[Cover Story] Pumped-Up Termite Market

In a nationwide survey of more than 800 pest control operators conducted in the first quarter of 2003, Specialty Products Consultants LLC (SPC) found that total revenue from termite control services accounted for 26 percent of the industry’s $5.65 billion annual service revenue. This represents an increase of 28 percent in termite service revenue over the last couple of years. In large part, this extraordinary growth is attributable to the robust real estate market.

POST-CONSTRUCTION WORK. As shown in the chart on page 28, almost half of this revenue was derived from post-construction applications. Termite control companies reported an average annual renewal fee of $94.62. In total, renewal fees contributed almost 29 percent of the total revenue earned from termite operations.

About 73 percent of pest control companies in the United States provide termite control services. Of these firms, almost 65 percent employ only one or two termite control technicians. (See chart on page 28.) Just seven percent of the companies in the country employ six or more termite control technicians. Nationally, this projects to more than 36,000 termite control technicians.

Two-thirds of the companies engaged in post-construction termite control rely on soil treatments with liquid termiticides as their primary treatment method. (See chart on page 33.) There was a five percent increase in the number of companies using soil treatments compared to the year earlier. The chart on page 33 shows the primary treatment strategies and the percent of companies electing to use a particular control method.

When asked whether they ever used both conventional soil treatments and termite baits on the same structure, 45 percent of the respondents said "yes." Of those responding affirmatively, 59 percent said that they used both treatment methods on 10 percent or less of the structures they treated. Only seven percent of the companies reported using both treatments on 91 percent or more of the structures treated.

Taken in total, over 12 percent of the more than 900,000 post-construction termite treatments received both a termite bait along with a soil application with a liquid termiticide.

While the percentage of companies relying primarily on termite baits for termite control may appear low, many of these companies are among the largest providers of termite control services. Consequently, the market share between termiticides and termite baits and monitors is closer than might be expected. Termiticides represented just more than 57 percent of manufacturers’ revenue in 2002 and termite baits, including associated renewal fees, and monitors captured nearly a 43 percent market share.

Regardless of the treatment strategy chosen, there is an extraordinarily high level of satisfaction with the performance of termite control products on the market today. Nearly half of all respondents said they were completely satisfied with the control they achieved with the termite control product they have been using. Never in the history of termite control have pest control companies had such a wide selection of highly effective technologies. Such a high level of satisfaction will make it challenging for new product entrants to the termite market. Pest control operators are in a unique position to support manufacturers who not only have outstanding products, but who also bring the most support and added value to their business.

TRENDS AND OUTLOOK. With the termite control technology presently available and new technologies on the horizon, the outlook for the termite control market couldn’t be brighter for service companies.

Nevertheless, as with many technological advances, the real challenge will be to maintain and enhance the value of the services provided. As one highly respected university researcher said, with the products available today, "conventional liquid termite applications will go the way of ‘baseboard spraying.’" Specialty Products Consultants projects that the volume of termiticide used in post-construction treatments could decline by as much as 40 percent.

Longer term, we believe that mostly exterior perimeter applications could replace conventional pre-construction treatments. The research data shows that control of termites can be achieved effectively from these less invasive treatments. Clearly, there are benefits to consumers from not having carpets pulled back and holes drilled through interior hardwood and tile floors. The challenge will be for termite control companies to charge the same or more for the less invasive treatment.

Regulators have been somewhat reticent to approve labels with use directions allowing for mostly exterior treatments. Many highly regarded termite control companies are presently providing less invasive post-construction perimeter treatments. We believe that it’s just a matter of time before the U.S. Environmental Protection Agency approves the new use directions. In our view, the environmental benefits far outweigh the termite control performance risks to the consumer. Approval of use directions permitting mostly exterior perimeter treatments would virtually eliminate any potential exposure risk from indoor applications of termiticides.

Moreover, we project that the volume of termiticide injected into the soil could be reduced by as much as 60 million gallons annually.

The author is president of Specialty Products Consultants LLC. He can be reached at gcurl@pctonline.com.

WHAT’S NEXT FOR SPECIALTY PRODUCTS?

Since forming Specialty Products Consultants in 2000, Gary Curl has completed a number of proprietary market assessments in the pest control, turf and ornamental, animal health and aquatic weed management markets. He has conducted syndicated studies of the U.S. structural pest control market annually for the last three years. His benchmark pest control study, “A Strategic Analysis of the U. S. Structural Pest Control Industry – 2000,” has been acclaimed for its accuracy, analysis and market insight.

SPC is presently surveying the pest control industry to assess the “unusual circumstances” of this past year. The report “Professional Termite and Insect Control – Strategies, Satisfaction, and Product Usage – An Analysis of the 2003 Season” will be published in April. For more information e-mail Curl at gcurl@spcresearch.com or call 973/543-5195.