In this piece we will dive into the home and garden industry, an industry which has received a significant tailwind in recent years. The COVID-19 pandemic triggered a cocooning trend, which created tremendous momentum for the home and garden industry. Some players experienced growth rates of >100% in 2020 as people allocated a greater share of their income towards home and garden equipment (rheingold institut, March 2021). Retailers also benefitted from cross-selling opportunities as customers were lured in with home office equipment. Purchases of residential hot tubs, saunas and garden sheds were made as a substitute for missed vacations, driving sales in the more capital-intensive product groups as well. A higher willingness to spend on home and garden furniture is expected to prevail after the pandemic, although equilibrium is expected to be below the spike seen in 2020 (industry expert interview).

The market’s structure shows a diverse picture, with a lower degree of consolidation in the furniture and outdoor retail sector than in the remaining segments. In the specialised area of hot tubs and saunas, the market is consolidated due to the relatively small end market. The majority of home and garden products are designed and assembled domestically to reduce distribution routes and logistics costs of these bulky products. In terms of the manufacturing function, players differ, with some engaging in in-house production while others outsource. Location-wise, manufacturing also varies from local manufacturing, near-shore (Europe) to off-shore (Asia). With internationally established brands, export rates of ~50-80% are the norm, with distribution mainly focusing on the European market.

Strategic acquisitions are few due to a rather consolidated market and limited cost synergies due to product-specific manufacturing requirements. However, high growth rates across verticals with momentum from the pandemic and further e-commerce catch-up potential has generated high investor interest, with >50% of identified players being PE-backed.

ESG considerations mainly revolve around the resource-intensive manufacturing process and general criticism around ‘fast furniture’. Players active in the industry engage in sustainability programmes and collaborate with agencies to offset their ecological footprints. Social issues take the form of safety and health concerns due to hazardous chemicals involved in the manufacturing process.