Eastern Redcedar

Market Analysis

2005 Directory

University of Missouri Center for Agroforestry

 University Of Missouri Center for Agroforestry
203 ABNR Building
Columbia, Missouri 65211

Eastern Redcedar
Market Analysis

2003 Directory

Michael A. Gold, Associate Professor

Larry D. Godsey, Research Economist
Mihaela M. Cernusca, Graduate Research Assistant

This document is also available on-line at [Link]

University of Missouri Center for Agroforestry

 The University of Missouri Center for
Agroforestry (UMCA) is an
interdisciplinary research, teaching and
technology transfer program that draws on
the expertise of university faculty in
forestry, fisheries and wildlife,
entomology, plant pathology, agronomy,
animal science, agricultural economics,
rural sociology and horticulture. The center
coordinates Agroforestry activities for use
in Missouri and adjacent areas of the
Midwest. Its mission is to initiate,
coordinate and enhance Agroforestry
activities to meet the environmental, social
and economic needs of land management
within the state of Missouri, North America
and the temperate zone worldwide.

University of Missouri Center for Agroforestry

 CONTENTS 2

Executive summary Page 3

Introduction Page 6
Eastern redcedar Page 6
Project description Page 7
Research methodology Page 8
Five Forces Model Page 9
Participants in the research Page 10
Ö States surveyed Page 10
Ö Value chain position in the eastern redcedar market Page 11
Ö Years in business Page 11
Ö Gross annual sales Page 12
Redcedar, commodity versus product Page 13
Ö Redcedar products Page 14
Ö Redcedar uses Page 15
Ö Complete utilization Page 16
Ö Volume Page 16
Ö Adding value Page 18
Analysis of the forces that drive competition in the eastern redcedar market
Ö Force 1: Barriers to entry (Threat of new entrants) Page 21
Ö Force 2 and 3: The bargaining power of suppliers and buyers Page 24
¾ Suppliers Page 24
¾ Buyers Page 30
Ö Force 4: Threat of substitute products or services Page 36
Ö Force 5: Rivalry among existing firms Page 37
Ö Additional market forces: Policy Page 39
Conclusions Page 40
Appendix Page 43
Mail survey
Phone survey
2003 Market directory

University of Missouri Center for Agroforestry

 EXECUTIVE SUMMARY 3

The University of Missouri Center for We surveyed the value chain from raw material
Agroforestry conducted an analysis of the producers (private landowners, loggers and
eastern redcedar market. timber brokers) and primary manufacturers
(sawmills, shavings or mulch producers) to
Research objectives
secondary manufacturers (parts manufacturers,
The redcedar market research study has two novelty producers, essential oil producers),
major objectives. The first objective is to wholesalers and retail outlets. Along the value
develop a basic understanding of the eastern chain, most of the participants are involved in
redcedar market (who are the participants in the both supplying and buying eastern redcedar
market, what kind of products are currently products. Some of the companies are vertically
being marketed, what are the general trends for integrated being involved in two or more steps
supply and demand). The second objective is to in product conversion.
use Porter's Five Forces Model to analyze the
competitive forces that coordinate and control Redcedar products
the market and to identify the resources and Companies surveyed buy a large variety of
relationships needed to be successful in the products ranging from standing timber to logs,
eastern redcedar market. The results of the posts, cants, lumber or by-products. The
research, together with an updated directory of products sold included logs, cants, lumber,
companies in the redcedar market, are designed fence posts, tongue and groove paneling,
to benefit those already in the market and others furniture, cedar-wood oil, novelties, mulch and
who are considering entry into redcedar shavings. A characteristic unique to redcedar
industry. is that every by-product and every fiber of the
To achieve our objectives, we analyzed the tree can be marketed. Manufacturing by-
products that are not used as cants, fence posts
competitive forces that coordinate and control
the market using Porter's Five Forces Model. or dimensional lumber can be used as flakes for
pressboard, mulch, shavings, cedar balls or can
Participants in the research be processed for extracting cedar-wood oil.
Through a mail survey, followed by more in The residue after extraction can be used as
depth phone interviews, we surveyed eastern boiler fuel.
redcedar businesses from 16 states,
predominantly primary manufacturers, ranging
from small operations with less than $10,000
per year gross annual sales to large firms with
gross annual sales over $16 million. Based on
all feedback, it is estimated that the US redcedar
market generates nearly $60 million per year in
gross sales and is growing.

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 4
Forces that drive competition in the eastern redcedar market
Threat of new entrants (Barriers to entry)
Our survey respondents identified the poor quality material will occur in the next
following barriers to entry in the redcedar 10 years
industry: However, based on the information obtained
Ö Capital requirements - 28% noted this as from US Forest Service, Forest Inventory and
a barrier, Analysis (FIA) data, there is abundant
Ö Lack of knowledge and experience redcedar available in four states (Arkansas,
(20%), Tennessee, Kentucky, and Missouri). FIA
Ö Access to inputs (16%), data indicates that the useable redcedar
Ö Access to markets (16%), resource will slowly increase in quantity for
Ö Labor intensity (12%), the next three decades.
Ö Economies of scale (12%). Survey results also indicate that demand for
The more difficult the barriers are to redcedar materials will remain the same or
overcome by those trying to enter the market, increase in the next 10 years. More
the better they protect the companies already specifically, demand for good quality cedar
in the market from potential new entrants. will increase, demand for average quality will
stay the same, and demand for poor quality
Bargaining power of suppliers and buyers
will decrease. This trend was expected as the
Characteristics of the value chain based on redcedar industry continues to upgrade its
survey results: standards to produce higher quality products.
Ö Suppliers in the value chain are Based on survey results, minimal bargaining
relatively small companies in terms of annual power is exerted along the value chain.
sales Bargaining power on the supply side is felt at
Ö Some of the companies surveyed have the primary manufacturing level. From the
their suppliers deliver to them while other buyers' perspective, there seems to be little to
companies find it necessary to travel more no bargaining power. Out of the companies
than 150 miles to obtain their raw material surveyed, there doesn't appear to be any
supply single buyer that purchases large volumes of
redcedar material.
Ö Transactions take place mostly on the
spot market
Ö The largest segment of the buyers' chain
is represented by resellers
Ö The majority of the companies surveyed
sell their products locally
Trends in supply and demand
Based on survey results, the supply of all
quality levels of redcedar materials is likely to
stay the same in the next 10 years. However, it
is possible that a shortage of good quality
redcedar material and an increase in

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 Their approach to competition is to keep
producing their products, focusing on quality
Threat of substitute products
and service.
Different uses of eastern redcedar have different
potential substitutes. For example, western Governmental policies
The policies that were recognized by the
redcedar, redwood or treated lumber could be
survey respondents to have influence over the
used as substitutes for eastern redcedar in home
redcedar industry included:
construction or dimensional lumber. Mulch can
Ö The EPA ban on CCA treated lumber
be obtained from different species of hard wood
Ö The implementation of sustainable
and pine shavings. Rice hulls or saw dust can
forestry certification for suppliers to
also be used as pet bedding.
Lowe's and Home Depot
That said, because of its distinctive properties:
Ö Management practices adopted by state
reddish/brown color, unique fragrance, natural
natural resource agencies determined to
rot resistance and insect repellent qualities all
eradicate redcedar
derived naturally, eastern redcedar is perceived
In practical terms, none of these policies were
to be in a niche by itself, with very few close
found to have a significant impact on the
substitutes.
redcedar marketplace.
Rivalry among existing firms
Based on the surveys, the level of rivalry in the Next steps:
eastern redcedar market is perceived as non- For the collective benefit of the redcedar
competitive to moderately competitive. industry, it is suggested that industry
Survey feedback indicates that the number of participants join their efforts to identify and
competitors will either stay the same or decrease pursue actions to grow the overall market.
in the next 10 years. Actions to be taken in the near future might
include:
Competitors are attracted to the eastern redcedar Ö Creation of a redcedar marketing board
market not only by the perceived profit and the to increase awareness of market
independence that a private business offers but opportunities.
also by the full utilization of redcedar material, Ö Developing an infrastructure by
availability of redcedar raw material, and the working with federal/state agencies to
fact that redcedar is a growing niche market. facilitate the flow of goods and
In response to new competitors that may enter information through the market.
the market, the majority of the companies Ö Linking industry participants with
surveyed did not indicate that they had a special research institutions to develop new
strategy or reaction. market opportunities by exploring
alternative uses for eastern redcedar
wood, oil, and products.
Ö Encourage private landowners to
manage redcedar stands and foresters to
learn more about how to manage it.

University of Missouri Center for Agroforestry

 INTRODUCTION 6

The University of Missouri Center for competitive forces that coordinate and control
Agroforestry’s redcedar market research study the market and to identify the resources and
has two major objectives. The first objective is relationships needed to be successful in the
to develop a basic understanding of the eastern eastern redcedar market. This information is
redcedar market (who are the participants in intended to assist companies in the market in
the market, what kind of products are currently the development of new strategies to improve
being marketed, what are the general trends for their business or assist individuals who are
supply and demand). The second objective is to considering entry into this industry.
use Porter's Five Forces Model to analyze the

EASTERN REDCEDAR

Eastern redcedar (Juniperus virginiana L.) is maintenance. It can also be used for almost
a member of the cypress family any kind of furniture, especially for cedar
(Cupressaceae) native to the forests of the chests and wardrobes and is commonly used
eastern and central United States. Because in closets. As wood utilization by-products,
this species tolerates extremes of drought, shavings are widely used for large and small
heat and cold, the natural range extends well animal pet bedding and redcedar mulch
out into the Great Plains. Eastern redcedar distinguishes itself by its appealing color,
thrives on thin limestone soils and will aroma, durability and insect deterring
successfully invade abused, overgrazed sites, properties 1 . From an environmental
abandoned pastures, and limestone rock standpoint, eastern redcedar is often used for
exposures. The species has proliferated over wildlife habitat and in agroforestry practices
the past 50 years due to land conversion, for shelterbelt and windbreak plantings.
overgrazing, land abandonment and fire
suppression. Many landowners have a
negative view of eastern redcedar, perceiving
it as an invasive weed species, often chained,
bulldozed and burned. As the resource has
spread and increased in age, its utilization
and value in an array of products has become
more widely recognized. The red, heartwood
of eastern redcedar logs contains secondary
metabolites or "oils" that possess the qualities
1
to resist and/or repel insects and decay. Suszkiw, J. 2000 Termites go hungry on resistant trees
USDA ARS News & Information,
Eastern redcedar wood is used by builders [Link]/is/pr/2000/[Link]
and homeowners because of its durability, Meissner H.E. and Silverman J. 2001 effects of
beauty, fragrance, resistance to insect aromatic cedar mulch on the Argentine Ant and the
Odorous House ant (Hymenoptera: Formicidae), J.
infestation and decay, and ease of
Econ. Entomol. 94(6): 1526-1531

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 PROJECT DESCRIPTION 7

We surveyed the value chain, from raw material and determined the factors that influence
producers to wholesale and retail outlets (Fig.1) entry into the redcedar market, the
and determined who the eastern redcedar market characteristics of the value chain, the relative
participants are, the array of products that are power of the value chain participants,
currently being marketed and the supply and potential substitutes for eastern redcedar and
demand trends. To better understand the market, the level of rivalry in the market.
we analyzed the forces that drive competition

Private Landowners
Timber Buyers/Brokers (log
contractors, etc. )
Loggers

Primary Manufacturers (sawmills, shavings or mulch producers, etc.)

Secondary Manufacturers (lumber companies, parts manufacturers,

novelty producers, essential oil producers etc.)

Wholesalers/Distributors

Retailers (pet and farm supply, craft markets, home improvement stores
Internet sales, etc.)

Consumers (private individuals, building contractors, etc.)

Figure 1: Redcedar value chain participants

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 RESEARCH METHODOLOGY 8

To identify the forces within the redcedar Porter’s Five Forces Model 2 was used to
market we developed a three-step research develop and analyze both the mail survey and
methodology. the phone survey.
In the first step we identified the market
participants using available secondary
information from the internet, Missouri
Department of Conservation data on the wood
products industry, knowledgeable university
colleagues, private forest consultants, and initial
contacts with businesses in the redcedar
industry. We developed a database of
companies participating in the redcedar market
listing basic identification information
(company name, contact person, address, phone,
fax, email and web site address), types of
products purchased and sold.

In the second step we developed a

questionnaire-based survey that was mailed to
the 187 companies identified. Fifty-eight
surveys were returned. Based on these surveys
we created a quantitative picture of the five
forces acting on the redcedar marketplace.
Analysis of the results from the mail survey
guided the development of a more qualitative
phone survey.

The third step in the research process was based

on a set of phone interviews administered to a
sample of the respondents that completed the
mail surveys and agreed to participate in the
follow up phone interview. Interviews were
conducted using a semi-structured questionnaire
with more open-ended questions. We conducted
25 interviews with managers and
owners/managers of small, medium and large
businesses in the redcedar market. With the
respondents’ permission, the interviews were
recorded, transcribed and analyzed by the
2
research team. Confidentiality was protected in Porter M. 1980 Competitive Strategy: techniques for
analyzing industries and competitors. The Free Press,
all surveys.
New York

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FIVE FORCES MODEL 9

The Five Forces Model (developed by The Five Forces Model looks at five areas of
Dr. Michael Porter of Harvard competition in the marketplace:
University) serves as a framework for
• Threat of new entrants (Barriers to
examining competition that transcends
entry)
industries, particular technologies, or
• Bargaining power of suppliers
management approaches. The underlying
fundamentals of competition go beyond • Bargaining power of buyers
the specific ways individual companies • Threat of substitute products or
go about competing (i.e. Strengths- services
Weaknesses-Opportunities-Threats • Rivalry among existing firms
(SWOT) analysis; the 4P’s of marketing: In addition to the five forces, a sixth force,
product, price, place, promotion). The governmental policies is added to Porter's
underpinning of this framework is the model because of its influence on all the
analysis of the five competitive forces other forces.
acting upon an industry and their
strategic implications (Fig. 2) By understanding the competitive forces
within the redcedar industry, participants in
the market can develop successful strategies
to influence the forces for their own benefit.

Figure 2: Forces driving industry competition

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 PARTICIPANTS IN THE RESEARCH 10

States surveyed

TN AL
TX AR AZ CT FL IA
OK 2% 2%
10% 11% 2% 2% 4% 2%
4%
The geographic distribution of the
OH IN
2% 58 respondents of the mail survey is
2%
presented in Figure 3. Responses
KY
2%
came from 16 states, predominantly
MA east of the Rockies.
MN MD 4%
MO
47% 2% 2%

Figure 3: Distribution of respondents from mail survey

Out of the 58 respondents, 25

participated in the follow up phone OK TX AR
12% CT
interviews. OH 8% 4%
4%
4% IN
Their geographic distribution is NY 4%
presented in Figure 4. 4%
KY
The majority of respondents were 4%
from Missouri. A broader
geographic distribution was
obtained during the mail survey (16 MO
56%
states) compared with the phone
survey (only 9 states).

Figure 4: Distribution of phone survey respondents

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 11
Value chain position in the eastern redcedar market

The distribution of the mail and phone survey We should note that respondents could be
participants based on their role played in the categorized as more than one of the labels i.e.
eastern redcedar market is presented in Figure a respondent could be both a primary and a
5. Primary and secondary manufacturers were secondary manufacturer.
the dominant respondents to the phone survey.

Essential oil producer and distributor 5%

19%
Retail outlet
16%
Fiber industry 22%
12%
Wholesaler, Distrubutor 26%
12% 21% 48%
Secondary manufacturer
50%
68%
Primary manufacturer

Broker 7%
4% 24%
Raw material provider, Logger 28%

Landow ner, farmer 24%

12%
0% 10% 20% 30% 40% 50% 60% 70%

Phone survey Mail survey

Figure 5. Value chain position for mail and phone survey respondents

Years in business

Results show that the number of firms relatively This suggests that redcedar is a growing
new in the market far outweighs the number of industry. New and more diversified firms entered
firms with tradition in the marketplace (~70% of the market and new uses continue to be found for
the surveyed firms have been in the eastern eastern redcedar
redcedar business for less than 20 years and
~50% less than 10 years compared with ~30%
that have more than 20 years of experience in the
market – Figure I - Appendix).

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 12
Gross annual sales
The redcedar market ranges from small
operations with gross annual sales of less than
$10,000 per year to large firms with gross
annual sales over $16 million. Out of the
companies participating in the phone survey,
39% specialize exclusively in redcedar.
Redcedar represents a majority of the business
for 62% of the respondents (Figure 6).

Less than 10%

17%
[10% -20% )
39% of com panies
9%
specialize 100% in
red cedar
[20% -40% )
13%
62% of
companies
derive over half
[80% -100% )
their sales from 9%
[60% -80% )
redcedar 13%

Figure 6. Percentage of redcedar from total gross annual sales (phone survey)

The distribution of the

companies participating in
the mail survey based More than Less than
exclusively on their gross $250,000 $1,000
28% 19%
annual sales from eastern
redcedar products indicates
that about ¼ of companies
(28%) had gross annual
sales in excess of $250,000 $100,001-
$1,000-$25,000
22%
(Figure 7). [Note that in the $250,000
mail survey the top sales 22% $25,001-
$100,000
category was “More 9%
$250,000”]

Figure 7. Gross annual sales exclusively from eastern redcedar products (mail survey)

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 13
Responses from the phone
survey provide a more
More than more than
accurate picture of gross sales $1 mill. $10mill Less than
figures for companies in the 5% $10,000
32% [$5mill-$10mill] 9%
redcedar market (Figure 8). 5%
About 1/3 (32%) of the firms [$1mill-$5mill] [$10,000-
in the phone survey indicated 22% $50,000]
22%
gross annual sales from
redcedar in excess of $1
million.
[$50,000-
[$500,000-$1mill] $100,000]
[$100,000-
14% 9%
$500,000]
14%

Figure 8. Gross annual sales exclusively from eastern

redcedar products (phone survey)

REDCEDAR, COMMODITY VERSUS PRODUCT

Items classified as commodities can be Products, in contrast, can be described as

described as possessing the following items that are value added goods, more
attributes: differentiated from one another. A product is a
First, customers want the cheapest price; "value package" of elements that in
second, commodities represent items produced combination offer benefits to satisfy customer
and purchased in high volumes and with high needs. The more differentiated the products
frequency; and third, producers are reliant on are, the more value they have and the more
the advantages of size and scale to achieve the unique they are perceived. The challenge is to
lowest cost of production and resultant low differentiate the products and add value in a
prices. They are minimally differentiated and way that will beat competitors and build long-
the buyers incur no cost to switch from one term customer relationships.
supplier to another.

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 14
Redcedar products
In the redcedar market, the companies million board feet of redcedar annually.
surveyed buy a large variety of products Standing timber is the most common product
ranging from standing timber to logs, posts, purchased (76%), followed by raw logs (64%)
cants, lumber or by-products. The products and and cants (28%). The results are influenced by
the quantities purchased by the phone survey the fact that primary manufacturers are the
respondents are presented below (Figure 9). largest group interviewed. The volume
Responses came in a variety of units of purchased annually ranges from less than
measure based on type of product purchased, 1,000 board feet to more than 5 million board
i.e. board feet, tons, cords, dollars, etc. Based feet and from 4,000 tons to 50,000 tons.
on the results, the largest firms use over 1

Cordw ood 4%

By products 4%

Lumber 8%

Cants 28%

Peeled logs (posts) 8%

Raw logs 64%

Standing timber 76%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 9: Products purchased (phone survey)

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 15

Forty percent of respondents expect the volume

purchased to increase and another 40% expect I don't
this volume to stay the same in the next 10 Decrease know
4% Stay the
years (Figure 10). 16%
same
The respondents that expect the volume 40%
purchased to increase are located in regions
Increase
with abundant redcedar (AR, MO, KY)
40%

Figure 10: Expectation for volume purchased

(phone survey)

Redcedar uses

Other products include:

caskets: 4%
hobby wood: 4%
Redcedar has a wide by-products: 20%
range of uses. Products Other 29%
range from logs, cants, Shavings, ribbon 16%
and lumber to 8%
Mulch
furniture, cedar-wood
Gift units, novelties 20%
oil, novelties, mulch
and shavings (Figure Closet lining 8%
11). Furniture 16%

Manufactured parts 16%

Lumber 28%

Logs 12%
Cants 12%

0% 5% 10% 15% 20% 25% 30%

Figure 11: Products sold (phone survey)

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 16
Complete utilization
Both primary and secondary manufacturers from the pressboard process is used as fuel for
surveyed indicated that virtually nothing is drying the flakes. The small slabs from the
wasted with redcedar, every by-product has a sawmill and other log waste are transformed
market. An excellent example of the full into mulch for landscaping. Sawdust and
utilization of redcedar material is provided by planer shavings from the sawmill are
Giles & Kendall on their web page processed for extracting cedarwood oil for the
([Link]). Large cants are fragrance industry. Residue, after extraction is
sliced into thin veneer for the furniture and used as boiler fuel for generating the steam for
laminated panels industry. Smaller cants are the oil process and as space heating in the
re-sawn and made into tongue and groove winter.
planks for closet lining. The smaller diameter
trees and large log slabs are typically shaved
into pet bedding or hogged into mulch. Waste

Volume
Thirty six percent of the
respondents felt that the
volume sold is going to
stay the same and 24% felt
that is going to decrease I don't know
(Figure 12). 8%
Decreasing Increasing
A company’s perspective 24% 36%
on future sales may be
influenced by its size in
the marketplace. Our
Staying the same
survey indicated that the
32%
majority of companies
with gross annual sales
exclusively from redcedar
under 1 million expect the
volume sold to decrease, Figure 12: Expectation for volume sold (phone survey)
while the majority of
companies that sell more
than one million annually
expect the volume sold to
increase or stay the same.

University of Missouri Center for Agroforestry

 17
The mail survey identified a wider range of redcedar wood is in animal bedding (about
products specific to the redcedar market than 10%) (Figure 13). The phone survey
the phone survey. Fourteen percent of the respondents indicated that their best selling
businesses surveyed indicated that the top products were: cants, 2x6 lumber, 2x4 lumber,
product of their operation is dimensional S 4 S lumber, mailbox posts, bird houses and
lumber. Another 14% of the survey feeders, coffee tables, beds, gift boxes, mulch
respondents mentioned that their top product is and shavings. In most cases, the best selling
closet lining. The third most prevalent use of products were also the most profitable ones.

16.0%

13.8% 13.8%
14.0%

12.0%
10.3%
10.0%
8.6%
8.0%
6.9%
6.0% 5.2%

4.0% 3.4%

1.7% 1.7% 1.7%

2.0%

0.0%
r

l
g

ch

r
ng

re
ts
s

ia
oi
be

he
nt

in
es

tu

er
ul
i

d
dd
ca

in
m

ot
ni

m
ch

oo

at
l
lu

be
ur
et

m
rw
al

rf
os

w
al

da
on

oo
cl

ra
im

ce
si

td

an
en

ou
m
di

Figure 13: Top redcedar products (mail survey)

University of Missouri Center for Agroforestry

 18
Adding value
To successfully add value to products, a 3) Changing the form of the product (cutting
company must begin by determining the to size, specialty cutting);
purchasing criteria of their customer(s). The 4) Making it easier for the customer to obtain
value package must satisfy the specific the product by arranging for easy acquisition,
customer’s needs. A company must develop a e.g., deliver the product to the customer or to a
product and marketing strategy that will location easy for the customer to access;
increase the bundle of benefits to the customer.
For redcedar (Figure 14), value can be added in 5) Saving the customer time and effort, e.g.,
many ways including: break bulk and package the product into
smaller units desired by the customers and
1) Improving product quality by removing making it easier for the customer to possess
defects and maintaining consistently high
the product, if necessary provide customer
product standards; training in use of the product.
2) Increasing the products functionality by 6) Packaging and labeling that helps
promoting and marketing the products unique differentiate the products and build brand
benefits, e.g., pleasant smell, decay resistance loyalty among customers.
and insect repellant characteristics;

Eastern Redcedar Products

Logs Clothes hangers or hooks

Cants Cedar necktie and belt hanger
Closet lining /Paneling Shoe rack, shoe “trees”
Fence Posts Cedar Moth Balls
Dimensional lumber Bird feeders
Cedarwood oil Bird houses
Gazebo, cabana Mailboxes
Furniture (chests, beds, drawers, Mailbox posts
tables, chairs, shelves, wardrobes and
closets)
Outdoor furniture (benches, tables, Boxes, novelties
chaise lounge)
Animal bedding Pencils
Mulch Carvings
Wood turnings Wreaths
Canes Wood chips
Figure 14: Eastern redcedar products

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 19
An example of how the price of products expresses the value that is added along the value chain
for redcedar products is presented in Figure 15.

EASTERN REDCEDAR PRODUCTS - $ VALUE ADDED

Products Unit price
Solid wood
Logs $250 - $350 / MBF
Cants $500 / MBF
Paneling $1,800 /MBF
Bird feeders $10...$20 / unit (retail price)
Bird houses $13...$40 / unit (retail price)
Mailboxes $32.19 /unit (retail price)
Mailbox posts $19.83 ... $24.97 (retail price)
Gazebo $2,395...$6,795(retail price)
Square Cabana $2,995...$9,295 (retail price)
Chairs $245 (cedar + cypress) (retail price)
Rocking gliders $385-$535 (cedar + cypress)
Dining Table $315 (cedar + cypress)
Decorative shelves $56.99 (retail price)
Cedar Chests $259 - $2,493 (sizes 24"...72") (retail price)
Beds $750...$1086 (retail price)
By-products
Cedar Hook $7.99 / sets of four - protects and deodorizes clothes (retail price)
Cedar tie and belt hanger $29.99/unit (retail price)
Cedar Moth Balls $5.99 (24 pack) (retail price)
Animal bedding
Dog bedding compressed bail $22 /bail (retail price)
Premier Pet Redcedar Bedding $9.99 (5 cu ft) (retail price)
L/M animal farms bedding $4.49 (700 cu in) (retail price)
Mulch
Retail: $30.95/cu. Yd.
Contractor: $ 28.95/cu. Yd.

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 20

Distillates
Cedarwood oil $1.83 (5 ml)...$27.61 (16 oz) for aromatherapy
$6/lb drum quantity, $9/lb less than one drum – for perfume and
cosmetic industry and household use (improve fragrance and
moth resistance properties in closets and dressers)
$7.95 (10ml) (on line store) for aromatherapy

Figure 15: Value added to eastern redcedar products

University of Missouri Center for Agroforestry

 ANALYSIS OF THE FORCES THAT DRIVE COMPETITION 21
IN THE EASTERN REDCEDAR MARKET
Force 1: Threat of new entrants (Barriers to entry)
The phone survey respondents identified the following barriers to entering the redcedar industry:
Economies of scale

- High volume of products needed to be

sold at very low margin 12%
- High overhead

Labor intensity

- Hard work required 12%

- Hard to find and retain reliable
workforce

Access to markets
16%
- The need to locate markets for
multiple products and by-products

Access to inputs
16%
- Availability of quality redcedar
- Building the relationship with suppliers

Lack of knowledge and experience

20%
- Knowledge about the industry
- Knowledge about the raw material
- Established relationship between suppliers and buyers

Capital requirements (financial resources)

28%
- Cost of equipment to get started
- Difficulty in obtaining credit
- Investment capital

Percentage of respondents that identified barriers to entry the redcedar industry

Figure 16: Barriers to entry

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 22
Barriers to entry are perceived
differently by companies already
in the market and those trying to
enter the market. The more
difficult the barriers are to More than $1 no answer
overcome, the better they protect mill 13%
17%
the companies already in the Less than
$10,000
market from potential new 8%
entrants.
[$100,000 -
Capital requirements were $500,000)
21%
perceived as the most important [$10,000 -
barrier to entering the redcedar [$50,000 - $50,000)
industry. Initial capital costs $100,000) 20%
21%
required to start a business ranged
from less than $10,000 to more
than $1 million (Figure 17). Most
of the companies in the redcedar
business obtained initial capital by
self-financing or personal loans. Figure 17: Initial capital costs required to start a
business (phone survey)

While it is possible to obtain bank

loans, the fact that most of the
redcedar businesses operate
more than 5 without contracts (see Figure 19)
don't know Less than 1
years
5% year makes it harder to establish credit
9%
32% with financial institutions. If the
company has the capital required
to start its activity, and can
2 - 5 years overcome the other barriers to
27% entry, the chances that the
company will become profitable in
1 year - 2 a relatively short time are quite
years
27% high. Thirty-two percent of the
companies surveyed stated that
they became profitable in less than
one year and 86% in less than 5
years (Figure 18).
Figure 18: Time to become profitable

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 23
While not explicitly derived from survey data, entrants, this factor favors the companies
availability of cedar logging infrastructure is already in the market that have cultivated and
most likely a larger barrier than availability of maintained strong relationships with their
trees and logs. suppliers and customers.
From our limited responses it appears that
there is a relatively high potential to start a Access to inputs and access to markets were
equally valued by the respondents. In areas
business without a huge capital investment.
One of the companies surveyed started with a where cedar manufacturers are located,
everything that is produced is marketable
$20,000 investment and today has sales
exceeding $10 million per year. including primary manufacturing by-products
such as shavings and sawdust. For start-up
Clearly the survey population represents a companies outside those areas, the sale of by-
somewhat biased sample as these are the firms products would probably be difficult without
that have succeeded and remained in business. significant marketing efforts. For example,
Furthermore, it is likely that only those firms without a developed poultry raising business
doing well in the redcedar marketplace at this the sale of cedar sawdust (especially from band
time consented to participate in the phone sawing) would be difficult. Identifying and
survey. securing markets for the main products and
also for the by-products is very important for
Lack of knowledge and experience was the successful entry and survival in the redcedar
second barrier to entry mentioned in order of business.
importance. To successfully enter the redcedar
industry one must have detailed knowledge
Labor intensity and economies of scale were
about the industry. Redcedar is unique
identified by some respondents as barriers to
regarding its management, cutting, grading
entry but less important than other factors
and processing. Because of its uniqueness, a
already discussed. Labor is considered a barrier
specialized knowledge base is required from
in terms of the intensity required in
market participants.
manufacturing redcedar products.
Knowledge about how to establish and
Economy of scale can be a barrier because
maintain relationships along the value chain
some redcedar products are sold at very low
helps assure both entry and survival in the
margin. Companies that produce these products
redcedar business. Redcedar markets are
must generate large volumes in order to cover
generally small, local markets that are
fixed costs and generate profit.
influenced heavily by reputation, frequency of
transactions and strong personal relationships.
The size of firms contributes to the perception
In order to enter the market, a new participant
of “high volume”. High volume for Missouri
would have to understand the social aspects of
cedar producers is rather low compared to
the market and develop strong transaction
other segments of wood industry.
relationships. While a barrier for potential

University of Missouri Center for Agroforestry

Forces 2 and 3: The Bargaining Power of Suppliers and Buyers 24

The value chain in the redcedar market starts Characteristics of the value chain based on
with the landowner that supplies the raw logs the phone survey results, from the
and ends with the retailer who ultimately adds suppliers' perspective
value to the product before reaching the final Suppliers in the value chain are relatively
consumer (see Fig.1, page 7). Most of the small companies in terms of annual sales
participants are involved in both supplying and (only 32% of companies surveyed were
buying redcedar products. Some of the supplied by companies with over $1 million
companies are vertically integrated, being annual sales; a further 20% had suppliers
involved in two or more steps in product with annual sales between $250,000 and $1
conversion. million.
Suppliers Transactions take place mostly in the spot
According to the mail survey, loggers are the market. Out of the companies surveyed, 64%
primary supplier of raw material (36%), purchase all (100%) of their supply in the
followed by primary manufacturers and spot market and only 12% purchase all
landowners (18%), wholesalers (12%) and (100%) of their supply through contractual
timber brokers (6%). arrangements, most of them verbal contracts
Based on the phone interviews, landowners are (Fig.19). This may indicate that there is
the number one supplier (52%), followed by enough supply available that there is no need
loggers (32%), primary manufacturers (20%), to secure a transaction through a contract; or
brokers (8%) and wholesalers (4%). it may indicate that the relationship between
suppliers and buyers is based on trust and
The results are influenced by the fact that the neither the supplier nor the buyer exerts
majority of companies interviewed were bargaining power.
primary manufacturers who use private
landowners as suppliers of raw material.

50% 70% 0%
25%
8% 4% 12% 10%
4%
15% 4%
4%

64% of
companies
purchase 100%
of their supply in
the spot market

Figure 19: Percentage of supply that is purchased

in the spot market (phone survey)

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 25
In terms of the distance a
company is willing to go
to purchase redcedar
materials, we identified zero, contractors
more than 150
two extremes: (Figure 20) miles deliver to them
• 28% of companies 24% 28%

surveyed do not travel to

get their supply because
they have private
landowners, local loggers 100-150 miles
16%
or brokers deliver to them, less than 50 miles
• 24% of companies 12%
50 -100 miles
surveyed are willing to go 20%
more than 150 miles to get
the supply.

Figure 20: Farthest distance willing to go to purchase

redcedar materials (phone survey)

The fact that some of the companies don’t need are involved in two or more steps in product
to travel to get the supply indicates that they conversion, for example taking the raw log
are in a more powerful position than their and manufacturing consumer goods such as
suppliers. tongue and groove paneling, mulch or
The fact that some manufacturers are willing to novelties). Vertical integration allows a firm
travel over 150 miles in order to acquire inputs to have more control over its supply needs.
indicates that there may be supply shortages in
certain areas of the country or there are other Trends in Redcedar Supply
factors affecting the supply of redcedar.
With the results obtained from the mail
The industry has high potential for vertical survey, we identified some trends in redcedar
integration (36% of the companies surveyed supply. The phone survey helped us describe
the trends in more detail for different levels
of quality.

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 26
General Trends for Eastern Redcedar Supply

Roughly half of the

respondents to the mail survey No response
indicated that over the past 20% Stayed the
same
five years redcedar supply had Increased
6% 48%
remained steady. An
additional quarter (26%) of
respondents felt that redcedar
supply had declined and only
6% indicated that supply had
increased during this same Declined
26%
period (Figure 21).

Figure 21: Changes in the supply of eastern redcedar products

over the last five years (mail survey)

No response
13% Will stay the
same More importantly, in the next
38% five years, almost 40% of the
Will increase
survey respondents felt that
13% supply will remain steady, 36%
felt that supply will decline and
13% see supply increasing.
Survey participants expected
the current changes to continue
Will decline
into the future (Figure 22).
36%

Figure 22: Changes in the supply of eastern redcedar products

over the next five years (mail survey)

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 27
Specific Trends for Eastern Redcedar Supply

The phone survey further

investigated supply trends and the
factors that influence them.
Supply trends in the next 10 years Decrease
Increase
17%
were analyzed for different levels 29%
of quality. More than half of the
respondents to the phone survey
(54%) believed that the supply of
Stay the same
good quality redcedar materials
54%
will stay the same, 29% indicated
that the supply of good quality
redcedar materials will decrease
and 17% felt that the supply will
increase (Figure 23).
Figure 23: Supply of good quality redcedar materials
over the next 10 years (phone survey)

In terms of average quality, 70%

of respondents said that the
No answ er Increase
supply will stay the same, 13%
Decrease 4.35% 13.04% said that the supply will decrease
13.04% and 13% felt that the supply will
increase (Figure 24).
The opinion about the supply of
poor quality redcedar materials is
Stay the same as follows: 48% felt that it would
69.57% remain steady, 39% expected an
increase and 9% expected a
decrease.
The overall conclusion from the
Figure 24: Supply of average quality redcedar surveys is that the supply of all
materials over the next 10 years (phone survey) quality levels of redcedar
materials is likely to stay the
same. However, it is possible that
a shortage of good quality
redcedar material and an increase
in poor quality material will occur
in the next 10 years.

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 28

Additional information about the redcedar average growth rate of .2” dbh per year, all of
resource, obtained from U.S. Forest Service this cedar would be desirable for harvest (at 6”
(USFS) Forest, Inventory and Analysis (FIA) dbh) within the next 5-15 years. Even if we
data3, raises questions about the supply concerns assumed a 20% mortality in this age class, we
expressed in the surveys. Based on FIA data would have a harvestable resource at least as
there should be an abundance of quality large as what is presently available.
redcedar available, at least for some regions. Looking further into the crystal ball, those
The four states with the highest census of trees in the 2” (1.0-3.0”) dbh class constitute a
redcedar are Arkansas, Tennessee, Kentucky massive 61% of the total number of trees
and Missouri (See Appendix figures IV, V, and inventoried. Again, let’s assume a 50%
VI). mortality and an average growth rate of 0.2”
Note: This data is strictly derived from forest per year. On average these trees would be of
land inventory and does not include non-forest harvestable size within 25-35 years.
land or other land classes, thus does not include Following this logic a bit further, this would
what appears to be a huge component of the present the industry with twice as much
emerging resource. harvestable cedar inventory on the stump as is
These four states account for 53% of the currently available.
nation’s redcedar (Eastern redcedar). Boiling all of this down, the current raw
Phone surveys reveal that the most desirable inventory data shows that the useable redcedar
cedar falls within the 6-8” dbh range, typically resource will be slowly increasing in quantity
thought to be between 35 and 45 years old. If for the next 3 decades. Information on the
we look at the data on the existing redcedar silviculture (reproduction, biology, growth) of
resource in the top 4 states, (Figure 25) we see redcedar can be found online at:
that 15% of the trees fall in the most desired, 6- [Link]
8” dbh class. These are the trees at the optimum ual/Volume_1/juniperus/[Link]
age with the least amount of age related defect.
3 – Personal communication with Neal Sullivan – Ecologist, USDA
Looking into the future, 22% of the resource is Forest Service, North Central Research Station, 202 ABNR Building,
in the 4” dbh class (3.1-5.0”). Assuming an Columbia, MO 65211

State Total 2" diam 4" dbh 6" dbh 8" dbh % % %
number class (3.1- (5.1- (7.1- available available available
of trees (1.1-3.0) 5.0) 7.0) 9.0) at present 10-20 yrs 20+ yrs
(Mill) (Mill) (Mill) (Mill) (Mill) (6/8" dbh) (4" dbh) (2" dbh)
Arkansas 451 296 89 34 20 12% 20% 66%
Kentucky 400 239 94 38 18 14% 24% 60%
Tennessee 437 244 99 49 26 17% 23% 56%
Missouri 384 226 89 40 18 15% 23% 59%
4 state 1,672 1,005 371 161 81 15% 22% 60%
total
% of 53% 52% 53% 55% 60%
nation
Nationally 3,142 1,922 702 291 135 14% 22% 61%

Figure 25: Redcedar on timberland, by state (USFS FIA data)

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 29

probably
Overall, the perception of the 16%
phone survey respondents is
optimistic. Along with the no
aforementioned trends, they still 16%
expect to have enough redcedar
available in their primary area to yes
meet their supply needs in the 68%
next 10 years (Figure 26).

Figure 26: Availability of redcedar in the area to meet the

companies’ needs in the next 10 years (phone survey)

The highest number of respondents

Poor than (43%) felt that the quality of redcedar
average, Very good,
mediocre superior available through the supply channel is
13% 9% acceptable, 35% indicated that the
quality is good, a smaller percentage
consider the quality mediocre (13%)
and 9% consider the quality of redcedar
Good, available through the supply channels
adequate,
very good. (Figure 27).
Acceptable, above
fairly decent, average, fine Current industry trends that
medium, Ok, 35%
influenced supply
fair
43%
Some current industry trends that
contributed to the increase in redcedar
Figure 27: Quality of redcedar (phone survey) supply are: land conversion to hunting
uses retaining cedar as escape cover and
winter shelter for deer and turkey,
restrictions on wood burning and the
growing popularity of small portable
saw mills. New housing developments
replacing forested land, clearing land
for pasture, and development of
industry in rural areas are some
examples of current industry trends that
decreased supply of redcedar materials.

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 30
Buyers
Figure 28 identifies the
predominant buyers from
the mail survey. The Pet and farm
supply
predominant group of Private
Other 10%
buyers identified is private 7%
individuals
individuals (29%) which Processors 29%

includes consumers, do-it- 7%

yourselfers, and domestic Direct markets

wood-workers. The retail 7%
Buiding
craft market was the second Wholesale craft contractors
Retail craft
most predominant buyer markets 10%
markets
(23%). 7% 23%

Figure 28: Primary buyers (mail survey)

Prim ary buyers

(Based on the phone survey)
The phone survey
had secondary
Export 4% manufacturers listed
28% as primary buyers
Individuals
(32%), individuals
20%
Retail outlet being considered as
Fiber industry 16% the second largest
Wholesaler, distributor 8% category of buyers
(28%) and retailers
Secondary manufacturer 32%
were listed as the
Primary manufacturer 16%
third most common
Broker 12% buyer (20%). (Fig.
0% 5% 10% 15% 20% 25% 30% 35%
29)

Figure 29: Primary buyers (phone survey)

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 31
Characteristics of the value chain based on the phone survey results, from the buyers'
perspective
The largest segment of buyers can be classified • 60% of buyers purchase more than half of
as resellers: their supply on the spot,
• 80% of the respondents sell 50% (or more) • 40% of buyers use contractual
of their products to resellers, arrangements. The relationship between
• 36% sell 50% (or more) direct to final buyer and seller becomes more formal
consumers (end-users). (more contractual arrangements) as the
value chain approaches the retail segment
On the buyers’ side, similar to the suppliers, the
(Fig. 30).
market can be characterized as a spot market:

0%
100% on the spot 24%
36% e.g. 40% of buyers
use contractual
arrangements
1%-20%
e.g. 60% of buyers 16%
to purchase between 50%-99%
50% and 100% of 24%
their product in the
spot market

Figure 30: Percent of buyers that purchase on the spot (phone survey)

Marketing area
Seventy six percent of the
32%
respondents sell their products International

in local markets. Forty-eight

percent of respondents sell National
48%

their products nation wide and

32% also have international Regional
32%
customers (Figure 31). The
products sold internationally 76%
Local
include lumber, boxes, logs,
manufactured parts, and pet 0% 10% 20% 30% 40% 50% 60% 70% 80%
shavings.

Figure 31: Marketing area (phone survey)

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 32
In terms of primary marketing area,
52% of respondents have a local
market, 36% have a national market
and 12% have a regional market as
No response Stayed the
their primary marketing area (Figure
13% same
II, Appendix).
33%

Trends in Redcedar Demand Increased

39% Declined
Results from the mail survey 15%
identified general trends in redcedar
demand. The phone survey helped
describe the trends in more detail, for
various levels of quality.
Figure 32: Changes in the demand for eastern
redcedar products over the last five years
General Demand Trends for Eastern (mail survey)
Redcedar
On the demand side (Figures 32 and
33), about one third of the respondents
feel that demand has been steady over
the past five years and a slightly higher
percentage, 37%, feel that demand will
remain steady in the coming five years.

A larger percentage of respondents

(~50%) feel that demand will increase
in the coming years in comparison to
the previous five years (39%). No response
7% Will stay the
same
37%

Will Increase
50% Will decline
6%

Figure 33: Changes in the demand

for eastern redcedar products
over the next five years (mail survey)

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 33
Specific Demand Trends for Eastern Redcedar

Phone survey results enabled

further investigation of demand
trends and the factors that
I don't know
influence them. We analyzed the Stay the same 4%
demand trends in the next 10 20%
years for different levels of
quality. Almost 3/4 of the Decrease
4%
respondents (72%) believed that Increase
the demand for good quality 72%
redcedar materials would
increase, 20% felt that the demand
for good quality redcedar
materials would remain the same
and 4% felt that the demand would decreaseFigure 34: Demand for good quality redcedar
(Fig. 34).
materials/products
over the next 10 years (phone survey)

In terms of average quality redcedar,

I don't know 44% of respondents felt that the
Increase
12% 24%
demand would stay the same, 24% felt
that demand would increase and 20%
felt that demand would decrease
Stay the Decrease (Fig. 35).
same 20%
44%

Figure 35: Demand for average quality redcedar

materials/products over the next 10 years
(phone survey)

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 34

Demand for poor quality I don't know Increase

redcedar materials is as follows: 20% 16%
40% feel that demand will
decrease, 24% feel that it will
remain steady, and 16% feel Stay the same
24% Decrease
that it will increase (Fig. 36). 40%

Figure 36: Demand for poor quality redcedar

materials/products over the next 10 years
(phone survey)

Bottom line, the perception of the phone

survey respondents is that the demand
for redcedar products in their primary
Decrease
marketing area will stay the same (48%)
12%
Stay the or increase (40%). (Fig.37).
same
48%
Increase
40%
The logical conclusion is that demand
for redcedar materials will remain the
same or increase. More specifically,
demand for good quality cedar will
Figure 37: Demand for redcedar increase; demand for average quality
materials/products will stay the same; and the demand for
in the primary marketing area (phone survey) poor quality will decrease. This trend is
expected as the redcedar industry
continues to upgrade its standards to
produce higher quality products.
In the future, the focus should be on
good quality redcedar material. Given
the substantial projected increase in the
resource base, good quality redcedar
should be readily available in major
redcedar regions of the United States
(AR, KY, MO, TN).

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 35
Current industry trends that influence demand
Current industry trends that have increased the there is little to no power. Those products are
demand for redcedar products include an not differentiated and are perceived as
increase in exports, changing fads (such as commodities with no cost for buyers to
western style furniture or using cedar mulch for switch from one supplier to another. As
landscaping) and growth in the use of cedar primary and secondary manufacturers add
bedding in the poultry industry. Other trends value to the product, bargaining power could
that directly influence demand include the possibly increase along the chain.
recent influx of poor quality redcedar products From the buyers’ perspective, very little, if
and the ban on copper chromated arsenate any, bargaining power is exerted. There
(CCA) treated lumber. doesn’t appear to be one single buyer that
The sluggish economy, tourism markets (which purchases large volumes of redcedar
support the novelty markets), and the material. However, it should be noted that the
importation of substitute products also have an large volume “do-it-yourself” home
indirect influence on the demand for eastern improvement stores, such as Lowe’s and
redcedar products. Home Depot, were not included in the
In conclusion, based on the results of both the surveys. It is possible that they would have
mail and phone surveys, very little bargaining some bargaining power over suppliers, due in
power is exerted along the value chain. At the part to their large volume and customer
level represented by landowners and loggers exposure.

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 36
Force 4: Threat of substitute products or services
Following the mail survey, the conclusion was the construction industry and would not meet
that western redcedar (Thuja plicata) may pose building code requirements.
a threat as a substitute for eastern redcedar and • Furniture and gift items
that in general, the trend toward products that Eastern redcedar can be used for almost
are "natural" (not chemically treated) provides every kind of furniture, especially for cedar
eastern redcedar an advantage over other types chests, wardrobes and closets. The fragrance
of substitutes. of cedar is recognized for repelling moths.
Cypress may be a substitute for eastern
The results of the phone survey provided more
redcedar in the manufacture of furniture or
detailed information about the potential
gift items. It can be cut to longer, wider
substitutes for eastern redcedar based on
material. However, cypress is more
specific uses of the wood.
expensive, less available and harder to work
• Construction
with. Pine and oak are also substitutes for
The beauty, fragrance, durability, ease of
redcedar in manufacturing boxes and
maintenance and resistance to insect infestation
novelties but eastern redcedar is less
and decay makes eastern redcedar the material
expensive.
of choice for many construction companies and
• Mulch
individuals. Compared to eastern redcedar
Compared with the mulch obtained from
lumber, western redcedar lumber can be of
other types of wood, eastern redcedar mulch
better quality (longer, wider material) and more
distinguishes itself by its appealing color,
readily available. But western redcedar has a
which resists fading better than other natural
shorter life span, is harder to mill, splinters
products. The color is complemented by the
easily, lacks the smell and resistance to insect
attractive aroma and insect (termite) deterring
infestation, and is more expensive.
properties.
By injecting wood with chemicals, treated • Shavings
wood receives some of the properties possessed If used as pet shavings, eastern redcedar is
naturally by eastern redcedar: rot resistance and better quality than pine shavings, rice hulls or
splinter-free. Treated wood can be cheaper and saw dust. It is more available and healthier to
more available but contains harmful chemicals animals, but it can be more expensive. If
such as arsenic. Treated lumber is also subject compared with polystyrene, hay or canvas to
to EPA regulations. pet bedding, eastern redcedar pet bedding is
Redwood could be another potential substitute higher in quality, natural, and not harmful to
for redcedar. It has a better grade and quality, the environment. On the flip side, it is more
and higher insect resistance, but is less expensive and less available than these
available, more expensive and is subject to potential substitutes.
concerns over sustainability. The phone survey confirmed that eastern
Looking beyond the survey it must be stated redcedar is perceived to be unique, with very
that there are no strength grade or construction few close substitutes. Eastern redcedar
grade specifications developed for eastern possesses a unique fragrance, rot resistance
redcedar. Eastern redcedar does not grow and insect repellent qualities all derived
particularly tall, so long lengths of lumber, naturally that places it in a niche by itself.
required for construction, are not available to

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 37
Force 5: Rivalry among existing firms
Rivalry among existing competitors
can be fierce. Companies can never
stop learning about their industry, 10-20 None
their rivals, or ways to improve or 12% 8%
modify their competitive position.
When studying the eastern redcedar
market, the mail survey provided us
with information about who the
players in the redcedar market are 1-10
but not very much about the 80%
competitiveness of the industry. By
using targeted questions, the phone
survey provided more information Figure 38: Number of companies that sell/buy/use
about the competitive environment redcedar products in area
in the redcedar industry.
Based on the phone survey, the level of area. Eighty percent of the respondents
rivalry in the eastern redcedar market is mentioned between one to ten companies
perceived as non-competitive to moderately that sell/buy or use redcedar products in
competitive. Only 8% of the 25 respondents their area, while 8% are without any local
considered the industry to be highly competitors. (Figure 38)
competitive while 48% considered it to be
non-competitive (Figure III, Appendix). One
reason of reaching this conclusion is the
small number of competitors in any given

Decrease
20% Respondents indicated that the number
of competitors will either stay the same
Increase (68%) or decrease (20%). Only 12% of
12% Stay the respondents felt that the number of
same
68%
competitors will increase in the next 5
years (Figure 39).

Figure 39: Opinion about the number of competitors

in the next 5 years

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 38
Phone survey
respondents indicated
that competitors are
attracted to the eastern
redcedar industry by 5%
It is a niche market
two classes of factors.
Generic factors such as
the perceived profit Independence 10%

and the independence

that a private business Total utilization of the 14%
offers would attract material
some competition.
Availability of red 5%
Specific factors for the
cedar
redcedar industry such
as the total utilization 43%
Perceived profit
of the product, the
availability of redcedar
0% 10% 20% 30% 40% 50%
and the fact that this is
a growing niche
market would attract
other competitors
(Figure 40).
Figure 40: Aspect of business that would attract competitors

In response to new competitors, most (68%) of

the companies already present in the redcedar relationships with the suppliers and customers
market stated that they had no special strategy will assure protection from new competitors.
or reaction to new companies entering the
market. Their approach is to keep producing Only 8% of respondents stated that they would
their products, focusing on quality service. welcome competitors because competition is
the best thing in the world for a business.
Another 16% of the respondents indicated that Another 8% declared that they wouldn’t like
they would have a cautious reaction towards a to be pressured by new competitors and they
new competitor. They mentioned that they would possibly cut prices to maintain their
would strengthen relationships with other position in the market.
participants in the value chain as a reaction to Based on the responses from the survey, the
new competition. The relationship between level of rivalry in the redcedar industry is
suppliers and buyers plays an important role in relatively low. The participants in the redcedar
the ongoing success of those already in the industry may only compete for raw materials
market. Good communication and good in areas where quality inputs are scarce.

University of Missouri Center for Agroforestry

 39
Additional Market Forces: Policy

Although governmental and non-governmental eastern redcedar is not harvested or managed

policy is not recognized as a “force,” per se, in a way that would be consistent with
the Five Forces Model acknowledges that sustainable management practices. In
policy influences all forces in the model. northern and western Missouri, redcedar is
Several policies were mentioned during cut out of fence rows or cleared out of areas
preliminary interviews that were perceived to where regeneration is not wanted. However,
have an affect on the redcedar industry. Those due to its persistence, redcedar remains a
policies included: species that is spreading rapidly. Certain
large volume retailers had insisted that all
• the ban on CCA treated lumber,
their lumber be sustainably harvested,
• the implementation of sustainable
meaning that care is taken to ensure future
certifications for suppliers to Lowe’s
harvests and preserve forest health. It was
and Home Depot, and
feared that these retailers would pull eastern
• management practices adopted by State redcedar products off their shelves until
natural resource agencies determined to suppliers could certify that the redcedar was
eradicate redcedar. being sustainably harvested. There are no
These policies all were perceived to have an significant producers of certifiable redcedar
effect on either the potential supply or the products. Fortunately, over the past year, this
demand of redcedar. Through follow-up requirement has been relaxed and redcedar is
surveys and interviews it was determined that still being sold in large volumes at these
the policies that were presumed to have the retail institutions.
greatest impact, had little or no impact on the Finally, it was reported that several States
market. For example, it was presumed that have adopted the policy of cutting and
with the ban on CCA treated lumber, the burning young redcedar trees in order to
demand for the rot resistance of redcedar prevent its further spread. These management
lumber would impact that market in a positive practices have had a minor effect on the
way. However, several factors have minimized supply in some areas, but are not widespread.
the effect of that ban. First, although CCA has Alternately, other policies adopted by the
been banned, it is still readily available in any government have increased the potential
retail outlet. Second, other alternate methods supply of redcedar. For example, many of
of treating wood have taken the forefront and the conservation easement programs funded
are being promoted as viable alternatives. by the United States Department of
Finally, only a very small amount of the Agriculture have removed management from
redcedar sold in the market was used as an agricultural land and allowed redcedar to
alternate for CCA treated lumber, such as in spread into areas that were once cropped or
decking and fencing material. grazed. It appears that the redcedar industry
Sustainable forestry was also perceived to be a has been relatively free from direct
policy issue that would have a major impact on governmental policy intervention.
the market for redcedar. For the most part,

University of Missouri Center for Agroforestry

 CONCLUSION 40

The analysis of the competitive forces helped Next steps:

us identify resources and relationships needed For the collective benefit of the redcedar
to be successful in the redcedar market. industry, it is suggested that industry
participants join their efforts to identify and
Critical resources needed to successfully
pursue actions to grow the overall market.
compete in the eastern redcedar marketplace
Actions to be taken in the near future might
include access to raw material and labor,
include:
market knowledge (where and how to sell
Ö Creation of a redcedar marketing board
everything that comes out of the mill),
to increase awareness of market
financial resources (even if it is possible to
opportunities.
start small and grow the business in time), and
Ö Developing an infrastructure by
the cultivation of personal relationships
working with federal/state agencies to
among players in the market value chain.
facilitate the flow of goods and
To gain an edge over other firms in the information through the market.
marketplace, the companies must build Ö Linking industry participants with
competitive advantages. A competitive research institutions to develop new
advantage can be a better price for the value market opportunities by exploring
offered, a higher and consistent quality, a alternative uses for eastern redcedar
recognized brand name, or additional services wood, oil, and products.
offered (availability, in time delivery,
Ö Encourage private landowners to
convenience, flexibility, serviceability, and
manage redcedar stands and foresters
reliability). Understanding of the coordination,
to learn more about how to manage it.
control, and relationships within the market
can also be a valuable competitive advantage.
Concentrating on small market niches, Creation of a redcedar marketing board
knowing where the resource can be found, One of the key characteristics of the current
having good management and a trained work redcedar market is the disjointed nature of the
force, building strong relationships with market participants. Little coordination exists
suppliers and customers, and watching for between participants in the market for
competition are some keys that help redcedar products. The market consists
companies to be successful in the marketplace. primarily of numerous individuals functioning
We performed an overall analysis of the autonomously. Because these market
participants are disjointed, efficiencies that
redcedar market. Each company, based on its
could benefit all players in the market are lost.
position in the value chain, must understand
the competitive forces that apply to them and By creating a redcedar marketing board,
overcome the specific barriers. coordination within the market would help
reduce these market inefficiencies.
This research has shed some light on the inner
For example, from our survey it was
workings of the redcedar industry. The market
determined that the supply of raw redcedar
directory provided is intended to help make
material in states such as Oklahoma and Texas
new contacts in the market and develop new
seemed to be limited; however, in Missouri
relationships.
and Arkansas, redcedar is so abundant that
people are paying to have it destroyed. A red

University of Missouri Center for Agroforestry

 41
cedar marketing board would be able to cedar prices and growth rates are reported
coordinate supply and demand, provide a through these agencies, more could be done to
contact point for those who are looking to buy help establish an infrastructure that promoted
or sell redcedar, and lobby governmental the redcedar industry.
agencies to adopt management practices on For example, the USDA has developed
public land that benefit the growth of good marketing standards for all the agricultural
quality redcedar. commodities. When “corn” or “pork bellies”
Regional and local organizations can be are marketed there is an understanding of what
formed to help educate the market about the is being traded. For “corn”, buyers and sellers
use and management of the redcedar resource. understand that it is a fixed number of bushels
These regional and local groups can work with of number 2 yellow corn with a specified
public educational institutions and programs, moisture content. However, no such
such as Future Farmers of America (FFA) or understanding exists in the redcedar market.
University Outreach and Extension to educate As a result, buying or selling raw redcedar
landowners and future landowners of the materials requires a considerable amount of
potential redcedar markets. negotiating on terms of quality and quantity.
Eastern redcedar’s invasive nature has been Most timber species have specified standards,
one of the greatest impediments to its market yet eastern redcedar’s standards of quality are
development. Very little effort has been spent extremely vague. From this research it was
on understanding what it takes to improve the quickly discovered that redcedar quality was
growth or quality of the species. Likewise, often defined differently depending on what it
very little effort has been put into was going to be used for.
understanding its market uses and potentials. Landowner’s who have redcedar growing on
The abundance of redcedar has translated into their property will be reluctant to participate in
the idea that it is a low value species. A a market where standards of quality and
marketing board can work with research quantity are not clearly defined, simply
institutions in order to develop new uses and because they are not in a position to negotiate
markets, as well as improve the quality of the price or hedge against risk.
products that are sold.
Coordinate industry participants with
Develop an infrastructure by working with research institutions to develop new market
federal/state agencies opportunities
The United States Department of Agriculture In several areas of the country, research
(USDA) has supported many agricultural institutions are beginning to work with
industries since it was established. Without landowners to develop new market
the USDA’s production and price reports, opportunities. For example, the Oklahoma
many agricultural commodities would suffer Redcedar Association is working with
greater market risks than they currently Oklahoma State University to develop a
experience. Likewise, many federal or state particle board product that can be used in
agencies provide information about timber closet lining and other places where solid
markets and timber growth, such as the wood redcedar had typically been used.
Missouri Department of Conservation’s Likewise, Niobrara Valley Wood Products in
quarterly timber reports or the US Forest Nebraska is working with the University of
Service’s FIA database. Although eastern red Nebraska to form a cooperative of eastern red

University of Missouri Center for Agroforestry

 42
cedar marketers. In each case, the partnership A joint effort between The University of
of market participants and research institutions Missouri Center for Agroforestry and US
has been a positive force in laying market Forest Service North Central Research Station
foundations. will develop a handbook for redcedar that will
provide an all encompassing look at
A template for an Eastern Redcedar Marketing
production, biophysical characteristics, and
Board already exists for the western redcedar.
markets. The goal of this handbook is to
The Western Redcedar Lumber Association
provide landowners with a basic
(WRCLA) is a non-profit association
understanding of redcedar and the industry in
representing 28 quality producers of Western
order to promote their involvement in the
Redcedar lumber products in Washington,
market.
Oregon, California, Idaho, North Dakota
(USA) and British Columbia (Canada). Encourage private landowners to manage
Known as "the voice of the cedar industry"- redcedar stands and foresters to learn more
the WRCLA operates customer service about how to manage it.
programs throughout the United States and Studies have shown that growth and yield of
Canada to support its members' cedar products eastern redcedar are affected by site quality,
with information, education and quality stand density and hardwood competition 3 .
standards. [Link] Good growth rates can be maintained by
Other institutions, such as the Midwest controlling competition and stand densities.
Research Institute, are looking at the chemical In a 45-year-old eastern redcedar stand,
properties of eastern redcedar that can be used highest volume growth was obtained in
as a natural insecticide or to provide rot unthinned stands from which hardwoods had
resistance to other types of wood. been removed, double the growth of stands
Researchers at the USDA Forest Service, where hardwoods were left. 4 Maintaining
Forest Products Laboratory (FPL), have relatively dense stands can maximize post
developed a new kind of water filter made production. Thinning one or more times
from a variety of wood fibers including before harvest cut hastens sawlog production
eastern redcedar that show promise in but may not increase total yield. Eastern
cleaning water contaminants in a more redcedar should be managed in even-aged
effective and less expensive way. These filters stands, judging from studies conducted in
are cleaning heavy metals from former mine northern Arkansas.4 The ideal density for
sites; phosphorus, nutrients, and pesticides growing saw logs is not known, but excessive
from agricultural activities; and oil from thinning may promote excessive formation of
highway and parking lot runoff. sapwood and growth of lower branches.
As mentioned earlier, the invasive nature of
eastern redcedar has hindered the interest in
research into redcedar reproduction; however, 3
Lawson, Edwin R. 1985. Eastern redcedar - an
a need for research on the production of non- American wood. USDA Forest Service, FS-260.
invasive ‘male’ cultivars could promote the Washington, DC. 7 p.
use of eastern redcedar for windbreaks, timber 4
and other product applications. In terms of Ferguson, E. R., E. R. Lawson, W. R. Maple, and C.
wildlife habitat, male redcedar (lacking fruit) Mesavage. 1968. Managing eastern redcedar. USDA
Forest Service, Research Paper SO-37. Southern Forest
would provide winter cover but would not Experiment Station, New Orleans, LA. 14 p
function as a food source.

University of Missouri Center for Agroforestry

APPENDIX 43

41-70 0-5
20% 12%

21-40
12% 6-10
36%
11-20
20%

Figure I: Years in business (phone survey)

national
36%

local
52%

regional
12%

Figure II: Primary marketing area (phone survey)

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 44

Highly competitive
8%

Non competitive
48%
Moderately
competitive
44%

Figure III: Level of rivalry in area (phone survey)

AR

TN

KY

MO
States with at least 50 million trees

VA

NC

SC

AL

MS
OK

IN

TX

NJ

NE

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000

Number of trees (thousands)

Figure IV: Total number (thousands) of trees by state

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 45

Number of trees per acre by county

0-2 32 - 64

2-4 64 - 128

4-8 128 - 256

8 - 16 256 - 307

16 - 32
Based on most recent FIA data (8 Sept. 2003)

Figure V: Eastern redcedar: Density of trees on timberland

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 46

Millions of trees per county

0 – 0.5 8 - 16

0.5 - 1 16 - 32

1-2 32 - 64

2-4 64 - 128

4-8 128 - 482

Based on most recent FIA data (8 Sept. 2003)

Figure VI: Eastern redcedar: Trees on timberland

University of Missouri Center for Agroforestry