[2004 State of the Industry Report] Termite Market Outlook: Going Strong

The termite market continues to be one of the top growth areas for the pest management industry. And most PCOs are taking advantage of that, since about 78 percent are now involved in this part of the business. That proportion has increased marginally in recent years. Last year, 75 percent said they were involved in this business. However, in 2001, only about 62 percent of PCOs said they were involved in termite control.

According to PCT’s annual readership survey, one-third selected the termite market as their top growth area. And regardless of the reports of less-than-stellar swarm seasons, for most PCOs, termite revenues continue to increase. In PCT’s 2004 survey, about 61 percent said their 2003 termite treatment revenues increased from 2002, while 12 percent said they decreased and 27 percent said termite treatment revenues remained the same. That was generally unchanged from the previous year.

Tommy Reeves, vice president of Oldham Chemicals Company in Memphis, Tenn., said he’s seen growth in the termite market throughout the Southeast, with some significant increases in a few southern states. Overall, he said, business was up by 15 percent over last year. "We never got the huge swarm season that we expected, but it was up substantially," he said.

One company that recently re-entered the termite business is Cooper Pest Solutions based in Lawrenceville, N.J. The company was out of termite work for a while, but 18 months ago again started offering termite control services with its new Termaware system, a quarterly service that utilizes the latest technologies when it comes to termite monitoring and control and also includes a damage warranty. "We have built it so we can bring the latest technologies to our clients, so we’re not bound to anything," said Phillip Cooper, president of the company.

The company’s program has been successful and well received so far and Cooper attributes that to the company’s proactive marketing philosophy. The service is marketed to individuals who in most cases don’t have active termites. "Termite coverage for a home that doesn’t have termites is just as important or more important than for a home that does have termites," Cooper explained.

While the termite market is good for the industry, this year’s season got mixed reviews from PCOs.

UPS AND DOWNS. Cooper said this year’s termite season in his area has been above average but not outstanding. However, he adds, the business expectations for termite work might be changing in recent years. "I don’t think there’s been a slam-dunk termite year for a while," he said.

Bryan Houtchens, vice president and general manager of Team Too Termite and Pest Control in Corona, Calif., said his company has experienced good growth in termite work in part because they offer alternative services to fumigation for drywood termites, such as heat treatments. He said the company also has experienced a 30 percent increase in subterranean termite work. He also attributes his company’s growth in this area to its customer service approach, referrals and advertising. "We’re able to offer our customers a very competitive package," he said.

Contributing to the growth of the termite market may be the continued availability of newer technology when it comes to termite control. Marcel Deshaies, owner of Advantage Termite & Pest Control in Lebanon, Tenn., notes that termite baiting systems are growing over traditional annual renewals. One benefit of baiting, he notes, is that the service can be offered as a quarterly or bimonthly service. Termite baiting is increasingly popular with customers, he added, because many don’t want their foundations drilled, nor do they want chemicals pumped into the ground around their homes. One program he’s found to be especially popular with customers is using a spot treatment with a nonrepellent termiticide along with a baiting system. "Customers love that," he noted. "They don’t want to use a whole lot of chemical, they just want the baiting system." Deshaies is also among those who expect an increase in termite revenues this year. "The past two years I’ve doubled my sales every year," he notes. "About 40 percent of our business is referrals so I think we’re doing something right."

Greg Augustine, president of Harbor Pest Control in San Diego, said he’s experienced growth in his termite business, one-third of which comes from subterranean termites and the rest from drywoods. He attributes the increase to having hired an additional full-time salesperson. Further, he added, the housing market in Southern California has played a key role. "People are putting money in houses or buying and selling homes," he notes, "which has provided strong demand for our services."

Bill Mashek, co-owner of Northwest Termite and Pest Control based in Santa Rosa, Calif., said dry weather this spring allowed the company to complete much more work, especially in the termite market. And, he added, a continued strong home sales market has also created more termite business, even though the company doesn’t focus on that area. Furthermore, his company’s termite business isn’t dependent upon the swarm season. Instead, people often call for service after discovering moisture problems while in the midst of renovations, or for real estate inspections. Another high point for Northwest, Mashek said, is the company’s offering of localized treatments for drywood termites. "That gives us a broader market spectrum," he said. Not many other companies offer these localized treatments, he explained, but they can be a good alternative to fumigation in many situations.

And Jeff Jones, vice president of Admiral Pest Control in Bellflower, Calif., said this year’s termite work has been "fabulous." "April of this year we had the best year we’ve had in 57 years," he said. Furthermore, Jones said, from February to April, the amount of the company’s termite work actually doubled. Jones attributes this strong April performance to good weather, strong home sales and also people spending money received from tax refunds.

Peter Schopen Jr., vice president of Mid Central Pest Control based in East Dundee, Ill., said termite control has been a terrific growth market in his area, which is all of northern Illinois and Chicago. "We do a lot of termite inspections and we’re finding more termites, it seems," he said. "We’re definitely servicing a lot more." He attributes the growth in termite work partly to the area’s healthy level of home sales. Interestingly, he added, it’s the new homeowners, not real estate agents, who are often demanding inspections. "Some communities in Chicago have tremendously bad termite problems," he noted. Surprisingly, real estate professionals aren’t pushing for inspections, he says, simply because they don’t realize that termites can be a problem in northern Illinois. But Schopen adds, when people move from the South to the North, they usually always request termite inspections.

Not all PCOs are experiencing such strong conditions. Ray Street, general manager of Turner Pest Control based in Jacksonville, Fla., said he’s experienced a mild termite season since early spring that has translated into normal business levels. "Swarm season this year I would say was moderate, about the same as last year," he said. However, that’s in contrast to two years ago, Street added, when termite business was very strong. This year, he said, "Our number of calls were consistent." He explained that his company, as well as most others in the area, weren’t overwhelmed with termite calls this year. However, "Two years ago every company was behind by weeks as opposed to days."

And Herb Field, chief operating officer at Lloyd Pest Control in San Diego, said the company has historically experienced growth in its termite business but this year the company’s work has leveled off. While he’s not sure why, he notes, "I think we’re seeing a slowdown in the real estate market and that translates to the beginning of a slowdown in the termite market."

MARKET CHANGES. PCT’s survey indicates that product switching of termiticides has slowed somewhat over previous years. About 18 percent have changed their termiticide of choice for the 2004 season. In addition, close to 60 percent of those involved in this market say they use both baits and liquids in their termite treatments.

About half of PCOs said they increased their termite treatment prices for 2004, while half said they kept prices at the same level. In a related finding, the amount of total service revenues spent on termiticides, at 12 percent, appears to be about the same as last year. While that’s about the same as one year ago, it’s up significantly from about 8 percent in 2001.

Stuart Herman, president of Brandon Pest Control, Jacksonville, Fla., said he’s spending more on termiticides, in part because the products he’s using are more expensive and in part because he’s using higher quantities of product. However, he says, he’s seen a trend in the industry of termite service prices declining, as companies are doing whatever they need to do to sell more jobs. "In general, we find that when we go into competition with a lot of companies, you find that the price of termite jobs are being severely discounted because companies are not taking the time necessary to calculate the amount of product needed and the time necessary to complete the job correctly." Herman hasn’t gone that route, he said. "We’re keeping our prices where they need to be because we explain the value of the job we perform and quality of our company to the customer."

Meanwhile, Street says his company, Turner, hasn’t increased its termite prices also due to heavy competition and higher chemical prices. "The market is what mainly dictates the price here," he said. Further complicating this issue, he notes, is that more companies have entered or re-entered the residential pretreat market in recent years in his area.

Those companies that have increased termite prices often cite increased overhead costs. Houtchens said he increased his company’s termite prices by about 10 percent this year, based on additional fuel costs, termiticide costs and insurance increases. "We’ve seen an increase in all of our supplies and merchandise and equipment across the board," Houtchens said, "Our fuel prices have absolutely killed us." (See related story about gas prices on page 17 of this State of the Industry report.)

Gary Rottler, president of Rottler Pest Control & Lawn Care in St. Louis, Mo., said he also increased termite prices, as well as general pest control prices, by about 10 percent across the board. He also cited increased material costs, and increased insurance and fuel costs, for the change. "It just seems like this year we got hit pretty good," he said. "We couldn’t absorb it so we had to make a decision to raise prices this year." h

The author is a contributing editor to PCT magazine.