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Ceramic: State of the Industry—Housing strength, buying trends boost consumption

November 21/28, 2016: Volume 31, Number 12

By K.J. Quinn

screen-shot-2016-11-28-at-11-02-48-amWhile much excitement in the U.S. flooring industry surrounds innovations in LVT, the irony is most of these faux designs resemble a product requiring no introduction: ceramic tile. The category is making some noise of its own, as new digital printing technologies and larger formats are driving pent-up demand in the residential market.

“Speaking with various manufacturers and tile distributors at TSP, everyone seems busy and their sales are up,” said Donato Pompo, president, Ceramic Tile and Stone Consultants. “Everyone seems to be looking forward to continued growth in 2017.”

While industry sales and consumption projections vary widely due to fragmentation, the category is on pace to post 10% growth in sales and volume in 2016 and similar results are expected next year, according to industry estimates. Tile is also more accessible to consumers than ever before, as nearly all flooring retail channels sell it.

“We have seen positive growth in the domestic residential ceramic tile market, particularly in the new residential segment,” said Gianni Mattioli, executive vice president, product and marketing, Dal-Tile.

Tile of Spain is bullish about category growth, noting U.S. residential and commercial tile sales have been strong the past 36 months. Year-to-date U.S. ceramic imports from Spain increased 35.5% in value and 46% in volume. “Tile of Spain feels it is going to be a great year for Spanish ceramic tile manufacturers, consolidating a growth that started in 2011,” said Rocamador Rubio Gomez, director of Tile of Spain U.S.

Traditional metrics used to gauge the state of ceramic—such as strength of the U.S. economy, lending and unemployment rates—are pointing in the right direction. But what really has industry members excited regarding prospects for next year is good news from the home front. New single-family housing, the single-largest economic indicator for the residential market, rose 3.1% in September to a seasonally adjusted rate of 593,000 units and is up nearly 30% over last year, according to the U.S. Department of Housing and Urban Development and U.S. Census Bureau. “In recent years, single-family homes have continued to grow larger in size, which is positive for the ceramic tile market, since the category represents a greater percentage of the flooring used,” Mattioli said.

While the builder business remains on solid ground, it still lags behind growth rates prior to the 2008 recession. “The market is fairly good, even if residential housing is still stuck below the normal [annual] level of 1.5 million housing starts,” observed Donato Grosser, president and chief consultant, D. Grosser & Associates. “If housing starts were up to 1.5 million, you’d see a lot more tile sold.”

Indeed, there remains plenty of room for growth, as the U.S. market has only scratched the surface in per-capita use of ceramic. Tile as a percentage of total flooring in new homes continues to rise as it finds more applications in spaces such as patios, garages and basements. “We are also seeing an increase in overall dollars per home sales, so that means more premium finishes—which benefits tile,” noted Sean Cilona, director of marketing and product development, Florida Tile.

Issues impacting growth
screen-shot-2016-11-28-at-11-03-11-amWhile the builder market is the biggest driver of U.S. residential tile consumption, there are other issues emerging which stand to impact sales and volume in 2017. For example, the stronger U.S. dollar is reportedly reducing the cost of imported products. “The increase of lower-priced imports is affecting overall price and competition with domestic suppliers,” Cilona stated.

Ceramic, like all floor coverings, is losing an untold number of opportunities to LVT. Nonetheless, suppliers are convinced tile’s position as a premium, natural product will win out, as there are products for all shopping budgets. “Tile is better than any other floor and can last longer,” Grosser said. “If someone is buying for the short term, they may buy a cheaper product which may have to be replaced in five years.”

Another issue is the perennial shortage of qualified installers. “Tile installers typically don’t have a formal education in how to properly install tile and they don’t know the industry standards,” Pompo explained. “Standards are created by a consensus group of tile installers, manufacturers, distributors, scientists and consultants in order to prevent reoccurring problems.”

To that end, the University of Ceramic Tile and Stone (UofCTS) offers an online course, “Tile Installers Thin-set Standards (ITS) Verification,” to teach floor layers the industry standards. “Installers who are ITS verified are more likely to provide quality workmanship and tile installations,” Pompo said. “This course is offered through CTDA, NTCA, TTMAC and Fuse Alliance.”

Cultivating and recruiting qualified labor is an issue vendors take very seriously—and for good reason. “It’s essential that there are plenty of experienced contractors to meet growing demand for tile installation,” said Lindsey Waldrep, vice president of marketing, Crossville. “It’s also essential for those installers to invest in training and education to successfully work with new products, particularly the increasingly popular porcelain tiles.”

Crossville has been proactive in helping to address this issue by participating in, hosting and leading training sessions for installers. “Whether holding training at our plant in Tennessee or providing hands on support for workshops at the regional level in partnership with our distributors, we are committed to helping installers achieve success with our creative solutions,” Waldrep said.

Continuing education among installers is important when you consider the plethora of new tile products hitting the market each year. “New technologies and new products may [not] impact the supply chain, if all agents involved do not have proper knowledge about applications, installation and many other factors,” Gomez pointed out. “That is why, for Tile of Spain, education has always been so important. We place a priority on informing the tile community of new technologies to the U.S. market as soon as the manufacturers put them into the supply chain.”

Innovation improves value
screen-shot-2016-11-28-at-11-03-04-am2016 saw investments made in digital printing technologies which enabled producers to introduce game-changing formats and designs. These innovations have completely transformed the category, allowing manufacturers to supply consumers with high-quality floor tiles that resemble concrete, wood planks, stone and marble.

“Cersaie 2016 demonstrated many of the new technologies in tile which illustrated the versatility of porcelain/ceramic in applications,” said Raj Shah, president, MSI. “This includes not only porcelain/ceramic flooring in differing but realistic looks, but also in numerous shapes and sizes that were never available before.”

The digital printing process has become so sophisticated that manufacturers are creating tile that varies from piece to piece, much like the real products. Size does matter as vendors continue churning out larger formats such as 16 x 16 and 24 x 24 inches and shapes to accommodate demand. “New sizes and shapes are opening new markets,” Shah pointed out. “Large-format tile, hexagons, planks, etc., are all available in tile today.”

The latest porcelain tile panels are opening up possibilities for creative applications in residences as well as installation efficiencies, observers say. These products are generously proportioned—available in sizes as large as 72 x 120—so they cover lots of surface area with minimal grout lines for a sleek, sophisticated look. “These large tiles require a whole set of new tools and methods for installing, transporting and storing,” Pompo said. “They can be installed over existing tile surfaces or over properly prepared wall or floor substrates.” UofCTS offers online courses on Thin Gauged Porcelain tile so architects, installers, distributors and industry members can stay updated on these new products.

In order to meet future market demands, suppliers are closely following shifts in the segment to ensure they are providing products that meet customer demands. “Many of the trends in the residential segment are positive signs for the ceramic tile industry, as they will lead to increases in sales,” Mattioli said.

Meanwhile, suppliers continue investing in manufacturing to bolster production efficiency and speed to market. “We have added a new rectification line to our manufacturing facility that allows us to offer this new style of product manufactured inside our facility without sending it out for a third-party application or purchasing it from our companies overseas—both of which add to the final cost,” Cilona said.