November 20/27, 2017: Volume 32, Issue 12
By K.J. Quinn
Slow but steady. That’s how industry experts describe the current state of the ceramic tile business. Still in recovery mode several years after the Great Recession, the industry continues taking gradual steps forward with economic indicators pointing in the right direction and significant investments being made to improve styling and performance.
When you look at the numbers, ceramic is among the healthiest of all flooring categories. Last year, tile rang up $2.8 billion in sales at the first point of distribution while volume spiked nearly 6% to 2.31 billion units, marking the seventh consecutive year of growth, according to FCNews research. “The U.S. continues to trail most of the world on per capita sales of tile,” noted Raj Shah, president, MSI. “We believe that the U.S. consumption will grow at a disproportionate rate.”
The stateside market remains fertile ground for foreign tile makers, as the amount of ceramic sold is significantly less than other parts of the world. “The import market in general has grown, but the growth percentage for Spain was much bigger,” said Rocamador Rubio, director, Tile of Spain USA. The organization reports U.S. ceramic imports from Spain jumped 19.5% in value and a 22.9% in volume during the first eight months this year.
Traditional metrics used to gauge the state of ceramic—the strength of the U.S. economy, new housing market, consumer confidence, lending and unemployment rates, for example—are all positive. Commercial activity was up in most sectors, with growth seen in hospitality, healthcare, education and corporate spaces, according to published reports. “Ceramic tile is the second fastest growing hard surface category behind resilient in terms of percentage growth,” noted Vance Hunsucker, national sales manager, tile and stone, Shaw Floors. “The increase in U.S. residential ceramic tile sales is driven by consumer demand for higher-end products and a greater breadth of visuals and formats.”
Experts say tile as a percentage of total flooring in single-family new homes continues to rise as it finds more applications in spaces such as patios, garages and basements. Meanwhile, new single-family homes are larger and more expensive, industry observers say. “As a result, these homes often use greater quantities of ceramic tile because it offers the style and luxury homeowners crave without the maintenance and performance concerns found in other materials,” said Gianni Mattioli, executive vice president, product and marketing, Dal-Tile.
Another factor impacting ceramic consumption is the fact the category is available in more retail channels than ever before and at price points that can meet nearly every budget. “Mass retailers are significantly investing in the product line, which is increasing awareness,” MSI’s Shah observed. “The likes of Pinterest, Houzz, etc., are providing inspiration to home owners at almost no cost.”
There are unforeseen situations—such as the recent hurricanes in the South and fires in Northern California—impacting flooring choices in home improvement projects as well as new residential construction. “The recent storms are making people rethink soft surfaces and the value of having tile floors,” Shah explained. “We are hearing examples where insurance companies are demanding tile floors be installed as replacements.”
Issues affecting growth
While industry sales and consumption projections vary widely (mainly because U.S. ceramic distribution is so fragmented, experts say), the general consensus is tile is on pace to increase 4% to 8% this year. “We have seen positive growth in the U.S. residential ceramic tile business, something we anticipate to continue throughout the remainder of 2017,” Dal-Tile’s Mattioli said.
Masking the positive gains are numerous macroeconomic issues, experts note. One is new home construction, a sector lagging behind growth expectations. Privately owned housing starts in September were at a seasonally adjusted annual rate of nearly 1.13 million, a 6.1% increase over September 2016, according to the Census Bureau. “Considering the growth of residential construction, it would be a good assumption to say that residential ceramic tile sales are increasing accordingly,” Tile of Spain’s Rubio said.
The average per-square-foot tile price increased from $0.95 to $1.20 in the last decade, FCNews research shows. While this contributed to increasing sales, it also means ceramic is among the priciest floor coverings. “Other products with good visuals such as LVT have also entered the market,” noted Lindsey Waldrep, vice president of marketing, Crossville. “The dilution of hard surface offerings at a wide range of price points also impacts ceramic industry’s position.”
The lack of qualified installers remains a major issue, as flooring retailers and contractors are challenged to find good help when they need it. “As ceramic tile sales continue to increase, the market demand for experienced installers will likely cause an increase of skilled laborers, as retailers and independent contractors look to find ways to match supply with demand,” Shaw’s Hunsucker explained.
The labor shortage could also stunt ceramic growth, as this lingering issue finally comes to bear. “This is leading to increased labor prices and lower quality of work,” said Luca Setti, chief sales and marketing officer, Florida Tile. “This affects choices being made on what product to spec and buy.”
Investments pay off
Suppliers continue investing in manufacturing to bolster production efficiency and speed to market, plus create new value-added products. “Obviously, much more domestic production has come online over the last year and in the upcoming 12 to 18 months,” noted David Koenig, vice president and general manager, Crossville Studios, the tile maker’s distribution division.
Domestic production has been a big story in ceramic the past few years, as several companies expanded production or broke ground on new plants. For example, Crossville, which produced the first domestically made porcelain tile in 1986, expanded its plant and firing capacity last year. “We continue to keep up with fashion and the value proposition of porcelain tile exceeding those of other materials,” Waldrep stated.
The plethora of new styles offers even more incentive for homeowners and specifiers to choose ceramic for more than just showers and backsplashes. For instance, gauged porcelain slabs and panels offer exciting opportunities in areas where tile has never been a player, such as veneers for furniture and cabinetry, countertops, tabletops and exterior paneling. “Finally, in traditional tile, many manufacturers are employing nano-particulates and catalysts within their glazes to inhibit bacteria growth, self-clean—to a degree—and even help to purify the air,” Fasan explained.
Indeed, vendors are constantly evaluating their technology to improve upon their product offerings. “I believe the thin tile technology is the innovation that brings the most value to our end consumers,” Florida Tile’s Setti said. “The ability to install tile over tile gives you the very important benefit of less downtime and still have a result that is beautiful.”
While thin is in, a major point of emphasis—from a design perspective—centers on digital printing. The process has become so sophisticated that it completely transformed the category, allowing production of high-quality floor tiles that mimic natural materials and vary from piece to piece. “This is enabling production of just about any format, size, finish and look, ultimately giving consumers infinite choices of tile,” MSI’s Shah said.
Advances in technology have also paved the way for larger sizes. “The industry has developed new standards for these products,” said Rick Church, executive director of the Ceramic Tile Distributors Association. “The products can be used in many applications, including outside in large commercial construction.”