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Upstart ‘niche’ mills survive, thrive through innovation

January 19/26, 2015; Volume 28/Number 15

By K.J. Quinn

Screen Shot 2015-01-19 at 3.35.29 PMIn the past 10 years, the carpet industry witnessed the entry of new mills during a time when flooring sales were sporadic. But despite facing long odds and stiff competition, these start-ups quickly ramped up operations, carved a niche for themselves and helping them thrive.

“Most of [the new manufacturers] are focused on a specific part of the market and are not trying to be everything to every retail channel,” explained Ed Williams, president of Lexmark Carpet Mills’ residential division. “There is also the opinion that different retail channels want to have larger numbers of suppliers for various reasons.”

Each “specialty” mill that entered the scene in the past decade filled a void or specific market niche, and/or introduced innovation previously unseen in a business dominated by three major players who represent approximately 80% of carpet industry sales.

“We have fundamentally shifted how carpet will be made in the future,” said James Lesslie, assistant to the chairman, Engineered Floors. “That’s what makes us different. Our competitors might think we’re a bunch of weirdos, but it’s the same story we tell customers.”

Engineered Floors was established in 2007, during a time when the carpet industry was mired in a deep recession. The residential carpet business was in a state of flux, having dropped nearly 50% from its peak in 2005. But the person behind the new company—industry icon Bob Shaw— gave credence that it could succeed. “We had a founder with a lot of experience in growing companies,” Lesslie pointed out.

Meanwhile, other factors came into play to create what Lesslie called, “the perfect storm. Polyester (PET) fiber went from No. 3 or No. 4 in residential volume and quickly became No. 1 in volume fiber. Solution-dyed became the fastest growing segment within polyester.”

Creating an edge in the market, Engineered Floors introduced a proprietary solution-dyed polyester fiber system called PureColor. What makes PureColor distinct is the color is part of the material and goes all the way through the fiber. By comparison, many other carpet fibers show color on the surface only, which can wear off or fade over time.

Screen Shot 2015-01-19 at 3.38.15 PM“It’s a tremendous challenge when dying carpet to make sure the color is consistent throughout the dye run,” Lesslie said, noting that putting the color into the fiber when it is made virtually eliminates “side match,” a major industry quality control issue. By tweaking the traditional carpet production process, the mill claims its quality levels are six times higher than the industry average.

A second major advantage is solution-dyed polyester carpet can be produced at less cost than competing products. Because of the way PureColor is made, the mill uses considerably less energy and 50% less oil than piece-dyed nylon. “We’re a ‘disruptive technology’ to the carpet industry,” Lesslie noted. “We streamlined carpet operations in one facility, but, more important, we eliminated the step of using water to dye carpet.”

Since its founding, Engineered Floors has executed a rate of growth and expansion not seen in the carpet industry since the late 1980s and ’90s— an estimated 400% over the past few years. Last year, the mill added

1 million square feet of capacity and announced another expansion that would more than double its workforce in northwest Georgia.

Innovation and growth in PET

One specialty mill that quickly established a reputation as a leader in the development and growth of the residential PET category is Phenix. The company believes polyester’s continued growth in residential is due, in part, to advances in extrusion equipment that helps create a uniform, highly bulked yarn.

“Our objective is to continue to leverage our ability to manage a complex manufacturing process and bring differentiated products to the market,” said Susan Curtis, vice president of marketing and product development.

Phenix has particularly found success in responding to market conditions with products that meet the changing usage of carpet. “As the consumer redefines how and where she will use carpet, we have the opportunity to rethink how these products interact with other finishes and provide differentiated solutions,” Curtis noted. “In addition, the strength of our retail partner relationships and their desire for a viable and creative alternative supplier has been an important factor.”

The company plans to continue bringing products to market which center primarily on PET and nylon “soft” carpets.

High-end styles provide competitive advantage

Screen Shot 2015-01-19 at 3.43.14 PMEach supplier that entered the carpet industry in the early 2000s quickly established its own set of competitive advantages. For instance, Moda, established in 2005, had a goal of providing unique styling with superior quality and service. In the past two years the company has reported double-digit sales growth, a notable accomplishment during a time when the carpet industry was still recovering from the recession.

“We introduced tone-on-tone patterns unique to the marketplace,” recalled Don Kazarian, president, noting patterned carpet and solid colors were in vogue. “We had 18 styles in [approximately] 30 colors and everything from a typical cut pile to some very unique, random patterns.” Price points ranged from around $20 to $50 per square yard uninstalled, with the high-end product consisting of an 80-ounce cut pile, or a heavy three-tone shag carpet.

All Moda products are made from nylon 6,6 Stainmaster continuous filament fiber and beck dyed. “Submerged in the dye for a period of time gives us better color continuity,” Kazarian said. “It virtually eliminates end-to-end side match issues and allows us to do custom colors.” One of Moda’s top-selling products, Treanna, is a random cut-and-loop carpet with three color options, retailing for about $45 per square yard uninstalled.

The mill is launching two TruSoft carpets featuring tonal cut-and-loop patterns and two TruSoft texture cut piles. “We offer a very liberal custom color program,” Kazarian added. “Continued product introductions have been key to our recent growth.”

While the bulk of its business is conducted in Western states, Moda plans to expand its penetration nationwide, with an eye on Texas, south Florida and greater Chicago. Earlier this year, Moda became a specialty vendor to the National Floorcovering Alliance and was recently acquired by Royalty Carpet Mills, a move that provides access to tremendous manufacturing assets, Kazarian said.

Affordable fashion in high-end broadloom

In a similar vein, Dixie Home was introduced in early 2003 as a brand to provide stylish, differentiated products that offer affordable fashion in the more moderately priced sector of the high-end broadloom carpet market. Dixie Home styles are made from premium branded yarns and include traditional velvets, contemporary patterns and a wide range of textures in fashion-forward colors.

“We use premium materials throughout the manufacturing process, featuring an extensive array of Stainmaster products,” said Paul Comiskey, president of residential sales, The Dixie Group.

According to Dixie, the Dixie Home brand experienced rapid growth and enthusiastic market acceptance, surpassing the $100 million dollar mark in total sales.

Dixie Home’s manufacturing scale gives the mill flexibility, allowing it to quickly respond to new trends, keeping the latest patterns and colors within reach of a wide spectrum of soft floor covering consumers. Additionally, Dixie plans on expanding its pattern assortment with new technology.

Hospitality visuals meet residential Interiors

Lexmark, which produces commercial carpets for the hospitality segment, expanded its footprint when it entered the residential market in 2012 with a collection that included 18 styles. The line—which featured a high-end look that appealed to a broad segment of consumers—was designed based on extensive market research to determine the best products and price points. In 2015, the mill is introducing a residential line featuring unique styles based on linen and worn wood, designs typically seen in hospitality settings.

“Our key objective in the short term is to bring some differentiation to the marketplace, and our customers will see that with first-quarter introductions in 2015,” Williams said. “We will be offering a new collection of high-definition looks that will be very unique to Lexmark.” The new line is called Tailored by Lexmark (FCNews, Jan. 5/12).

Lexmark has made investments in its manufacturing operations within the past few years, which included opening a new, larger facility to accommodate new equipment and offer better service and unique styling. “Our competitive advantage is just being good in a lot of areas,” Williams said. “Sometimes it is the little things that count and it is easier to manage that if you are a smaller player.”