Durango Gravel

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Gravel Rock Products Business Plan

Market Analysis Summary

Asphalt products are required for road and driveway construction.  There are a significant number of roads and driveways which need to be paved each year.  There is at present only one area source for asphalt.  The high prices charged are a reflection of their monopoly.  Thus, there is a significant niche to be filled.

Gravel and rock-related products are a necessary ingredient to road building in the area.  There are a significantly large percentage of roads which need to be re-graveled each year.  In addition, there is a significant percentage of the population who have "retired" to the area, and are engaged in remodeling and making their new homes more accessible.

Also, the previously-described "window of opportunity" and the vulnerability of competitors to a customer-oriented operation are significant.  The average end-user is more concerned with customer service than with price. 

4.1 Market Segmentation

The major customer groups for Durango Gravel, Inc. are:

Municipalities, Schools and State Agencies. There are 12 municipalities in the immediate area who are using, or have needs for, our products and are in our target market.  They are able to utilize our products and the quantities we could manufacture.  As of this date, five are using us as one of their sources.

Larger Construction Companies. Many of the larger construction companies bid on state, county, city and large private construction projects,  We have bid on their gravel products and received 12 awards in the past six months.  We plan to bid on their asphalt needs as well this year.

Construction and Private Companies. The area is filled with smaller contractors who either purchase concrete, gravel and asphalt products directly, or arrange for them for a fee.  Many of the smaller contractors are not compensated to a significant degree, and have been eager to utilize a company such as ours.

Market Analysis
2001 2002 2003 2004 2005
Potential Customers Growth CAGR
Public 15% 10 12 14 16 18 15.83%
Private 15% 65 75 86 99 114 15.08%
End User 20% 60 72 86 103 124 19.90%
Other 0% 0 0 0 0 0 0.00%
Total 17.35% 135 159 186 218 256 17.35%

4.2 Target Market Segment Strategy

The population of the Four Corners Area has increased dramatically in the last 10 years and is still increasing, creating a greater demand for houses and roads.  A large percentage of this increase is attributed to both retirees, and those with substantial incomes who have purchased a second home.  Many people belonging to these groups have come from areas where good customer service is expected, and had been unhappy with the quality of customer service available before we began operations.

4.2.1 Market Needs

We understand that our target market needs more than just asphalt and gravel products. This need has grown out of increased population growth, the influx of a segmented customer base with significant disposable income, and the lack of change of our competitors to increased customer service requirements.

The market for asphalt, gravel and gravel-related products has grown at a steady rate for the past seven years, and shows no signs of abating. There are trends toward both more institutional and private road development and more private end-user interest in quality and customer service.

4.2.3 Market Growth

According to the three major suppliers in the region, as well as the La Plata Area Chamber of Commerce, the market in construction products has grown at 12% per year for the past three years, and is projected to increase.  More important is the increased need for road-related products.  With an almost 45% population increase in the county in the last 10 years, it is estimated that over 35% of existing county roads will require maintenance in the next four years. In addition, the extensive winters in the region are particularly difficult on gravel roads.  After two mild winters, this winter of normal snow will result in an increase in road maintenance.

4.3 Service Business Analysis

The last decade has shown a consolidation of suppliers by nationwide corporations. In numerous instances, these companies have policies which are set on a national level and are not "user-friendly" or responsive to the particular needs of this region.

The area asphalt market has but one producer at present, with predictable non-competitive pricing and customer service policies.

4.3.1 Competition and Buying Patterns

The Durango area is a region where "Word-of-Mouth" endorsements are unusually important. Most private end-user customers seem to choose their provider based on quick delivery, friendliness and customer service. Business and construction-related users choose based on the establishment of a mutually beneficial and trustworthy relationship.

4.3.2 Main Competitors

Oldcastle (Four Corners Materials)

Strengths - long-term relationships, 30 years in business, long-term employees, decent quality.

Weaknesses -  product, price and credit flexibility, foreign ownership, product reserves, travel and loading time, monopolistic practices in regards to asphalt.

C & J

Strengths - established, local ownership.

Weaknesses - limited products, limited reserves, location.

4.3.3 Business Participants

The main sales volume in this area is now concentrated in the following companies:

Asphalt: Oldcastle (Four Corners Materials).

Gravel (Durango): Oldcastle (Four Corners Materials), Durango Gravel, Inc., C & J, Sandco.

(Outlying Areas):  LaFarge, Gosney & Sons, Hocker.

All of these other companies compete with similar limited products and unchanging company policies. Products are similar, costs are important, but customer service and perception of honesty is critical. Our company has increased its participation in the local gravel market by 400% in just five months.