After the OESP 61st Annual Trade Show & Convention in May, PHC News stopped by U.S. Boiler Company’s Lancaster, Pa., headquarters and factory for a tour led by Dan Cork, the company’s vice president of sales and marketing.
We took the opportunity to ask Cork a few questions about the boiler market, the latest products, and staffing developments at the company, including a new Engineering Center, and how the company is using its brand to help the contractor with his own brand.
“If he performs a successful installation in a neighborhood, chances are the neighbors will want to use him because he’s established himself as a solid brand,” Cork said. “We need to make sure our products are easy to install and start-up, so that he can get into the basement and get out with no callbacks. That’s how we use our brand to help enhance his brand.”
Q: What’s the “state” of the boiler market today in North America?
A: The North American boiler market is a mature, steady, market. The installed base of boilers is estimated to be some 10-12 million and the majority of the annual volume stems from replacement of that base.
On an annual basis, roughly two-thirds of the boilers sold in North America each year are cast-iron boilers; the other one-third is a combination of heating only condensing boilers and condensing combi boilers.
One change from the last few years is the stabilization and growth in sales of oil-fired equipment as consumers elect to stay with fuel oil rather than switch to natural gas. This is a reversal versus the last several years where high fuel oil prices drove a large number of consumers to switch to natural gas and in some cases propane.
I often get asked if cast-iron boilers are going away. Frankly, no – not any time soon. Both the oil-fired boiler segment and the market for gas/steam remain consistent year over year with oil showing nice growth currently.
Q: How is the market changing?
A: First, condensing boiler sales continue to slowly increase while cast-iron sales remain stable.
This is understandable given the potential savings a homeowner can realize with a properly installed and applied condensing boiler. Here at U.S. Boiler, we think condensing is an exciting technology not only for the combustion efficiencies it can provide but also for the processing power of the current generation of operating controls these boilers are equipped with. These controls can do so much more than just turn a boiler on and off safely. They can begin to unlock real savings by intelligently managing the complete heating system; zone management, variable speed pumping, smarter modulation, multiple boiler control to name a few advancements. Our expectation is that simple cloud connectivity and communications as part of the “Internet of Things” will migrate from the commercial markets to the residential markets over the next few years.
Secondly, while the efficiency improvements offered by condensing boilers are attractive, those products aren’t always the right solution for every house. As contractors gain more experience with the products, they are becoming more cognizant of when a cast-iron product is a more appropriate choice than a condensing boiler. I have talked to a number of contractors who are now moving back toward using cast iron in more homes, particularly as natural gas prices have fallen.
It’s about “real” energy savings – payback on investment, and comfort. There are reasons why the cast-iron boiler has an installed base in the millions – it’s the right product for many homes. A hydronically heated home specifically engineered for high water temperatures won’t necessarily allow a condensing boiler to provide maximum comfort or economic benefit.
Thirdly, while the North American cast-iron market is concentrated among a handful of manufacturers, there are significantly more choices available for condensing and combi products. Manufacturers from Asia, Eastern Europe, and Western Europe all are competing for a chunk of the North American condensing market. The plethora of choices has started to overload the distribution channel. As a result wholesalers are beginning to question the logic of carrying so many brands. They are reaching the point where inventorying multiple brands of cast-iron and condensing products is becoming less logical, particularly as their cost of carrying parts and inventory will increase if the Federal Reserve’s promised interest rate hike becomes realty later this year.
Additionally, their personnel just can’t keep up with the educational requirements necessary to be conversant about all the new products and their ever expanding feature sets. We believe there will be brand consolidation as distributors refocus their resources to a smaller selection of brands.
Frankly, given the breadth of our cast-iron line, and our ever increasing footprint in condensing, we expect to be part of that conversation every time.
Q: How is U.S. Boiler working to differentiate itself in this changing boiler market?
A: U.S. Boiler and the Burnham brand have long been leaders in the boiler industry. The last several years have seen some of the most rapid change in the industry in decades. Accordingly we have introduced more products in the last several years than ever in U.S. Boiler’s history.
That said, we pride ourselves on a couple of key factors that we believe provide real value to our customers; customer service; breadth of product line, and bringing new technology to market on our boilers. In my visits with distributors, a common compliment is the quality of our field sales organization and the customer service we provide to our distributor partners as well as the technical support we provide to our contractor customers. Yes, the phone is answered by a real person. We have some of the most knowledgeable technical support people in the industry committed to solving any product or installation issues a contractor may have.
In addition to “live” help, we recently, revamped our website to simplify access to the tons of product specifications and product support information available for our products. It has become the go-to access point for distributors and contractors to look up boiler information based on serial number, do heat loss calculations, calculate the BTU output of legacy floor standing cast-iron radiators and, of course, download the world famous Heating Helper, among other actions. We are constantly adding more content so our distributors and contractors can go online and find everything they need to make their experience with us the best it can be.
We also believe our broad line up of cast-iron boilers is an advantage few in the industry can match, and we aren’t done yet. We have significantly expanded our engineering investment in the last few years with an extensive slate of new products under development. As I mentioned, we believe in bringing easy-to-use technologies to market. The controls we use on our condensing boilers are powerful, but we’ve simplified the set-up and interface so that one touch on our industry-leading touch screen display results in multiple adjustments behind the scenes.
Several years ago, we launched several lines of boilers equipped with our proprietary IQ Control technology – these controls remain unique to the industry and started contractors down a path of using highly functional, integrated controls. Our ES2, Series 3, ESC, and MPO boilers equipped with the IQ Control platform offer a simple upgrade path for adding wireless outdoor reset technology, multiple aquastat options and various low-water cut-off solutions all in a powerful plug-and-play configuration that requires essentially no additional wiring.
I am particularly excited about a new piece of technology we just launched, the Smart Zone Panel for our Alpine and K2 condensing boilers. The zone panel plugs into the boiler control with a standard Ethernet cable. Once attached, the zone panel can be programmed from the touch screen on the boiler and allows contractors to assign a specific BTU amount to a certain zone. For example, a contractor can assign 20,000 BTUs to a small heating zone like an office, and when that zone calls, our condensing boiler will not go to high fire like all other condensing boilers. Rather, our proprietary algorithm will modulate the boiler’s firing rate to precisely match the needs of that zone’s demand. This patent-pending technology helps reduce short cycling by allowing the boiler to see longer run times and operate in a condensing mode more consistently. The Smart Zone panel can manage up to four zones in this fashion and can be connected to additional panels if more zones are required. I think this is a great example of how we are using technology to begin to take an approach to energy savings that is more systems focused than boiler/combustion centric.
Q: Are there particular products or, generally speaking, types of product lines that the company is focusing on currently?
A: Our current focus is on educating our customers on the recently upgraded K2 Boiler and its system accessories; a Combi Kit, a primary/secondary header kit, a wireless outdoor reset sensor and the Smart Zone panel. The K2, with efficiencies ranging from 93 to 95 percent AFUE, is a stainless steel, wall-mounted, condensing boiler ranging in size from 80,000 BTUs to 180,000 BTUs that we first released last fall. We designed the K2 with input from 25 different contractors – we wanted to build an extremely contractor friendly boiler. The K2 has easy side access to the boiler pump, a swinging door that gets the controls and wiring out of the way for work on the heat exchanger, a larger cabinet with room to work, and the same full functional touch screen found on our Alpine product. The primary/secondary kit for the K2 I mentioned is called FastPipe. It’s a custom-designed piping kit specifically engineered to work with the K2. It dramatically decreases installation time and is extremely easy to mount.
We are also excited about our new Combi Kit. It takes about 10 minutes to add to the bottom of a K2 and once installed, turns a heat-only K2 into a full featured condensing combi. The piping is done with unions for easy installation and if necessary, contractors can easily replace the flat plate heat exchanger on the domestic hot water side without taking the entire combi unit apart. In fact our wholesalers love the ability to stock just a kit rather than dual inventory both heat only and combi boiler products. And contractors have been impressed by how easily and quickly the kit is installed. It gives the ability to retrofit K2s in the future as a cost effective, space saving option to replacing a stand-alone tank-type water heater.
We feel the accessory items we have introduced simplify system installation as well as boiler installation. They allow contractors using our equipment to significantly reduce both their time on the job, and the potential for installation errors. While most of the systems pieces mentioned above are for our K2 boiler, the Smart Zone Panel also works with our highly successful Alpine boiler.
Q: Tell us about the typical contractor customer? What is changing for them and what is the U.S. Boiler doing to meet any new challenges
A: Contractors tell us they are under price and margin pressure due to the competition they face, and they need, more than ever, to get into the homeowner’ basement, perform an excellent installation as efficiently as possible, and then leave without receiving callbacks. So what are we doing? I spoke before about our excellent customer service and technical staff – we try to make it easy for them to get answers. We hold multiple training sessions in the field and here in Lancaster – we tailor sessions to what the contractor tells us they need to learn.
We are building products that are easy to install and startup. If troubleshooting is required, we have built-in advanced diagnostics that help quickly lead the contractor to the right solution. We are constantly revamping some of our literature to make it more reader friendly – installation and programming manuals for our zone panel and Combi Kit are recent examples. We have written step-by-step instructions along with lots of pictures to guide contractors through easy installations. These are a few of the things we are doing –we are asking ourselves how we can help ensure an easy installation with no callbacks – that’s the question we start with when designing products and changing/adding services.
Q: Dan, you also mentioned you did some work with a Market Research firm in Boston. Can you tell me what was learned from this and what’s been put into place as a result?
A: Two years ago, we worked with a group in Boston, called Applied Marketing Research, to determine what contractors value in products and services, what they need to be more successful, and why the make the decisions about buying boilers that they make. What we learned is enough for an all-day discussion, but here are a couple of key items:
We learned that the contractor is the brand. What does that mean? Well, the reputation he builds is everything – his brand is what he can sell to the next homeowner. If he performs a successful installation in a neighborhood, chances are the neighbors will want to use him because he’s established himself as a solid brand. We need to make sure our products are easy to install and start-up, so that he can get into the basement and get out with no callbacks. That’s how we use our brand to help enhance his brand.
We all know condensing boilers are growing in popularity, but contractors told us cast iron is far from dead. In fact, many contractors told us that they know condensing boilers are often misapplied and that they are taking great care to ensure the boiler they select for a homeowner is appropriate for the application – they are recommending cast iron if it best fits the application.
We have greatly expanded our online presence to facilitate their brand growth and to tout their successes. We welcome Facebook likes and posts – we think one of the best ways to build credibility with homeowners is to show them examples of successful installations.
We often have installation pictures and short stories on our Facebook page and we publish a story every month in our U.S. Boiler Report. We have a full-time social media person working to connect us better with our contractors and distributors so we can help build their businesses.
Q: What can you tell us about the new Engineering Center the company is in the process of completing?
A: Sure, later this fall, the U.S. Boiler engineering teams will be moving into a new 20,000-square-foot Engineering Center.
As I mentioned, we’ve greatly increased our engineering staff in the past three years and we have a multi-year road map of development projects in support of our commitment to significantly broaden our condensing boiler portfolio.
As you can tell from the relative market sizes we discussed earlier, cast-iron products still have a significant place in the North American market, and we don’t expect that to change in the short term. Subsequently, we are continuing to innovate and improve our cast-iron products. Stay tuned. Our investment in the lab and product development is all indicative of our focus on and commitment to the boiler industry in North America. U.S. Boiler is a leader in the boiler industry, and I believe that the products we are launching, the product development that is underway and the investments being made all demonstrate our willingness to maintaining our leadership role and leading from the front.