Industry Forecasting

The industry I have decided to research is the Fire Apparatus industry. The product within that industry is the Compressed Air Foam System (CAFS), specifically those manufactured by the Odin Foam division of WS Darley. The Odin Foam division doesn’t currently utilize a formal forecasting system. According to Paul Darley, CEO and President of WS Darley (email, 2010), a lack of resources, a lack of local expertise, and an ever-fluctuating consumer base make it difficult to predict sales for this division.

Potential Market and Competition

The potential market for the products manufactured by Odin Foam is worldwide. In fact, they already have apparatus in various countries including the USA, Canada, Mexico, China, Brazil, Australia, South Africa, and the Middle East. This potential market is generally limited to government-sponsored agencies, but there is potential in the private sector as well. (Dave Erwert, personal interview, Jan. 2010)

For a potential market this large, there really isn’t much competition. In my research at the Fire Apparatus & Emergency Equipment website (2010), I was able to identify eight CAFS manufacturers in the United States. Although there may be others without a web presence, I was unable to locate any information, and they were not listed in the definitive guide.

Market Trends

According to Paul Darley, “The biggest trends to affect CAFS are wildland fires, federal grant dollars, use of Class A Foam (Leading indicator), environmental concerns and global climate changes” (email, 2010). Many of these trend issues are beyond the scope of this paper. However, Darley also states that they “watch the federal grant dollars very closely, particularly the Fire Act Grant,” so I have focused my efforts towards tracking federal grant monies awarded in the past five years.

According to the FEMA website, (2010), in 2004, almost $700 million was awarded through the AFG. Of that $700 million, nearly $200 million was spent on fire vehicle procurement. In 2005, the award amount had dropped to about $600 million with $160 million designated for vehicle procurement. By 2008, as the world was hit with the hardest recession in years, the award amount had dropped to about $500 million with vehicle spending at about $132 million. Information for the 2009 award year is not available currently. (FEMA, 2010)

According to Stephanie Frost, Office Manager at Odin Foam, apparatus sales trends tend to follow about eighteen months behind other national trends. (Personal interview, 2010) With this being the case, and considering recent declining award trends, it is likely that federal grant award amounts will continue to fall in 2010 and into 2011. Since apparatus sales are largely tied to federal grant monies, apparatus sales will also fall during this period. These fluctuations are all part of the natural economic curve, and the recession has been declared over, so federal grant awards for firefighters could begin to increase again as early as 2012.

Forecasts

Bearing in mind that “all forecasts are wrong” (Mullins & Walker, 2010, p. 151), the following observations offer my best estimations. Although federal grant money will likely decrease in the next couple of years, it’s unlikely to fall more than $150 million before things start to turn around. Vehicle procurement averaged at about 25% of the total award amount and 25% of $350 million is still about $88 million dollars. (FEMA, 2010)

Of course, not all fire apparatus is sold with CAFS units installed. They could be, and it’s quite possible they should be. According to Dominic Colletti, in the November 2009 issue of Firehouse Magazine, “One of the most promising technological advances to occur within the fire service over the last 25 years was the technology associated with Class A foam and compressed air foam systems (CAFS)” (Para. 1). Jim Juneau is his presentation Welcome to FDIC 2008, states that 50% of the US Apparatus Fleet is over 15 years old, 13% of which are more than 30 years old (p. 5). Updating and replacing outdated apparatus is essential to the future safety of firefighters everywhere, and Odin Foam should be at the forefront of this upcoming trend. (Juneau, 2008)

Conclusion

In 2008, vehicle acquisition accounted for $132 million. (FEMA, 2010) If ¼ of this could be attributed to CAFS sales, then $33 million would have been spent on CAFS units in 2009. Of that $33 million, Odin Foam’s projected sales as of October 2009 of $1.6 million (Paul Darley, email, 2010) attribute them a 4.8% share of the market. With a 12.5% share available in an industry of only eight manufacturers, Odin Foam is under-performing in their marketing and sales departments, and expertise in this area could be improved.

Marketing is going to play a huge role in the success of Odin Foam in the coming years, especially if they want to improve their current 4.8% market share and survive the lean years to come. They must improve their visibility with previously untapped markets, further develop their long-term relationships while initiating and nurturing new ones, and continue to offer the best product, at the best price, and with the best service.