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Moldings find their match in multi-layer flooring products

August 5/12, 2019: Volume 35, Issue 4

By Megan Salzano

 

Multi-layer flooring has impacted the flooring market greatly as its quick acceptance by consumers has driven growth within the home. While it has taken share from other flooring categories such as laminate and hardwood, there is one subcategory that has welcomed the newcomer with open arms: moldings.

For some in the moldings game, the explosion of multi-layer flooring—including LVT, WPC and SPC—has opened new possibilities in design and, in turn, new channels of revenue. “The vinyl plank flooring category has basically introduced a completely new category for us,” said Tim Tipton, senior vice president of sales, Zamma. “While the laminate flooring business has been relatively flat the last few years, and we’re seeing a slow decline in hardwood, this has been a breath of fresh air for us.”

Even those manufacturers previously focused on categories outside of multi-layer flooring have opened their doors to the new opportunity. “As primarily a wood accessories manufacturer, sales on the majority of our wood profiles has remained flat,” said Bill Treiber, technical sales and education manager, Artistic Finishes. “The introduction of our Enduracor line of WPC accessories has allowed us to increase our sales. Now in its third full year in the market, Enduracor has continued to grow. The impact has been real.”

Treiber added that growth is becoming very diverse in the molding business due to the introduction and success of multi-layer flooring products. “It’s not just T-molds, reducers, stair nosings and square nosings,” he noted. “Today, we have to provide the complete package of accessories. The new trends are asking for treads, risers, millwork and floor vents also. With all the new multi-layer flooring products sprouting up in the flooring industry today, this task has become monumental in size and scope.”

Haley Plank, marketing manager at Flexco, noted the company’s product evolution in an effort to answer challenges unique to multi-layer flooring. “It has required us to develop products that are compatible with the flooring and wide enough to complete an installation successfully. We have introduced the new Base Sculptures Profile Wall Base with a 1⁄2-inch toe that covers the gap between the floor and wall, at the request of our customers.”

With the category continuing to grow in both style and design, matching moldings to the increasing number of product lines entering the market can be tricky. However, some molding manufacturers have found success with a variety of strategies while expecting to implement new techniques in the near future.
Plank noted Flexco’s 61 colors that can be used to match different multi-layer flooring products. “We have just introduced three new white colors,” she added. “Profile moldings will be added to the Flexco portfolio as customers expand their use of the category.”

Pennwood Products has its own in-house tooling that allows it to match just about any size flooring needed with the exact tongue-and-groove configuration, making a perfect match for the molding to the floor. The company also has plans to add new ways of matching in the fourth quarter of 2019. “At the moment we have been using all solid wood products to match the multi-layer flooring, but we are soon going to be offering WPC digital-wrapped moldings, WPC veneer-wrapped moldings and also MDF digital and veneer as well,” said Kraig Coxon, owner. “Pennwood will always focus on the hardwood flooring market whether that be engineered, WPC/SPC with a veneer or solid hardwood flooring. With that being said, we have watched WPC/SPC/LVT grow and haven’t captured near enough market on these floors. That is why we have decided to get into the wrapped moldings/digital print side of the business and try and capture some of this market as well.”

Artistic Finishes’ Treiber said that while the company’s Enduracor line stains a wood veneer to coordinate to the different floors, the company’s next finishing process will include a completely different process that will allow it to get very close to the look of the different multi-layer flooring designs. “Look for that in the near future,” he said. “Then, similar to our wood profiles, we can custom blend to the product being paired up.”

When it comes to Zamma’s strategy, Tipton said plainly, “We don’t match.” Rather, the company procures the actual decorative film that is used to manufacture the flooring. “This is the same process for any vinyl or vinyl composite flooring,” he added. “We don’t change our process or raw components, even though the flooring manufacturers do with PVC, SPC, WPC, etc. We then thermally fuse a commercial wear layer and wrap around a 100% pure PVC extruded profile.”

Looking ahead, molding suppliers said the possibilities for their products that match multi-layer flooring are endless—for those who can keep up. “The evolution into multi-layer flooring will never end,” Treiber said. “Quality increases will drive the market growth. From the moldings side of the industry only the highest quality and the best performing products will survive. Price remains a big factor also, but the technological advancements cannot be overlooked when it comes to long-term performance and aesthetics.”

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Power of brands: Strong names pack a potent marketing punch

August 5/12, 2019: Volume 35, Issue 4

By Ken Ryan

 

Many small business owners have made the mistake of viewing their brand merely as a logo and tagline. The reality is, according to marketing and brand experts, branding is much more than just a cool logo or a well-placed advertisement.

The value of branding to a small business lies in loyalty—the stronger your brand, the more connected your customers feel. Instead of simply purchasing from you, they’re identifying with everything you stand for.

As Jeff Bezos, founder of Amazon, famously said: “Your brand is what other people say about you when you’re not in the room.”

Legacy flooring dealers understand the importance of establishing and maintaining a good brand, of serving their customers and being invested in the community. Otherwise, they wouldn’t have survived the inevitable ups and downs of a business cycle.

Tulsa, Okla.-based Grigsby’s Carpet Tile & Hardwood, for example, is celebrating its 60th year in business this year. Locally owned and operated, this flooring dealer has a dedicated and loyal staff with a combined 700 years of experience.

For Grigsby’s, burnishing a successful brand means being connected to the community. To that end, it supports Tulsa University, promotes dog and cat adoption, supports various church-driven missions, has donated all the flooring for housing for sex-trafficking victims as well as flooring for the child abuse network. “We also attend fundraisers and support many other local charities in our community,” said Penny Carnino, director of operations. “We hope the community sees not only a thriving business but one who cares about the community it serves.”

In the same vein, A.J. Rose Carpets & Flooring, with three Massachusetts locations, has been in business for more than four decades and has serviced generations of customers. “We’d like to think our customers and community first and foremost trust us,” said A.J. Boyajian, co-owner. “People like to buy from people they like and trust and know will do a professional job and stand behind their work. Having been in business for over 40 years reminds our customers that we are greatly invested in providing a quality product at a fair price. If we weren’t, we wouldn’t have been in business this long.”


Timeless products, exceptional service

The brand takes a holistic and consumer-centric approach to marketing and product development. Today’s consumers demand a simplified shopping experience both in-store and online, and Anderson Tuftex is listening to their expectations by designing timeless products and providing exceptional service that address the needs of today’s premium flooring market.

Purchasing flooring is complicated, and consumers feel pressured to get it right. At Anderson Tuftex, it’s about simplicity. Anderson Tuftex doesn’t want to overwhelm consumers with options, but rather craft designs that serve as a canvas for their lives.

In addition to listening to consumers, Anderson Tuftex provides solutions for retailers by keeping their merchandising straightforward and streamlined. The brand is committed to elevating the discussion with its customers and providing them with a product mix they’re eager to sell. By offering bold yet timeless patterns and foundational colors in both hard and soft surface flooring products, Anderson Tuftex empowers its customers to create a seamless shopping experience for consumers. The brand designs and produces coveted hardwood, carpet and custom rugs that enable retailers to take consumers from refined to rustic via handcrafted products that offer a cultivated charm.

Anderson Tuftex believes brand power lies with the customers and consumers who purchase its products. Though design is inherently seen in all its products, the durability of those products is what sets the company apart.

A leader, trailblazer in adhesive solutions
Steeped in tradition, DriTac Flooring Products has manufactured premium-grade adhesives, underlayments, rubber sports flooring and installation solutions for the wood and resilient floor covering markets for more than 60 years.

DriTac was established in 1956, offering one product—DriTac 6200—that continues to stand the test of time several decades later. Since then, DriTac, via its state-of-the-art laboratory and research facility in the U.S., has expanded its product line to produce a wide array of adhesives, underlayments and other products tailored to perform across a broad spectrum of flooring products. The company is currently one of a few adhesive manufacturers to offer all the major technologies: urethane, MS polymer, pressure-sensitive, acrylic and more.

DriTac has become a leader in developing wood flooring adhesives that offer sound and moisture control with a single-component, one-step application. In 2007, it was the very first to go to market with a urethane-based, 4-in-1 sound and moisture control wood flooring system adhesive.

A trailblazer in cultivating environmentally friendly flooring adhesives and underlayments, DriTac offers a comprehensive line of eco-friendly wood and resilient flooring installation solutions. The company prioritizes the green movement and actively works with architects, builders and developers to provide high-quality adhesives that contribute to green building efforts.

Many of its products feature zero VOCs and solvents, signified by its Certified Green logo. DriTac’s environmentally friendly focus includes LEED certification and sustainable initiatives. Many of its solutions have been stringently tested and certified by the Carpet and Rug Institute’s Green Label Plus Program for indoor air quality. In the early 2000s, DriTac went to market with a completely solvent-free and VOC-free, moisture-cured urethane wood flooring adhesive, DriTac 7500 Eco-Urethane.


Putting muscle behind its brand building

Since its inception 10 years ago, Engineered Floors has set the pace for the flooring industry with innovative products—first in carpet and then in hard surface. Engineered Floors is outpacing the industry in the development and implementation of brands across an ever-growing portfolio of flooring solutions. It’s a true exercise in the “Power of Brands” at a phenomenal rate.

The third-largest flooring company has added a variety of flooring specialty divisions to its flagship Dream Weaver carpet division. Included are Dwellings (targeted to builders), Engineered Floors Multifamily, Pentz Commercial Flooring Solutions and Engineered Floors Hard Surfaces. Each division carries a unique identity and sig- nature that are identified across the bottom of all Engineered Floors communications, serving as a powerful reminder of the size, scope and breadth of what the company has to offer its dealers.

Within each of these branded divisions, Engineered Floors has strategically crafted branded collections and features that clearly communicate to the trade and consumers about the advantages of each. For example, in 2018, through its Hard Surfaces division, Engineered Floors launched Triumph. The collection marks Engineered Floors’ triumphant entry into the growing and highly popular rigid core category, featuring waterproof construction and pet-friendly planks with stain-resistant protection.

Engineered Floors has even branded the augmented reality technology that enables consumers to visualize and explore its Dream Weaver, Pentz and EF Hard Surfaces products online. The EF-EYE Visualizer tool allows consumers to upload an image of their home and see what their favorite product would look like after installation. Dealers have raved about EF-EYE serving as a closing tool; as a result, Engineered Floors is now covering the cost for their direct dealers to add EF-EYE to their websites.

These examples are only the latest in product power branding by Engineered Floors that also includes brands such as Apex SDP Advanced Polyester Extrusion fiber for commercial carpet or the PureBac carpet backing system for residential carpet.

Learn more about this powerful brand lineup by visiting engineeredfloors.com


The brand that helps other brands thrive online

Since 2012, FloorForce has built an outstanding brand while paving the way for digital marketing in the floor covering industry. FloorForce was founded by flooring industry veterans and was recently acquired by AdHawk, a digital advertising company founded by two ex-Googlers, located in New York City. The acquisition bolsters FloorForce’s offering of best-in-class websites and Google and Facebook advertising management with unmatched technology.

FloorForce has set its brand apart by offering solutions that are helping more than 1,600 retailers and manufacturers generate leads and move successfully into the digital marketplace.

As both a Google Premier Partner and Facebook Marketing Partner, FloorForce has the know-how to elevate retailer and manufacturer brands online. FloorForce’s clients get the peace of mind of knowing their business—their livelihood—is in the expert hands of the industry’s most advanced digital marketing company.

While FloorForce’s current digital solutions are powerful enough on their own merits, it’s the company’s commitment to innovation and creative solutions that continues to elevate the brand year after year. By understanding the ever-changing digital landscape and having inside knowledge of the floor covering industry, FloorForce has been able to anticipate and prepare clients for the increasingly competitive marketplace.

FloorForce has built trust and credibility from more than seven years of developing scalable, affordable solutions for its clients. The FloorForce team has grown to 110 passionate people who have devoted themselves to developing meaningful products and relationships in the flooring industry.

In 2019, FloorForce is in a great position to keep helping the brands that rely on the company to stay ahead of the competition by developing the future. AdHawk, FloorForce’s parent company, raised $13 million to build tools to help their clients navigate the ever-changing landscape of the Internet and fuel innovation to create new opportunities.

In a marketplace that is rapidly changing, FloorForce believes the power of your brand online is the undeniable variable of success.


Great products backed by superior service

Inhaus has always had a clear mission to be an industry leader in technology, innovative design and service while staying true to its core values. Since the company’s inception almost two decades ago, the dedicated people who work here come together to provide great value products backed by superior service.

Inhaus cares deeply about this mission and strives every day to fulfill it. “When you get to know our company and see our logo, we hope this is the promise you remember,” said Derek Welbourn, CEO. “We realize that to supply a great product, no detail can be overlooked. It must be well designed both aesthetically and technically; it must last a long time and look the same way it did the day it was installed even after years of use. We work hard to be a cost leader to ensure we always deliver the highest possible value product.”

The company strives to ensure that when consumers or end users purchase an Inhaus product that it exceeds their expectations knowing that behind it is a group of people who care and are highly knowledgeable about products that bear the Inhaus brand name.

Inhaus’ R&D team comprises experts in designing and engineering the products they supply to market—products that are developed, manufactured and supported from start to finish. “We enjoy the process from the inception of a product concept or new design to a finished installed floor,” Welbourn noted. “We believe a floor is your largest piece of furniture and is the foundation of the personality of your interior space, and this is the basis for our company slogan: ‘Love Where You Live.’

Leveraging the power of the ‘family’
As the world’s largest flooring company, Mohawk is proud to offer its customers flooring options in more than 30 categories. The Mohawk family of brands offers an extensive selection of world-class products from some of the most trusted names in flooring. These include Aladdin, American Olean, Daltile, Durkan, IVC, Karastan, Marazzi, Mohawk, Mohawk Group, Mohawk Home, Pergo and Quick-Step.

The power of brand and its attributes is vastly important for infrequent purchase categories such as flooring. The company’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, wood, tile, vinyl, rugs and countertops. The enterprise-wide innovations yield products and technologies that are differentiated in the marketplace. Therefore, from product conception to the manufacturing process to the transportation of products, Mohawk employees are providing the foundations for homes and businesses around the world.

The organization invests heavily in the Mohawk brand by way of lead generation, advertising, digital marketing, public relations, merchandising, point-of-sale, innovative products and national promotions, just to name a few. These efforts result in high consumer recognition and increased profit margins for Mohawk’s retailers—both large and small.

The primary reason Mohawk invests in its family of brands is to deliver qualified consumer leads to its valued retail partners. The current pace of change in flooring products and flooring retail requires new programs that give its retailers the inside track to stay ahead of the competition.


Uncompromising value, constant innovation

Pennwood continuously pursues high standards in manufacturing and marketing of flooring transitions, stair products and vents. The Pennwood staff studies and researches trends in design, color and finish.

The company currently matches 6,000 different hardwood floors ranging in color, style and textures with standard boards—all held in the Pennwood Color Library. Pennwood employees take pride in their craftsmanship, and as long as the company has the color standard it can custom-produce a retailer’s stair treads or flooring transition with a normal turn-around time of two to three weeks.

Pennwood believes in partnering and can customize a program for a retailer’s specific needs. The company can produce various fixed lengths in moldings and stair treads. It also offers random-length flooring transitions up to 12 feet, which is increasingly popular in the builder and multifamily market segment.

Today, the Pennwood brand means uncompromising value, known for innovation and a driving force within the industry. Pennwood is synonymous with a “we-can-do” attitude.

 

Leveraging strength to leave lasting impressions
Philadelphia Commercial is committed to providing flooring solutions that meet the needs of any commercial space without compromising on design, workmanship, quality or service. The brand offers a wide range of flooring from commercial broadloom to carpet tile and resilient, all expertly crafted to ensure aesthetics and performance go hand-in-hand.

Philadelphia Commercial products are known for high performance, on-trend design and attainability. From classic to contemporary, end users can choose from an extensive variety of options in every price range and aesthetic. Philadelphia Commercial provides solutions to meet the unique needs of many environments spanning education, healthcare, government, senior living, workplace and everything in between.

Reinforcing product knowledge with hard data, Philadelphia Commercial provides innovative products that are designed to inspire and transform. Products are informed by deep analysis and market research, built for durability and designed as stylish, functional flooring solutions for any environment. The highest quality materials and proprietary manufacturing processes make sure its carpet and resilient flooring consistently exceeds expectations.

Philadelphia Commercial is passionate about product, but not to be overlooked is a brand culture driven by service. From speed and efficiency to tailored flooring solutions, there is a dedicated team in place with the expertise to make it happen. With the largest quick-ship selection in the industry, there are hundreds of high-performance styles available to customers within days. The brand also offers custom design solutions to bring designers’ visions to life. Customized or running line, all Philadelphia Commercial flooring solutions are easy to maintain and backed by unmatched warranties.

Collaboration is the cornerstone of Philadelphia Commercial. It leverages the strength of its leadership, sales team and retail partners to provide flooring solutions that leave lasting impressions.


Taking quality floors to new heights

Provenza Floors has built its reputation on bringing unique hardwood and luxury waterproof vinyl products to market that exceed the demands of builders, architects, interior designers and residential consumers. The company’s award-winning floor and wall collections lead the industry in beauty, style and innovation year after year.

The Provenza Floors brand stands for experience, innovation and creative inspiration. Every product it brings to market reflects its commitment to deliver the highest standards in manufacturing, superior quality and uncompromising attention to detail that today’s consumers expect when choosing a floor or wall covering brand for their home or business.

Provenza’s ever-expanding portfolio of hardwood and luxury waterproof vinyl collections offer consumers unlimited choices in flooring types, styles and design from a company they can trust, backed by industry standard warranty coverage.

Provenza Floors also offers custom, made-to-order hardwood floors that are personalized and designed for those who require that one-of-a-kind product for their home. Provenza custom products are proudly USA-made in Southern California.

Its MaxCore luxury waterproof vinyl products take 40-plus years of experience in the hardwood flooring industry to a new level, featuring innovative surface patterns, textures, variation and bevels that result in a surface that mirrors the natural beauty of a hardwood or stone floor—in a durable, easy-to-maintain floor that can stand up to everyday use. Provenza MaxCore luxury vinyl floors are 100% waterproof, beautiful and durable.

 

Count on the company that’s ‘Ön It’
In keeping with its German roots, Schönox is a technology-driven innovator of safe, cost-effective, environmentally responsible subfloor solutions worldwide. But great products alone are not enough in the demanding and competitive flooring world.

To that end, Schönox combines transformational products with a North American team that brings an Ön It attitude to work every day. Ön It is not just a marketing slogan; it is a way of life for the Schönox team and guides every interaction with professional flooring contractors. The combination of industry-leading products and superior customer service drives the company to its singular goal of making flooring contractors’ jobs safer, less stressful and more profitable.

Schönox has built a globally recognized brand through 125 years of delivering daily on the promise to provide the highest quality primers and moisture-mitigation systems, repair products, floor-leveling compounds, adhesives and waterproofing materials. As a member of the SIKA worldwide brand of building products, Schönox believes in building trust through services, driving innovation to transform flooring and ensuring sustainability for the future.


A legacy built on service, innovation and passion

Shaw Floors, the largest brand in the Shaw portfolio, brings more than 50 years of product expertise and experience. It offers carpet, hardwood, laminate, luxury vinyl, tile and stone flooring and solutions for real life and real homes across all life stages. Its legacy and expertise are founded in a culture of service, innovation and passion.

Shaw Floors believes in research, technology and thoughtful design for each and every product solution it offers. Its dedicated teams equip and immerse themselves in multifaceted research regarding design, color and messaging, which translates into award-winning products and innovative merchandising solutions.

Through cohesive product selection, improved digital experiences and an innovative consumer strategy, Shaw Floors’ retail partners are better positioned to provide exceptional design expertise and service in-store and online.

Shaw Floors’ commitment to its customers propels the brand to continuously improve and evolve. This commitment informs the decisions and investments it makes. From smart merchandising to enhanced digital solutions, Shaw Floors is dedicated to creating meaningful experiences for its customers and, in turn, the consumers.

Rooted in a culture of giving, Shaw Floors is a proud partner of St. Jude Children’s Research Hospital. With the help of its retailers, the company donates more than $1 million each year in support of St. Jude’s mission. This desire to serve and give back is at the heart of everything Shaw Floors does.


The originator, disrupter and innovator

As the originator of waterproof vinyl flooring, COREtec carries this waterproof promise through from USFloors’ original WPC to the new COREtec SPC Pro, COREtec Wood and COREtec Stone. All four categories deliver high-style, waterproof performance.

COREtec is regarded as the originator of the multi-layer flooring category—a true disrupter and innovator in the industry. In its passion to develop a new wave of multi-layer flooring, the company has discovered a formula that works, a style leadership that propels. It is a brand focused on providing an exceptional customer experience throughout the new flooring purchase. USFloors understands that consumers value authenticity while having high performance expectations.

COREtec is the go-to brand in waterproof because of the assortment of decors, visuals, plank widths and lengths, alongside a dependable, patented construction. COREtec sets the bar and creates products that bring higher value to the consumer. The brand continues to lead the category by offering the look and feel of natural hardwood and tile but in a waterproof option.

USFloors will continue to create value and a healthy platform for growth for its retail partners.

 

Innovative rigid core flooring solutions
At Wellmade, research and development provide the key to future innovation and success. As the inventor and exclusive manufacturer of its patented high-density plastic composite flooring (HDPC), Wellmade maintains a leadership position in the emerging rigid core flooring revolution.

Wellmade’s state-of-the-art, energy-saving manufacturing plant is committed to producing the ultimate in quality and innovation. At its core, HDPC provides a superior platform for Wellmade’s Opti-Wood and Nouveax En Vogue waterproof flooring lines. With superior density, HDPC is 100% waterproof and features excellent tolerance to extreme temperature fluctuations.

But product performance is only part of the story. Realizing flooring is really about fashion, Wellmade works closely with its customers and the design community to anticipate emerging design trends while developing and delivering high-quality, leading-edge products. Natural and enhanced colors as well as a variety of finishes and textures are key elements. Attention to detail yields floors that speak directly to the Wellmade brand, providing beauty, performance and value to its retail and distribution network.

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Pergo ad campaign preps dealers for a surge

July 8/15, 2019: Volume 35, Issue 2

By Reginald Tucker

 

Mohawk first sought to whet the appetites of its dealer partners with the official rollout if its Pergo-branded Extreme LVT line at last year’s Edge Summit (FCNews, Dec. 10/17, 2018). Now, with nearly 1,500 Pergo Extreme displays firmly planted in Mohawk Edge dealer showrooms across the country, the company is ready to kick off an integrated consumer advertising campaign designed to deliver shoppers to retailer storefronts ready to buy.

The multifaceted ad campaign, which boasts the tagline “Go Bold,” aims to influence the consumer throughout all phases of the shopping experience while educating her on the key visual and performance attributes of the Pergo Extreme LVT brand. Whether she discovers the brand while researching flooring options online—or if she is exposed to the product via more traditional advertising means such as radio, cable TV or shelter magazines—it will all crystalize when she finally sees the Pergo Extreme displays, installed floors and various point-of-purchase signage and materials upon entering the store.

According to Jason Sims, director of brand marketing at Mohawk, the goal is to reinforce the Pergo Extreme messaging and impressions the consumer absorbs across various media, culminating in a customer who is likely pre- disposed to the Pergo LVT brand when she visits the retailer for a consultation. “We had a great response to Pergo Extreme at Edge, and there’s a ton of excitement for the product,” Sims told FCNews. “We’re about 90% complete with our placements, so the consumer journey from online to in-store can begin.”

Beginning July 11, the official pergo.com website—which heretofore had been promoting mainly Pergo-branded laminate and hardwood—has been updated to reflect the full Pergo Extreme LVT offering. (That’s “phase two” of the strategy.) The launch coincides with a national digital media campaign to drive demand to independent retail. (Note: The campaign does not affect Pergo local advertising, which retailers can start as soon as they receive their displays.)

“Our goal has been to activate our digital strategy once we had 75% of our displays in the market in order to drive leads to active retailers,” Sims explained. The timing, he noted, was to help protect the brand, create the best experience possible at independent retail and ensure a solid footing for future efforts. “Previously the Pergo site only represented the laminate and home center positions and channels. Now, we’re excited about bringing Pergo Extreme for our specialty retail partners online, along with the full launch of our media ads for Pergo Extreme.”

During the kickoff of the “Go Bold” digital campaign, Mohawk will be placing digital ads across YouTube as well as other targeted channels. Meanwhile, on the Pergo website, consumers will see a beefed-up presence for Pergo Extreme along with clear positioning to help consumers understand the value of what LVT does and how Pergo Extreme stands out. “We’ve already experienced a lot of early success in the market without the power of national media, but over the next couple weeks we really expect to open some eyes,” Sims stated. “There’s going to be a lot more traffic coming in, a lot more lead generation for Pergo Extreme.”

With the seeds of the Pergo Extreme LVT line planted back at the Edge Summit, Mohawk took a measured and deliberate approach in bringing the product to market prior to launching a national marketing effort. Again, according to Mohawk, it goes back to protecting a storied brand. “We know Pergo has the best brand awareness in the industry, so doing this right was very important,” Sims explained. “There’s been quite a bit of patience on the part of the retail community who knows what the Pergo brand can do for them. The Edge conference was the start of it. We knew we had to partner with the right folks to launch this brand.”

A potent package
It was no accident that Mohawk chose to partner with Edge dealers to launch this initiative. To protect the brand, Mohawk realized it needed to exercise some control on how it was going to distribute the products. “Our Edge partners qualify as the best opportunity to promote our best products,” Sims said. “In our minds they have the most potential and are the ones who see the value in the partnering with Mohawk. So that was phase one—getting everyone on board with how this would roll out and what, exactly, was going into this product line.”

What ultimately ended up going into the line, according to Sims, was an expansive offering of 60 SKUs spanning four collections of trendy, high-end wood and stone visuals. Among them: Wood Originals—30 hardwood looks boasting genuine texture and multiple plank size options; Wood Enhanced—seven realistic visuals with added touches such as painted bevel and an embossed-in-register finish; Wood Wider Longer—five fashion-forward options offered in a 10 x 72 format; and Tile Options—an assortment of 15 stone pat- terns in three oversized tile sizes.

Pergo Extreme LVT is backed by strong benefits and warranties. Developed for families with active households, the Pergo Extreme collections are 100% kid-, pet- and water-proof, and they come with a Worry-Free for Life, No-Dent Warranty (lifetime residential warranty) and a 10-year medium commercial warranty.

“Sixty SKUs is a lot of product, even if you’re not adding a new display,” Sims explained. “It’s quite an undertaking—the designs, the samples and, now, the merchandising. These collections offer dynamic looks and dramatic patterns with unmatched characteristics and detail while providing homeowners with true worry-free living.”

In support of Edge dealers’ marketing efforts, Mohawk will be providing Five-Star point-of-purchase kits entailing high-end graphics, wall art, floor decals—all the things the dealer needs to promote the Go Bold campaign.

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Correction: Tariff truce—U.S. calls off new hikes; industry in holding pattern

Editor’s note: The following story has been updated to reflect erroneous information that was reported in its original form in the July 8/15, 2019, issue of FCNews. The original story inaccurately stated that the 25% tariff on goods from China that included flooring materials had been rescinded by the U.S. government. The latest round of tariffs that was put on hold did not include flooring products, but rather consumer products such as iPhones and televisions. The original 25% tariff on flooring materials from China remains in effect. FCNews regrets the error and any confusion caused by the original article. 

 

July 8/15, 2019: Volume 35, Issue 2

By Ken Ryan

Flooring executives managed to curb their enthusiasm on the news of a truce in the ongoing U.S.-China trade battle, saying that much remains unresolved. Furthermore, few believe a mutually beneficial trade deal can be reached in the near future.

President Trump had threatened an additional 25% tariff on $325 billion worth of goods from China, mostly consumer products such as iPhones and televisions. For now, that tariff has not been applied. However, all applicable flooring products that shipped from China after May 10, 2019, are now subject to the full 25% tariff.

The on-again/off-again nature of this trade spat is sowing seeds of discontent and frustration among many top-level flooring executives.

“The tariff truce simply extends the uncertainty that our industry has been dealing with for many months,” said Michael Martin, president and CEO of the National Wood Flooring Association (NWFA). “It does nothing to help resolve the current business environment, nor does it provide any sense of stability required to develop a long-term business plan.”

Scott Humphrey, CEO of the World Floor Covering Association (WFCA), believes this “indecision may be our worst enemy” with regard to the current tariff situation. He elaborated on the statement, adding, “Manufacturers are determining how much to raise prices. U.S. sellers who utilize OEMs in China are determining how much of the hit they will take. All the while, the only thing that is certain is that nothing is certain. The floor covering industry needs to make decisions today based on what the future holds. This is virtually impossible without the knowledge of how pricing will be impacted by tariffs and the geopolitical tug of war between the U.S. and China.”

Other flooring executives agree that many issues remain unresolved. Some of that uncertainty depends on your industry sector. While acknowledging that it is a positive that trade negotiations are back on with China, Kip Howlett, president of the Decorative Hardwoods Association, said “the jury’s out” if a deal can be struck. “Because the engineered flooring and hardwood plywood products have antidumping/countervailing orders in place against China, they are outside these trade negotiations,” he explained.

Howlett added that U.S. hardwood logs “continue moving into China in massive amounts, and U.S. hardwood veneers still face non-tariff trade barriers keeping them out. With the rampant Chinese circumvention, on the whole we’re still the losers here—except logs.”

Even more so than hardwood lumber and flooring, the LVT category—especially rigid vinyl products—is in the crosshairs of any tariff increase given that a high percentage of rigid vinyl is produced in China. As Thomas Baert, president of Shanghai-based CFL Flooring, explained, “One can argue the merits of tariffs, but the bottom line is tariffs are an unnecessary added cost for our industry. Most major Chinese suppliers caught in all of this have worked very closely with their customers through efficiencies and cost reductions to offset a major portion of the 25% tariff as much as possible. This has minimized the net increases passed
along to retailers vs. absorbing full tariff costs.”

In advance of the 25% tariff that President Trump had imposed on China, CFL proactively moved portions of its manufacturing to Taiwan and Vietnam. Other companies are making similar arrangements.

Jeff Hamar, president of Santa Fe Springs, Calif.-based Galleher, a top-five flooring distributor with extensive business dealings in China, said he believes both sides want to do a deal. However, he is uncertain one can be achieved easily. “The Chinese side has to give up a lot, and I believe there is enormous internal pressure to stand up to the West and not let the U.S. change the way they do business. The downside for them is if they don’t give as much as Trump needs, the giant sucking sound of companies leaving to other sources of supply will only get louder. The U.S. continues to be in a strong position.”

The WFCA’s Humphrey said now is the perfect time for a deal to be forged in light of the fact China’s economy is slowing and their growing middle class covets U.S.-made products.

 

Look for an update on this subject in the Aug. 5/12, 2019 issue of FCNews.
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Housing: Rising mortgage rates put the brakes on demand

June 24/July 1, 2019: Volume 35, Issue 1

By Reginald Tucker

 

After a robust 2017, the U.S. housing market in 2018 showed it is only human. According to statistics compiled by the U.S. Census Bureau, single-family starts rose 3.2% to 876 million units—a slower rate than what we saw over the 2016–17 period, when single-family starts grew nearly 8.6%. On the plus side, total starts (including single- and multi-family) inched up 3.9% in 2018 to 1.25 million units. That’s up compared to the 2016–17 period, when total starts grew nearly 2.5%.

From a regional standpoint, the greatest activity was seen in the South (630 million units) followed by the West (336 million units). The Midwest and Northeast regions accounted for 173 million and 111 million units, respectively.

One of the biggest surprises was the performance of the multi-family sector, where starts increased 5.6% in 2018 to 374 million units. That marks a dramatic about-face from the 2016–17 period, when multi-family starts actually decreased almost 9.7%.

Like housing starts, single-family building permits also rose in 2018. U.S. Census Bureau figures reflect a 2.3% uptick to 1.31 million permits last year. However, that growth rate is down significantly from the 2016–17 period, when permits grew 6.2%. On the flip side, multi-family permits dipped just over a percentage point last year from 462 million to 457 million.

Robert Dietz, chief economist at the National Association of Home Builders (NAHB), cited the dynamics behind the changing U.S. housing market. “For the past several years, shortages of labor and lots—along with rising regulatory costs—have led to a slow recovery in single-family construction. While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates coupled with the cumulative run-up in pricing has caused housing demand to stall.”

According to a Wall Street Journal article, single-family home building stagnated in 2018 after steadily climbing throughout the economic expansion that began roughly eight years ago. Construction of multi-family buildings in particular continued to ease as the market for new condominiums and apartments cooled, the article added.

Despite strong economic growth and a historically low unemployment rate, factors that would typically support homebuyer demand (i.e., a shortage of inventory and rising borrowing costs) have locked out many potential buyers. And while house price inflation has slowed, it continues to outpace wage growth, sidelining some first-time home buyers. “The residential construction market hit the pause button in 2018,” said Aaron Terrazas, senior economist at Zillow, an online real estate database.

Another indication of the pulse of the market in 2018 was the rate of existing home sales. According to the National Association of Realtors (NAR), 5.34 million existing homes were sold last year—down 3% from 2017. Meanwhile, 667,000 newly constructed homes were sold in 2018, up roughly 3% from the year prior. Meanwhile, investment in homebuilding contracted 0.3% in 2018, the biggest drop since 2010.

Mid-year report
The year 2019 kicked off on a high note as seasonally adjusted housing starts reached 1.29 million units in January, a whopping 13% increase over the last month of the previous year. However, that rally was short-lived as starts fell roughly 11% in February 2019 to 1.149 million seasonally adjusted units before inching up 1.6% to 1.168 million seasonally adjusted units in March. Then, inexplicably, starts kicked up again in April, growing 5.7% to 1.235 million seasonally adjusted units. More importantly, both single- and multi-family segments saw consecutive monthly gains from February through March.

In May, however, the brief momentum stalled. Privately owned housing starts reached a seasonally adjusted annual rate of 1.269 million units, 0.9% below the revised April estimate of 1.281 million and 4.7% below the May 2018 rate of 1.332 million units. Single-family housing starts in May totaled 820,000, 6.4% below the revised April figure of 876,000.

Meanwhile, building permits in May—the most recent period for which reliable statistics are available—hit a seasonally adjusted annual rate of 1.294 million, which is 0.3% above the revised April rate but 0.5% below the May 2018 rate of 1.301. By comparison, privately owned housing completions in May were at a seasonally adjusted annual rate of 1.213 million units, 9.5% below the revised April estimate of 1.34 million units and 2.8% off the May 2018 rate of 1.248 million.

Current sentiment among major builders is telling. A newly released report showed falling confidence among builders surveyed by NAHB and Wells Fargo, whose jointly produced HMI Index fell two points to 64 in June. (The NAHB Housing Market Index is a gauge of builder sentiment on the relative level of current and future single-family home sales. A reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative industry outlook.) Sentiment levels have held at a solid range in the low- to mid-60s for the past five months.

“While demand for single-family homes remains sound, builders continue to report rising development and construction costs, with some additional concerns over trade issues,” said Greg Ugalde, NAHB chairman.

Continued housing market weakness could be signaling a slowdown in the overall economy, observers say. Residential investment contracted in the first three quarters of 2018, the longest stretch since mid-2009, reports show. The decline in homebuilding investment that became evident in the fourth quarter of 2018 is expected to persist through the first half of 2019 as the sector continues to adjust to higher mortgage rates. (The 30-year fixed mortgage rate has increased more than 60 basis points this year to about 4.63%, according to mortgage Freddie Mac.)

“Home prices remain some- what high relative to incomes, which is particularly challenging for entry-level buyers,” NAHB’s Dietz said. “And while new home sales picked up in March and April, builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”

New home sales
According to estimates supplied by the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new single-family homes in April 2019—the most recent period for which reliable estimates are available—hit a seasonally adjusted annual rate of 673,000. That’s 6.9% below the revised March rate of 723,000 but 7% above the April 2018 estimate of 629,000. The median sales price of new houses sold in April 2019 was $342,200, with the average sales price hitting the $393,700 mark.

New home sales in the South, which accounts for the bulk of transactions, increased 3.6% in March to their highest level since July 2007. Sales in the Midwest soared 17.6%, while those in the West surged 6.7%. However, sales in the Northeast tumbled 22.2%. About 62% of the houses sold in April were either under construction or yet to be built. Analysts say new home sales have not been severely impacted by the supply problems that have plagued the market for previously owned homes.

With respect to inventories, the seasonally adjusted estimate of new houses for sale at the end of April was 332,000. This represents a supply of nearly six months at the current sales rate.

Despite the broader housing market’s struggles with supply, industry observers believe the fundamentals for housing are generally improving. The 30-year fixed mortgage rate has dropped by about 80 basis points since November, according to Freddie Mac. That followed a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.

In addition, home price inflation has slowed and wage growth has picked up. At the same time, land and labor shortages are constraining builders’ ability to break more ground on lower-priced housing projects.

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Commercial: Corporate, healthcare sectors lead the charge

June 24/July 1, 2019: Volume 35, Issue 1

By K.J. Quinn

 

An uptick in activity in key end-use sectors—namely corporate, hospitality, healthcare and education—drove the bulk of commercial flooring specifications in 2018. FCNews research shows total specified commercial flooring sales grew to $7.012 billion in 2018, a 5.9% increase over 2017.

“History will view 2018 as a solid year for nonresidential construction spending in America,” said Anirban Basu, chief economist with Associated Builders and Contractors. “Both private and public segments experienced growth in construction spending last year.”

The growth of the commercial market is heavily attributed to stronger demand for hard surfaces—specifically LVT—which have entered practically every commercial sector. “Resilient flooring, particularly LVT, is growing across virtually all commercial channels, as hard surfaces are seen more and more often in spaces that used to feature carpet,” observed Deb Lechner, vice president, marketing, Armstrong Flooring. “This is true from offices to hotel rooms.”

Hard surfaces’ versatility is a major factor in the commercial segment’s performance last year. FCNews statistics showed hard goods generated just over $3.2 billion in sales for 2018, a 15% increase over 2017. No surprise that resilient accounted for the bulk of that growth, representing about 52% of commercial hard surface consumption.

“We’re continuing to see an influx of competition within LVT, especially given the rapid growth of the rigid core category,” said Katherine Caringola, communications manager, Karndean Designflooring. “As a result, there appears to be higher market investment in floating floor options, especially rigid core/WPC.”

LVT is the headliner of resilient, posting double-digit sales growth and expanding its usage across all segments, the majority in specified contract. “Technological developments may also allow the floor to go into new spaces and take on other flooring categories inside the hard surface market,” said John Szilagyi, manager-market intelligence, Tarkett North America. “With the modularity of design that has accompanied LVT and new core technologies, there should be no end to the combinations that end users and A&D firms can leverage into new spaces.”

Not all hard surface categories fared as well as LVT. FCNews research found several major products such as VCT, sheet goods, hardwood and laminates experienced low- to mid-single digit declines in volume and sales last year. Rubber and linoleum sales and volume held steady, as they are positioned as healthy flooring choices, especially in healthcare and education.

One hard surface that sustained growth despite competition from LVT is ceramic tile. While statistics are hard to pin down due to fragmented distribution channels, tile sales experienced a low single-digit increase to $1.086 billion according to FCNews research. “We have seen the growth of LVT due to lower installation costs and faster installation costs,” observed Raj Shah, president, MSI. “We believe that finding ways of keeping ceramic tile’s value [proposition] is important in its long-term growth.”

Despite its high price tag, tile is positioned as the most formidable hard surface alternative to LVT. An estimated two-thirds to 70% of ceramic’s commercial sales come from specified contract and half the volume.

“The greatest impact on the ceramic commercial market is the continued development of segments that use a lot of tile in their structures, such as healthcare, hospitality and education,” said Gianni Mattioli, executive vice president, Dal-Tile.

Meanwhile, soft surfaces showed a slight decrease of 0.8% from $3.805 billion in 2017 to $3.774 billion in 2018. Approximately 75% to 80% of carpet sales and 65% to 70% of volume were generated from specified contract while the remainder came from the Main Street commercial sector, research shows.

Within the segment, carpet tile boosted its position as the top soft surface, representing about half of sales and more than 60% of volume, according to FCNews research. The subcategory maintained nearly double-digit increases in both areas, while broadloom’s presence in commercial spaces continued to dwindle—even in the bedrock hospitality sector. “The main reason why people buy tile is it works in any segment,” Mike Gallman, president, Mohawk Group, explained. “People know how to use it from a design standpoint.”

Corporate
The largest sector remains corporate/offices, representing roughly 40% of commercial flooring sales. Although key economic indicators such as new construction, asking rents per square foot and leasing activity point in the right direction, major design trends taking hold are reportedly influencing flooring choices.

“As more employees put in more hours at work, many offices are beginning to offer unique amenities to make employees feel relaxed, comfortable and happy,” said Kerri Convery, a spokesperson for Parterre Flooring Systems. “Current trends in office design focus on improving both the functionality and aesthetics of a space, and we expect that pattern will continue.”

The workplace is among the most diverse segments in terms of flooring selections. Among the key factors impacting specs are functional and design needs of the space. Carpet tile is the most popular choice, representing close to 60% share.

“The ‘resimercial’ trend of creating offices that feel more like home lends itself to innovative uses of carpet tile, both in terms of design and texture,” said Matt Miller, president, Interface Americas. “Designers are often looking for more of a homey feel than before.”

Armstrong’s Lechner agreed, noting, “LVT and rigid core illustrate a blurring of lines between products that are considered strictly residential or commercial. These products are increasingly gaining traction in commercial environments, bringing authentic wood looks to spaces, along with the durability to maintain their beauty even under high traffic, high moisture and high impact.”

Hard surfaces such as resilient, hardwood, porcelain tile and polished concrete are preferred for areas where fashion and functionality are required. LVT is gaining ground in reception areas, workrooms, kitchens, dining areas. “We are seeing a trend toward more hospitality-like finishes, including LVT or laminate flooring, polished concrete, specialty decorative tile—all items to bring personality and warmth to the previously sterile workplace,” stated Alana Lopez, RA, NCIDQ, LEED AP, director, hospitality and workplace studio at Stantec.

Still, broadloom remains a favorite in speculative workspaces or “market-ready” offices looking for cost-effective upfront investments. “You see broadloom in high-end areas such as conference rooms,” said Jeanette Himes, Mohawk’s creative design director for workplace. “Sometimes it’s in offices adjacent to open areas where you might use tile and, of course, on stairs.”

Hospitality
The hotel/lodging sector is one of the fastest growing markets, due to economic growth that’s driving more business and leisure travel, experts say. Designers and hotel proprietors are seeking to create a higher-end environment than their guests live in at home. “Hotel design seeks to help guests feel at home,” said Kim Drautz, director of segment strategy, hospitality and senior living, Tarkett North America. “As we’ve been shifting our residential interiors to have more hard- surface flooring than carpet, the hospitality industry is following suit.”

An increasing number of major hotel chains are specifying LVT for its good looks, durability, acoustic and hygienic qualities. “LVT feels cleaner to the everyday traveler because it gives them peace of mind knowing they can clean it themselves,” said Doug Detiveaux, interior designer, associate, at Gensler’s Houston office. However, not all hotel owners are onboard with using LVT, due to its higher initial cost and potential for longer cleaning times, he added.

Carpet is not expected to be phased out completely, as there will always be people who prefer the plush feel underfoot after waking up in their guest room. “A trend in the healthcare market is to use carpet tile to create an accent rug inset into a hard surface product,” noted Brenda Knowles, vice president of commercial marketing and product development, Shaw Industries.

Performance, style and sustainability needs are impacting flooring selections and driving demand for new hard surface options. For instance, large-format porcelain tile is reportedly viewed by hospitality designers as a cost-effective alternative to ceramic or marble floors and coveted for aesthetic qualities and resistance to staining and chipping. Polished concrete is gaining popularity in commercial spaces, offering a different twist to products specified in contemporary design.

“Hotel lobbies, guest rooms, schools, grocery stores, etc., have all used concrete,” explained Curt Thompson, president and CEO, Aggretex Systems. “The trend now is to start to blend seamlessly the exterior concrete, which is becoming more and more decorative, with the interior concrete.”

Retail
Similar to hospitality, the retail business is undergoing a makeover to attract more foot traffic and distinguish locations from competitors. Online shopping continues to reduce the number of brick-and-mortar stores. What’s more, it contributed to the decline in retail store sales last year, according to recent studies. “While the retail segment has been a little softer than expected, we are seeing positive signs in key areas,” Dal-Tile’s Mattioli said. “Car dealerships and fitness centers, as well as quick-service restaurants, are areas of growth that are positively impacting the tile market.”

Retailers are redesigning their stores to create inviting and comfortable shopping environments that appeal to all customers. Flooring selections run the gamut, often depending on the end use. Ceramic, wood and carpet tile are often specified in high-end retail spaces while resilient, VCT and rubber flooring are found in other public areas.

“We have an opportunity to continue to take share from broadloom in retail and hospitality as designers recognize the performance, maintenance and flexibility benefits of carpet tile in other segments—coupled with technology advancements in carpet tile design,” Interface’s Miller said.

No surprise that LVT is a popular choice among commercial specifiers in a segment renown for staying on top of interior design trends. “Retail has dramatically shifted to hard surfaces, with the advent of LVT and more younger shoppers,” Mohawk’s Gallman observed. Hard surfaces accounts for nearly 25% of commercial flooring sold to the sector, FCNews research shows.

Healthcare
Renovation and new construction are reshaping healthcare to accommodate the needs of an aging U.S. population. Designers are paying close attention to specific criteria for meeting safety and sanitary requirements. According to FCNews research, the segment saw a slight uptick in flooring sales in 2018 with much of the growth coming from hard surfaces.

“In 2018 we saw growth in the healthcare segment, specifically clinics, assisted-living communities and urgent care centers,” Dal-Tile’s Mattioli said. “This segment is anticipated to continue to soar, particularly due to the shortage of spaces available to care for the currently aging population and the high usage of tile in healthcare buildings.” The channel accounts for roughly 12% of the commercial hard surface market.

Natural materials such as ceramic tile, hardwood, rubber and linoleum are considered sustainable options. Rubber sheet, vinyl and linoleum are the mainstay in areas that require high sanitary levels. Carpet, rubber, luxury vinyl and vinyl composition tiles have found their way into non-critical areas such as corridors, medical, patient and waiting rooms.

Infection control is a major area of emphasis and concern as hospital-acquired infections can be both deadly and costly. Homogenous resilient floors are preferred in surgical suites, where infection control and quick turnaround of the room is paramount while other spaces. “[Healthcare] continues to be a strong market for vinyl sheet due to the ability to heat weld and flash cove the flooring for a seam-free surface that is easier to keep clean and hygienic,” Armstrong’s Lechner said.

Education
Similar to healthcare, there is a good amount of remodeling taking place in education, according to published reports. The amount of flooring sold is aided, in part, by increases in state and local government tax revenues and private schools investing in remodeling to attract high school and graduate students. “College and university endowment investment returns grew in 2018, which also helps to support construction spending,” Lechner observed.

K-12 represents the lion’s share of the education sector, accounting for approximately 75% of flooring sales, with the remainder generated from colleges/universities, according to FCNews research. The driving force impacting interior design within K-12 schools is the notion of the active learning classroom, experts say.

Performance, health and safety requirements are also important selection criteria, as flooring needs are changing to support new learning environments. For example, schools are looking for ways to optimize their learning environments to have the right sounds and acoustics, avoiding vibration issues. Materials such as flooring must meet stringent criteria for issues such as indoor air quality, sustainability and maintenance.

“University systems as well as high schools are looking at having a better teaching and educational space,” said Rives Taylor, director of design resilience, Gensler.

An estimated 50% to 60% of the business is hard surfaces, as its versatility enables it to be found in virtually all learning environments. LVT is the leading resilient product utilized across the board, FCNews research found. The latest WPC products offer color and design flexibility which enable designers to apply numerous looks into learning environments.

As awareness around the maintenance and lifetime cost of owning floors grows, school officials are seeing the budget-friendly benefits of investing in quality products, according to industry executives. Premium materials such as ceramic and porcelain tile, terrazzo, rubber and linoleum are often utilized in high-traffic areas on campus such as corridors, lobbies, retail stores and restaurants.

Education is the second-largest commercial segment for carpet, representing approximately 30% of sales. However, broadloom is limited to small areas, such as stairs. “Education has the second highest penetration rate of carpet tile,” Interface’s Miller explained.

Outlook
Leading indicators such as ABC’s Construction Backlog Indicator and Construction Confidence Index strongly suggest that 2019 will be another year of nonresidential construction spending growth in the United States. “There are many variables to watch, including interest rates, worsening skilled worker shortages, rapidly rising construction compensation costs and the U.S. economy’s broader trajectory in the context of a slowing global economy,” Basu stated. “Rapid job growth should boost demand for office and commercial space. Healthier state and local government finances should help fuel additional spending across multiple categories.”

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Ceramic: Lower consumption keeps growth rates in check

June 24/July 1, 2019: Volume 35, Issue 1

By Megan Salzano

 

For the ninth consecutive year since the fallout of the Great Recession, the U.S. ceramic tile market registered growth. However, the growth witnessed in 2018 was not on par with the 5%-6% increase the category experienced in both volume and sales since 2016. In fact, many industry observers noted a significant slowdown in 2018.

“In the past year, we saw growth in both residential and commercial segments for ceramic tile,” said Raj Shah, president, MSI International. “That said, the growth was the lowest we have seen since the economic crisis.”

FCNews research shows the category saw about 2% growth in volume from 2.426 billion square feet in 2017 to 2.474 billion square feet in 2018. Sales were relatively flat for the category, registering less than 1% growth from $2.921 billion in 2017 to $2.935 billion last year. “It is important to note there was a lot of buildup of inventory, especially from China, during last quarter of 2018 in anticipation of higher tariffs scheduled to start January 1, 2019,” Gianni Mattioli, executive vice president of Dal-Tile, explained.

Even with the slowdown, the category still held strong in 2018 as the third-largest sector in flooring in terms of dollars and volume, representing 12.8% of all flooring sold in 2018—although down from 13.3% in 2017—and 12.6% of total industry volume, slightly up from 12.35% in 2017. Only the carpet/rugs and resilient categories accounted for more volume and sales.

Commercial gains
The commercial market saw a slightly better outcome in terms of growth when compared to residential. Commercial projects and spending continued on the growth path they have experienced since 2015. FCNews research showed ceramic’s share of the commercial market increased slightly to 15.4% last year, up from 14.1% in 2017. This was driven by strong growth in the hospitality, corporate, retail and assisted-living segments. Multi-family construction also rose in 2018.

Tile suppliers noted the ongoing success of wall tile within the commercial market and the possibility of its future growth within both the commercial and residential segments. “We have seen a renaissance in wall tile happen with all kinds of new formats and aesthetics being popularized in the market,” Shah said. “Long term, I believe the percentage of wall tile to floor tile will continue to grow as wall tile is not as susceptible to product substitution and due to the innovation in formats and aesthetics.”

Imports vs. domestic
U.S. imports in 2018 comprised about 70% of tile consumption in square feet, up from about 68% in 2017. In 2018, the U.S. imported 2.2 billion square feet of ceramic tile, up 4.7% from 2.1 billion square feet in 2017, according to the U.S. Department of Commerce.

China remained the largest exporter of ceramic tile to the U.S. (in square feet), a position it has held each year since 2015. Chinese imports made up 31.5% of U.S. imports in 2018, the highest annual percentage China has ever held of the U.S. import market. The 10% tariff increase on Chinese ceramic tile imports imposed by the Trump administration took effect at the end of September but, according to the Tile Council of North America (TCNA), was unlikely to have a meaningful impact on China’s market position.

Despite the peso’s significant decline vs. the U.S. dollar over the last six years, losing nearly half its value, Mexican ceramic tile exports to the U.S. have fallen each year since 2015, the TCNA reported. In 2018, tile from Mexico comprised 17.3% of U.S. imports vs. 18.9% the year prior, the lowest share since 2006. Italy was the third-largest exporter of tile to the U.S. in 2018, making up 16.4% of U.S. imports, down from 18.1% in 2017. The next largest exporters to the U.S. were Spain (14.1%) and Brazil (7.3%).

In terms of dollars (including duty, freight and insurance), Italy remained the largest exporter to the U.S. in 2018, comprising 30.9% of U.S. imports. China was second with 27.3% and Spain was third with 15.6%.

Compared to 2017, U.S. shipments of ceramic tile in 2018 were down 5.4% to 911 million square feet. This marked the first year-over-year decline in domestic shipments since 2009. Even still, domestically produced tile is still the tile of choice for consumers as it accounted for 29.3% of all U.S. tile consumption in square feet in 2018. The next highest countries of origin were China (22.3%), Mexico (12.2%) and Italy (11.6%).

In dollar value, 2018 U.S. FOB factory sales of domestic shipments were down 4.4% to $1.39 billion, vs. $1.45 billion in 2017. (FOB port means the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays the cost of marine freight transport, insurance, unloading and transportation from the arrival port to the final destination.) Domestically produced tile comprised 37.7% of total U.S. tile consumption by dollar value. The per-unit value of domestic shipments increased from $1.51 in 2017 to $1.53 in 2018.

U.S. ceramic tile exports in 2018 were 29.7 million square feet, up 4.4% vs. 2017. Most of these exports were to Canada (79.6%) and Mexico (4.5%).

Ongoing challenges
Industry observers cite several challenges that led to the reduced tile consumption in 2018. Among them: tariff wars, a less robust housing market, competition from other categories and continuing labor/installation woes. “Generally speaking, it was a strong economy throughout the year,” MSI’s Shah said. “That said, beginning in the second quarter a lot of confidence began to deteriorate with the threat of trade wars between China and the U.S. Section 301 tariffs did get set at 10% with a threat of 25% for most of the year, which hurt overall confidence. The third and fourth quarters of 2018 were dramatically slower than the first half of 2019 for ceramic tile.”

One key indicator for the health of ceramic tile is that of the housing market, which continued to have heavy implications for 2018. “After the end of the recession, the ceramic tile market increased quite a bit, but last year the increase became very small compared to previous years,” said Donato Grosser, industry consultant. “The main reason is the housing market is not moving—it’s basically flat. Housing is a very important factor for ceramic tile. During the recession housing starts fell by more than 70%, tile declined 30% and you saw that immediate decline.”

Grosser added that while the remodeling segment of the housing market is doing fairly well, “we don’t sell as much tile in remodeling projects as we do with new projects.”

Competition from other categories, namely resilient, also put pressure on tile. “LVT is widely reported to have been the largest growth category in flooring in 2018, taking significant share and putting pressure on other categories of flooring,” said Jeff Daniel, vice president of sales support and planning, Emser Tile.

The novelty and low cost of LVT—and its WPC/SPC brethren—were major factors for its growth, observers said. “It’s a new product, it’s inexpensive, it’s easy to install and people are not looking at which product is superior; they’re looking at how much they’re spending,” Grosser explained. “People look at the first thing— cost. Then, the second—looks. That’s basically what affects the whole market and part of ceramic tile.”

In order to push back against LVT, suppliers said continued innovation within the category as well as adding value will be key. Some also noted several advantages tile already has in the market that should be better leveraged. For example, MSI’s Shah noted the growing popularity of new looks in tile vs. current LVT visuals. “LVT is still primarily a wood-look category,” he explained. “We are starting to see more non-wood visuals coming to market. The aesthetics available in ceramic tile that are non-wood still are significantly higher quality than can be found in LVT. In addition, with LVT there are technical difficulties with certain looks that are available in ceramic tile. This remains an opportunity for the LVT market, but at the same time it seems ceramic tile has a large head start in these looks.”

Emser’s Daniel focused on the upside—the belief that ceramic tile has not been as heavily impacted as other flooring categories by LVT’s growth. “Based on our view that the tile category continued to grow year over year, the market share pressure was likely hardest felt in soft flooring and wood categories.”

Another challenge the category continues to struggle with is the shortage of qualified installers. “This problem continued to be present in 2018,” Shah said. “This definitely accelerated the push toward LVT, which has a faster and lower install cost.”

Emser’s Daniel agreed, adding: “It is certainly impacting the cost of the final delivered product to the owner/buyer of both residential and nonresidential builds. There are issues with delays due to labor, but most issues appear to be pressures on the installation cost side due to competition for qualified labor. Innovation in products that require less labor to install will help offset labor time and cost.”

Looking ahead
While the ceramic tile market slowed its growth in 2018, sup- pliers are hopeful about the category’s potential for the remainder of this year and into 2020. “Innovation will continue to be the key to growth in the future,” Dal-Tile’s Mattioli said. “Advancements in decoration technology and impressive sizes such as 5 x 10-foot porcelain slabs are examples of how tile has been an innovation leader in the flooring industry.”

Pre-recession numbers remain on the minds of industry observers. For the category to return to its heyday, some believe both commercial and residential construction will have to continue on the path of stable growth. “Despite the long post-recession recovery, many would argue we are still falling 10%-15% short of the annual residential starts number to support population and demographics,” Daniel noted. “Affordability aside, that supply shortage would aid to the growth in the category when realized.”

Overall, ceramic tile has its inherent qualities that keep end users—both big and small—coming back for more. MSI’s Shah noted that ceramic tile continues to be the flooring option that has the highest longevity, least maintenance and most décor options.

“As an industry we can continue to see growth in ceramic by making it affordable and accessible,” he explained. “This specifically means making sure there is inherent value in all of the positive aspects ceramic tile has to offer while bringing more innovative aesthetics and performance that consumers are looking. At the same time, we have to take into account the relative value and competing products.”

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Laminate: Segment feels heat from hard surface counterparts

June 24/July 1, 2019: Volume 35, Issue 1

By Reginald Tucker

 

Fierce competition from alternative hard surface categories—combined with a diminished number of laminate displays in many independent specialty retail showrooms across the country—kept the category’s growth in check for much of 2018.

FCNews research shows laminate flooring sales dipped to just over $1.103 billion last year, a 1.7% decrease from 2017. It also represents the second consecutive year of sales declines in the category.

Likewise, volume took a hit as square footage sold fell to roughly 1.012 billion square feet, a 2.1% decrease over the prior year on top of a 1.9% decrease in volume sold in 2017.

To put things in greater perspective, laminates’ part of the overall flooring market fell to roughly 4.8%, down from 5.1% of total industry dollars in 2017. With respect to volume, the category represented approximately 5.1% of total square footage sold, down slightly from 5.3% in 2017. Going back 10 years, laminate represented roughly 5.7% of total industry sales and 4.4% of volume.

The falloff is even more pronounced when measuring laminates’ performance against competing hard surface categories. Last year, for example, the category accounted for about 9.5% of total hard surface sales and 11.2% of hard surface volume sold. That’s down slightly from 10.6% of sales and 11.6% of volume in 2017, respectively. But just five years ago, laminates’ share of total hard surfaces was 15% in dollars and 17% of square footage.

It’s no coincidence that the laminate category has lost the most market share over the past five to 10 years; over that same time span, certain segments of the resilient flooring category have increased share. “Without a doubt the biggest issue facing the laminate category is competition from WPC/LVT/SPC,” said Dan Natkin, vice president of hardwood and laminate, Mannington. “These categories have grown tremendously in the past 10 years and have presented some headwinds for laminate.”

Other laminate flooring manufacturing executives—even those who participate in the competing rigid floor covering segment—agree. “Clearly the biggest pressure on laminates is the competition from rigid core vinyl in all its forms,” said Derek Welbourn, CEO of Inhaus, manufacturer of the Sono ceramin-based line as well as company-branded laminate flooring. “As the industry statistics clearly show, these resilient products are continuing to claim market share against all categories and, in particular, laminate flooring.”

As more retailers participate in the explosive rigid core sector, they are devoting more of their floor space to these products and less to others, namely laminate. “During laminates’ heyday between 1996 and 2003-04, the average retailer had five-plus laminate displays on the showroom floor,” said Drew Hash, vice president, hard surface product/category management, Shaw Floors. “Now you’re lucky to see one laminate display on the showroom floor.”

Mannington’s Natkin agreed. “At independent retail, we have seen some choosing to dedicate less space to the laminate category, instead focusing in on two or three key brands they know and trust.”

Not everyone is in agreement that the laminate category has fallen off to the degree that many suggest, however. “We continue to estimate high market share for laminates in North America than what is published,” Inhaus’ Welbourn stated. He puts 2018 volume in the 1.2 billion-square-foot range. “The added features have driven more top-end sales, escalating the average sales price of laminate.”

Other executives such as Travis Bass, executive vice president of sales and marketing for Swiss Krono, a private-label supplier, believes volume was even higher than that in 2018. “We believe the market to be approximately 1.3 billion square feet and in excess of $1.2 billion in sales.”

Changing dynamics

Along with the overall shift in hard surface preferences, there has also been some movement internally within the laminate category as it pertains to how and where the product is being sold, distributed and consumed. For instance, laminates’ share of the commercial sector continues to dwindle (combined Main Street business and specified commercial business account for only 1.1% of sales) while residential replacement and builder applications are holding steady. FCNews research showed a slight uptick in new construction applications (12% of sales) with residential replacement activity—the leading end-use sector for laminates—hovering around 87% of sales.

“Residential remodel is still the strongest market for laminate, but we’re seeing growing acceptance among the builder community,” Mannington’s Natkin said.

In that same vein, industry observers reported greater activity at the home center level as big boxes dedicate more space (and SKUs) to flooring. FCNews research shows that Home Depot and Lowe’s collectively generated roughly $13 billion in total flooring sales in fiscal 2018. With respect to laminate in particular, there has been strong activity among entry-level laminate products in the $0.99 to $2.49-per-square-foot range. For 2018, FCNews research showed the major big-box chains—including Home Depot, Lowe’s and Menard’s—grew their collective share of laminate flooring sales to 51% of the market, as the specialty retail segment’s share dipped slightly to roughly 28%. The industry also saw other mass merchants—including the likes of warehouse clubs and Lumber Liquidators—increase their respective shares of the market.

The good news for specialty retailers is the kinds of laminate products in which they choose to specialize generally represent higher-margin opportunities. “We’re seeing more activity with the 12mm laminate products at specialty retail vs. the less expensive 8mm products you generally find at the home centers,” Shaw’s Hash explained. “Not only do the thicker products translate into bigger profits for our retail partners, but they also mean better-performing products for the consumer.”

Domestic vs. imports
The high volume of entry-level laminate flooring products moving through the home center channel—combined with fewer brands being represented at the specialty retail level—has impacted the supply chain dynamics in recent years. As stateside suppliers look to remain profitable in a market segment where the basic wholesale price of the product hasn’t budged much, there has been an increasing reliance on private-label manufacturers located in the U.S. Companies like Clarion and Swiss Krono, for example, have invested millions in their stateside operations to meet demand for what they view as a steady home center business. At the same time, they continue to make higher-end goods for some major American suppliers.

Nonetheless, the U.S. market is still attractive for laminate manufacturers based in Europe, China and, to a lesser extent, Canada. While imports have fallen off somewhat over the past two to three years, inbound shipments still represent a respectable portion of laminate flooring products making their way to U.S. shores.

A cursory view of statistics provided by the European Producers of Laminate Flooring (EPLF) bears this out. Last year, manufacturing members of the EPLF (including Classen, Alsapan, Berry Alloc, Egger, Haro, Faus, Kaindl, Balterio, Swiss Krono and Krono Flooring, among others) achieved worldwide sales of European-produced laminate flooring totaling 4.9 billion square feet, down 4.6% compared to 2017. This indicates that even with a downward trend in some regions, the global laminate market remains at a high level.

North America in particular continues to be a profitable sales region for the European laminate flooring sector, although weaker figures from Canada have mitigated those results. At 476 million square feet, total sales for North America in 2018 are off about 10.4% against the previous year. With around 330 million square feet sold in 2018, the U.S. market exhibited a slight reduction of 2.4%, while Canada recorded just under 146.3 million square feet for 2018, representing a drop of 24.5%.

By comparison, in Western Europe, the “home market” of the EPLF, sales declined further in 2018. Last year total member sales to the region reached 2.42 billion square feet, down 7.3% compared to the previous year. Meanwhile, EPLF sales to Latin America and Asia once again recorded the biggest increases. EPLF sales to Latin America grew 4.7% to approximately 200 million square feet in 2018 with Chile, the largest individual market, rising 5% compared to the previous year. Mexico recorded 42 million square feet, down from 46.3 million square feet in 2017, while Colombia registered 22.6 million square feet, up from 17.2 million square feet the year prior.

In Asia, EPLF producers achieved total sales of around 323 million square feet, up 2.8% over the previous year.

Silver linings
While the laminate flooring segment faces ongoing challenges from external forces and internal dynamics alike, suppliers continue to invest in the category. Mohawk Industries, for one, is looking to continue ushering the category into the next stage of its evolution via both its RevWood and Quick-Step NatureTEK offerings—products that tout enhanced durability as well as resistance to water incursion.

“We have a pretty good base here in the United States for production of RevWood products,” said Jeff Juzaitis, vice president, product management, Mohawk. “We have a breadth of design styles that satisfy almost every design whim. So that’s our focus—keeping the features at the forefront of the market and making sure we have price points across the entire range. We have the best partners out there in the marketplace to convey the story of RevWood to our end consumer who’s going to put it on the floor.”

It’s specifically the “waterproof” segment within the laminate flooring category that Mohawk sees the greatest potential. “In a world where everybody is being bombarded by rigid LVT, it’s really refreshing to have a different product category to talk about,” said Paul Murfin, senior vice president of distribution at Mohawk. “I would argue that this category of flooring is actually the fastest growing category in the industry today, growing faster than SPC or WPC. We are potentially looking at high-double or potentially triple-digit growth for this type of product.”

Quick-Step distributors like Owings Mills, Md.-based Elias Wilf tend to agree. “The laminate category has taken a pretty good hit over the past few years; WPC and rigid core floors certainly haven’t helped that,” said Jeff Striegel, president. “But the relaunch of Quick-Step in the form of NatureTEK just goes to demonstrate that if you keep a product current, fashionable and in line with the attributes that consumers are actually interested in and looking for, it still has a meaningful place on the floor both in the retail space and at the builder level.”

For companies like Shaw Floors, the greatest opportunity lies in step-up products. “Sales of our better-end, moisture-resistant products—which we classify as Repel—are doing very well in the market,” Hash explained. “Where we have had more challenges within the laminate category, quite frankly, is on the entry-level side where there’s more pressure from inexpensive 7mm-8mm products vs. the higher quality 12mm option, which accounts for a much smaller piece of the pie.”

The goal, according to suppliers like Shaw Floors, is to put more “distance” between the types of laminate products primarily sold at home centers and mass merchants vs. the more differentiated, higher-margin goods predominantly peddled by independent specialty retailers. “At Shaw we have launched 72-inch laminate boards, which have come a long way compared to a time when everything was 48-inch, fixed lengths,” Hash stated. “Also, with laminates today, the depth of the embossing is much better and the visuals are much stronger than they were in the past. When you take into account the apparent value of the products along with the visuals and the water-resistance story tacked on—it’s still a great value for the product.”

Swiss Krono’s Bass agreed, citing the vast improvements made in recent years. “With the product evolution into moisture resistance, laminate has solidified its place in the overall floor covering market. Moisture-resistant laminate gives the consumer a desired wood product with a wonderful environmental story and a great product with the best features and benefits of all floor covering choices.”

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Wood: Price hikes, look-alikes squeeze profit margins

June 24/July 1, 2019: Volume 35, Issue 1

By Reginald Tucker

 

While several major hardwood flooring manufacturers reported modest sales increases in 2018, many will admit that profit margins were a bit tighter than they would have liked. That’s due in large part to numerous price increases enacted last year in response to rising lumber and energy costs. On top of that, portions of the category—particularly entry-level products—faced pricing pressures from the surging popularity of less expensive alternatives to hardwood, namely LVT, WPC and, more recently, SPC.

When the smoke cleared, the hardwood flooring category generated $2.422 billion in sales, a 4.4% increase over 2017. The volume of hardwood flooring sold at the first point of distribution also grew, albeit at a slower rate (3.2%), to 959 million square feet, reflecting higher-priced product and better-quality goods.

Industry observers owe hardwood’s performance to the strength of key end-use market segments. “Residential replacement continues to be the primary driver in hardwood consumption, followed by new construction—primarily single family,” said Dan Natkin, vice president of hardwood and laminates, Mannington.

Michael Bell, COO of AHF Products—the company created when Armstrong Flooring spun off its hardwood business—is in agreement. “Hardwood flooring consumption is being driven primarily by a combination of single-family new construction and residential replacement. We have enjoyed steady overall growth for the past 10 years.”

For Boa-Franc, maker of the Mirage brand, single-family construction is driving revenues followed by commercial contract and residential replacement, according to Brad Williams, vice president of sales and marketing.

Mohawk, whose gross hardwood flooring sales are up, also sees activity in the new home construction sector, especially single-family homes. Residential replacement sales are strong as well. “Commercial is strong in certain areas, but by and large it’s not a huge market for hardwood,” said Adam Ward, senior director of wood and laminate. “We don’t see those trends changing anytime soon.”

Anecdotal observations from suppliers is supplemented by hard numbers. FCNews research shows the residential replacement sector grew its share of the pie in 2018, accounting for roughly 58% of end use. That’s up a few percentage points from 2017, when residential replacement activity accounted for approximately 55% of wood sales. But that growth came at the expense of lower consumption by the new home construction sector, which fell to roughly 33.5% of sales last year compared to 35% in 2017. Commercial (specified plus Main Street) also saw its share slip in 2018, accounting for only about 8.5% of category sales. That’s off from approximately 10% of category sales in 2017.

Wood’s shifting consumption trend is more readily evident when compared to activity across other hard surface categories. In 2018, for example, hardwood represented about 17% of hard surface sales but only 10.1% of volume. Going back five years, wood accounted for nearly 20% and 15% of hard surface sales and square footage, respectively.

Much like other traditional hard surface categories, hardwood has ceded market share to the likes of trendy resilient flooring options in recent years. That’s no surprise considering many of these less expensive alternatives do an admirable job of replicating the natural visual—if not the overall heft and feel—of genuine hardwood flooring.

Bruce Zwicker, former president and CEO of Haines turned independent industry consultant, recently delivered a sobering keynote address that drove home just how much resilient flooring—both flexible and rigid core products—are nipping share from the total floor covering pie, not just hardwood. Specifically, he cited research showing LVT grew by 25% in the U.S. last year, accounting for roughly 20% of the total flooring market. By comparison, he said hardwood—although it represents approximately 13% of the total flooring space—grew by single digits.

“Flooring demand in general is growing, but wood flooring demand is not,” he said. “Why is that? No. 1, the price of wood combined with the installation cost of wood makes it the most expensive floor covering. And as we all know, economic growth is not robust; disposable income is not rising at a high rate, and the standard of living in the U.S. is not growing like it used to. Hardwood is still the consumer’s aspirational choice, but flooring dealers are fighting a battle in educating the consumer that they can get more value from wood compared to some of these other products.”

Nonetheless, it’s a real issue with which wood flooring suppliers must contend. “Without a doubt, these categories are exerting tremendous pressure on the lower end of the wood category,” Natkin explained. “We have seen significant category cannibalization as vinyl-based products continue to take share. However, the mid to upper ends of the hardwood category remain strong and less prone to impact from the look-alike products.”

Observers believe the onslaught of WPC, SPC and LVT products has put many hardwood suppliers back on their heels. “It has forced hardwood to strengthen what makes it special and unique to the customers,” Mohawk’s Ward said. “However, hardwood at the upper end of the market still remains a viable option—there’s less competition there.”

Wade Bondrowski, director of sales, U.S., at Mercier Wood Flooring, attests to the toll resilient has taken on the wood market, but he’s not overly concerned. “It doesn’t seem to be affecting Mercier as much as the lower-end type products on the market” he explained. “We are finding buyers in the market for real wood typically consider better goods.”

Domestic vs. outsourcing
The gradual shift in consumer tastes is also manifested in the types of products manufacturers make domestically vs. what they import from other countries. With profit margins getting ever tighter, particularly with respect to the solid side of the business, suppliers are exploring options that make the most sense from a financial and practical point of view.

“In the U.S. today, we produce less wood flooring than we used to and we import a whole lot more,” Zwicker said. “You can actually take lumber from the U.S., ship it over to China, create a floor and ship it back to the U.S. and still be more competitive than many U.S. producers. The Chinese have lower labor costs, and the government subsidizes manufacturing there. There are anti-dumping penalties and tariffs in place to prevent unfair trade, but their costs are still really low compared to U.S. producers.”

The import trends are reflected in the numbers. Zwicker cited research showing total flooring imports account for almost 50% of U.S. consumption, with China representing at least a third of those imports. Looking specifically at wood, however, China represents 50% of wood but 85% of LVT/multilayered flooring—the category that has been taking the greatest share from wood.

Even more telling, Zwicker said, wood imports accounted for roughly 30% of the U.S. market 10 years ago compared to 52% last year. In 2006, wood imports accounted for just 15% of the market, he said.

“The fact is producing wood flooring in the U.S. is simply not profitable for many manufacturers,” Zwicker stated. “In response, many manufacturers scaled back production, raised prices and sold all or part of their wood divisions.”

One of the companies Zwicker referenced was Shaw Floors, which earlier this year announced plans to sell its solid hardwood flooring plants to Beasley Forest Products, a vertically integrated operation based in North Carolina. The move allows Shaw to lower its production costs without disrupting the supply chain.

“We’re continually looking at how we can optimize and create value through our supply chain to make sure we’re aligned with the market,” said Herb Upton, vice president of hard surfaces at Shaw Floors.

Emerging formats
In addition to taking measures to better control costs, hardwood flooring suppliers are adapting their product offerings to better compete with the likes of WPC and SPC. In fact, many traditional wood flooring manufacturers are increasingly incorporating non-wood-based cores in their products. And now with the National Wood Flooring Association’s updated standards that classify rigid core-based floors that feature sliced or peeled wood veneers as real wood, it’s open season for this emerging format.

“These types of products have been around for years—originally on HDF cores and now evolving to vinyl or stone based,” Mannington’s Natkin said. “The latest twist is the marketing of these products as waterproof.”

AHF Products’ Bell believes these new “hybrid” formats open the door for further innovation. “We embrace the development and evolution of core structures to ensure the hardwood customer has relevant options based on their particular needs,” he explained. “It is our job to innovate and lead in the development of such products so we are a dependable solution provider for our channel partners.”

American OEM, whose forte has long been genuine engineered hardwood, is jumping headlong into the arena with a new product called Raintree, which features a sliced veneer on top of an SPC core. “This real wood floor will be guaranteed to withstand being totally submerged in water for up to 24 hours,” said Don Finkell, CEO. “We also introduced a water-resistant, six-surface coating system on our premium products that will allow our traditional veneer core wood floors to be approved for certain wet mopping maintenance systems. We think this is a significant improvement to most wood floor warranties offered today, which disclaim any type of wet maintenance.”

Another player that has reported growing acceptance of the wood veneer/rigid core for- mat is Wellmade, which markets the Opti-Wood line of waterproof wood flooring. “Our HDPC Opti-Wood products provide dealers and distributors what they need to grow sales and improve margins in the emerging market for waterproof hardwood flooring,” said Steve Wagner, vice president of sales and marketing.

Others are taking a wait-and-see approach. “So-called hybrid products like these have the potential to be good,” Mohawk’s Ward said. “We’re obviously monitoring the products that are coming out, looking at how we can offer a superior product. While we don’t have one of those cores out yet, we want to make sure what we believe customers want in a hardwood is a real, authentic product. If we can marry that with some of the benefits—such as a water resistance or waterproof features—that makes it all the more valuable to a certain subset of customers.”

The challenge for wood flooring suppliers, observers say, is leveraging the category’s winning proposition. “All these products—LVT, WPC, SPC—are taking market share,” Zwicker said. “However, wood flooring isn’t going away anytime soon.”

Lumber pricing trends
Another factor that impacted hardwood flooring in 2018 was the escalation in raw material prices, especially for in-demand species. “Last year, we saw fluctuations in raw lumber, especially in white oak,” Mohawk’s Ward said.

Shaw Floors announced price hikes on its solid offerings last year as a result of both domestic and international demand. Upton cited the impact of an increase in shipments of logs destined for further processing in Southeast Asia as well as normal ebbs and flows of stateside demand for flooring. Also factoring into the equation, he noted, is growing demand from the other users of wood—such as mat timbers and other businesses (industrial lumber applications). “These can, over the long term, cause a major disruption in demand patterns,” he explained. “For example, we’ve seen industries such as fracking exploration impact demand for wood.”

The impact of rising demand from exports as well as domestic industries that compete for raw materials is well documented in reports provided by the Hardwood Review Weekly. The publication concluded that 2018 was by and large a good year for the U.S. hardwood industry as it ended up being the second strongest export year on record. Research shows export volumes totaled roughly 1.73 billion board feet–quite a feat considering Chinese demand tailed off significantly during the second half of the year.

The spring of 2018 in particular was particularly noteworthy with respect to export volume movement. In fact, the month of April was the highest on record for U.S. exports of red oak lumber, according to the USDA Foreign Agricultural Service data. Chinese demand for 4/4 #1C grade red oak and green #2A, 3A and kiln-dried #2A red oak remains strong as flooring plants continue to aggressively purchase lumber. FAS red oak green lumber pricing is 9% higher than a near record increase seen in July 2017. (Grades such as #1C & 2A prices were 10% and 8% higher, respectfully, during the period.)

International demand for white oak is also on the rise. Reports indicate increasing FAS grade white oak sales to Europe the, Far East and Oceanic destinations. Back at home, U.S. residential and truck-trailer flooring factories are aggressively pursuing green #2A & 3A white oak with some buying kiln-dried stock to fill gaps in supply. Sawmills also report solid orders for green #1C and better white oak from exporting concentration yards.

Overall pricing across all grades shows white oak increasing by almost 6%, with grade #1C and 2A pricing increasing 7%. The market direction for walnut, which is also rising in popularity, has shifted in recent months with demand for green exceeding kiln-dried lumber in addition to demand for grades higher than #1C and #2A. (FAS walnut lumber pricing was reported at $3,000/MBF, the highest since January 2015.) Common-grade walnut prices have followed the same trend, according to the Hardwood Review. Green walnut lumber pricing across all grades is 20% higher than the high mark seen in July 2017.

Pricing for cherry species is also up thanks to rising demand from China. This despite declining demand in the U.S. and elsewhere. Cherry lumber supplies are running thin, particularly green stocks, which has kept pricing up. Green lumber prices across all grades of cherry are 19% higher than those reported in July 2017. Pricing for FAS grade cherry has been on a roll since July 2014; common-grade cherry (1C and 2A) is averaging 23% higher than what was reported in July 2017.

Sawmills also report growing order files for hard maple, primarily due to demand from cabinet and wood component manufacturers. Residential flooring factories and distribution yards are buying at a steady pace at a time when hard maple is seasonally slower, according to the Hardwood Review Weekly. This combination of circumstances is compressing supplies and gradually lifting prices, particularly for the common grades, which are attracting the strongest interest. Hard maple lumber pricing in mid-2018 was 14.5% higher across all grades compared to what was reported in July 2017. (Grade 1C lumber showed the largest increase at 18%.)

But it’s not just raw materials that’s impacting the cost of wood flooring production. “We also saw transportation inflation throughout the first half of the year in 2018,” Mannington’s Natkin explained.

With respect to the impact of the tariffs on pricing, supply and demand, some executives are seeing the warning signs. “We have noticed an increase on prices to the trade, even on products not finished or sourced from regions affected by the tariffs,” said Mitch Tagle, founder and CEO of DuChateau.

Even if the imposition of tariffs on imports from China result in tangibly higher prices or reduced shipments, experts believe it won’t significantly stem the tide because it’s still more cost effective to make hardwood flooring outside the U.S. Zwicker’s research shows countries such as Vietnam, Indonesia, Cambodia and Thailand are already picking up some of the slack. “Put them all together, and they represent 17% of all the wood flooring imports coming into the country today,” he said. “That will continue to rise.”

Outlook
Despite the well-documented challenges, hardwood suppliers remain confident the category will remain viable. In fact, many are investing in their operations in anticipation of strengthening demand. Earlier this year, for example, AHF Products announced the acquisition of LM Flooring, a major producer with a global manufacturing footprint. In that same vein, Wickham Hardwood Flooring invested millions of dollars in its milling and finishing operations in Canada. Mannington also recently completed a major capital upgrade of its hardwood manufacturing plant in High Point, N.C., to enhance efficiencies and production capabilities. “There is still very strong fundamental demand for hardwood,” Natkin told FCNews.

Another factor leaning in wood’s favor is the outlook for residential remodeling spending—a critical end-use sector for the category. A newly released report from the Joint Center for Housing Studies of Harvard University showed homeowners spent $339 billion on remodeling in the first quarter of 2019, a 7% increase from a year earlier. More importantly, consumers are expected to lay out $345 billion in the second quarter, up 6.9% year on year, according to the center.

By the first quarter of 2020, spending on home remodeling is projected to reach $347 billion, an increase of 2.6%. This compares with estimated expenditures of $352 billion in the third quarter of 2018, a 6.9% rise from a year earlier, and $353 billion in the fourth quarter of 2018, a 5.2% uptick over 2017.

“Home improvement and repair spending has been in an extended period of above-trend growth for several years, due to weak homebuilding, aging homes and other factors,” said Abbe Will, associate project director at the center’s Remodeling Futures Program.

On the downside, suppliers expect raw materials pricing fluctuations to continue to be a challenge, remaining higher than this time last year. “We expect to see increases across all species, with red oak being the most volatile,” AHF Product’s Bell said. “We have also experienced significant inflation in freight and packaging.”

All in all, though, suppliers expect to see movement in the right direction. “As we look further into 2019, we expect to see slight to modest growth,” Shaw Floors’ Upton said. “We’re predicting growth around 5% for the hardwood category.”

Mirage’s Williams predicts a slower increase than what the industry experienced in 2018. “We project the overall hardwood category will see a modest growth rate of 3% for 2019.”

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Resilient: LVT, WPC, SPC bulldoze the competition

June 24/July 1, 2019: Volume 35, Issue 1

By Lindsay Baillie

 

Industry observers will not be surprised to hear that the resilient category had another spectacular year of growth in both sales and volume. FCNews research shows the category generated $4.916 billion in sales (not including rubber) in 2018—an industry-leading 23.1% increase over 2017’s $3.993 billion. In terms of volume, the category accounted for 4.373 billion square feet (not including rubber) at the first point of sales, an 8.67% increase from 2017’s 4.024 billion square feet. This positive momentum, executives say, is directly attributed to the performance of subcategories such as WPC and rigid core.

The resilient category’s strong performance in 2018 is even clearer when measured against other hard surfaces. When compared to the likes of tile, wood and laminate, resilient accounted for 42.4% of sales. When taking total flooring sales into account, resilient comprised 21.4% of revenue and 22.3% of volume.

The category’s skyrocketing growth really comes into perspective when you consider the fact the segment’s percentage increase in revenue is over five times the growth of the entire industry, while volume is almost four times that of the flooring sector as a whole.

Resilient’s continued double- digit growth in sales in 2018 is made that much more significant when looking at its performance over the past few years. FCNews research shows 2018’s sales represent a 40.5% increase over 2016’s $3.499 billion and a 68.13% increase compared to 2015. To put this growth into perspective, total resilient sales increased 123% from 2013’s $2.206 billion and 130.3% from 2008. Meanwhile, total resilient volume increased 68.8% from 2013’s 2.59 billion square feet and 49.76% over 2008.

Industry executives cite a multitude of factors that contributed to the resilient category’s meteoric rise. One of which is the fact that the category possesses a wide range of products to fulfill a range of retailer and consumer needs. As Michael Raskin, CEO, Raskin Industries, explained, resilient products across the board provide the consumer with value. “Today’s customer wants performance and design. The visuals in this category have vastly improved. All of these attributes—waterproof, durability, ease of installation and maintenance—provide an unsurpassed value. Also, it is more difficult to find skilled labor, which impacts products like ceramic and wood. Retailers ultimately push products they can install with confidence in a timely manner.”

Other executives agree, citing the features and benefits the category provides. “Resilient flooring provides tremendous value to consumers through advancements in visuals that are better than natural wood and tile looks, superior performance and ease of installation,” said Ed Sanchez, vice president product management, Mohawk Industries—parent of the Pergo Extreme brand. “Consumers want value but don’t want to compromise on features. With resilient, they don’t have to.”

Other manufacturers see the category’s red-hot LVT segment as a major factor in resilient flooring’s performance. “The resilient flooring market is being fueled by LVT’s continued growth,” said John Szilagyi, manager market intelligence, Tarkett North America. “The category has captured some of the best features of design, performance and price. It has also been a hotbed of innovation. While other product categories have remained somewhat stagnant, LVT has benefitted from digital printing. LVT has also seen advancement in material innovation—especially WPC and SPC— and diverse production.”

Most executives agree LVT’s sister subsegments, WPC and SPC, have brought the category to new heights. “The consumer has embraced the SPC category as a high-value flooring choice,” said Art Layton, director of specialty products, Axiscor. “The performance is proven in high-traffic and high-moisture applications, and it is an extremely easy product to clean and maintain. Retailers love selling the product for several reasons, including ease of transport to and from jobs, faster installations and very few callbacks.”

It also helps that LVT, WPC and SPC are all products that provide retailers with a compelling story to sell, executives say. “They can sell the end user on its practicality, the fact that it is waterproof, scratch resistant and so on,” said Chris Dillon, vice president of sales and marketing, Celeste. “Every year it seems the looks get better and more realistic. A few years ago, you could easily see the difference between real wood and resilient; now it’s more difficult.”

Residential
FCNews research shows the residential end-use sector made up almost 65.6% of total resilient revenue or $3.227 billion. With respect to volume, residential resilient accounted for 71.4% of square footage shipped. The bulk of that activity was driven by residential LVT (including WPC and rigid products), which generated an estimated $2.6 billion in revenue or 80.6% of total residential resilient sales. In terms of volume, these trendy products accounted for 1.848 billion square feet, or 59.2% of residential resilient volume.

Resilient manufacturers attribute the category’s success, in part, to the strength of key end-use sectors. Many industry executives see the greatest activity in replacement/redesign markets. However, builder and new home construction—in both single- and multi-family installations—are helping to bring the category to new heights. Executives also say that while WPC and rigid core products remain the darlings of the resilient category, each segment is seeing a different resilient product take market share.

“I have seen this category grow everywhere, but it has been stronger in the residential replacement market,” Celeste’s Dillon explained. “I had a friend recently go into a retailer looking to purchase hardwood, but the retailer kept trying to push her toward a resilient floor. It has become the trend in the retail market, much like laminate used to be.”

The resilient category as a whole is thriving in residential replacement in part because its unique selling points catch the consumer’s attention. That’s according to Jason Hair, vice president of hard surfaces, Phenix Flooring, who sees WPC clearly leading the charge in this sector. “The waterproof story seems to resonate with the consumer since it’s such a practical feature. It’s a feature they can easily understand and apply to their own home.”

While residential replacement has also been a primary driver in the growth of LVT volume, some companies are seeing a strong LVT presence in the multi-family market. There have even been reports that indicate builders are embracing rigid core products. “Residential retail has been a big player in the growth of luxury vinyl flooring, in particular the rigid segment,” said Lindsey Nisbet, director of marketing, EarthWerks. “While there are so many options of flooring to consider, luxury vinyl flooring has all of the looks, performance capabilities and price options for the homeowner.”

Other executives are also seeing builders install more luxury vinyl planks (LVP) and tiles (LVT) in all rooms of the home. “We continue to see the resilient products, planks and tiles along with textile back sheet replacing other hard surface products in new construction, property management and residential replacement,” said Nick Brown, vice president of sales – North America, Beauflor USA.

Industry executives also attribute this continuous growth in the residential arena to the evolution of vinyl plank. “Starting with traditional LVT, followed by WPC and, most recently, HDPC/SPC rigid core products, each incarnation has provided improved structural design and performance with enhanced HD visuals and textures,” said Dick Quinlan, senior vice president of sales and marketing, Wellmade Performance Flooring.

Subsegment breakout
Within residential LVT, dryback and click products experienced decreases in 2018, research shows. Dryback was down roughly 1% from $523.65 million in 2017, while click saw a 6.56% decrease from $460.6 million two years ago. Conversely, loose lay revenue grew 22.2% from $33.8 million in 2017 to $41.3 million in 2018. In terms of volume, dryback represented 34.5%, click was 18.8% and loose lay was roughly 1% of total LVT volume in 2018.

“We are seeing growth within all three categories of LVT—glue- down, loose lay and rigid—residentially because they provide practical benefits in addition to original visuals,” said Bill Anderson, CEO, Karndean Designflooring. It is ultimately the intended use that dictates which LVT format is chosen by the consumer, he added.

WPC and rigid had another stellar year in 2018, on the heels of astronomical growth in 2017. The subsegments together claimed 61.9% of residential LVT dollars and 46.5% of residential LVT volume, respectively. That is an 84.7% uptick in dollars and 92% increase in volume from 2017. Observers believe this trend provides evidence of WPC and rigid core’s cannibalization of LVT click products.

Rigid core’s growing acceptance, experts say, boils down to several factors: ease of installation, waterproof qualities and visuals. “Rigid core has the trifecta of irresistible attributes: unbelievably realistic look and feel, fast and easy installation and upkeep, and 100% worry-proof and waterproof with industry- leading warranty,” said Sam Kim, senior vice president, MSI. “We have seen increased acceptance of rigid core LVT in all areas of construction—new, replacement, low-end, mid-end, high-end, spec homes and custom homes.”

Innovations in subsegments such as WPC and SPC are also driving appeal. As Axiscor’s Layton explained, “Technologies and improvements to SPC products such as embossed in register finishes, beveled edges and superior natural visuals have made a major impact on the popularity of the category.”

While WPC has been outpacing other flooring categories (including traditional LVT) since its inception, the subsegment has felt increasing pressure from rigid core over the past two years in particular. This phenomenon, executives say, is due to rigid core’s differentiating qualities.

“SPC does not require adhesive during production so it is more efficient from a production standpoint,” Raskin explained. “The consumer market can still differentiate as WPC uses a thicker foam board that is less dense. It depends if the consumer sees value in a thicker foam product filled with air used in WPC or a denser board with no air or foam. If the consumer is educated properly, then WPC sales should continue to decline.”

What’s more, rigid is expected to continue taking market share away from almost every sector. “Our results indicate it is primarily taking share from residential, both single- and multi-family,” said Kurt Denman, chief marketing officer and executive vice president of sales, Congoleum. “With the growing preference for hard surface, it is seen as a product that can go anywhere in the home.”

Despite rigid core products stealing share from WPC, industry executives still see a market for the latter. “There has been hyper growth in SPC in all of the channels,” said Herb Upton, vice president hard surface flooring, Shaw Industries, parent company of USFloors and Fusion. “If you look at it on a percentage basis, SPC growth is significant but it’s the laws of bigger numbers. There’s more WPC out in the market right now. Both WPC and SPC have a place in the residential home, so they can coexist. WPC is the luxury 60-ounce carpet; it feels great underfoot, looks beautiful and performs. It is what you want in those main rooms within your house. SPC offers a high-performance platform for high traffic.”

Sheet
With the continued success of LVT—more specifically WPC and rigid products—residential sheet vinyl flooring saw another year of decline in 2018. According to FCNews research, the segment was down 12.3% from $579 million in 2017 to $507.9 million in 2018 in sales and 12.6% off in volume. Several manufacturers see this decline in starter homes and multi-family projects in particular.

Some manufacturing executives do not see sheet ever regaining market share. “Sheet vinyl has an uphill battle against rigid core and flex vinyl planks and tiles,” said Jamann Stepp, vice president of hard surface, The Dixie Group. “What market share rigid core does not consume from sheet vinyl, flex vinyl such as dryback, click vinyl and loose lay will. There will be a market for sheet vinyl goods; however, that market will continue to shrink.”

However, not all manufacturers have written off sheet in residential settings. “Beauflor has revived sheet with textile-back products,” Brown explained. “Textile-back sheet allows the customer to install the floor similar to a luxury vinyl plank and tile with limited floor prep and being able to install over single-layer constructions.”

Mohawk’s Sanchez also sees sheet as a viable product moving forward. While sheet has experienced pressure from the commodity plank products in the market, sheet should be able to hold a unique position for some applications in the face of increased pressure from imports. “Improved realism, design and features such as EIR make sheet an ideal solution for some applications, delivering value and fashion to the consumer,” he said.

While sheet vinyl manufacturers foresee a tough road ahead, there are several moves they can make to jump-start the subcategory. Proponents like Bret Perkins, vice president, hard surface, Southwind, sees potential in installation innovation. “About the only thing the industry can do is create a product that can easily be installed by DIY, is free floating and easy to seam together,” he explained.

Another avenue that may help sheet recover market share is creating unique visuals untouchable by other resilient products. As Dan Natkin, vice president–hardwood and laminates, Mannington, explained, “From a product perspective, we have seen success in reviving sheet through patterns that are nearly impossible in any other category. The other area to revive sheet revolves around telling the quality story and training a new generation of installers.”

Within this resilient subcategory, FCNews research shows felt goods continuing to lose market share to fiberglass. While felt was approximately 22.5% of dollars and 25.3% of volume in 2017, the product has dropped to 18.2% of dollars and 22.1% volume in 2018. Fiberglass, on the other hand, increased its share to 71.6% of dollars and 71% of volume—a 3.8% and 2% increase, respectively, from 2017.

“With the introduction in textile-back sheet and the continued development of fiberglass sheet constructions, felt will continue to lose market share in the residential replacement, property management and builder markets,” Beauflor’s Brown said.

Despite felt losing share to fiberglass and other backings, some executives still see a market for felt-backed sheet. “It is still the most value-oriented construction and performs exceedingly well in many environments,” Natkin stated.

Commercial
FCNews research shows resilient products in the commercial arena generated $1.916 billion in sales in 2018, a 17.8% increase from 2017. Volume, by comparison, was up 7.7%. Industry experts believe key end-use sectors such as healthcare, hospitality, education and Main Street assisted in resilient flooring’s growth in the commercial market. This trend is expected to extend through 2019 and beyond as LVT, WPC and SPC products continue to poach market share from soft goods as well as other hard surfaces.

“Resilient flooring—particularly LVT—is growing across virtually all commercial channels, as hard surface is seen more often in spaces that used to feature carpet,” said Deb Lechner, vice president of marketing, Armstrong Flooring. “Growth occurred in healthcare and also within the office sector, with the ongoing growth in employment. The education market showed growth as well, as state and local tax revenues improve. In addition, hospitality improved last year as economic conditions encouraged business and leisure travel.”

Others are seeing growth in resilient in education as well as retail. “We are in the education buying/specification season with much school construction under way,” said David Thoresen, senior vice president commercial hard surface, Mohawk Group. “We are seeing the growth in retail because of our strong position in the segment with strategic accounts and relationships.”

Similar to 2017, much of resilient contract sales came from commercial-grade LVT, which accounted for roughly $1.087 billion in 2018—a 35.9% jump over 2017’s $799.8 million. Within this subcategory, WPC and SPC made up a significant portion of dollar growth, rising from $72 million in 2017 to $151.7 million in 2018. Dryback saw a 19.17% growth in volume, while click continues to see a drop-off—likely due to the growth of commercial SPC, which captured 57.7 million square feet in volume in 2018, observers say.

“In a commercial setting—such as those with roller traffic—LVT or a glue-down SPC will perform very well,” said Amy Tucker, senior marketing manager, Philadelphia Commercial. “WPC, however, is engineered for spaces less likely to encounter roller traffic. Resident living spaces and areas looking for more comfort underfoot pair best with WPC.”

The growth of LVT in the commercial market, experts say, is likely due to the subcategory’s low maintenance requirements, ease of installation and performance attributes. “If you look at many restaurant chains where they used to specify wood, they now have vinyl planks,” said Perry Coker, CEO, CFL Flooring North America. “Same for hotels, which used to have wood or ceramic in the lobbies and carpet in the guest rooms. Ditto office space.”

FCNews research shows commercial sheet increased 3.79% in revenue to $232.5 million in 2018 from 2017’s $224 million. This is slightly down from the 4.9% growth the subcategory saw in 2017. This slowdown, executives say, is likely the result of an uptick in commercial-grade LVT sales as well as the growing popularity of SPC in commercial applications.

However, some believe sheet resilient still has a place in the commercial sector. “Because there are no seams with sheet resilient, it is ideal for spaces where spills and messes may happen and has less maintenance requirements than other flooring options,” Tucker said.

VCT
Increases in commercial-grade LVT, WPC and rigid products have finally caught up to traditional resilient categories such as vinyl composition tile (VCT), which is now seeing a decrease in dollars and volume. According to FCNews research, VCT saw a 6.8% decrease in dollars from $299 million in 2017 to $278.6 million last year. In terms of volume, square footage fell 7% in 2018.

Despite its decline, manufacturers that are heavily leveraged in the product category still see VCT as a viable commercial product. “Although LVT and rigid core are currently attracting the lion’s share of attention, VCT continues to account for a large share of square footage of resilient commercial flooring installed each year,” Armstrong’s Lechner explained. “It offers a durable and cost-effective flooring solution, particularly for education and mass retail applications.”

Rubber
FCNews research shows rubber generated $227.4 million in sales in 2018, a 3.7% increase over 2017. In terms of volume, the category accounted for 61.5 million square feet, a 3.4% increase from last year. “The rubber market continued to fare well in 2018,” Tarkett North America’s Szilagyi said. “Its growth was better than the overall market but not as robust as the rest of the resilient category.”

The main reason for this growth, according to Mark Tickle, director of marketing for American Biltrite, is more end users are acknowledging the benefits of rubber tile and sheet. “Manufacturers are stepping up to the plate with an increasing number of designs and colors to meet the growing demand from designers,” he explained.

Linoleum
FCNews research shows linoleum grew 4.2% to $100 million in 2018 from 2017’s $96 million. What’s more, the subcategory’s volume increased 2.4% to 33 million square feet. According to Tim Donahue, residential national sales manager, Forbo Flooring Systems, linoleum’s growth was driven primarily by residential replacement. “Forbo is seeing double-digit growth with our Marmoleum brand of linoleum for five years straight—residentially,” he said. “This is due to customers seeking healthier flooring options for their homes in colors and patterns that allow design flexibility. Flooring specialty retailers have also been a key driver for the growth in our residential replacement business.”

Imports vs. domestic
The resilient category is still heavily reliant on imports, which represent 76.7% of sales. However, domestic production continues to increase, taking a small percentage away from imports. In 2018, domestic production accounted for 23.3% of the category.

Domestic manufacturers say bringing production to the U.S. helps eliminate several problems often associated with imports. “Domestic investments shorten the supply chain and reduce variability,” Mohawk’s Sanchez explained. “This gives domestic manufacturers and their customers more options on how to service their consumers.”

While some manufacturers are looking to move away from imports, generally, domestic mass capacity comes online to supplement a growing, sustainable product category. So says CFL’s Coker, adding, “We see this now with SPC. The challenge is almost all of the innovation in the vinyl category over the past years has come from China—where change is fast, new ideas are welcome and unique limited-production types of products find success and become the new mass-production norm.”

The Dixie Group’s Stepp sees the majority of flexible vinyl being produced domestically. He also noted more manufacturers are attempting to produce rigid core in the U.S. “However, I look for that to change in the near future—especially if the tariffs on goods from China remain at a punitive 25%.”

When talking about domestic production and import activity, it is almost impossible to not con- sider the recent tariffs imposed in 2018 by the Trump administration. For some industry executives, the tariffs may help drive domestic production capacity in the next five to 10 years. For others, it will remain business as usual as importers look to other countries beyond China for manufacturing. However, virtually everyone agrees the situation has created uncertainty across the board as to whether or not the tariffs—including the new 25% hikes proposed in 2019—will stick.

Regardless of what happens with the tariffs, executives see the opportunity for even further innovation in the resilient category. “Home buyers, renters and remodeling homeowners have already seen $1 billion added to U.S. housing construction costs thanks to tariffs,” said Tom Hume, vice president of marketing, Cali Brands. “The tariffs are also prompting some manufacturers to diversify product portfolios and develop other categories that can be made outside of China.”

While increased innovation is all well and good, it will ultimately create greater saturation in a flooring category that is already overflowing with me-too products. This, executives say, could cause the prices of certain resilient products to dive even lower than current levels. As Chet Graham, president, Marquis Industries, explained, “SPC has allowed a cheap alternative to enter the resilient flooring [arena]. So-called ‘fly by night’ manufacturers are entering the domestic market and just selling product on cost.”