2024 Tool Industry Research Report

Tool industry: The industry growth rate is stable, and the global market size will be US$103 billion in 2022

There are many types of tools in the tool industry, which can be divided into three categories: hand tools, power tools, and outdoor power tools (OPE) according to driving methods and application situations. The tool industry is mainly used in home maintenance, construction engineering, vehicle repair and maintenance, manufacturing and processing, landscaping and gardening, among other fields. Among them, the home construction and related repair and maintenance industry is the most important and the highest proportion of application channels. Taking Stanley Black & Decker, the global leader in the tool industry, as an example, its revenue in 2022 is divided into housing construction, outdoor and industrial related accounting for 66%, 17% and 17% of revenue respectively.

The tool industry has a long history, and the scale of the industry has continued to rise with population growth in recent centuries. Thanks to the strong demand for products and short replacement cycles, the industry's growth rate is relatively stable. According to Frost & Sullivan statistics, the global tool industry market will grow steadily from 2018 to 2022, with the market size increasing from US$82 billion to US$103 billion, with a CAGR=5.9%.

Industry structure: demand is concentrated in North America, Europe, and Asia-Pacific; industry echelons are obvious and share differences are large

Consumer side: Global tool industry demand is mainly concentrated in North America, Europe and the Asia-Pacific region. North American and European residents are the main consumer groups in the high-end tool industry. In 2020, tool demand in North America accounted for 29%, Europe accounted for 25.8%, and the Asia-Pacific region accounted for 38.6%.

On the production side, the tool industry has obvious echelons with large differences in share. In 2021, the first echelon is Stanley Black & Decker, Chuangke Industrial, and Bosch, accounting for approximately 23.30%, 19.70%, and 10% respectively. The remaining companies do not account for more than 10%. %, of which Superstar Technology accounted for 2.6%. The overall export areas of China's products are mainly the Belt and Road Initiative, the United States and the 28 EU countries. The export share of the Belt and Road region accounts for the highest 28%. Among exported products, handicrafts and storage accounted for the highest proportion, accounting for 26%; followed by professional power tools, accounting for 22%.

Industry trends: electrification, cordless, OPE commercialization, online channels to supplement industry sales

OPE's main customers in the commercial field are landscaping and gardening companies. In 2023, the lithium battery replacement rate in the North American commercial field will be less than 5%. Compared with household products, commercial products emphasize all aspects of service capabilities and product systematization. On December 9, 2021, California issued a fuel ban and decided to ban the sale of new fuel-powered leaf blowers and lawn mowers from 2024. The development space of lithium battery OPE will further expand.

Hand tools: Downstream demand drives the industry's sustained and steady growth, with low market concentration and fierce competition.

Affected by the automobile industry, infrastructure expansion and building renovation, the downstream demand of the hand tool industry is rising. At the same time, hand tool manufacturers focus on developing new products with greater durability, higher work efficiency, and more segmented types, driving overall market demand growth. According to FMI, the global hand tool market is expected to be US$15.9 billion in 2023 and will reach US$27.9 billion in 2033, of which 35% is concentrated in the Asia-Pacific region.

The hand tool industry has low market concentration, high industry segmentation, and fierce market competition. Medium and large hand tool manufacturers have achieved higher market share by expanding tool categories and developing sales channels, while small manufacturers have taken root in specific categories to compete. In 2021, the global hand tool industry CR3=32.3%, and the market is relatively fragmented.

External influencing factors: related to macroeconomic prosperity, affected by real estate sales + channel inventory

Meso-dimension 1: New house renovation and old house repair are expected to become new growth points

The home building repair and maintenance industry is the main downstream channel of the tool industry, and the prosperity of the industry is greatly affected by real estate sales. From 2002 to 2023, the growth trend of new home sales and existing home sales in the United States was basically consistent. It was at a low point from 2008 to 2010, slowly recovered from 2010 to 2019, and the fluctuations intensified from 2020 to 2022, showing an overall downward trend. Since 2023, sales of new homes have picked up, while sales of existing homes are still not optimistic. Sales of new homes are expected to improve.

In terms of housing inventory, the number of newly built homes for sale has remained relatively stable since 2023. The sales inventory of existing homes has decreased by approximately 3 million units from 2008 to 2023. There is insufficient housing available for purchase, affecting existing home transactions. At the same time, the 30-year mortgage fixed interest rate in the United States exceeded 7%, reaching a historical high in 20 years, suppressing the demand for home replacement. According to Home Depot, nearly 90% of households with mortgages currently hold fixed-rate mortgages of less than 5%. Residents’ motivation to sell their existing homes and take on higher-rate mortgages is increasingly weakening, and existing home inventory may remain low. level.

Based on the above factors, we believe that in the future, the downstream of house maintenance in the tool industry may focus on two types of needs: new house decoration and old house maintenance. On the one hand, the rebound in new home sales will help increase the demand for renovation of new homes; on the other hand, the average age of existing homes exceeds 40 years, and the extension of living time in old homes is expected to further increase residents' investment in repairing old homes.

Meso-dimension 2: Channel dealers have good sales and improved inventory conditions. This round of inventory reduction may be coming to an end.

Channel dealers have a higher say in sales in the tool industry in North America, and corporate orders are directly affected by the channel dealer's inventory strategy. From 2010 to 2023, channel dealer inventory has gone through the following cycles: 1) Continuous and slow replenishment of inventory: Between 2010 and 2019, the inventory of major channel dealers has continued to grow; 2) Short-term passive destocking: In 2020, the global tool industry market raw material prices and supply chain Due to the turmoil and the blockade of professional maintenance dealers, the demand for tool industry products used for daily home maintenance has increased, and channel dealers have passively destocked; 3) Radical and proactive inventory replenishment: The lag in global tool manufacturing capacity in 2020 will be released in 2021, and the global tool industry market size Strong growth, tool shipments surge; 4) Radical and proactive inventory destocking: In 2022, tool consumer spending in Europe and the United States will shrink, channel vendors will accumulate inventory, and actively optimize inventory.

As of 23Q3, Home Depot's merchandise inventory was US$22.8 billion, a year-on-year decrease of US$2.9 billion, or 11%, and the inventory turnover rate was 4.3 times, which was the same as the same period in 2022. With the stabilization of commodity prices and the easing of deflation, sales of channel dealers are good and inventories have improved. This round of inventory reduction cycle may be coming to an end.

Macro dimension: related to macroeconomic prosperity, the possibility of an interest rate cut by the Federal Reserve increases

From 2002 to 2023, the growth trend of the consumption of tools, hardware and supplies in the United States is basically consistent with GDP. The downward cycle is short and generally outperforms GDP growth. Tool industry consumption is related to macroeconomic prosperity. In 2022, real consumer spending on tools and hardware in Europe and the United States, after deducting inflation factors, fell by 11.7%, the worst year-on-year decline in the past 30 years. In the future, tool consumption is expected to rebound due to the recovery of the real estate industry, manufacturing industry and economic growth.

The federal funds rate mainly affects instrument consumption indirectly by affecting inflation and mortgage interest rates. Between 2013 and 2023, higher federal funds rates generally lead to lower consumption in the tool industry. Starting in April 2022, the Federal Reserve will enter a new round of interest rate hike cycles, with the federal funds rate reaching a historical high in nearly 20 years. With inflation under control, we expect the Federal Reserve to begin cutting interest rates in 2024, economic growth may resume, and tool consumption is expected to improve.

Review the global leader: multi-brand strategy + omni-channel layout + mergers and acquisitions to expand SKUs +... = building a corporate moat

Stanley Black & Decker: leader in the U.S. tool industry, with tool & outdoor business accounting for over 80% of revenue

The U.S. is the leader in the tool industry, accounting for more than half of the market: The U.S. is Stanley Black & Decker’s main market, and its market share is increasing year by year, from 52% in 2016 to an expected 63% in 2023, accounting for 2023 Q3 operating revenue of tools & outdoor/industrial businesses respectively. Receive 71%/57%. The share of Europe and emerging markets shows a downward trend, from 23%/16% in 2016 to the expected 16%/12% in 2023 respectively; the market shares of Canada, Japan, Australia and other regions are low, and the expected market share in 2023 5%/2%/2% respectively.

Tools & Outdoors business accounts for over 80%: Stanley Black & Decker’s Tools & Outdoors business has certain seasonality and shows fluctuating growth. During the epidemic, revenue declined, but the business was highly resilient and recovered quickly. The cumulative revenue of tools & outdoor/industrial business from Q1-Q3 in 2023 will be US$10.212/1.832 billion respectively.

Stanley Black & Decker: Supply chain transformation reduces costs, cordless improvements improve quality

Inventory continues to decline, and gross profit improves significantly: Since 2022Q3, Stanley Black & Decker's inventory has continued to decline, with a total decrease of approximately US$900 million in the first three quarters of 2023. At the same time, Stanley Black & Decker carried out supply chain transformation through strategic procurement, factory mergers, product complexity reduction, production optimization and other methods to reduce transportation costs. Gross profit margin rebounded from 20% in 2022Q4 to 28% in 2023Q3, effectively resisting endogenous growth. negative impacts of the slowdown.

Streamline SKUs and develop and promote power tool solutions: Stanley Black & Decker actively seeks improvements in product structure. For existing products, as of 2023H1, Stanley Black & Decker has passed 70,000 SKU due diligence and completed more than 20,000 SKUs; at the same time, Stanley Black & Decker attaches great importance to the research and development of tool solutions, providing high energy density cordless power tool solutions and wide-range charging Technical solutions, comprehensive tool loss prevention and stop-loss solutions.

Chuangke Industrial: Targeting the European and American markets, ranking first in global power tool market share

Revenue is growing year by year, with Europe and the United States being the main markets: Between 2013 and 2022, Chuangke Industrial's operating revenue increased from US$4.300 billion to US$13.254 billion, with a CAGR=13.32%, mainly contributed by the European and American markets, accounting for 91.86% of total revenue in 2023H1. At the same time, TTI is actively expanding into markets outside of Europe and the United States. In 2022, Canada, Australia, Mexico, and New Zealand all outperformed the market, and it has made strong progress in the Asian market.

Global leader in the power tool industry: Chuangke Industrial's power tool business is developing rapidly, and its revenue share is increasing year by year. From 2013 to 2022, the power tool business revenue increased from US$3.144 billion to US$12.329 billion, with a CAGR=16.40%. The revenue share will increase from 73.12% to 93.02% in 2022. In 2020, the global power tool market share ranked first at 23.71%.

Grebo: Focusing on overseas markets, a global leader in new energy garden machinery

Revenue is increasing year by year, with North America as the main market: from 2018 to 2022, Grebo's operating income increased from 3.112 billion to 5.211 billion yuan, CAGR=13.76%, most of which was contributed by overseas markets, with CAGR=13.82% from 2018 to 2022 . From 2018 to 2022, overseas market revenue accounted for more than 98%, with the North American market being the largest market, accounting for 79.33% of revenue in 2021.

Lay out new energy garden machinery to achieve a high market share: The company is deeply involved in the production of garden machinery, and the proportion of new energy garden machinery has steadily increased, reaching 73.04% in 2023H1. Relying on domestic and foreign R&D centers and global intelligent manufacturing bases, the company maintains a high industry position. From July 2019 to June 2020, the company's products' North American market shares were: 17.5% for push lawn mowers, 10.6% for lawn mowers, Hair dryers 9.8%, pruners 6.7%, chain saws 13.4%.