A Wholesaler’s Perspective – John Branstetter
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Hey readers, it’s Matt Meyers. I am here today with John Branstetter from Wildwood Trading Group. It’s a pleasure to speak with John about the issues in the industry and the market perspectives from wholesalers.
John has nearly four decades of experience and expertise in the Lumber and Building Materials Industry. He’s seen the evolution from phone, to fax, to email, to internet, and now Yesler. He proves that tech adoption and forward thinking are independent of age (no, he didn’t start trading lumber at 5 years old). He’s provided first-hand feedback, insights and perspective to us as we build Yesler and is one of the many reasons we continue to build a system that puts relationships and brands first. I think you’ll find this interview insightful.
So, John, here’s what we want to cover:
What market forces will continue to impact the industry?
What are key points of differentiation for you and your team?
How has technology changed the way you do business or go to market?
Let’s dive in!
John: Right now, it looks like the overall economy in the United States is a little rocky. Interest rates are up dramatically and single family home prices are way up as well.
For young people that are trying to get into their first house, I don’t know how in the world – if you’re a young couple, for example, and don’t have a whole lot of resources – how you buy a home for $400,000 or $500,000. I just don’t know how you do that.
And with the mortgage rates going from 3% to 6%, that effectively doubles your monthly mortgage payment. That just makes it difficult.
Therefore, we are seeing lots of multi-family activity going on. Apartment buildings and condos, for example. And I know a lot of investment companies have been building homes, rental type homes, so that helps a little bit with the single family numbers.
Yet, it still looks to me like single-family is going to be weak in 2023. I expect multi-family will be relatively strong, but we haven’t really built many houses for the last 20 years, yet the population has only grown. It just keeps getting bigger. And at some point, those kids have to move out of the family basement. If you’ve got more than one kid, they can’t live there as adults. At some point, they have to move out.
Overall, I think the lumber market is going to be very challenging – lumber prices will be low. It’s still about supply and demand. Lumber’s only worth what somebody will pay you for it. And if “Bob’s” got it cheaper than I am selling it for, then you’re going to buy it from Bob, not from me. It’s no more complicated than that.
Matt: How does this period of rockiness compare with previous tumultuous times?
John: It’s too early to tell, but having been through the seventies and eighties and the early 2000s, like 2008, we are prepared for anything. In 2008, we sold and shipped 84 million feet. Our sales average for the year was $236. So I tell folks, “You think it’s tough now, see what we did then.”
2022 we’ll produce somewhere between 250 and 300 million feet, and our sales average is going to be probably close to $900. This year, 2023, I’m guessing it’s going to be in the $500 neighborhood, and it’s hard for us to make money at that. So, somewhere along the line we have to ratchet back on production.
Matt: Do you think that the industry is better prepared to deal with these tumultuous times than in years past? Or is every rocky period totally unique to that moment in time?
John: I think they’re all unique, but you learn something every time.
I think as far as the sawmill goes, let’s say us for instance, we’ve been through this a few times. We have a pretty good idea how to survive it, and one of the ways we’ve done that is by investing a fair amount of our resources. We’ve had good years by buying timberland. The banks like to deal with you if you have that kind of asset. If you just have a sawmill, you don’t have much.
Matt: So, diversification is important.
John: Yes, I think you have to prepare for the downtimes. You can’t go out and buy yourself a new jet because you made a whole bunch of money one year.
Matt: How do you differentiate yourself in a market during prosperous times and during tumultuous times?
John: I’ve tried to get our team to differentiate themselves, personally, by approaching the market with humility and confidence and by trying to be a good business partner. Try to go for that win-win every time you can. That way, you try to build a relationship that carries you through the tough times. That’s on the personal side of things.
On the product side, we try to make a better stick of lumber than most. We attempt to. We expect to get paid for more of it than most. We try to diversify our customer base within reason. And we can’t be everything for everybody, but we do have a lot of diversification with our species mix. We have seven different species. We make a lot of MSR lumber, which not a lot of people make. So, our products are a little bit different than mainstream. Our tallies are a little more different than mainstream with lots of long length, 18 and 20 foot primarily. And then the MSR stuff, the MSR grades and so on.