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Resilient sales rise, but do not tell whole story

by K.J. Quinn

Understanding the state of resilient flooring is similar to peeling an onion. By carefully removing each layer, one is able to uncover underlying causes impacting the business on many different levels.

“The industry still has a significant amount of unfilled capacity,” observed Dennis Jarosz, Congoleum’s senior vice president sales and marketing. “Combine that with available import products, and the biggest challenge becomes margin, as more producers compete for a market that has shown only slight overall growth.” Excess manufacturing capacity contributed to driving down prices in the mid to lower price points, suppliers say.

The heat is on resilient flooring suppliers as they wrestle with key issues impacting sales growth and profitability, particularly in the residential business. Fanning the flames are cost pressures, competition from natural materials, and dealers who are skeptical about selling resilient. Nonetheless, suppliers expect things to cool down soon, as innovations in luxury vinyl tile (LVT), fiberglass-backed sheet vinyl and installation systems take hold.

“LVT was phenomenal both commercially and residentially,” reports Frank Ready, executive vice president, Armstrong World Industries and CEO, Armstrong Floor Products. “Fiberglass (backed products) continues to grow at a great rate.”

The latest FCNews research indicates there’s plenty of life left in resilient. The category tallied approximately $1.83 billion in 2011 sales, up 6.3% from the previous recession year. Vinyl units were up as well, increasing 4.2% over 2010 to 2.47 billion square feet.

Meanwhile, vinyl’s sister product, rubber, achieved similar success in 2011, according to FCNews research. Rubber sales (which include cove base and accessories) were $504 million, up 3.5% from 2010. The 222 million square feet sold rose 2% over the prior year. While most rubber flooring is specified in the commercial arena—where its functional and design properties are coveted—the category experienced a residential resurgence the last several years with the advent of home gyms. And as safety issues become more important, raised rubber tile reportedly gained increased usage in potential slippery environments.

While the numbers paint a favorable picture overall for resilient, experts say they do not tell the whole story. Builder (namely tract housing), the bedrock market for vinyl, was weak last year based on the low number of new housing starts, and residential replacement sales rose slightly.

Volume from specialty retail and home centers was mixed, depending on region and market specialization. Multi-family construction opened up last year and remains a strong segment which can yield incremental sales for resilient.

There’s more. The sluggish economy contributed to price-conscious consumers trading down to lower priced resilient floors. Vinyl sales were partially inflated from price increases—primarily the result of higher raw materials costs—and pent-up demand for LVT. And al-though sheet vinyl flooring sales were up, suppliers say, this was driven largely by the fast growth of fiberglass-backed products.  “This is apparently happening even faster than many would have predicted due to greater acceptance of (fiberglass-backed) products and a broader selection of product qualities and price points,” said Paul Murfin, president, IVC U.S.

 

Installation ease drives glass

Statistics are hard to pin down, but fiberglass-backed floors represent approximately 35% of resilient sheet sales and forecast to continue growing, according to industry estimates. Felt-backed floors are said to offer similar performance and offer better embossing and texture. However, the ease of installation (handling) and higher perceived quality of fiberglass (thicker and heavier) have made it one of the fastest growing categories in the industry.

Last year marked Armstrong’s first full year of offering three glass-backed products: Duality, StrataMax, and CushionStep. “They continue to do well,” said Allen Cubell, Armstrong’s vice president of residential resilient products. “StrataMax is the most durable floor with a 70% limestone backing and has a great performance story for property management.”

The major selling points of fiberglass-backed floors are comfort underfoot, high style and flexibility. “Fiberglass-backed flooring is the very near future for all sheet vinyl products, based on ease of installation, moisture resistance, comfort, structural integrity and superior design,” stated Bruce Ziegler, Tarkett’s director of product management – residential. “Felt-backed products can’t perform as well and the only advantage they have is potentially price; (but) even that is diminishing as manufacturing efficiencies are lowering the cost of fiberglass.”

Installation is, perhaps, the biggest point of differentiation between the two products, suppliers say. Traditional felt-back products are ideal for full spread and most perimeter-fastened installations, while fiberglass- reinforced floors offer the choice of modified loose lay (using tape to secure the vinyl sheet under appliances and at doors), or full-spread adhesive options. The loose lay method not only saves time and reduces overall installation costs associated with the use of adhesive and subfloor preparation, experts say, but enables consumers to remove/replace the floor as their decorating choices change.

“Floating” installation systems represent an estimated two-thirds of resilient sales and 50% of units sold while glue-down products represent the remainder, according to industry estimates. “Floating floors of all types are gaining momentum,” Congoleum’s Jarosz observed. “It saves on installation cost and makes for easier future replacement.”

The first widely marketed floating LVT incorporating a grip-strip locking system—Metroflor’s Konecto—was considered a boon to the category, according to Russ Rogg, Metroflor’s president and CEO. “Last year was all about turning the corner, getting Konecto in the right direction and launching Engage,” Rogg said. “Our business is growing today because of those efforts.”

Changing face of LVT

A second major factor fueling resilient sales is the product’s good looks. Perhaps more so than any other flooring category, resilient has undergone significant advances in styling, which have enhanced its value and appeal to consumers. Product improvements, especially in visual reproduction and improved realism and fidelity of wood and tile designs, have put vinyl in a new light.

“LVT grows residentially and commercially, and glass-back [products] continues to grow,” observed Kim Holm, president, residential business at Mannington Mills. “We continue to focus on what we do best, which is our styling, and we enjoy a great reputation with our retail partners who have enjoyed a great deal of success because of our styling.”

LVT continues to benefit from its realistic styling and shapes which allow it to resemble wood and ceramic. An estimated two-thirds of floor designs sold resemble wood strips and planks and the remainder mimic tile, according to industry estimates. Although LVT is priced higher than sheet vinyl floors, it is now the largest subcategory and  continues to grow by double digits, industry watchers said.

Armstrong positions its Alterna and Luxe Plank LVT collections against the natural materials they emulate, rather than competing resilient products. Alterna mimics quartz, travertine and slate, while Luxe closely resembles hardwood. “We saw a lot of growth in Alterna and Luxe,” Cubell said. “Alterna is winning because of style and design and stealing sales from stone and ceramic, sheet vinyl and even some laminate. Luxe is winning because of style and design, and not just the installation story.”

LVT is touted as both a vinyl upgrade and quality alternative to tile and wood, as the final cost is less than natural materials because installation costs are considerably lower. “LVT generally looks really good and is easy to install,” IVC’s Murfin said. “Glueless systems take this to the next level.”

Looking ahead, experts said the challenge for the resilient industry is simple, yet complex: Continue to develop value-added products that meet consumers’ needs while increasing customer satisfaction and dealer and distributor profit margins. The companies that figure this out, experts explained, stand to be the most successful.

But such a task is easier said than done. A case in point is the heightened competition domestic suppliers are facing from importers. A major challenge is communicating the differences in how factories produce their resilient floors and their features and benefits.

For example, “there are dozens of upstart factories that are selling LVT at low prices,” noted Jonathan Train, vice president of product development, EarthWerks. “Some are good and well managed while others will face major obstacles.

“We have been well established in the LVT business for decades and it is important our customers understand that value.” Train reports EarthWerks’ LinkWerks LVT is taking market share from other flooring categories, as it is used in place of laminates, hardwood and ceramic.

IVC enters its first full year as a U.S. manufacturer after transitioning from a company that imported product from Belgium the previous year. “Most of the efforts were spent on getting our new plant in the U.S. up and running,” Murfin explained. “The changes put us in a position for significant growth in 2012.”

While vinyl is still the flooring of choice for bath, laundry and utility rooms, it is expected to continue facing stiff competition from laminate, tile and wood in kitchens and entryways. When pricing in the high-end, part of the market overlaps with that of natural materials, industry members say resilient is often ruled out as a decorative element. As a result, the category is losing valuable real estate inside the home.

But suppliers contend the pricing issue is not so cut and dry. They claim resilient actually represents more bang for the buck than any other floor covering when you consider its performance and design benefits. And depending on the product, resilient is said to offer profit margins that can be at least 10% higher than other hard surfaces.

“Today’s purchaser of flooring in all segments—consumer, property manager, and builder—is willing to spend dollars on the product that brings them the most value according to their needs,” Tarkett’s Ziegler said. “The brand or dealer that satisfies their needs the most will survive and thrive, even in an uncertain/volatile renovation and housing market.”