Commercial and industrial lighting has thrived over the past ten years as the booming construction market created plenty of business to keep the whole supply chain hopping. Competition among suppliers has remained vigorous all the while, but as the economy slows down, that competition is getting more intense, particularly among the largest of the commercial and industrial (C/I) fixture manufacturers.

Sales of C/I lighting fixtures through wholesalers have more than doubled since Electrical Wholesaling did an article titled “Lighting Giants” in April 1992, from approximately $3 billion to $6.4 billion in 2000. Of this figure, four companies account for the lion's share.

Lithonia Lighting, Conyers, Ga.; Cooper Lighting, Elk Grove Village, Ill.; Genlyte Thomas Group, Louisville, Ky.; and Lighting Corp. of America/U.S. Industries, Iselin, N.J., dominate the commercial/industrial lighting market. Built over the past couple of decades into broad packages able to supply virtually all the lighting fixtures on a commercial construction job without resorting to other sources, the majors have enormous leverage, and their expectations about the changes ahead shape the future for everyone involved.

Executives from the four majors expect further consolidation over the next few years, along with continued expansion into new geographic and end-use markets, a focus on operating efficiency, the reduction of excess production capacity and development of new product categories based on new technologies.

The wild card in the back of all their minds right now is California. Recent power problems promise to raise awareness of energy conservation and demand for high-efficiency electrical products, even while they threaten to slow down the construction economy of the busy Golden State. It hasn't been lost on lighting manufacturers that much of the problem could have been avoided if more builders and specifiers there had paid attention to the benefits of energy-efficient lighting years ago.

“We're stupid in this country, in that this California energy problem pretty quickly could be solved if the State of California would just go back and say, ‘If you have any (fluorescent) lighting fixtures installed before 1985, you must retrofit all those with new energy-efficient T-8 and electronic ballasts,’” suggests Larry Powers, president and chief executive of Genlyte Thomas Group. “Then if they would just legislate basically doing away with all the incandescent lighting fixtures for any kind of retail spaces or commercial spaces, they could solve their energy problem almost overnight.”

Even without the state legislating new demand, power problems in California have the glimmer of opportunity for makers of lighting fixtures. If the problems expand this summer into neighboring western states and perhaps even the U.S. economy overall, as some analysts have predicted, it could give a huge boost to demand for energy-efficient technologies that have lagged behind expectations for many years.

With or without the California Effect, the ongoing development of more efficient light sources such as T-8 and T-5 fluorescents and HIDs will continue to drive fixture design. These technologies now account for a dominant portion of new commercial lighting specifications and their influence promises to grow stronger.

“You've got to look at the real energy-efficient sources. The compact fluorescents and what they have brought to bear over the past 10 years or better make up a big part of our lighting palette that we draw from,” says Jeff Bucar, vice president of U.S. sales for Cooper Lighting. “We're also very interested in smaller-wattage HID sources. We see them becoming more popular as time goes by.”

Development of newer, more exotic technologies such as fiber-optic lighting and white LEDs have been making headlines, but their usefulness in mainstream commercial lighting is still some time in the distance, says John Morgan, executive vice president of the Lithonia Lighting Group and president of Holophane.

Morgan believes the most significant advances in fixture design over the next few years will come not from new light sources but from new materials. “I think there's significant design opportunities that exist in the area of materials such as steel and finishes, aluminum substrate,” he says. He believes advances will be made in the reflective and light-controlling properties of a lot of materials.

Research and development is an important part of the plan for major fixture makers looking to expand into new product markets. Possibly more important is market entry by way of acquiring companies already established in desired niches.

LITHONIA LIGHTING — National Service Industries Inc., Conyers, Ga.

2000 sales — $1.5 billion
Antique Street Lamps — decorative outdoor lighting
Avante — recessed direct/indirect fluorescent lighting
Gateway — harsh-environment vandal-resistant lighting
Gotham — architectural downlighting
Holophane — outdoor and industrial lighting
Hydrel — architectural landscape lighting
Lithonia — fluorescent lighting
Indura — industrial emergency lighting
Peerless — architectural linear fluorescents
Synergy — lighting control systems
Quick Flex — wiring systems

COOPER LIGHTING — Cooper Industries Inc., Elk Grove Village, Ill.

2000 sales — $1.2 billion estimated
Halo — recessed, track and surface lighting
Portfolio — high-performance, specification-grade architectural downlighting
Metalux — fluorescent lighting
Neo-Ray — architectural lighting
Corelite — fluorescent lighting
Lumark — indoor and outdoor HID lighting
McGraw-Edison — HID lighting
Sure-Lites — emergency and exit lighting
Fail-Safe — high-abuse fixtures, control systems
Iris — architectural, residential and commercial lighting
AtLite — emergency, exit, fluorescent and downlighting
Lumiere — landscape and area/accent lighting
USL — sports lighting
MWS — modular wiring for fluorescent, incandescent and HID lighting

The direction of the construction economy will have a strong influence on the pace of consolidation, says Morgan. “Consolidation probably has not occurred at the rate that some expected (10 years ago),” says Morgan. “However, I think that one dynamic at work over the last 10 years has been that the construction economy has been tremendous; therefore the economy has been able to support a lot of manufacturers. As the economy cycles and construction needs and available square footage gets lower, the economy will be tougher, and consolidation will occur again.”

GENLYTE THOMAS GROUP LLC — jointly owned by Genlyte and Thomas Industries, Louisville, Ky.

2000 sales — $1 billion
Bronzelite — specification-grade landscape and underwater lighting
Capri Lighting — downlighting and track lighting
Chloride Systems — emergency lighting and exit signs
Crescent — fluorescent lighting
Day-Brite — commercial and industrial HID and fluorescent lighting
EMCO Lighting — area luminaires and poles
ExceLine — indoor and outdoor HID lighting
Gardco — site luminaires for parking, garage, roadway and path lighting
Hadco — specification-grade exterior architectural lighting
Horizon — lighting fixtures and reflectors for retrofit
Ledalite — linear fluorescent lighting, lighting management systems and transportation lighting and communication systems
Lightolier — downlighting, track, decorative and fluorescent lighting
Lite-Energy — decorative architectural interior and exterior lighting
Lightguard — emergency lighting, exit signs and central systems
Lumec — specification-grade decorative street and area lighting
Matrix Control Systems — microprocessor controls for interior lighting systems
McPhilben — exit and other electrical signage
Omega — architectural grade specification downlighting
Stonco — indoor and outdoor HID lighting
Translite — open-conductor low-voltage lighting
Thomas Lighting Residential — residential lighting
Wide-Lite — specification-grade HID lighting and controls
Zed — decorative outdoor urban lighting

LIGHTING CORP. OF AMERICA — U.S. Industries Inc., Iselin, N.J.

2000 sales — $813 million
Architectural Area Lighting — specification-grade outdoor lighting
Alera Lighting — architectural-grade indoor direct and indirect lighting systems
Columbia Lighting — commercial and industrial fluorescent lighting
Dual-Lite — exit signs, emergency lighting and emergency power systems
Kim Lighting — outdoor lighting
Moldcast — outdoor lighting
Prescolite — downlights, track lighting, surface products, life safety products and lighting controls
Progress Lighting — residential and commercial lighting
Siteco — indoor and outdoor lighting
Spaulding Lighting — commercial outdoor lighting

Strategically, the acquisitions often are driven by a desire to expand into a new market, either to take advantage of an opportunity or to keep a package breadth equal to competitors'. Linear fluorescent fixtures, the fastest growing segment in fluorescents for the commercial market, were the target of a flurry of activity in the late 1990s.

“There was almost sort of an stampede when Lithonia bought Peerless” (in 1998), says Powers of Genlyte Thomas. “We then acquired Ledalite, and then Cooper acquired Neo-Ray and Corelite. One of the big guys gets in and the other big guys don't want him to dominate, so everybody scrambled for that.”

What market will be the target of the next round of acquisitions is unclear. Morgan of Lithonia says the most likely candidates are markets that remain heavily diversified, particularly those built on concepts that were new within the past 10 to 15 years and have really caught traction in the last handful of years. “My personal speculation is that it would fall into a handful of categories, such as architectural indoor products, architectural outdoor products. Those are two areas where the market is diversified with a lot of niche manufacturers.”

Although the list of small independents is not as long as it was in the early 1990s, there still are many, as well as some substantial companies in the middle of the market, such as Hubbell Lighting, Christianburg, Va.; Juno Lighting, Des Plaines, Ill.; and GE Lighting Systems, Hendersonville, N.C.

“I think there'll always be a group of upstart companies looking at niche markets that eventually develop into sizable markets that attract the big four to them,” says Bucar of Cooper Lighting. “Consolidation is happening, probably more than in the past, but I don't think it's at the expense of the small startup niche companies. I think they're still bubbling up to the top.”

Behind the scenes, the fixture manufacturers are tweaking their operations to prepare for further competition in an already low-margin business. All four companies have mentioned steps they're taking to improve internal efficiencies.

Consolidation is a major priority for Lighting Corp., says Jim O'Leary, who is executive vice president of U.S. Industries and has been tapped to become chairman of the lighting group once the company completes a planned spin-off to shareholders. In March O'Leary told analysts at a housing conference hosted by Credit Suisse First Boston, an investment banking firm, that Lighting Corp. will consolidate two plants and shift to expanded facilities in the Maquiladora border region of Mexico.

“Taking capacity out is first and foremost on the Lighting to-do list,” O'Leary says. “Lighting is an inherently lower-margin business, and where U.S.I. has been woefully behind the curve is in the move to offshore manufacturing. What we did two years ago at Progress, which stops this year and starts to show results, was expand the Maquiladora plant. We were manufacturing in South Carolina, and that's not the way to make money in the lighting business.”

The companies also are continuing to explore efficiencies that can be gained on the market channel side with communication technologies based on the Internet. The recent shakeout in business-to-business electronic commerce may have cooled some of the furor and hype surrounding the potential of Internet commerce to solve everybody's problems, but it's also put real benefits to be gained in a more realistic light.

“The B2B side of the Internet has been good in that it's helped all of us dramatically improve efficiencies and communicate quicker and more accurately,” says Powers. “Our industry certainly is lagging other industries in using electronic commerce, but we're getting better. The industry hasn't moved that quickly because it hasn't been forced to, and it's a lot of money and it's hard to know what to do. We spent a lot of money on some false starts. But sometimes I think the people who have drug their feet a little bit are going to be the recipients of the lessons from a lot of us making mistakes.”

The past years of the Internet boom have taught companies a lot about what works and what doesn't in an electronic-commerce environment. It may have huge potential to simplify the education and transaction process, but Bucar of Cooper Lighting says some things still require a personal touch.

“The specifying public is so demanding of what they're looking at, it's still back to the old methodology of, ‘I'd like to see a sample, I'd like to table-top yours against somebody elses, I'd like to do a comparison and really see what your product looks like,’” Bucar says. “When it comes right down to it, the architect, or the lighting designer or the consulting engineer — they're going to want to see a sample. They're going to want to have somebody sit there and show them the benefits of the product.”

What has become clear is that communications technology is still an important investment for distributors, and manufacturers are hoping distributors won't back off because of the recent downturn in the technology sector of the economy.

“I know it's gone slower than (distributors) would like, but electronic commerce is the wave of the future. Even though a lot of the Internet companies have failed and so forth, I hope they don't look at it like, ‘Well, we don't have to do anything,’” Powers says. “They're going to need to be there, and if they don't update their systems and spend a little money and do the things they need to do in the long run, they'd better be prepared to sell out or do something else because they won't be around. They've got to keep up with technology. Electronic commerce is not a cure-all, but it's just one more thing that can help us do a better job.”

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