Vertical integration in materials and timber, beginning with First Wood (2014)

Buying the people who send you invoices

Volume housebuilding is a trade in which the seller does not set the price. Local comparables fix the ceiling, and auctions fix what the land costs. What is left is the cost of building, and what Iida Group Holdings has been doing since 2014 is walking, company by company, into the inside of that cost. The firm that mills the timber, the firm that assembles the glass, the firm that makes the kitchens, the firm that makes the doors and flooring — every one of them had, until then, been sending it invoices. It was shopping that replaced negotiating terms with managing them internally.

What the substitution revealed is that the inside of the cost line still contains things you cannot read. The surge in timber prices hit its own procurement directly in 2021, and the Russian forests it obtained the following year were made hard to use by war. The 4.1% operating margin in the year to March 2024 is the figure recorded after taking four materials makers in-house. Vertical integration transfers the economics of a process onto your own ledger; it does not erase the market that process is exposed to. What Iida Group Holdings is now reaching for is neither processing nor raw material, but the selling side that faces the customer directly.