI sheets have been around long enough to offer that assurance; but FCR tiles are a relatively new product. While demonstration roofs may help to show that the tiles will keep out the rain, durability will take many years to demonstrate. This is a very difficult hurdle to overcome. We of course know that FCR tile roofs will NOT be durable (indeed may not even keep out the rain) unless they are carefully made and well laid on a properly constructed roof. Serious producers will have confidence in their products and should therefore be willing to offer their customers some kind of guarantee. But as the construction of the roof is at least as important as the quality of the tiles, this is only really meaningful if producers offered a 'supply and fix' service. There is evidence that some producers in Ghana and Nepal are now beginning to do this. The provision of a complete roofing service (i.e. selling roofs instead of tiles) accompanied by a performance guarantee, is perhaps the best way of providing the customer with the assurance that he/she requires and deserves. (It is also an excellent way of diminishing the ever-present threat of low-quality producers spoiling the market).

A further criticism of FCR tiles is that they require sawn timber in the roof structure. In some parts of the world, this may simply not be available; or it may be available but extremely expensive. This seems to be the case in parts of Nepal, where some entrepreneurs cite the high cost of timber in the market place as a reason why people in their neighbourhood will not buy FCR tiles. It is also the situation in Bangladesh, where attempts are now being made to construct roof trusses out of bamboo. (The success of these experiments is as yet unclear).

Another problem that potential customers see in purchasing FCR tiles is the difficulty in transporting them. In many cases, this means an additional cost; in other cases maybe just an added inconvenience. Either way, the customer will make the comparison with GCI sheets which are so very easy to transport. Producers in Nepal have learned to help people with transportation by rickshaw. In African countries, where these don't exist, the problem may not be so easy to solve. It may well serve to restrict the growth of the market, both geographically and to the lower income groups.

A final constraint to the development of the market for FCR tiles seems, paradoxically, to be the absence of a guaranteed supply. Very few producers can afford to keep a stock of tiles, so customers can not buy them 'off the shelf'. Even when an order is placed, the limited capacity of individual producers may mean that it is many months before it can be filled. Direct evidence that this is a serious deterrent to potential customers comes from Ghana and Peru; in Kenya it seems to be a factor hindering the sale of tiles to small estate developers.

Some Implications for FCR tile production as a business:

The entrepreneurs in Nepal, Kenya, Ghana, Peru, Nicaragua, Honduras etc. who responded so willingly to the SKAT questionnaire are in a very real sense 'pioneers'. They are the first in what will, hopefully, one day be a long line of FCR tile producers throughout the world. But being first is never easy. They have the difficult job of introducing a completely new roofing material into what is traditionally a very conservative market. To build up customer confidence in FCR tiles can take a long time. Even when a market has been developed, demand may be expected to be inherently unstable, due to seasonal, economic or other factors. Small entrepreneurs with limited capital are more likely to be able to survive periods of low demand if they have another source of income. Nearly all of the producers surveyed do in fact have some such source -whether it be full-time employment, temporary employment in the off-season, or other lines of business (such as building contracting, gin brewing or hotel ownership). For these entrepreneurs, FCR tile production is essentially a part time occupation; because they have perceived it in this light, they have managed to survive. Although the producers themselves may survive by doing other work, fluctuations in demand also create cash-flow problems for the business. Consistent operation at less than full capacity (e.g. when the market is seasonal) will also seriously affect profitability, and hence the viability of FCR tiles production in the longer term. Evidence from some producers suggests that profits are currently negligible and lack of capital is hampering expansion. If this is so, then prices probably should be raised. But in practice producers may have little room to manoeuvre if they are not to price themselves out of the market. In this context, the availability of a supply of cheap but reliable equipment becomes critical. As does a source of low-interest finance.

Conclusions:

Attempts to disseminate FCR tile technology on a commercial basis are relatively recent. Nevertheless, it is important that we try to draw some lessons from the experience of the few 'pioneers' in this field. The following 'guidelines' are put forward for consideration:

1) The price of FCR tiles, vis-a-vis other roofing materials, is a crucial factor affecting sales

2) Allowance should be made in cost comparisons for the fact that GCI sheets are frequently placed on inferior roof structures

3) feasibility studies should also carefully consider the effect of less than full capacity operation on profitability and costs

4) Even if the price of an FCR tile roof is competitive, people will not buy FCR tiles unless they are reasonably sure they will perform as well as GCI sheets

5) The offer of a supply and fix service accompanied by a guarantee may prove to be the best way of ensuring the widescame acceptance of FCR tile roofing

6) It may take many years for a market for FCR tiles to develop even then, the demand for building materials is inherently unstable. Entrepreneurs should not therefore be encouraged to enter the FCR business on a full-time basis