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Top distributors: Wholesalers overcome labor shortages, slow growth to post modest increases

November 6/13, 2017: Volume 32, Issue 11

By Ken Ryan

 

Screen Shot 2017-11-13 at 9.32.13 AMFormer NFL Hall of Fame football coach Bill Parcells used to say, “You are what your record says you are.” If that logic was applied to the flooring industry’s top 20 distributors, that record would be fairly exemplary as the group posted gains averaging 4% in 2016. By way of comparison, the gross domestic product—the monetary measure of the market value of all final goods and services produced in the U.S.—grew 2.9% for all of 2016.

Flooring distributors once again showed that even in a slow-growth economy, in which obstacles like an ongoing labor shortage delayed or extended projects, wholesalers were able to rise above it.

With regard to the lack of skilled labor impacting all construction trades, including flooring installation, there is no short-term fix to this issue, observers say. While many aspects of the housing market are improving—housing starts are up and prices have increased—the lack of qualified installers remains. This problem began surfacing in 2012 as construction activity picked up and the unemployment rate dropped; it has worsened in the years since.

Jerry Howard, CEO of the National Association of Home Builders (NAHB), said the cause for the shortage was workers leaving the industry after jobs dried up during the recession. Many workers fled to other industries or other countries, and many haven’t come back. Some took jobs in the manufacturing and auto industries, while others found work in the energy sector.

“Simply put, they were getting any work they could and had to go into other sectors to find ways to put food on the table,” Howard said. “We are now at the point that there is a serious shortage of workers. It’s a real problem that ripples throughout the home-building process that ultimately costs the consumer.”

Distribution executives said that while labor shortage is a concern, there are other issues such as land availability, affordability issues and modest activity that have held the market back from reaching its fullest potential. “There has been no real momentum in the discretionary replacement of existing floors without any other construction or remodeling activity,” said Jeff Hamar, CEO of Galleher, a top 10 distributor based in Santa Fe Springs, Calif. “I think this is due to the fact it has been roughly 20 years since the first introductions of natural looking vinyl products, second-generation laminate and urethane- coated, wider-width wood flooring.  Products installed after 1998 haven’t ‘uglied out’ and don’t need to be replaced.”

Despite some challenges, there have been positive signs that have fueled growth, namely an improved job market, favorable stock market, and—at least statistically—higher consumer confidence. According to the Conference Board, consumer confidence in October 2017 increased to its highest level in almost 17 years, boosted by the prospect of improving business conditions. However, not everyone is seeing this confidence translate into higher flooring sales. In fact, some say a lack of confidence continues to keep shoppers on the sidelines, thus impeding growth and contributing to less than normal existing home sales.

The inventory shortage that has plagued the housing market for over two years has lessened the pace of sales. The 1.7% decline seen this past August was the fourth in five months and brought the annual rate to the lowest level in 12 months.

Private label growth
In the past decade, the industry has witnessed a large increase in imported products, many of which are well suited for private labeling because they allow the distributor to tailor the offerings to specific markets, picking and choosing patterns, constructions and designs that fill voids in their current lineups or complement other flooring options. The ability to customize the program to suit specific market needs is a strong attribute of private labeling and is one reason why it continued to rise.

Several distributors cited private-label lines as their best performers in 2016. For example, Denver Hardwood’s top selling line was Neptune, a private-label rigid core waterproof offering. Overall, the company’s private-label program was cited as a major factor in Denver’s success.

As opposed to brand name national programs that oftentimes are not market specific, distributors can design private-label programs for their specific markets. In so doing, they can increase margin opportunities, don’t have limitations to where they can take the product and can protect their customers from being shopped online. Indeed, private labeling ensures the distributor have single distribution on the products in that brand.

How companies fared
While macro trends such as housing and economy impact all distributors to some degree, there are those wholesalers who face challenges specific to their own markets. That was the case for T&L Distributing in Houston. Its string of unfortunate events actually began in February 2015, when Shaw decided to distribute its Anderson hardwood brand. Losing that business cost T&L $10.6 million for 2015. Later that year oil sunk to $30 a barrel, leading to a slow fall selling season. In 2017, T&L took another hit to the tune of $5 million, when Mannington sold its VCT business to Armstrong. “There have been some very bright spots and some negative,” Bob Eady, president, acknowledged. “Oil prices still are up and down. The rest of the country loves it; I hate it. Oil pricing has an effect on our economy. Texas lost 88,000 jobs last year.”

T&L, as well as Reader’s Wholesale and Swiff-Train Co., also dealt with the disaster that was Hurricane Harvey in 2017. The long recovery and rebuilding will eventually result in a spike in business for wholesalers in southeast Texas but probably not before 2018.

In the last seven years, Galleher has averaged 20-plus percent growth year over year to nearly 250% in that time. However, 2017 saw only a 7% gain, Hamar said, as the distributor experienced problems with quality, availability and styling of its domestically sourced products. “We also were forced to change from Roppe to Johnsonite mid-year and lost a couple million of sales in that transition. We also relocated our manufacturing operation from Los Angeles to a much larger facility in Phoenix, and that really impacted sales this year. Combine all of these negative headwinds and we would have had growth of close to 15%. I’m not making excuses—just putting into context that we have much sales momentum going on out here.”

For Lee’s Summit, Mo.-based Tingle Flooring, a newcomer to this year’s top 20, being nimble and opportunistic continues to pay dividends. While its flooring division was relatively flat, Tingle’s installation products division increased 11%. As Chip Moxley, president, put it: “Undoubtedly the economy is helping to sustain our business, but real growth is coming from new products that both retail and commercial customers want for their floors today.”

Like many others, Tingle increased the percentage of its LVT/WPC business from 20% in 2015 to 27% in 2016, while laminate (8%) and hardwood (27%) stayed relatively the same.

Herregan Distributors, Eagan, Minn., has been particularly bullish on LVT/WPC, with more than one-third of its business now devoted to the category. Other top-tier distributors are all in double digits percentage-wise in terms of product mix, a number that continues to rise. “We continue to take WPC market share which is impacting our business,” said Pat Theis, vice president of sales and marketing. “We feel the economy has also helped at retail.”

Similarly, William M. Bird cited a better retail market and LVT/WPC for its increase of 5% from 2016 to 2017.  “LVT/WPC is the fasted growing segment with our flooring,” Maybank Hagood, CEO, said, echoing a sentiment shared by virtually every other distribution executive.

Commercial slowdown

While the LVT segment produced strong gains on the residential side in 2016, commercial sales of LVT and other products were not as strong, resulting in less project activity, distributors report. “My fear from things I’ve read and what I’m seeing out in the market is that some commercial flooring selections are shifting to things like polished, painted and stained concrete,” said Torrey Jaeckle, vice president of Jaeckle Distributors, Madison, Wis. “Any market shift like that is going to hurt the traditional flooring distributor as well as manufacturers, as none of us that I know of are involved in that product category.”

Looking ahead, Jaeckle sees a mixed bag on the economic front, with the immediate future looking promising.

“On the commercial side, I expect more robust growth throughout 2018, as that is what key economic indicators are telling us right now. On the residential side, I think overall the industry for our region is going to see more lackluster growth compared to 2017 as GDP growth slows as the year progresses before entering a mild recession in 2019.”

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NAFCD scores 100% of FCN top 20 distributor list

screen-shot-2016-12-01-at-3-40-21-pmChicago—The North American Association of Floor Covering Distributors (NAFCD) recently reported that every distributor featured on Floor Covering News’ 2016 Top 20 Distributors are also NAFCD distributor members. (Floor Covering News, Oct. 24 issue)

“NAFCD is very proud to be able to claim all distributors on this year’s top distributor list as their own,” said Kevin Gammonley, NAFCD executive director. “We do not believe it’s a coincidence that the strongest distributors in the industry are long-time NAFCD members who regularly take advantage of all that NAFCD has to offer,” he added.

NAFCD offers the distributor community an extensive menu of products and services designed to help them grow their distributorships. Education, benchmarking and trend analysis are core to the NAFCD value proposition. Most valued are the efficient and effective forums for connecting distributor executives with their peers as well as providing a foundation for facilitating stronger distributor-supplier relationships.

“NAFCD distributor members’ most valuable asset is each other,” Gammonley said. “A peer and supplier network developed over years featuring the sharing of best practices along with open and honest communication is a powerful competitive edge. Distributors interested in growing their businesses should consider connecting with the best in the business.”

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Distribution: NRF’s Pomerleau stands by carpet

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.49.31 PM It’s easy to spot Norman Pomerleau, founder and president of NRF, at an NRF Northeast Floorcovering Market (NEFM); he can be found by the carpet displays, likely holding court with customers.

To say Pomerleau is partial to carpet would be an understatement. “Norman could be walking the show floor with us but if he sees us heading toward the hardwood displays, he leaves us,” said Denis Lebel, co-owner of Sherm Arnold’s Flooring & Kitchen, a Lewiston, Maine-based dealer.

The flooring distribution market may be embracing more hard surfaces to keep current with trends, but Pomerleau never abandoned the carpet category. While many of the industry’s top 20 flooring dealers have little or no presence in carpet, NRF increased its overall mix to 25.1% carpet in 2015 compared with 24.4% in 2014. NRF also holds 25.1% in resilient, the hottest category in flooring.

“Norman never gave up on carpet,” said Terry Pomerleau Gray, senior vice president at NRF. “Norman loves carpet, it’s No. 1. And No. 2, it is a service.”

Gray reflected on a time in the 1970s when Bob Shaw, then CEO of Shaw Industries, called Pomerleau to inform him that Shaw would be selling direct. Other mills followed suit and soon distributors were switching to hard surfaces.

However, NRF continued to sell carpet. His model was to buy truckloads to get a better price and save on freight. A strong service component allowed NRF to command a slightly higher price than the mill.

NRF is the exclusive distributor of Lexmark Carpet in an eight-state region of the Northeast. The mill’s Tailored by Lexmark boutique collection of patterned goods has been one of the most successful soft surface introductions in 2015 and NRF has helped drive that business to hundreds of its retailers.

Tom Mathis, vice president of the residential division of Lexmark, credits NRF’s stellar sales team for that success, as well as the steadfast vision of the founder. “Norman never lost his foothold in carpet,” he said. “A lot of distributors got out of it. NRF never did and today it is one of the strongest carpet distributors in the country.”

Of the top 20 distributors NRF has the largest percentage of carpet. BPI, which was out of the carpet business from 1998 to 2005, returned in 2006 and has seen that percentage of the business increase to about 10%. Carpet accounts for 7Screen Shot 2015-10-30 at 4.49.23 PM% of Swiff-Train, which has been in the carpet business since the 1960s.

While Pomerleau acknowledges the gains hard surfaces have made (at 28.8%, hardwood is NRF’s largest product category), and how his company has adapted to those changes, he maintains there is no better value for the consumer than carpet. “There are so many applications where carpet is the better surface. It’s still the best thing out there.”

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Distribution: Mid-level players maintain muscle in their markets

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.46.02 PMIn economics, “disintermediation” is a term that means the removal of intermediaries in a supply chain; in other words, cutting out the middleman.

The word was originally applied to the banking industry in 1967, but flooring distributors are well aware of the practice of a manufacturer bypassing them to sell direct.

The top 20 distributors are generally immune to getting squeezed, but smaller companies certainly feel the pinch when it happens. “It is tough to be a midsized flooring distributor,” said Jeff Hamar, president of Galleher, a top 10 distributor based in Santa Fe Springs, Calif. “You can be big or you can be small but being in the middle is tough.”

While midsized distributors may not be as nimble as its niche counterparts and face challenges that perhaps the bigger entities don’t, there are many success stories among these mid-level players.

To compete against the larger full-line distributors, a midsized distributor has to rely on competitive pricing and products, as well as a strong service component. Those that offer a full line of products can benefit the dealer in terms of consolidating shipments as well as being a trusted partner.

Gilford Flooring, a Cincinnati-based distributor, has assembled a strong supplier lineup—including IVC, Inhaus, EarthWerks, Somerset, Anderson, Horizon and American Biltrite—by staying close to customers and being committed to its success.

With two months left in 2015, Gilford is on pace for a record year, according to Dennis Cook, president. “We budgeted for 7.8% growth this year and we expect to achieve that number. We’ve got some great products, we have some outstanding salespeople, we have a customer service team that I would put up against anyone’s in the business, and we have a well-oiled logistics team. When you have all those things you become very relevant to your customers.”

Like all successful companies, Gilford has learned how to adapt over the years. It started in 1991 as a commercial-only distributor and entered the residential space in 1999. Today Gilford is 80% residential and 20% commercial.

It also has a knack for picking winners. When a resilient supplier dropped Gilford about 10 years agScreen Shot 2015-10-30 at 4.46.07 PMo, Cook traveled to Dalton in search of a replacement. He found one in an upstart business, IVC. “Dennis saw something in this little Belgian company and that was before we were even incorporated,” said Paul Murfin, CEO of IVC US. “A company like Gilford is committed to you, committed to your success.”

Also a midsized supplier, Trinity Hardwood Distributors, a Dallas-based distributor that focuses almost exclusively on wood flooring, has been in business since 1977. Jon Roy Reid, president and founder, believes in building relationships with suppliers based on trust and mutual respect. It has fostered long-standing relationships with Mullican and Mirage, among others. “It’s about relationships,” Reid said. “When I started in 1977, people knew each other. Building relationships was important then, but it may be even more important today.”

Jaeckle Distributors of Madison, Wis., may be a midsized wholesaler in terms of revenue but it can even the playing field through technology. “I think we benefit from having a relatively young ownership and management team,” said Torrey Jaeckle, vice president. “My brother Jeff and I came up through the business during the technology boom; that and the rise of the Internet over the past 20 years means that change is not only embraced, it is a part of our DNA. We are always looking for ways to improve, especially through the use of technology.”

Jaeckle embraced fcB2B technology, employs high-level data analytics and measures everything with a mind toward making sure the company provides the levels of service and value its customers desire. “We utilize a warehouse management system and our warehouse is both bar-coded and paperless,” Jaeckle said. “Every salesperson is outfitted with an iPad and has access to any document they might need via the cloud. These aren’t things we do because it’s now the ante to play the game; we want to do these things and we want to be the first ones there. We are driven to change and improve, and get excited about new initiatives that allow us to become more efficient and provide better service.”

Being efficient and providing superior service are part and parcel of what makes a midsized distributor relevant in an era of industry consolidation. “One thing about our company is that we are willing to invest big dollars into looking forward,” Jaeckle noted.

Cook said every truck that is purchased (including driver and overhead) costs Gilford about $150,000 per year to manage, which is not a small sum for a midsized distributor. “I have a saying: ‘If you don’t grow, you go.’ But you want to grow at a level that affords you the ability to serve the customer.”

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Distributors turn to private label brands

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.38.14 PMFlooring distributors continue to rely on name brand manufacturers for strength in marketing efforts and the ability to sell reliable names to consumers. However, private label—or house brands—is a growing part of the business for many as a way to provide differentiated offerings and to boost margins.

“Like other distributors we have created brands that allow us to make adjustments in the offering based on regional trends,” said Donna Lagano, vice president of marketing at BR Funsten in Manteca, Calif., which carries six private label brands.

There is sound reasoning for a private label approach. In many product categories there are high quality options available from relatively unknown manufacturers and brands. When the brand name is unknown there isn’t much ability for the distributor to leverage the label in the marketing of the product. In those cases, it may make sense to private label the offering.

“Private label in distribution has a connotation that this is a way for a distributor to get a low priced product to market,” said Maybank Hagood, CEO of William M. Bird, Charleston, S.C. “But what we found is it is more of an opportunity to find a high value product consumers in our market really want.”

The past 10 years have seen a large increase in imported product, especially from Asia. Many of these products are well suited for private labeling because they allow the distributor to tailor the offerings to specific markets, picking and choosing patterns, constructions and designs that fill voids in their current lineups or complement other flooring options. The ability to customize the program to suit specific market needs is a strong attribute of private labeling.

Bob Eady, senior vice president of sales and marketing for T&L Distributing in Houston, explained private label offerings allow distributors to provide their dealers with looks that are customized to their specific regions as opposed to a product that is styled nationally in scope but may not resonate in local markets.

Jeff Hamar, president of Galleher in Santa Fe Springs, Calif., calls private labeling “customization at an affordable price.” One-third of Galleher’s business is private label.

Margins are also an important component. Executives said there is a definite inverse correlation between margins and the number of distributors carrying a brand in a market. Every distributor would prefer to have single distribution on every line it carries; the reality is that many manufacturers, especially domestic companies, have a market strategy that is not in accord with single distribution. “Private labeling ensures the distributor will have single distribution on the products in that brand,” said Torrey Jaeckle, vice president of Jaeckle Distributors in Madison, Wis. “While that may mean higher margins, it also adds activity and costs to the distributor since much of the marketing and sampling for the line has to be developed, managed and maintained in-house.”

In the end there are pros and cons to both manufacturer and private label brands, and most distributors will develop a good mix of products using both in an effort to achieve business objectives.

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Distribution: CEO Hagood reflects on William M. Bird’s 150 years

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.35.20 PMFounded just after the end of the Civil War in 1865, William M. Bird has survived wars, the great earthquake of 1886 and economic depressions. Today, it is thriving as the industry’s No. 7 flooring distributor with 2015 sales projected to be $149 million. Bird’s vision is to be the leading floor covering distributor in the South. From meager beginnings in Charleston, S.C., the distributor now has 12 locations covering 10 Southeastern states.

“It is humbling—to be honest with you—knowing how many companies came before us,” said Maybank Hagood, CEO of William M. Bird. His brother, Robert, serves as president.

Maybank Hagood said that when he looks back at the company’s legacy, he is most proud of the way his organization continues to focus its energy on the customer. “There has been so much change in our industry over the last 25 years and there is always a hill to climb. Staying focused on our customers has made a difference. I do believe our company’s DNA is our ability to respond to change.”

For example, in 1990 hardwood was less than 1% of Bird’s business. Today, wood is close to 50% of the business. When laminate was hot in the mid 1990s Bird was one of the first distributors to jump in, signing Pergo, then the biggest name in the category. Now that luxury vinyl tile is gaining popularity, Bird has made significant investments with Armstrong and Metroflor LVT, both on the residential and commercial sides.

Culture

William M. Bird’s mission statement comes down to five simple, yet meaningful, principles:

  • We care about each other
  • We play to win
  • We play by the rules
  • We believe respect is earned
  • We do what we say

Hagood said the No. 1 principle—we care about each other—“is a tough one to put on your wall if you are not going to live it. We try to create an environment where people want to come to work.”

Today, William M. Bird is a blend of many long-term associates and young blood that has revitalized the team. In a survey conducted by the South Carolina Chamber of Commerce, Southern Diversified Distributors (Bird’s parent company) was voted the second best place to work in the state in the small- to mid-sized category.

Reliability plus relationships

Distribution is all about adding value to the supply chain. Some companies can do it by carrying the right products and delivering goods in a timely manner; others do it by developing relationships built on trust.

“Some larger distributors may have the reliability piece down but not the relationships; some smaller distributors may have the relationships part but not the reliability,” Hagood noted. “We feel as a regional distributor we can do both well. Reliability is absolutely critical. When a customer places an order with us that is the last time they have to think about that order until it arrives at their place of business. If they have to worry about the order before that then we are not adding value. So reliability is critical.”

Bird has adapted to changing product trends as well as to how technology has altered the business model. About 25% of Bird’s orders are processed online and 50% of customer inquiries are handled the same way. Bird was the first distributor in its region to consolidate customer service in one call center, and the first to employ a hub and spoke distribution model, intended to keep costs down by centralizing and integrating logistics through a system of receiving products from many different origins, consolidating them and sending them directly to their destinations.

The distributor has also developed three successful private label house brands and branched outside of the flooring market; 50 of its customers have non-flooring products.

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Top 20 distributors: Flooring distributors grind out gains in 2015 behind strength in commercial sector

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.29.34 PMThe industry’s top 20 flooring distributors are a resourceful bunch, continuing to find ways to grow their businesses while navigating through choppy economic waters.

While the commercial sector has been strong in 2014-15, residential remodel—which accounts for about half of floor covering demand—continues to underwhelm.

“Just like 2014, we see the market as disappointing compared to expectations for 2015 of mid- to modestly high single-digit growth of floor covering in the U.S.,” said Bruce Zwicker, CEO of Glen Burnie, Md.-based Haines, the industry’s largest flooring distributor. “Floor covering demand in 2014 was predicted to grow 7% or more following strong 7% growth in 2013. But 2014 did not live up to expectations.”

The good news is that the commercial sector is on mostly solidfooting, particularly property management, which one distributor described as “the goose that is laying the golden egg.” Well-positioned distributors have been able to shift more of their business to commercial while waiting for retail to rebound.

The strong commercial business has resulted in some healthy sales increases for distributors; however, because commercial work produces lower margins than residential work, the percentage of overall gross profit has taken a hit.

Sales, distribution climate

As previously noted the residential remodel sector concerns distributors most. With the exception of a strong 2013, that segment has remained mostly sluggish since 2008 as consumers continue to delay big-ticket purchases.

“Today’s retail consumer is fickle,” said Jeff Striegel, president of Elias Wilf, Owings Mills, Md. “Whatever it is—a war in the Middle East, rising gas prices, the Pope comes to America and shuts down three cities—it can be anything that makes the consumer fickle.”

Adding to that impediment is what some executives call the “lack of available discretionary income.” After adjusting for inflation, consumers’ incomes have not Screen Shot 2015-10-30 at 4.29.45 PMimproved much since 2009. Furthermore, many are saddled with debt, particularly younger consumers with significant college loans to pay off.

“Consumers are not quite confident enough to spend on discretionary big-ticket items,” Zwicker said. “When they do they spend on other big items like cars and roofs. Other big spends are often prioritized by consumers over floors. Plus, homeowners are less convinced that they would get a return on investment on home remodeling expenditures. Remodeling spending has been driven more by higher income consumers who have the confidence and wherewithal. This is fine but we need the broad market of consumers to step in to really move the needle.”

Several distributors said August 2015 was a rough month for business, but no one seems to have a clear reason why. “The year was moving along quite strongly, but in the last 90 days things slowed down a bit, tempering overall performance,” said Scott Rozmus, president of FlorStar Sales, Romeoville, Ill. “Reports from the field and feedback directly from customers suggest that in many of our markets retail traffic was down.”

Meanwhile, the auto industry saw its strongest sales in a decade in August.

While both flooring and automobiles are considered large-ticket items, more favorable credit terms in the auto industry have allowed consumers with spotty—or even poor—credit history to purchase vehicles.

Specialty retail is still strong for those dealers and distributors who are diversified in all segments. As Jeff Hamar, president of Galleher, Santa Fe Springs, Calif., put it, “You have to be where the market is and not where you hope it is going to be.”

Despite these challenges, the industry’s top-tier distributors continue to do what they do: generate year-over-year revenue gains. These wholesalers have thrived in part by taking market share away from smaller competitors, having diversified product portfolios and being more important in their local markets.

Being well positioned has been a godsend for Adleta, according to John Sher, president. Ten years ago the Carrollton, Texas-based distributor was not even in the hardwood business; today its portfolio is 1⁄3 wood, 15% laminate and sundries, and the rest LVT/resilient. “We are pretty fortunate not to be tilted into any one category; we were able to diversify, and that is a great thing,” Sher said. “Our plan for years has been to participate in every market without becoming too dependent on any one area.”

At one time Denver Hardwood was 100% wood; today the distributor is still about 90% wood but the other 10% is comprised of LVT, sundries and laminate (IVC Balterio, specifically). “We are happy with our 2015 results but I don’t know if I could make that comment if not for our product diversification,” said Enos Farnsworth, president.

For All Tile in Elk Grove Village, Ill., logistical improvements for the distributor and its CCS supplies company that it acquired in early 2014 have paved the way for a nearly 7.5% increase in 2015. “Combined trucks equals better logistics and cost savings for our customers, better distribution for our suppliers and more control over our deliveries,” said Bob Weiss, CEO.

All Tile opened a new CCS facility in Davenport, Iowa, on Sept. 1, marking its initial presence in the Hawkeye state. Weiss said All Tile would be expanding into Indiana in the fourth quarter of 2015.

Galleher, which has made two acquisitions since 2009 to fuel its business, is on a run of five consecutive double-digit yearly gains, having gone from $50 million in 2010 to a projected $175 million in 2015. “Through August we are up 18% over last year,” Hamar said.

As it grows Galleher continues to launch initiatives. It is expanding its in-house manufacturing capacity, relocating several branch facilities to larger locations and working on data-driven models to help improve results in its major sales channels.

Oil production woes

Lower gas prices have helped sales of automobiles nationwide and boosted consumer confidence; however, in the major oil- producing states including Texas, Oklahoma and Louisiana, the downturn in oil production has resulted in massive layoffs. Four of the top 20 distributors are headquartered in Texas.

“A loss of jobs and what it does to the general psyche does more harm than what the advantage at the pump can do down here,” said Sher, whose company covers a seven-state region including Texas, Oklahoma and Louisiana.

Jonathan Train, president and CEO of Swiff-Train in Corpus Christi, Texas, said the decline in oil production affects many jobs. “The general feeling is that oil prices will remain depressed and have a negative impact into 2016.”

Bob Eady, senior vice president of sales and marketing for T&L Distributing in Houston, said when T&L was budgeting for 2015 it did not predict that oil would drop to $45 per barrel. “It has really slowed down the market here. Texas, Oklahoma and Louisiana do much better when oil is $100 per barrel but then the rest of the nation would suffer. So it’s a tradeoff for us.

Product trends

Being aligned with the right vendors in trending products like LVT has been a formula for success for ages. As LVT continues to be the nearly perfect product, suitable for most commercial and residential applications, distributors continue to expand its assortment in the category. LVT has gotten so big some distributors have separated it from the broader resilient categorization.

For Herregan Distributors in Eagan, Minn., LVT accounts for the majority of its resilient portfolio, which is more than 50% of its business. “Mannington and Metroflor continue to be the leaders in our markets in LVT,” said Pat Theis, vice president of sales and marketing. “We are also seeing aggressive growth in our fiberglass sheet vinyl business.”

Distributors said the burgeoning WPC category will be carefully watched going forward. Striegel said he expects 30 to 40 new WPC product introductions at The International Surface Event in Las Vegas in January, in what could be a preview of an explosive 2016. “There’s a saying, ‘You have to run to where the noise is,’ and LVT and WPC are making lots of noise these days. Any time you have a product that solves a problem it seems to do well. One of the issues people have with LVT is that there is some telegraphing, so there are limitations of what you can put it over; however, WPC solves that problem.”

The biggest change in laminate is its lack of acceptance in the builder community. With the advent of 12 mil, the product looks like a ½-inch hardwood and is less expensive, which has helped it gain appreciation. “A few years ago I didn’t have laminate in a single builder account,” Striegel said. “Now 40% of my builders [use it]. Laminate is thick, durable and the visuals have come so far, a flooring expert would not be able to tell the difference between 12 mil laminate from Mannington or Quick-Step and hardwood. It can be a $2 laminate that looks like a high-end DuChateau.”

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Distributors praise Mullican as trusted partner

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.20.17 PMWhen Jon Roy Reid first entered the flooring business in 1977 there were only a handful of hardwood flooring manufacturers in the U.S.

“Back then, everybody knew everybody,” reflected Reid, owner of Trinity Hardwood Distributors. Building relationships was important then but it may be even more important today as new players enter the field.

Reid said he formed a relationship with Mullican Flooring’s two top executives—Neil Poland, president; and Brian Greenwell, vice president of marketing and sales—when they worked for Tarkett in the early 1990s.

When Greenwell joined Mullican, he called Reid at Trinity and soon the distributor was carrying Mullican products. “It all goes back to relationships,” Reid said. “I can trust them and they can trust me. These guys are good suppliers and they are my friends.” Today, Trinity carries virtually every Mullican line.

Hoy Lanning, senior vice president, CMH marketing and Haines purchasing, forged a similar long-term relationship with Poland. They met shortly after Poland graduated from the University of Florida and took his first job as a marketing rep for Armstrong. Lanning was a sales manager at Peerless, which was one of Poland’s accounts. “That was more than 30 years ago, so we go way back,” Lanning said.

The relationship continued when Lanning went to CMH Space Flooring and Poland joined Mullican. Around 2001 CMH started a private label line with Mullican called Carolina Hardwood. Over time CMH got more involved in the builder business and decided it needed a branded Mullican product.

When asked what makes Mullican stand out as a supplier, Lanning said, “It’s the people. They have special people in that business—Neil Poland, Brian Greenwell, Pat Oakley [national sales manager], Mike Knight [regional sales manager], Neil Wenger [national field sales manager]. Those guys are all passionate about the business and they are very customer-focused. It makes it nice to do business with them.”

Mullican was initially known for its stellar collection of ¾-inch solid hardwood products; today its expertise has expanded to engineered. “They are always looking for new products,” Lanning said. “As engineered picked up they got into it overseas and eventually built a plant in the U.S. [near the company’s headquarters in Johnson City, Tenn.]. Then they got into handscraped, hand sculpted. They have always been quick to market, quick to change.”

Derr Flooring is yet another distributor with a long and binding relationship with Mullican. When Mullican opened for business 30 years ago, Derr was one of its first distributors. “It was not a lot of product back then,” said Rick Holden, COO, Derr Flooring. “We really started our relationship with them when Neil and Brian joined.”

Holden called Mullican a distributor’s dream, a company with exceptional products supported by an experienced and responsive staff that can answer questions and solve problems quickly. “The vast majority of their products are made in Johnson City, and that allows us to receive products much faster than if we sourced them from oversees. It also allows us to keep a smaller inventory. Their offerings cover what I would call the standard constructions and styles, as well as unique styles, designs and constructions that attract consumers looking for more contemporary visuals. They are a company that is dedicated to making quality products and serving their customers.”

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