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Laminate: State of the industry—Segment thrives despite impact of WPC, LVT

March 5/12, 2018: Volume 33, Issue 19

By Reginald Tucker

 

For all the talk about laminate’s demise in the face of intensifying pressure from competing hard surface categories, the now-mature product segment is proving it has staying power. Ongoing innovations in the form of dramatically improved resistance to moisture, ultra-realistic replications of natural materials like wood and stone, and upgrades in surface texture and product performance are keeping the segment in the spotlight.

While the laminate flooring category has certainly ceded some market share to red-hot products such as WPC, SPC and LVT, the fact remains it is still a viable option since its official entry into the U.S. marketplace more than 20 years ago. “As manufacturers, it’s our job to remind people of the incredible benefits laminate flooring offers,” said Roger Farabee, senior vice president, laminate and hardwood, Mohawk Industries. “We’re asking consumers to take another look at the product category and great visuals and performance it offers. They can now have a premium wood look without any compromise. At Mohawk we are still very bullish about the product.”

Farabee is not alone in his assessment of the product’s capabilities. Dan Natkin, vice president, wood and laminate, Mannington, attests to both the category’s long history and reputation for durability, as well as the newfound focus on waterproof attributes. “In some cases, we’ve lost sight of what makes laminate great—phenomenal realism, all bio-based, superior indentation and scratch resistance, and the fact the vast majority is made in the USA. Most laminate is significantly moisture resistant as well, with multiple manufacturers developing new technologies to make the product nearly impervious to liquids.”

Other proponents are bullish on the category’s current position in the marketplace. “I think the laminate flooring industry is in a good place,” said Derek Welbourn, CEO, Inhaus. “It continues to enhance its core value proposition, which is a great-looking floor at a leading price point that won’t let you down on performance. We see continued evolution in terms of design and features that are creating some amazing looks and furthering the value proposition of laminate.”

Travis Bass, executive vice president, Swiss Krono, also sees the laminate flooring category moving toward better visuals, deeper textures and innovative products. This provides an opportunity, he said, to continue educating the consumer—via retail exposure and industry associations such as NALFA—about the benefits of laminate. “It’s a wood-based product with the look and feel of solid hardwood, but with less maintenance and more durability,” he noted. “It’s easier to install and offers a much healthier, sustainable environmental impact than many competing products.”

Despite all these benefits and attributes, the category is not without its challenges. Reported overstatement of the product’s capabilities—something that negatively impacted the segment’s reputation in its early days in the U.S. 20 years ago—is a growing concern for some industry observers. Back then it was about overselling the product’s resistance to dents and scratching, leading some to suggest it was virtually bulletproof. Today, it’s mostly about managing consumer expectations when it comes to claims about moisture resistance.

“I can’t speak for other manufacturers, but Shaw is not going to make claims on a product that could ultimately disappoint the consumer,” said Drew Hash, vice president, hard surface product/category management. “We choose to be more conservative in our approach.”

For executives like Barron Frith, president, CFL North America, the attributes must square with a particular manufacturer’s marketing claims. “We have been big believers in water-resistant laminate since we launched our Atroguard line in 2013. No doubt the water-resistant feature is the future of the laminate category and will leave less space for regular laminates. Many big players are entering this market, at the same time leading everyone to push further marketing claims about being ‘waterproof’ as opposed to ‘water resistant,’ causing confusion about the performance of the product.”

Mohawk’s Farabee also warns against the dangers of misleading consumers about moisture resistance. It’s critical, he noted, to remind dealers that not all products are created equal. “Based on some of the testing we’ve done, some of the products do not live up to the claims they make. The question becomes, does it create significant consumer dissatisfaction and potential blowback for the category? That remains to be seen.”

What Farabee can say for sure is many companies are focusing on how to minimize any visible damage from water incursion at the edge of the products as opposed to the tongue and groove area. “Most of them have been introducing lower-swell coreboards, which will help that problem overtime, but the one we worry about—which is also an issue with floating vinyl—is the majority aren’t doing anything with their joint systems. And while they may have minimized damage through topical moisture on the edges of the plank, you still have moisture penetrating the joints and creating issues under the floor.”

For its part, Mohawk said it has developed products that are far more moisture resistant than laminate floors made many years ago. So much so that “we have personally developed technologies that enable us to make some moisture-resistant claims far beyond what everybody else could. We’ve had these products out in the market for more than two years now, and it has given us a position in the market where we can go head to head with one of the No. 1 attributes that LVT and rigid core have been talking about for the last several years.”

While some companies remain cautious about specious product claims, other major suppliers welcome all the hoopla surrounding waterproof/water-resistant marketing. “We believe it is helpful for the category,” Inhaus’ Welbourn stated. “Ever since the change in core construction from particleboard to high-density fiberboard in the 1990s, laminate has stood up well to moisture. But through new innovations, this feature has been enhanced. However, laminate is still a wood-based product and it’s important that we don’t oversell these features and disappoint consumers. If a company tries to sell a laminate as being impervious to water, we need to ask the question, ‘Can you install it in a shower or a steam room?’ If the answer is no, I would question the waterproof statement.”

Mannington’s Natkin also sees benefits in touting the category’s water-resistant attributes. “Realistically, laminate is already one of the highest performing product categories given its resistance to indentation and scratching, as well as the ease of installation. Water resistance is the icing on the cake.”

CFL is also embracing the renewed focus on the product’s performance attributes. “Water-resistant laminate is far from new for CFL,” Frith stated. “The bulletproof reputation has proven to be a big positive for us since we launched Atroguard more than four years ago. When consumers started shifting toward more waterproof vinyl categories, they did so without really realizing they were accepting a product that was inferior in terms of scratch resistance. No special coatings on vinyl flooring currently on the market come near the performance of a laminate in terms of scratch resistance.”

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Ceramic: State of the industry—Technology, design help drive tile consumption

November 20/27, 2017: Volume 32, Issue 12

By K.J. Quinn

 

Screen Shot 2017-11-27 at 10.12.39 AMSlow 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.

Screen Shot 2017-11-27 at 10.12.50 AMAnother 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
Screen Shot 2017-11-27 at 10.12.56 AMSuppliers 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.”

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Carpet: State of the industry—Higher-end goods boost residential end of the market

August 28/September 4: Volume 32, Issue 6

By Ken Ryan

 

Screen Shot 2017-09-05 at 11.43.04 AMAfter a slow start to 2017, the residential carpet category gained some traction in the second quarter, resulting in a 2% rise in sales over the year-ago period, with units up 0.5% overall in the first half. Executives cited sales of better goods, an uptick in consumer confidence and price increases that have firmed up the marketplace.

The U.S. carpet category continues its ever-so-slight recovery from the Great Recession, its growth held in check by hard surfaces. “We have seen patterns, loops and differentiated product at the upper end doing disproportionately well and outperforming the medium end of the market,” said Tom Lape, president of Mohawk Residential.

T.M. Nuckols, executive vice president of residential business for the Dixie Group, which oversees the Dixie Home, Masland and Fabrica brands, agreed that better goods at the higher end of the spectrum and well-styled products are seeing the greatest activity in the residential market these days. If the products offer soil and pet stain protection—as many of them do—it’s a plus.

The 2% growth in residential carpet is a welcome sign for a category that has shown little to no growth in the last three years. In 2016, for example, FCNews’ research showed carpet sales down 1% to $8.7813 billion while total volume—which includes carpet and area rugs—gained 1.2% to 11.22 billion square feet.

There are some positive signs in housing that should favor a boost in carpet sales going forward. Between July 2016 and July 2017, U.S. home values increased 6.8%, according to Zillow, the online real estate database interest. That number is expected to rise another 2.7% within the next year, the company said. This uptick in home prices has helped boost consumer confidence among homeowners, which has increased two months in a row. As a consequence, the residential replacement market has experienced growth as spending on remodeling projects has moved higher. While most of that spending has been for hard surfaces, soft goods have not been shut out entirely.

However, rising home prices are a double-edge sword because it prevents many would-be buyers, especially older millennials, from entering the market. The flip side is that has resulted in a more robust multi-family segment. The multi-family production index (MPI), which provides a composite measure of three key elements of that market—construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums—jumped 8 points to 56 in the second quarter as all three components increased.

“Improved units can be attributed to a fairly good builder market in both multi-family and single family as well as the return of home equities in the retail remodel sector,” said Brad Christensen, vice president, soft surface portfolio management, Shaw Floors.

Screen Shot 2017-09-05 at 11.43.21 AMThe Main Street segment of the business continues to perform reasonably well, with carpet tile continuing to grow in both small, local businesses and specified commercial. Broadloom, however, continues to lose share in both sectors.

Market research has shown consumers desire the warmth and comfort of carpet in their homes. To meet that need manufacturers are focusing on the look and feel of carpet more so than fiber type. As Christensen explains: “Consumers want a stylish, high-performing carpet that complements their uniquely curated living spaces and demand both design and function in a variety of price points.”

Rodney Mauter, executive vice president of residential marketing for Lexmark, sees value and fashion, especially, as the primary inspiration for consumers. “She wants her bedrooms and family rooms to be just as much of a statement as the rest of her home. As carpet manufacturers we must continue to exceed performance standards while offering more color and fashion choices.”

The dwindling middle
Carpet continues to play well in certain regions, in particular the upper Midwest and Northeast, observers say. Meanwhile, both the low and upper ends of the market are showing fairly brisk activity. Engineered Floors, the No. 3 carpet company, is flourishing in the lower-end polyester market, which continues to be strong. The upper end, which counts Dixie, Shaw (Tuftex) and Mohawk (Karastan), continues to shine. However, the mid-range market—$8 to $13—is struggling. “Rather than building products that fit your assets, build products that fit your customers’ needs,” Lape explained. “We have to figure out a way to create compelling products for our retailers even if it is hard.”

Innovative offerings
Screen Shot 2017-09-05 at 11.43.26 AMMohawk’s SmartStrand is an example of a compelling product that has enjoyed tremendous reception at the retail level, with new iterations like SmartStrand Reserve giving dealers more profit potential. “SmartStrand Reserve has hit the market with very solid acceptance across our dealer base,” Lape said. “Our prior research told us consumers loved luxurious soft performance carpet, and since our launch earlier in 2017 our research has now been proven true with the introduction of SmartStrand Reserve.”

Several advancements in technology have driven today’s exceptional quality, performance and styling looks. Improved yarn systems offer softer hand along with a range of visual aesthetics coupled with enhanced performance and durability. According to Susan Curtis, senior vice president, product development for Phenix, developments in tufting technology continue to open new ways to design creative carpets. She said additional attributes are being engineered into carpet products that enhance the consumer’s use and experience with the product.

Mark Clayton, president of Phenix, said innovations in tufting technology have provided opportunities for manufacturers to create more compelling textures and color palettes for the consumer.

Technology’s contribution to carpet has kept it as a viable flooring solution especially in the areas of improved stain, soil, wear and fade resistance—in addition to affordable pricing. That’s according to James Lesslie, executive vice president at Engineered Floors, whose company introduced an advanced polyester extrusion process fiber system called Apex SD.

Screen Shot 2017-09-05 at 11.43.32 AMAt Shaw Floors, its LifeGuard waterproof backing system is now offered as a trade-up option for dealers. In 2017 Shaw added LifeGuard to its Anso Color Wall in a Titanium collection with 150 new SKUs. “We’re listening to consumers more than we ever have before and adapting our strategies to meet their needs,” Christensen said. “Making LifeGuard an optional upgrade on more styles is just one example of this new approach.”

Products that offer stain and soil protection continue to resonate with consumers, the majority of whom own pets, studies show. To that end, the Dixie Group introduced a significant number of new products under the Stainmaster PetProtect brand, including many new carpet styles under its Dixie Home and Masland lines.

Phenix’s Cleaner Home carpet, meanwhile, features built-in Microban antimicrobial technology to protect against the growth of stain- and odor-causing bacteria and mold. Recognizing consumers’ growing desire for a cleaner home without cleaning more, Phenix combined these three unique components—a new fiber with two proactive technologies—to create this new carpet collection.

In terms of innovation and initiatives perhaps no one has been as busy as Engineered Floors. “Our top innovations are hard to pinpoint because 2017 has been so busy for us,” Lesslie explained. “So far this year, we’ve launched a totally new website, expanded our social media, broken ground and are in the process of completing a new modular carpet manufacturing facility, added several new Main Street commercial products through our Pentz brand and introduced Apex SD. And we’ve got four more months to go.”

 

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U.S. Congressman Duncan visits TCNA

TCNA_logoAnderson, S.C.U.S. Representative Jeff Duncan, SC-3, spent time meeting with the Tile Council of North America (TCNA) staff and touring TCNA’s facilities on Aug. 9.

Eric Astrachan, executive director, provided the Congressman with a brief current state of the ceramic tile industry and discussed issues in Washington most relevant to the tile industry including U.S. trade agreements, EPA regulations and increasing problems with fake ceramic tile products and false advertisements. The Congressman’s visit ended with a tour of TCNA’s state-of-the-art performance testing laboratories, led by lab manager Katelyn Simpson.

“We are honored Congressman Duncan took time out of his busy schedule to stop by the Clemson Research Park for a visit with TCNA,” said Bill Griese, director of standards development & sustainability initiatives, TCNA. “With our association headquarters right here in the Congressman’s backyard we wanted him to see firsthand the relevance of the ceramic tile industry and our organization’s involvement in research, testing and the development of standards.”

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Resilient: State of the industry—LVT, WPC remain primary drivers of category growth

July 31/Aug. 7: Volume 31, Issue 4
By Lindsay Baillie

The resilient category continues to follow its blazing path from 2016 with aggressive growth just six months into 2017. Industry observers attribute this activity once again to the industry’s “darlings”—LVT, WPC and rigid core.

Screen Shot 2017-08-07 at 11.14.42 AMBased on FCNews research, LVT and its subcategories accounted for 42.3% of residential volume and 67.6% of residential dollars in 2016. Observers expect numbers in 2017 to reflect similar—if not more—control of the category. In 2016 the resilient category as a whole saw a 19.7% increase ($3.499 billion) over 2015’s $2.924 billion. This percentage is almost four times the growth of the overall industry. In addition, resilient captured 16.5% of the total flooring industry in dollars—the highest among all hard surfaces. Industry experts predict resilient numbers for 2017 will continue to rise, especially as waterproof products capture consumer interest.

In fact, many of the fiscal trends seen in 2016 have continued into the first half of 2017. For example, most experts have noticed residential sheet is still relatively flat, and felt is continuing to lose market share to fiberglass. Meanwhile, LVT continues to gain market share at the expense of sheet and other flooring types such as laminate and hardwood. Furthermore, LVT and its subcategories continue to gain market share as more manufacturers ramp up U.S. production for faster lead times and greater product control. Lastly, with the soaring popularity of WPC-type floors, more companies are adding rigid core to their portfolios.

Overall, success in this category is often attributed to the various innovations in printing and design, allowing manufacturers to create visuals that are almost indistinguishable from the natural materials they mimic. In addition, these designs can be achieved at a fraction of the cost. “Style is the point of entry to any design decision, but then cost quickly becomes a factor,” said Gary Keeble, director of marketing, Metroflor. “The ease of installation, the durability of LVT and associated easy care and maintenance have all assembled in a bit of a perfect storm.”

Looking at the trends, it’s easy to see why the industry is bullish about the category’s growth in 2017. “As a luxury vinyl specialist, 2017 has fared very well for us, both in terms of our glue-down products and with the introduction of our rigid core product line,” said Larry Browder, CEO, Karndean Designflooring. “The tremendous growth LVT has experienced confirms what we’ve known all along: Luxury vinyl provides the beauty and realism of natural wood and stone in a more practical format.”

All types of manufacturers, even those that produce multiple types of flooring, have seen impressive increases so far. “Resilient continues to be a very strong category for Shaw and is showing no signs of slowing down in 2017 or the foreseeable future,” said Clark Hodgkins, resilient director.

Sheet, felt feel the squeeze
FCNews research shows residential sheet vinyl had a less-than-stellar year in 2016—coming up relatively flat with a 0.2% decrease compared to 2015. Most industry observers attribute this subpar performance to the rise in demand for LVT, WPC and rigid core products.

“Sheet vinyl has lost share to LVT for several reasons,” explained John Wu, CEO, Novalis Innovative Flooring. “More manufacturers are adding LVT to their product offerings, so LVT is promoted more than sheet vinyl. Secondly, handling and installation [of LVT] is easier, especially for DIY applications.”

Screen Shot 2017-08-07 at 11.15.10 AMEasier installation is one major factor sheet vinyl manufacturers need to consider when developing new products, according to executives such as Jeff Fenwick, president and COO, Tarkett North America. As it stands today, “[installing] sheet product requires a level of expertise that tile does not.”

Fenwick also believes improvements in design are needed to help capture the consumer’s eye and break the stereotype that sheet vinyl is “what’s laid down in grandma’s kitchen.”

While some experts see the slight decline of sheet continuing in 2017, many manufacturers believe the category is still viable.

“There’s some softness on the sheet vinyl side but we firmly believe in the category,” said David Sheehan, senior vice president of product management, IVC—a division of Mohawk Industries. “Sheet in general is going to have to innovate. As manufacturers of sheet we need to do a better job of stepping up by innovating not only from a product standpoint but also in terms of how we talk about these products.”

For some manufacturers sheet still holds a certain value proposition. “Sheet is still the best value per square foot in flooring,” said Kurt Denman, chief marketing officer and executive vice president of sales, Congoleum. “This is the original waterproof flooring and it delivers an exceptional value.”

Instead of simply dismissing the segment most sheet vinyl manufacturers are working on ways to innovate their product offerings to compete with LVT, WPC and rigid core. Investments in manufacturing, processes and technology are ways suppliers are seeking to re-invigorate the segment.

“Regardless of what the market is doing, we’re focused on growing our business by bringing innovative products to market,” said Matthew Savarino, senior product manager, resilient sheet, Armstrong Flooring. “We have already introduced new innovations in 2017, specifically Diamond 10 technology across select residential and commercial sheet.”

Sheet innovation at Mannington Mills involves finding answers to the question: How can the company push style and design? “You can make really innovative looks with sheet vinyl,” said Jimmy Tuley, vice president of residential resilient. “I know that has not been the popular perception in the past, but if you look at a couple of our new collections they really do a fantastic job of mimicking incredibly high-end looks with embossed in register, very realistic visuals at a very reasonable price point.”

Despite the overall segment’s slight decline, some manufacturers reported seeing an uptick among their sheet offerings. “We continue to see good strong performance and actually growth out of our sheet category,” Denman noted. “We’ve spent a fair amount of time really targeting the builder/multi-family market. A couple of years ago we introduced the ArmorCore line, which was designed specifically for them. We’ve invested [heavily in] the category and we continue to see growth.”

Just as sheet continues to fight against LVT and its subcategories for market share, felt continues to battle fiberglass. In 2016 fiberglass saw a 4.8% increase in dollars while felt was down 6%, according to FCNews research. Most manufacturers see this flip from felt to fiberglass continuing through 2017, but do not see felt completely disappearing.

“Growth in felt market share is going to come from specific market segments,” Armstrong’s Savarino explained. “Felt-based products still provide, generally speaking, greater durability over fiberglass-based vinyl sheet. The comfort tradeoff has won out with homeowners—which is why we have seen such a large shift in the market [to fiberglass], but segments such as property management and builders still put a high value on rip, tear and gouge performance. The installation benefits of fiberglass over felt have also been swaying some buyers in that segment, but picking between durability and ease of install is still a tough decision for many customers.”

LVT output rises
LVT is still singing 2016’s hit song as it continues to drive category growth and take market share from other categories. Based on FCNews data, LVT had a strong year in 2016, capturing 48.1% of residential market share in dollars. With only six months left of 2017 most manufacturers are reporting strong growth in LVT. This is most commonly attributed to the aggressive nature of it subcategories—WPC and rigid core.

As LVT remains a category favorite more manufacturers are expanding into domestic production. Experts have taken notice of the increase; however, most do not expect import production to disappear.

Screen Shot 2017-08-07 at 11.14.53 AM“With the significant growth in the category, both domestic and import production will continue to expand,” said Lindsey Nisbet, head of product marketing and development, EarthWerks. “With the increased demand on the market today, many are finding it possible to produce in the United States. However, the technology for this category continues to be derived from Asia, as well as many of the components that make up the products. I foresee a nice balance of the category across the globe.”

Mannington is a company dedicated to U.S. production and has seen success from its acquisition of Amtico. “It’s important for several key suppliers to be able to produce here in the U.S.” Tuley explained. However, he also sees a need in the industry for balance between domestic and import production, specifically in regards to keeping up with consumer demands. Tuley cited the rapid expansion of the market and the need for technical innovations as some of the reasons for a balance strategy.

Manufacturers invested in domestic production see a number of benefits that are not always available when importing. A few examples include greater product control, faster lead time and a Made-in-the-USA story.

“In today’s market end users and consumers want product faster,” said Michael Raskin, president and CEO of Raskin Industries. “Domestic production provides shorter lead times. Another point to consider is younger consumers with children are asking where the product is made and the perception is ‘made in the USA’ is better quality and safer. It’s also very hard to guess right with inventory management since we are in a fashion business and as trends develop, distributors and retailers can react much faster with supply/demand when product is made in the U.S.”

For some, the issue is not so cut and dry. For instance, Jamann Stepp, director of marketing and product management for USFloors, there are both positives and negatives to domestic and import production. In addition to the benefits listed previously, Stepp cited greater quality control with domestic production. When importing, he explained, a manufacturer is able to eliminate the capital required to set up, run and maintain a manufacturing operation.

Others see more benefits in importing products. “Importation can actually be more flexible and responsive to the needs and trends in the marketplace,” Novalis’ Wu explained.

Even though importing products may result in longer lead times and less control over manufacturing, the vast majority of LVT products are still coming from overseas, observers say. “If you’re importing it allows for quicker response for changes in construction processing,” Congoleum’s Denman said. “There’s no capital expense investment. You can also get fairly competitive bidding between [businesses]. The number that exists allows a brand to have a lot of choices and opportunities to building the product that it wants.”

In addition to the increase of LVT domestic production, some manufacturers are also bringing rigid construction to the U.S. One in particular is IVC, which announced last year that it is building a rigid plant in Dalton.

“We expect to be up and running the first part of 2018 and getting product out through the latter part of 2018,” IVC’s Sheehan reports. “We’re going to be at the lead of that movement which makes sense from a lead-time standpoint and not having to tie up a lot of inventory, work, capital and being able to serve the needs of our customers in a better fashion.”

Even though a growing number of manufacturers are investing in U.S. production, some say the effects of their shift away from importing has yet to be felt. “Most of these factories are still coming on line,” Metroflor’s Keeble said. “With that said, the overwhelming majority of LVT sold in the USA remains imported, and with the category growing as it has, imports will likely remain a very large part of the overall market.”

WPC’s performance edge
Experts predict the aggressive growth of WPC and rigid core products will continue as long as waterproof products continue to capture the hearts and eyes of consumers. As these subcategories achieve meteoric growth other flooring categories will continue to lose overall market share.

“The growth in LVT has come at the expense of many categories including sheet vinyl, hardwood and especially laminate,” Karndean’s Browder said. “With the advent of WPC/rigid core, laminate is taking an even bigger hit. The fall of laminate flooring due to water and noise issues created a market for WPC and rigid core products.”

The success of WPC and rigid core can be attributed to multiple factors including the categories’ abilities to solve certain performance problems. “Rigid core products have helped to solve for additional challenges that regular LVT could not,” said Jeremy Kleinberg, senior product manager, Armstrong Flooring. “For example, telegraphing of minor subfloor texture.”

Ongoing developments
In 2016 WPC and rigid core products saw what many industry experts have called phenomenal activity. In fact the subcategories, combined, have more than tripled in volume from 2015. Most industry experts expect this growth to continue well into 2018.

Screen Shot 2017-08-07 at 11.15.01 AM“I wouldn’t be surprised if WPC/rigid core becomes the larger sub-segment of LVT,” IVC’s Sheehan said. While he sees these subcategories still gaining market share, he does expect the WPC/rigid core craze will eventually level off and allow for an increase in sheet market share.

As fairly new subcategories, WPC and rigid core are expected to see at least two more years of aggressive innovation. In fact, Mannington’s Tuley sees these subcategories still in the early, steep part of the growth curve.

“There’s also a significant amount of innovation that’s going to be coming,” he added. “I wouldn’t think that even in the next two years that will stop. You will see a significant number of entrants moving away from WPC and going toward rigid core.”

Tuley has a good point. As WPC and rigid core continue to grow, more manufacturers are adding the products to their resilient offerings. New rigid core and WPC introductions—as well as additions to existing collections—are already being brought to market only six months into 2017. For example, Novalis has introduced its High Performance Core (HPC Technology) line for WPC/rigid LVT. Wu sees these newer introductions taking market share from other categories as well as developing a greater presence in the commercial sector.

Manufacturers such as Karndean have developed new rigid products to meet dealer demands. “Our dealers had been asking for a rigid core product with Karndean designs,” Browder said. “With Korlok we have the perfect combination of industry-leading technology and our renowned design quality.”

Shaw Floors has also taken advantage of the success of WPC and rigid core with a mid-year launch of the company’s new Floorté PRO collection.

WPC and rigid core have managed to attract almost every manufacturer. One concern regarding these products is the possibility they might cannibalize traditional LVT. According to the experts, higher-end traditional LVT may take a hit; however, low-end LVT should be able to withstand the “perfect storm,” as one executive described it.

“While multi-layer flooring is definitely taking share over the click options of LVT, the traditional glue-down LVT is also growing,” EarthWerks’ Nisbet explained. “The multi-layer flooring options are taking place of the original click LVT, as well as alternate flooring categories. With the enhanced technologies and realistic attributes of these designs, the affordability and performance of multi-layer flooring, the vinyl option has become a clear competitor in the overall choice for flooring.”

USFloors’ Stepp doesn’t see the subcategories cannibalizing LVT; rather, they are providing the consumer or end user with various choices. “[WPC/rigid core] merely offers the end-user and consumer a choice based on functionality, application and budget. The consumer will make the choice as to what best suits her needs in terms of performance, fashion and cost.”

 

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Contract: State of the industry—Innovation sparks broader usage of hard, soft surfaces

June 5/12, 2017: Volume 31, Issue 26

By K.J. Quinn

 

Screen Shot 2017-06-09 at 10.36.25 AMThe dynamics in the top commercial sectors are changing as interior design preferences evolve. While luxury vinyl tile (LVT) and modular carpet are the two fastest growing products, experts say, alternative flooring products are meeting designer needs for good looks, sustainability, durability and low maintenance and are expanding usage across the board.

“Categorically, the commercial carpet market is no longer defined by broadloom vs. carpet tile,” said Mike Gallman, senior vice president, commercial product, Mohawk Group. “It’s now hard surfaces vs. soft surfaces.”

Anecdotally speaking, experts say commercial flooring sales are on pace to increase 3% this year, according to industry estimates. While projections are based on a small sample size— approximately four months at press time—the growth rate represents a slight improvement over Q4 last year when market sales were reportedly soft. What is increasing more dramatically are flooring choices, as new products, aesthetics and finishes provide more selections than ever for the A&D community.

“Choices of sizes, colors, patterns, bevel treatments, constructions, wear layers, etc., affords them the ability to do what they do best—create,” said Al Boulogne, Mannington’s vice president of commercial resilient business. “Offering the broadest portfolio of choices gives them the ability to design a space without limitation of options.”

While experts say sales are fairly even between carpet tile and broadloom—the latter of which maintains a slight edge in volume—modular products are expanding significantly faster. “Carpet tile has been steadily taking share from broadloom in the education and corporate/office sectors, preferred for its ease of installation, increased design options and flexibility for moving and replacing tiles once installed,” stated Matt Miller, president, Interface Americas.

Sharing the spotlight is LVT, which is helping hard surfaces sustain growth in retail and healthcare strongholds and expanding at a double-digit rate into non-traditional markets like corporate/offices and hospitality. Expansion is coming at the expense of carpet and low-cost options such as VCT as lifecycle costs and styling further impact purchasing decisions. Workhorse products such as rubber, linoleum and VCT remain fixtures in healthcare and education settings while hardwood and laminates are carving a niche in certain retail and hospitality spaces.

Screen Shot 2017-06-09 at 10.36.37 AM“In all cases, performance and value are the drivers,” said Denis Darragh, Forbo’s vice president, North America, citing linoleum as an example. “Performance encompasses all aspects of the product, from durability through being the best product for a healthy indoor environment.”

Ceramic tile in particular has grown steadily. Estimates show the category represents about 15% to 20% of commercial sales and volume, with specified contract accounting for about 70% of the business. Ceramic is on pace to reach or exceed 2016 growth rates, when volume and sales rose approximately 6% and 5.5%, respectively.

“There still remains a tremendous growth opportunity for the tile category,” said Gianni Mattioli, executive vice president, product marketing, Dal-Tile. “Our company is diligently working to take advantage of this opportunity and the tile industry as a whole also appears to understand this reality.”

Mitigating factors
Despite the fact key economic indicators such as inflation, consumer confidence, lending rates and new construction are pointing in the right direction, growth—or lack thereof—within the five major markets varies. Each segment faces specific issues impacting interior design and flooring selections. For example, the corporate/office sector is witnessing changes in interior design aimed at helping employers retain and recruit top talent and ultimately drive greater results.

“Driven by strong earnings, many corporations are reinvesting in their offices through renovation or relocation,” noted Mark Oliver, vice president, workplace and retail segments, Mohawk. “They recognize the office—and the way its employees engage with it—is changing faster than ever before.”

The workplace remains a bedrock market for carpet tile, where it is coveted for acoustical properties, durability and comfort underfoot. “We’re still seeing carpet tile increase in the corporate part of the commercial market,” observed Ralph Grogan, president and CEO, Bentley Mills. “There are a lot of law offices and accounting firms using carpet tile now as they are going to a more open office concept.”

Screen Shot 2017-06-09 at 10.36.50 AMMeanwhile, hard surfaces such as resilient, hardwood, porcelain tile and even polished concrete are quickly gaining coverage in lobbies, break rooms and bathrooms. “Corporate is one of the last segments to be looking at hard surfaces in a bigger way,” Mannington’s Boulogne pointed out. “We are starting to see a shift in preference to LVT as design has started to focus more on targeting this category.”

Hard surfaces remains dominant in healthcare as resilient, rubber and linoleum meet durability, maintenance, hygienic and slip resistance needs, observers say. Ceramic, porcelain and terrazzo tile are commonly found in public areas such as hallways, making it easier to maneuver rolling equipment and mobile aids. Carpet and LVT are primarily specified for non-patient areas like waiting rooms and medical offices.

“Architects and designers are putting LVT in healthcare applications because of its modularity,” said Jeremy Salomon, director of product management and marketing – retail, Tarkett. “We’ve been designing LVT to look like some of the sheet vinyl products. It gives designers flexibility in solutions they want to put into healthcare applications.”

A fast growing area within healthcare is assisted living, due largely to the shortage of rooms available to care for an aging U.S. population. Facility managers are reportedly sprucing up these spaces to create “homey” environments for residents. “Activity is trending up, with some larger, continuing care retirement communities going up—along with new senior-living projects in urban areas, drawn by Baby Boomers in search of a more active retirement lifestyle,” said Jamey Block, vice president, resilient product management, Armstrong.

A similar makeover is occurring in hospitality, as hotels attempt to incorporate residential design with high-performance products that are also easy to maintain. “Our hospitality business has grown at a 33% compound annual rate over the past three years in the Americas region, and we expect that trend to continue,” Interface’s Miller said. More and more hospitality end users are shifting to a mixture of soft and hard surfaces, providing us the opportunity to sell both our LVT and carpet tile offerings.”

Sector-specific solutions
Other flooring materials, such as broadloom and ceramic, are also reaping the benefits. “For example, a design firm specified wood-look tile for the floors of guest rooms at a boutique hotel in Texas, but also specified carpet to be installed under the beds,” noted Lindsey Waldrep, vice president, marketing, Crossville. “Guests get the comfort of carpet right by the bed, yet the rest of the room is covered in easy-to-clean, rarely-needs-replacing tile that will let hotel staff turn rooms much more quickly and in a cleaner fashion.”

Similar to hospitality, the influx of new construction work and remodeling are impacting the retail segment. The sector is a mixed bag, with end uses ranging from small, mom-and-pop grocery stores to larger restaurants, retail chains and other establishments. “Car dealerships and fitness centers, both considered retail spaces at Dal-Tile, as well as quick-service restaurants, are areas of growth that are positively impacting the tile market,” Dal-Tile’s Mattioli said.

Screen Shot 2017-06-09 at 10.36.45 AMRetail is usually at the forefront of design trends as end users are always on the lookout for trendy, attractive options. “A new and different approach to hard surface designs wins in this highly competitive segment,” Mannington’s Boulogne said. “Abstract visuals are gaining share as are new and different looks.”

At the same time, the high amounts of foot traffic at retail locations require floors that perform well and look good over the long term. Ceramic, wood and carpet are often specified in high end spaces while resilient, VCT and rubber flooring are found in other public areas. “LVT is taking market share from both tile and broadloom sales because of design trends and ease of maintenance,” Mohawk’s Gallman observed.

Meanwhile, in the education segment, LVT is the rising star. Resilient accounts for an estimated half of the flooring specified in this sector, industry research shows. But other products, such as linoleum and rubber, retain a small niche as they provide both visual and functional qualities that appeal to staff, students and parents. “We are constantly improving the visuals as well as the depth and breadth of the product offering, particularly modular options, that enhance the capabilities of the product line,” Forbo’s Darragh said.

Ongoing innovations
Manufacturers of commercial flooring products are continually making investments to meet the varying needs of commercial customers. Designers are creating people-centric spaces for clients which, in part, helps enhance the work-life balance. “That’s why we’re seeing residential and hospitality influences in workplace design,” said Mark Page, senior director creative design and development, Mohawk. “With flooring, designers aim to strike a balance between hard and soft surfaces for work, rest and social activity.”

Soft surface innovation is taking place mostly in design, with new tufting technologies allowing for complex patterns and textures in carpet tile previously only available in broadloom. “It allows the use of more color, patterning capabilities and pinpoint accuracy,” Bentley’s Grogan said. “It has allowed all manufacturers to get lower face weights, which helps with budgets.”

LVT’s good looks have helped propel it to the forefront in many commercial segments. “In addition, the ongoing preference for designing commercial spaces to look more residential in nature has brought popular, proven hard surface products into the commercial arena,” Armstrong’s Block said.

With respect to tile, advances in digital printing technologies have enabled vendors to create realistic 3D visuals that mimic natural materials. “The bar is raised like never before,” Crossville’s Waldrep said. “Convincing wood looks, unique decorative facings, textures, more modular sizes, even porcelain tile panels so versatile they can be installed in ways traditional tile never could.”

Many tile production facilities feature printers that can digitally apply different gloss levels of glaze, metallic and even texture. “When coupled with sophisticated 3D scanners, this means highlights and shadows can actually be printed in line with the physical structure of the tile’s face to enhance the look of even subtly textured surfaces,” noted Ryan Fasan, technical consultant, Tile of Spain. Technology advances are also expanding tile formats, allowing vendors to create everything from beautiful mosaics in hexagon and rectangular shapes to massive porcelain slab sizes.

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Area rug: State of the industry—Custom programs, hard surface surge bolster category

May 22/29, 2017: Volume 31, Issue 25

By Ken Ryan

 

For the third year in a row, the U.S. rug business will outperform carpet. FCNews research puts area rugs sales at $2.5 billion in 2016, up an estimated 3.5% from the year-ago period.

Buoyed by the surge in hard surfaces and the popularity of custom rug programs, the category has provided manufacturers with additional selling opportunities. Most traditional broadloom companies now offer some variation of a custom rug program in which rugs are cut from broadloom and can be specifically tailored to the needs of consumers. Executives said they expect the custom rug trend to continue to evolve as more flooring dealers—and non-flooring outlets—take advantage of this profitable add-on opportunity.

Some flooring retailers who have de-emphasized the rug category or abandoned it altogether are reconsidering their position. Some are doing it via online sales. Then there are those who never wavered and have benefited from the increase in rug sales.

Screen Shot 2017-05-30 at 10.58.16 AMAccording to Teri Whittaker, rug buyer for R.C. Willey Home Furnishings, with 14 locations across four Western states, rugs grew by nearly 4.7% in the first quarter of 2017. “There have been steady increases each month.”

The numbers were even more robust at Nebraska Furniture Mart, where sales across its three locations increased 6% to 10% in the first quarter. David Snedeker, division merchandise manager-flooring, reported that larger sizes (8 x 10, 9 x 12, 10 x 14) were up, as were knotted sales but not necessarily high-end knotted. “Simple, low-profile or textural knotted rugs are on trend. Machine made, due to better construction, is also on the increase.”

Baker Bros., with multiple locations in the Phoenix metro area, has always been a staunch advocate of rugs. Phil Koufidakis, owner, said rug sales were up “double digits in the Q1,” which he finds encouraging.

Not all dealers were chalking up big increases, however. At Crest Flooring in Allentown, Pa., rug sales were about even with the year-ago period, according to Steve Weisberg, owner. He said his challenge is the sheer number of places where consumers can buy rugs. To get in on the action, Weisberg is contemplating a “Crest Cash” program that would give customers who purchase hard surface from Crest credit to use within 90 days for purchasing areas rugs. “This way they at least come to us,” Weisberg explained. “‘Kohl’s Cash’ is such a big draw for those who shop there that I figured I would copy them a bit.”

Custom is king
As more hard surfaces are being used in open floor plans, there is a growing need for larger and custom-sized rugs that can define areas with a design aesthetic. Retailers are taking advantage of this trend and allowing their customers to design a custom rug in standard sizes.

Some executives suggest that custom rugs, which incorporate customer service and product, is going to differentiate brick and mortar merchants from Internet retailers. Stephen Hoberman, vice president of sales at Momeni, is one of them. “Having a custom program gives retailers access to the customers’ needs that they can’t get online. They need to come to the store. They need to work with the person. The price points are not expensive for custom. You can give customers what they want at a price they can afford.”

Hoberman said he used to wonder what it would be like to make rugs out of broadloom. That idea came to fruition seven years ago, when Momeni launched a custom rug program. “We were the first ones. Now it is an endless business.”

Eric Demaree, president of Carpet One Floor & Home, acknowledged that while competing in the rug business is difficult these days for members—given the competition from big box stores and online retailing giants like Wayfair—he nonetheless encouraged dealers to embrace the new Cutting Edge program, which allows them to choose from the entire broadloom collection to create custom rugs for consumers.

Doug Jackson, vice president of sales and marketing at Tuftex, the high-end carpet brand for Shaw Industries, called the CCA Cutting Edge custom area rug program a “home run.” Tuftex has 700 displays in the Cutting Edge program, and because each display includes binding and tape, dealers have plenty of options to sway customers. Jackson said Tuftex’s business—both broadloom and rugs—is much stronger than the industry average. “No question carpet is losing share, but the carpet that is going out there is better goods and we’re getting that share. The share that is out there—in the upper end of the market—is in our wheelhouse.”

John McGeary, territory manager for the Northeast region at Karastan, said the rug division is coming off a very healthy 2016. “While true wall-to-wall carpeting was down 20%, we were up 8% in rugs. Units were up in the mid to high 30s, percentage-wise, but less expensive rugs brought the overall margins down.”

Hard surface factor
Larry Mahurter, vice president of marketing and advertising, Couristan, said in his 25 years in the business rug sales have always been influenced by hard surface activity. “Rug sales jump up when hard surface is up. Right now rugs is gaining momentum and broadloom is flat.”

Screen Shot 2017-05-30 at 10.58.55 AMDealers agreed that the growing demand for hard surface flooring in the home is impacting the rug market. To what degree, however, is debatable. R.C. Willey’s Whittaker said the growth of hard surfaces “has definitely increased the sales of rugs.” Koufidakis agreed, noting the growth of hard surfaces “has clearly had a positive impact on rug sales—something that should continue for the foreseeable future.”

Sam Presnell of The Rug Gallery in Cincinnati, who added luxury vinyl tile to his previously all-rug showroom more than a year ago, said hard surfaces “has helped the sale of rugs a little bit,” but he says it could be better.

NFM’s Snedeker said the transactional pairing of rugs with hard surfaces might just now be catching on. “It was not a noticeable relationship in 2016.”

Indeed, there appears to be some reticence on the part of dealers to embrace rugs as an add-on sale. At DeGraaf Interiors, with four locations in Michigan, owner Deb DeGraaf bemoans the fact she has been unable to energize her staff into making rug sales a priority. “It is unfortunate because the margins on rugs are good, and we are selling more hard surface than ever before.”

Online impact
The online world is one obstacle preventing flooring dealers from going all in. These days consumers can easily purchase rugs from major home goods sites like Wayfair, Overstock and Amazon. Mahurter said Couristan’s business is up 60% from last year, driven by ecommerce through the likes of Wayfair. Mahurter said these e-commerce companies have enhanced their visual search features to present close-ups of rugs from several different angles to show extremely realistic looks that make visiting a physical showroom unnecessary for some customers.

“Rugs have been strong across the board, from $299 to $799 for a 5 x 8, all driven by ecommerce sales through our accounts,” he said. “The marketing and promoting of area rugs online has taken on a whole new meaning.”

Rugs Direct, a Winchester, Va.-based retailer that lays claim to being the country’s leading online retailer of area rugs, throw rugs and rug runners, recently received an investment from a private equity firm that will help fuel growth.

Anecdotal information indicates the bulk of online area rug sales are for products $199 and under. This, executives said, is not likely to affect the luxury companies such as Dixie, Tuftex and Karastan.

 

 

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Hardwood: State of the industry—Housing sector, engineered sales drive revenues

March 27/April 3, 2017: Volume 31, Issue 21

By Reginald Tucker

 

Screen Shot 2017-03-31 at 10.18.34 AMBy most accounts, 2016 was a respectable year for North American hardwood flooring manufacturers. Anecdotal information combined with preliminary estimates show the category grew between 5.5% to 6% in 2016, with volume increasing roughly 5%. That would put sales at the first point of distribution somewhere between $2.17 billion and $2.2 billion in sales with volume in the range of 860-880 million square feet.

While manufacturer estimates vary widely, suppliers are in general agreement on several points: Strong end-use sectors combined with high-performing sub-categories and innovative formats within the hardwood flooring sector are sustaining revenues.

“Primarily new home construction and residential replacement are the sectors driving the most growth for hardwood,” said Dan Natkin, vice president, wood and laminate, Mannington. “The category continued to increase in 2016, albeit at a slightly slower pace—3%-4% over the prior year.”

Other major manufacturers were also conservative in their estimates. “Last year was a fairly good year in hardwood sales with the category up by low- to mid-single digits,” said Christopher Moore, wood product manager, Armstrong Floors. “While the new home construction sector did not reach the lofty highs that many expected, a modest movement helped to lift sales of hardwood flooring to a respectable level in 2016.”

Some estimates were much more aggressive. Mohawk, which also counts the Quick-Step wood line among its brand assets, believes the prefinished hardwood flooring market grew close to 10% in 2016 vs. 2015. “The majority of this growth was driven by the new construction market, both in single-family and high rises,” said Roger Farabee, senior vice president, wood and laminate. “Remodel grew as well but at a slower rate. Commercial had the lowest growth and remains a very small part of the overall hardwood market.”

Within the prefinished segment, suppliers saw particularly brisk activity on the engineered side of the business. Indeed, in 2015 the industry saw a continued shift in the ratio of engineered to solid production. In fact, more manufacturers are developing engineered products that mimic the thickness of solid but offer the performance attributes of engineered. (Lauzon’s new Organik series, which features the company’s innovative Pure Genius anti-microbial technology, is a case in point.)

The trend toward wider plank visuals lends itself to engineered given their enhanced stability, experts say. Natkin estimates engineered will represent 60% of the hardwood market within the next two years—up from about 50% today.”

Screen Shot 2017-03-31 at 10.18.27 AMThe continued shift from solid to engineered is increasingly evident, experts say, especially as imports continue to take market share from domestic manufacturers. Brad Williams, vice president of sales and marketing for Boa-Franc, makers of the Mirage brand, cited several reasons why these thicker engineered products continue to increase their share. “With the builder market using wood subfloors, their goal is to make a flush transition with ceramic floors in the kitchen, bathroom, etc. As ceramic tiles trend larger and thicker, it’s a nice option to have the same in hardwood—wider and thicker. There is also the renovation market where flooring ripped out was ¾ inches thick. It makes for an easier renovation as the heights for doors and cabinetry were done based on ¾- inch thickness.”

For some buyers, it boils down to personal preference. As Michael Barnett, wood product manager, Armstrong, explains: “Innovation continues to happen across both structures and, of course, engineered offers opportunities for design innovation combined with its installation flexibility. While solid wood continues to be a coveted choice for homebuyers, certain looks, lengths and widths can be achieved with engineered that either do not exist with solid or are more challenging to produce. Engineered hardwood floors are also better suited than solid in certain installation applications, such as basements.”

The ongoing migration to engineered hardwood is reflected in the investments major manufacturers are making in the segment. Shaw Floors, for instance, completed the expansion of its hardwood flooring manufacturing facility in South Pittsburg, Tenn., specifically to meet the growing demand for its engineered hardwood flooring products. According to Vance Bell, chairman and CEO, the $40 million investment adds more than 60% capacity to the existing hardwood manufacturing facility. “The expansion of our South Pittsburg engineered hardwood facility is a prime example of our continued investment in new product development and advanced manufacturing practices. Hardwood is important to Shaw’s business growth strategy.”

Shaw is not the only company heavily investing in engineered production. Last summer Mullican Flooring announced plans to invest $15 million in equipment, buildings and working capital to expand its manufacturing operations via the acquisition of a 126,000-square-foot warehouse in Johnson City, Tenn. This latest expansion, which marks Mullican Flooring’s fourth major growth initiative in Johnson City during the past 16 years, will provide extra capacity as well as raw material and finished product storage space to meet increased manufacturing needs.

In that same vein, Wickham Hardwood has invested more than $7 million in a new, state-of-the-art engineered flooring line. The game plan over the mid to long term, according to Paul Rezuke, vice president, residential sales, USA, is to align its engineered offerings with its solid products.

Pricing stability
Screen Shot 2017-03-31 at 10.18.14 AMAnother factor that has positively impacted U.S. hardwood flooring manufacturers is the continued stabilization of raw material costs. In 2013 and into 2014, skyrocketing lumber costs negatively impacted margins for many suppliers—including Canadian companies—and forced several market leaders to raise prices. But manufacturers report the raw material pricing stability they experienced in late 2015 has carried over to much of 2016.

“There is great pricing stability at the moment,” Boa-Franc’s Williams said. “We believe the demand from overseas has softened with North American suppliers, which creates more of a need to supply the local market here in North America, so pricing is holding steady. At the same time, inventories throughout the pipeline are at good, balanced levels—which also contributes to stable prices.”

For Mohawk, lumber pricing stabilized overall in 2016—a trend that, according to Farabee, seems to be holding steady so far in 2017. “But this could change if demand for certain species (e.g. white oak) outstrips supply.”

That’s a real concern for some suppliers. Mannington’s Natkin says raw material prices are still high but have been stable through the first quarter of 2017. Certain species, such as hickory, walnut and white oak, he said, are showing modest inflation. “But it is generally under control for the time being.”

Stiff competition
While hardwood suppliers are keeping a close eye on raw material costs, they are also watching the rising popularity of competing hard surface products, particularly those that are doing a much better job of replicating natural materials such as wood. WPC, LVT and, yes, laminate all fall into this category.

Wood suppliers agree some of their products could be ceding market share to these competitive categories. “For the first time in my career, I can definitively say some of these categories have taken share within certain segments from hardwood,” Natkin said. “Particularly in new home construction, both single- and multi-family units.”

Others are not as concerned. Armstrong’s Moore believes that as long as hardwood itself is desirable, there will continue to be a proliferation of wood looks, whether in resilient, tile or laminate. “While hardwood is challenged by some look-alike products, we believe genuine hardwood flooring will continue to be desired by homeowners because of its natural beauty, enduring quality and durability. This is an investment that lasts for years and offers timeless style.”

Screen Shot 2017-03-31 at 10.18.48 AMMohawk’s Farabee agreed, adding: “Hardwood remains the top aspirational hard surface flooring product, and we don’t see that changing anytime soon. While the other categories have done a better job imitating wood, many customers don’t want an imitation; they want the real thing. No other product will ever be able to duplicate the 100% custom, unique look obtained with every hardwood floor that is installed.”

Williams believes some wood products—especially those on the lower end of the price spectrum—have ceded some market share to competing categories, but he thinks that pressure is coming primarily from builder and residential renovation markets, which tend to be more cost conscious. On the whole, though, he has not seen any dramatic market share shift from a numbers point of view to substantiate and support this increase is coming at the expense of wood.

Mitigating factors
Beyond pricing/raw material costs and competitive pressures (both within the category and externally), suppliers identified other issues that stand to impact hardwood’s growth. These range from global competition to changing retail dynamics right here at home.

“Imports continue to be unfairly dumped at low prices,” Natkin said, adding this is an issue primarily with engineered hardwood. “Despite the ITC actions, there is rampant circumvention and the U.S. government has failed to act on any of it.”

For Armstrong, one of the issues in the hardwood industry right now seems to be private-label imports. “At the entry level, where the growth rates are highest, most of the competitive landscape is dominated by imports, which keep margins thin,” Barnett said.

Mirage’s Williams also expects to see an increase in imports as well as additional pressure from “look-alike products” from other categories. But he also thinks home centers and large retailers are getting bigger and taking market share from the smaller independents. “Private-label programs also continue to take market share.”

Outlook for remainder of 2017
Despite these pressures, many suppliers are optimistic hardwood will continue to hold its own as a category. They cite, among other things, continued investment in manufacturing and innovation as well as strong demand among consumers and end users.

“The housing market will continue to strengthen, although single-family starts and completions remain more than 20% lower than the historical average,” said Neil Poland, president Mullican Flooring. He expects to see growth in the 4%-5% range for 2017. “Engineered flooring will lead this growth as housing grows more rapidly in Sun Belt markets.”

Others are more bullish with their projections. “We are confident that—if interest rates remain constant and the U.S. economy continues to be positive—growth will be in the 6% to 10% range,” Wickham Hardwood’s Rezuke said. “Our opportunities will derive from our increased expansion in the U.S. market, along with successful implementation of new products.”

Shaw also expects to see growth in the 6%-8% range for 2017, based on trends it is seeing in the new home construction market. “We will continue to outpace the growth of the flooring market,” said Drew Hash, vice president, hard surfaces. “Our wide breadth of categories and consistent standard of quality supports that outlook.”

 

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Laminate: State of the industry—Focus shifts from Asian exodus to U.S. production

February 27/March 6, 2017: Volume 31, Issue 19

By Reginald Tucker

 

Screen Shot 2017-03-06 at 10.54.42 AMHeading into 2016, many laminate flooring manufacturers, distributors and retailers were dealing with the fallout of the 2015 “60 Minutes” Lumber Liquidators report about excessive levels of formaldehyde in laminate flooring planks imported from China. The end result was the palpable departure of many laminate flooring products imported from Asia combined with a simultaneous and dramatic influx of shipments from Europe.

While the dust has largely settled from that episode, industry observers say they are still feeling the tremors as it pertains to the rising domestic production along with newfound capacity from producers from Germany and elsewhere.

“That dynamic continues to spill over in 2017; however, it has significantly moderated,” said Dan Natkin, vice president, wood and laminate, Mannington. At the same time, he sees U.S. capacity continuing to expand. “Many are investing in newer technologies to deliver even higher levels of performance and visual differentiation. Some domestic manufacturers have expanded production capacity as well.”

Other industry observers are gauging the impact of the rise in domestic laminate production and investment over the past year and into 2017. “The trend of this pullback was readily evident last year, but the day-to-day operating in this new climate continues,” said Derek Welbourn, CEO of Inhaus. “There was an increase in European and domestic supply with less interest and volume from the market for Chinese-made goods. This trend is continuing and has become firmly entrenched with greater competition among the producing sectors that displaced the Chinese production volume.”

One company that is investing heavily in stateside production of laminate flooring and its components is Kronospan USA. The company recently completed the construction of a laminate facility in Oxford, Ala., in a move to add more capacity to feed distributor and retailer demands. This comes on the heels of its 2015 purchase of Shippenville, Pa.-based Clarion Boards and Clarion Laminates, which produces medium-density fiberboard (MDF) and high-density fiberboard (HDF) panels as well as laminate flooring at the same site. This acquisition supplements the production coming out of a separate facility in Eastaboga, Ala., a site where Kronospan manufactures MDF and HDF for manufacturers of laminate flooring, furniture, store fixtures, moldings, doors and other architectural applications.

“Capacity, technology and vertical integration is aiding U.S. manufacturers who are investing by lowering costs and producing a more desirable product for the consumer,” said Mike Babula, chief marketing and sales officer. “We see more focus on higher-end, thicker products that yield better margins for the retailer and manufacturer.”

Other industry watchers believe the Chinese retreat continues to create opportunities for U.S. and European producers. Case in point is Swiss Krono, which has a significant presence in both markets. According to Travis Bass, executive vice president of sales and marketing, Europe-based suppliers have also enjoyed the benefit of the eroding exchange rate. On the plus side, he believes consumer interest in higher-end laminate flooring seems to be growing. “The market is becoming more competitive with growing capacity and relatively flat demand—though we do see a positive shift in product mix.”

Not everyone, however, believes the full impact of all this additional capacity is being felt at present. Some industry experts feel the biggest ripples are yet to come. “It really hasn’t had an impact yet because most of that new capacity has not yet come online,” said Roger Farabee, senior vice president, laminate and hardwood at Mohawk, which counts the Quick-Step brand among its assets. “We’re certainly seeing companies putting more capacity in the U.S., going after all the big box customers in particular. This will continue as that capacity comes online.”

In some cases, this new capacity simply displaces product that had previously been made in Europe by those same companies that are now producing domestically, Farabee stated. This phenomenon, he believes, will put pressure on the remaining producers both in the U.S. and in Europe to be able to compete not only on price but also in terms of product performance and visuals. “It will be interesting to watch because there’s a lot of new capacity coming online in a category that’s not really growing. However, we do expect some price pressure.”

Onslaught of LVT, WPC
Screen Shot 2017-03-06 at 10.54.24 AMCompeting laminate manufacturers, as it turns out, are not the only threats suppliers are facing these days. The well-documented success of waterproof core floors, LVT and the like is also forcing laminate suppliers to adjust their strategies or—at the very least—pay more attention. “There is no doubt these hot categories have stolen growth from the laminate category and others,” Welbourn said. “However, laminate is in a much better cost position than these plastic-based categories and is able to deliver some of the best value in the flooring business. This fact, along with continued innovation in the laminate category, has kept it competitive.”

As consumer preferences shift toward more hard surfaces being incorporated into the home, resilient flooring has seen an uptick in market share. The challenge for laminate flooring, executives say, will be its ability to improve upon water-resistant technology. “Today’s consumer demands functionality without sacrificing style or comfort, and water-resistant flooring is a top concern of many active households,” said Carr Newton, vice president, hardwood and laminates, Shaw Floors. “Our latest laminate collection, Repel, has been specially designed to take laminate to the next level in water-resistance technology and is the hottest revelation to hit the laminate industry in a decade.”

Laminate suppliers agree the water-resistance story has boosted the category’s value proposition, as evidenced by the various performance demonstrations conducted at Surfaces 2017. Although this story is not new (the innovations that originally created the laminate sector was improved performance in regards to moisture and general everyday use), suppliers say enhancing these features certainly has created greater value for laminate flooring. “Additional focus on design continues in laminate with further enhanced textures and high-definition printing continuing to create the best designs the laminate category has ever been able to offer,” Welbourn added.

Laminate, like other flooring products, has indeed ceded some share to WPC, which targets one of laminate’s key selling points—its rigid structure, but without the susceptibility to moisture from laminate’s fiberboard core. But from the consumer’s perspective, according to Morgan Hafer, product manager, Armstrong, laminate is a great product that’s relatively inexpensive and offers great styling, design and amazing performance. “Our premium laminate business is strong, driven by our cutting-edge designs, realistic looks and great performing products. Buyers love our laminates because they are able to get premium hardwood visuals—not necessarily available as an option in natural woods either due to cost or impracticality—and they can make a personal design statement in their homes.”

Managing channel conflict
In terms of the category’s internal battles, laminate flooring manufacturers must still contend with the issue of feeding competing supply chains—namely the specialty retailer sector vs. big boxes. While suppliers have certainly become more adept at appeasing these diverging market sectors, it’s still a challenge impacting their respective product development and go-to-market strategies.

“We’ve always tried to create differentiated products in terms of style and performance so those products can compete with one another in the marketplace,” Farabee explained. “So far that strategy has worked pretty well. We’ve not only been able to do that with respect to the quality of the product itself but also with respect to our brands that have meaning to the consumer and the trade. It is a challenge, but that’s why we have so many products in the pipeline. We want to make sure the key features are available in all the brands we offer, although we might utilize them in different ways.”

Armstrong is taking a similar approach. “We are committed to continued innovations in performance and design to not only compete but also give specialty retailers more products that can’t be shopped at the big boxes,” Hafer said.

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State of the Industry: The builder business is back

January 2/9, 2017: Volume 31, Number 15
By K.J. Quinn

Fueled by significant gains in single- and multi-family units, the new housing market skyrocketed by 25.5% in October, an indication one of the major drivers of the U.S. economy and flooring industry is moving full steam ahead.

screen-shot-2017-01-09-at-2-24-55-pm“The builder market is showing improvement,” observed Dawn McElfresh, builder channel marketing manager, Armstrong Flooring. “The variety of homes in production is helping our mix. Single-family price ranges, both high and low, are selling, as are condos and new multi-family buildings.”

Housing starts reached a seasonally adjusted annual rate of approximately 1.3 million in October, the highest pace in nine years, according to the U.S. Department of Housing and Urban Development and the Commerce Department. Multi-family production rebounded, as starts in buildings with five or more units—such as condos and apartments—climbed almost 69% in October to reach 454,000 units, an indication developers continue hedging their bets on this segment. “2016 marked the first year since the Great Recession that single-family construction grew faster than multi-family,” said Robert Dietz, chief economist at the National Association of Home Builders (NAHB).

Single-family starts rose nearly 11% in October, reaching a nine-year high with a rate of 869,000, gains which confirm economic forecasts that the housing market will steadily improve into 2017, according to published reports. “The single-family channel was also very strong for FEI Group members,” David Gheesling, CEO, said. “We expect to see it grow as much as 10% nationally going into 2017.” The group is a network of flooring contractors, cabinetry and countertop dealers, and decorative hardware and plumbing businesses.

Housing permits—which provide a snapshot of pending new construction—grew at a much slower pace. Nonetheless, the 0.3% increase over September for privately owned housing units boosted the seasonally adjusted rate to 1.23 million in October, a new high water mark for 2016. Ground is usually broken within 30 to 60 days after a permit is issued. The builder market is significant to the flooring industry, as approximately one-third of total flooring sales are generated from this segment and a similar percentage of dealers service this business. A firming job market, growing U.S. economy and rising household formations are expected to keep the housing recovery on track into 2017. “Despite rising interest rates, wage gains and job growth are supporting housing demand,” NAHB’s Dietz said. “The industry continues to rebuild its infrastructure, including land and workers, following the Great Recession.”

 

Issues stunting long-term growth
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Further evidence the housing market will sustain growth into next year is provided by the Architecture Billings Index (ABI), whose October score indicated a modestly larger share of architecture firms reporting an increase in their billings, according to the American Institute of Architects (AIA). However, fewer firms reported a bump in inquiries for new projects in November, and firms also cited declining value of new design contracts signed in October. While none of these indicators signals immediate alarm, AIA stated, it is important to keep a close eye on business conditions over the coming months.

Similar sentiments were expressed in industry circles about whether the builder business can sustain growth over the long haul. Rising mortgage interest rates can quickly temper expectations. “However, rates are historically low, so that impact should be modest,” Dietz said. “The primary challenge for prospective home buyers remains saving for a down payment and qualifying for a mortgage.”

New residential construction data can be skewed by regions that enjoyed growth beyond the numbers. For example, while permit issuance rose 12.1% in the Midwest and 7.5% in the West, the Northeast and South saw this number drop by 21.1% and 2.4%, respectively, according to published reports. “We are pretty much flat in builder [market sales] so far this calendar year compared to 2015,” said Larry Barr, president and co-CEO, Floors Inc., based in Southlake, Texas. “As we have seen more starts in each of our markets, the builders are struggling to turn the houses over due to labor constraints.”

The availability of qualified labor in all trades remains a major concern for the channel and continues to limit industry output. While builders are adding jobs, attracting the next generation of construction workers remains a long-term challenge. “In most markets, builders are struggling to find workers in every area, from slab to landscaping, in the construction process,” said Jeff Ausloos, national builder manager, Mannington.

The shortage of flooring installers remains an industry bugaboo, making it difficult for builder dealers to find good help when they need it. Some regions face a shallower pool of craftsmen than others, which can directly impact flooring selections. “In Texas, for example, because of a shortage in ceramic installers, some builders are moving into LVT because they can get a sheet installer to put it in,” Armstrong’s McElfresh said.

 

Housing trends affect floor covering sales
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One trend expected to continue into the New Year is the movement toward smaller home designs, which traces its roots to around the time of the housing market downturn. As homes become smaller, flooring choices for specific areas will be impacted, in part, by how these spaces are utilized. For example, carpet is projected to remain a go-to product for living rooms although hard surfaces are growing at a much faster rate.

“The next generation of LVT [and] WPC products are rapidly gaining acceptance in the new home construction segment,” Mannington’s Ausloos said. “As the innovation in WPC continues it will become a staple product in the channel.”

Still, new home buyers are eager to choose different floors for individual rooms, industry members say. For example, resilient is often specified for a bathroom or laundry room, laminates can be found in a family room or basement, and carpet, ceramic and hardwood are selected for main living spaces and bedrooms. “Millennials who are coming into the market might be looking for smaller but nice homes,” McElfresh said. “We’re seeing a good interest in LVT products for this reason as well.”

Homebuyers still desire natural products such as ceramic tile and hardwood, and upgrades for these higher priced floors are becoming more prevalent. Most upgrade monies are allocated for kitchens and baths because both areas offer the greatest return on investment and time spent in the home. “For new homebuyers, hardwood continues to be the trophy flooring,” McElfresh said. “As the market continues to improve, we see further investments in trade-ups since homeowners are looking for homes not purely for resale value, but for their own comfort and pleasure.”

In addition, homebuyers planning to be long-term occupants are willing to invest in better quality products. “They realize the long-term value of upgrading to better looking, better performing products,” Mannington’s Ausloos said. “We are seeing trends that verify this in our upper-end hardwood lines Maison and Antigua.”

Ceramic as a percentage of total flooring in new homes continues to rise as it finds more applications in spaces such as patios, garages and basements. “We have also seen more tile sales compared to carpet, for the first time,” Floor Inc.’s Barr said. “I believe this is because there are an abundance of lower priced, good looking tiles that buyers find attractive.”

Industry members cite the importance of educating new homebuyers about the features/benefits of flooring so they can make informed purchasing decisions. Products which provide a logical “trade up” story can have a real impact on upgrade sales.

“If there’s true differentiation from one level to the next, it’s likely that a consumer will choose the upgrade,” Ausloos said. “One builder that Mannington does business with in the Northeast has seen homebuyers selecting upgraded Maison and Antigua hardwood collections 44% of the time.”

As the housing market continues to grow, multiple flooring choices are expected to reap the benefits. Considerations such as budget, styling and value play a major role in determining which products are chosen for different areas inside the home. “We address each of these needs in a big way, with the broadest collection of products for every type of home, in every region of the country,” McElfresh explained.