resilient

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N E W S PA P E R

floorcoveringnews volume 32/number 1 I fcnews.net I the publication more retailers prefer I June 26, 2017 I $2.00

IN THIS ISSUE

Scoring Flooring

Industry Stats for 2016 Total industry sales (in billions of dollars)

$21.174

(in billions of square feet)

5.1% 20.138

19.13 21.174 16.980

$19.221 $17.541

17.639

3.8%

17.956

18.364

19.13

$18.536

By the numbers FCNews’ annual Statistical Issue defines the flooring industry in 2016 in terms of dollars and units sold.

3.8%* 5.1%*

Carpet/Rugs .....................16 Resilient ..........................20 Wood ...............................26 Laminate..........................32 Ceramic ...........................36 Commercial.....................40

-13.8%* 2012

Carpet Wood

Housing summary The U.S. housing market did not break any records in 2016, but there was positive movement nonetheless. PAGE 43

2012

2013

2014 Rugs Laminate

2015 Resilient Rubber

2013

2014

2016 Tile

2015

2016

Carpet/Rugs

Resilient

Tile

Wood

Laminate

Rubber

*Represents 2015–16 percentage change

he flooring industry in 2016 continued its recovery from The Great Recession. While growth rates pale in comparison to the mid2000s heydays, the industry last year continued to post steady gains across the board with increases of 5.1% in dollars and 3.8% in volume. This comes on the heels of 4.4% growth in dollars and 3.2% in volume in 2015; 3.6% growth in dollars

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and 1.8% in volume in 2014 and respective 5.5% and 3.8% growth in 2013. In fact, 2016’s figures represent the seventh consecutive year of dollar growth and fifth straight year of volume increases. FCNews’ exclusive research reveals total 2016 flooring sales of $21.174 billion and 19.13 billion square feet. (These numbers are in wholesale dollars reflecting the first point of sale.) While the industry remains far off the peak it reached in 2006, when sales of $24.175 billion and 26.36 billion square feet (down 12.4% and 27.4%, respectively) were posted, it has gained back much of what was lost. The low point for the industry was 2009, when sales bottomed out at $16.189 billion and 16.625 billion square feet (in 2010). Since that time, the industry is up nearly 31% in dollars and 15% in volume.

Perhaps more significant is total industry sales surpassed the $21 billion mark for the first time since 2007, when sales were $22.337 billion, and volume is at its highest level since 2008’s 19.905 billion square feet. Also of note is the fact dollars are growing faster than volume. That is a reflection of consumers buying more expensive goods in addition to a series of price hikes, particularly on the carpet and hardwood sides. The average selling price of all flooring in 2016 was $1.11 (same as 2015) and up $0.02 from 2014 and up $0.04 from 2013). Just to compare, the average selling price of all flooring in 2006 was $0.94. One needs only to look at the resilient category for an explanation. Ten years ago the average selling price for all resilient flooring was $0.64. In 2016 it was $1.04. A decade ago,

sheet vinyl, vinyl composition tile (VCT) and the low-cost, peel-and-stick tile commanded 75% of dollars. Last year that number plummeted to 33%. The increased usage of the higher-cost LVT and WPC has been an industry game changer. But it’s not just resilient. The average ceramic tile price has increased from $0.95 to $1.20 a square foot over the last 10 years, and hardwood has seen an average-square-price jump from $2.21 to $2.48 per square foot. Even the maligned soft surface segment—which has seen its share of the market dip from 63.6% in 2006 to 53.6% in 2016—has seen an increase in average pricing from $0.89 to $1.01. For the record, laminate is the only category with pricing in decline, going from $1.30 a square foot in 2006 to $1.09 in 2016. Continued on page 10

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4 I June 26, 2017

( IN THE NEWS ) Armstrong closes purchase of Mannington VCT business LANCASTER, PA.—Armstrong Flooring has closed on the previously announced definitive asset purchase agreement to acquire Mannington’s VCT business. The transaction, which was announced May 8, entailed intellectual property as well as select manufacturing assets. Don Maier, CEO, Armstrong Flooring, said the acquisition strengthens its footprint in the well-structured VCT category and will drive accretive benefits to earnings in 2018. “It marks an exciting step in our multi-pronged approach to achieve our medium-term goals.” Armstrong Flooring said it intends to use its existing plant and distribution networks to accommodate the additional VCT volume from the acquisition in order to drive top- and bottom-line benefits through increased scale and capacity utilization.

Emser Tile expands presence in thriving Houston market LOS ANGELES—Emser Tile has opened another branch in Houston. The new location marks its 10th location in the state and its 72nd facility in North America. Emser has experienced exponential growth in the Houston market over the last 14 years. The latest location—its fourth facility in Houston—strategically positions the company in all four quadrants of the metropolitan area. The new facility also brings new jobs to southeast Houston. “We are honored to be able to further service our growing customer base in southeast Houston,” said Barbara Haaksma, vice president of marketing. “This fourth location allows us to expand our unparalleled customer service and provide robust support for the thriving Houston community.”

NWFA, Gary Sinise Foundation team up for worthy cause CHESTERFIELD, MO. —The National Wood Flooring Association (NWFA) has provided flooring for its 14th home in partnership with the Gary Sinise Foundation Restoring Independence Supporting Empowerment (R.I.S.E.). The program builds custom, specially adapted smart homes for severely wounded veterans and first responders. The home dedication for US Marine Corporal Sean Adams took place May 19 in Maysville, Ga. Cpl Adams was injured in Afghanistan in 2012 when an improvised explosive device detonated near him, resulting in the loss of both his legs above the knee, injury to both his hands and his right arm. He also lost partial vision in his left eye. “It’s truly gratifying to see how these homes impact the lives of these heroes and their families,” said Michael Martin, NWFA president and CEO. “Flooring is just a small part in helping these families address the everyday challenges they face, and NWFA is truly grateful to its members that help make this important work possible.” Flooring for the project was donated by Mannington, an NWFA member.

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Royalty closing leaves dealers in a lurch recalled. “I said, ‘What news?’ and he explained that Royalty had closed down.” M & D Carpets told FCNews it plans he abrupt shutter of Royalty Carpet to continue selling its Tuftex and Mills, a California carpet manufacKarastan products and is interested in turer with a 50-year history, bringing in Dixie Home products to take stunned many of its flooring dealers who Royalty’s place. said they were caught completely off Then there are dealers like guard by the sudden closure. Lesley Castruita, House of Carpet, “There are a lot of angry folks South Lake Tahoe, Calif., who had and angry customers,” one industry an order confirmed that is no longer executive told FCNews. available to her. “We’re not very Typical of the reaction was that happy about this. We’ve been of Julie Goodman of Goodman’s Royalty customers for 34 years, and Floor Covering, Florence, Ore. She we had no idea this family-owned, was attempting to order Royalty Southern California mill could have samples over the phone when she such a devastating effect on us.” heard the recording explaining the Among those mills looking to fill plant was closed for good. the void is Tuftex, a California-based Goodman’s Floor Covering has sold Royalty Carpets since 1990 and Andrea Greenleaf took over Royalty Carpet Mills in manufacturer and the high-end carpet division of Shaw Floors. now has to find another brand to 2013 from her late father, Mike Derderian. “Customers will be looking for take its place. “We need to fill the options for a West Coast supplier, niche,” she said. “We’ve always really appreciated their products so there’s a Another longtime Royalty dealer, M & West Coast service, West Coast styling void without them.” D Carpets, noted no signs of a potential and West Coast colors,” said Doug Others were similarly stunned. shutdown. “I had no idea,” said Danielle Jackson, vice president of sales and marMichele Hurst of A-1 Carpet & Tile, Berger, owner. “We were going to call and keting. “Our Tuftex sales force will be out Portland, Ore., heard the news from place an order that day. We were kind of to earn this business. Where dealers may already have orders not being serviced by another manufacturer’s representative. shocked.” “We had tried to reach our Royalty rep M&D Carpets learned about the clos- Royalty, Tuftex can offer quick alterna[earlier this month] and were not able to. ing from a Royalty rep on June 14, the day tives and service to help keep these conHe never called us back. I put in a call to the business closed. “I actually had a past sumers satisfied and get their floors finour Mohawk rep to ask about her prod- representative who worked for Royalty ished. The dealers that have enjoyed the ucts, and she asked if we had heard the call and ask if I heard the news,” Berger Continued on page 44 By Ken Ryan and Lindsay Baillie

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news.” Like other Royalty dealers, A-1 Carpet & Tile is suddenly looking for a replacement. “We’re not quite sure what we’ll do,” Hurst said. “We already have Dixie Mills’ products. We also may look into more wool lines.”

Greater New York Floor Coverers Association presents annual scholarship awards By Reginald Tucker

NEW YORK—Six high school seniors— along with a veteran member of the New York flooring contractor market—were recognized here recently during the 33rd Annual Francis J.P. McHale Scholarship and Greater New York Floor Coverers Industry Promotional Fund Scholarship Awards ceremony. This year’s event was historic in that it marked the first time that seven awards were presented at the event—the most awards doled out at one time since the program was created in 1985. This year’s scholarship awards were presented to three students whose parents are affiliated with the NYCDC/Local 2287, and to three seniors whose parents are non-union employees of contractor

members. The recipients of the Greater New York Floor Coverers Scholarship are: Amy Kappel, Sonja Meberg and Casey Morrow. The recipients of the 2017 Francis J.P. McHale Scholarship awards are: Megan Dicosta, Ailish Durcan and Hope Ortiz. “The J.P. McHale Scholarship award was truly David Meberg, left, chairman of the Greater New a labor-management part- York Floor Coverers Industry Promotional Fund and nership in how it began, and president of Consolidated Carpet, presents the 2017 that’s how it perpetuates Francis J.P. McHale Scholarship Honoree Award to itself year after year,” said John Mucciarone of National Interiors. David Meberg, master of ceremonies, who also serves as both Promotional Fund and as president of trustee-chairman of the Greater New Consolidated Carpet, a prominent comYork Floor Coverers Industry Continued on page 44

( SNAPSHOT) Haines honors HLC Southern sales winner ORLANDO, FLA.—Affordable Carpet & Wood of Jacksonville, Fla., was named the Haines Loyalty Club Southern Sales Performance Award winner for 2016. The retailer grew overall sales 24% between 2015 and 2016. In addition, its Mapei sales increased 34%; its Haines Cushion sales grew 38%; and its Carolina Hardwood sales increased 84%. Pictured accepting the award at the recent Haines Southern Summit is Jeff Howard, owner, with Haines executives, from left, Chris Pratt, chief sales and marketing officer; Michael Barrett, president/CEO; and Hoy Lanning, senior CEO advisor.

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6 I June 26, 2017

floorcoveringnews

my take

michael blick president/ceo [email protected]

The flooring industry, by the numbers

steven feldman publisher/editorial director [email protected]

o when the dust settled, FCNews’ exclusive research revealed the flooring industry in 2016 was up 5.1% in dollars and nearly 4% in volume. This is the seventh consecutive year in which dollars outpaced volume, meaning the average selling price of most products continues to rise. Attribute that to some price hikes and consumers buying higherpriced goods. Every category showed gains with the exception of carpet, which posted the slightest of losses. All in all, the industry continues its rebound from the Great Recession. Hey, it may not be as good as the mid-2000s, but then again, neither am I. Unless you have just awoken from a year-long coma, you know the resilient category, specifically LVT and to be more accurate, WPC/rigid core, is driving the growth. The joke on the street is one company said to the other, “How’s your sheet business?” Response: “Why? Do you want to buy it?” A few words about our numbers, which we believe to be the most accurate in the industry. We comb government and industry data, and we speak to a lot of people—particularly on the resilient side—because it is the category driving the industry right now. Just about every manufacturer shared with us their proprietary numbers. The lone holdout was Armstrong. Repeated phone calls and

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emails to various individuals were left unreturned. So in this case we were forced to talk to countless individuals with knowledge of their business. We are confident we got close enough to ensure the most accurate aggregate number. A couple of things to keep in mind about our numbers: 1. The ceramic number we report is strictly floor tile. The general rule of thumb is flooring constitutes about 78% of the ceramic floor/wall tile market. So after we did the research and came up with the total floor and wall number, we applied the factor. 2. Our total industry sales do not include stone flooring, which admittedly is a significant number. Why? Because we don’t feel we can apply the same degree of accuracy to the stone flooring market that we assign to every other category. Most people interviewed for this report feel there is no way to determine whether a particular square foot or linear slab of stone—be it granite, marble, slate, travertine, etc.—that gets sold is going on the floor, wall or countertop. Some stone can even wind up in other applications. So rather than just guess, we’ll leave that to you. 3. You will notice a lower rubber number from years past. Reason being: We are only taking rubber sheet and tile flooring into consideration this year. We have

eliminated the cove base, stair treads, accessories, etc. We estimate the rubber flooring market to be about $180 million. It’s probably in the $550 million range when everything else is counted. We have adjusted numbers from prior years to reflect this change. There are several industry reports out there, and all have their own methodology. Some rely on government numbers, which are a good start. But sometimes the government misclassifies products, especially as it relates to wood. Others estimate, particularly as it relates to proprietary company information—which is fine if you’re looking to just get into the ballpark but don’t care where you’re sitting. Some industry associations do a good job of having their manufacturer members report confidential sales to a thirdparty research firm. The RFCI does a good job of this. The problem is it only takes into account member sales. When you don’t include companies like USFloors, Beaulieu, Raskin, Forbo and a host of imports, you are not painting a complete picture. In any case, rest assured a lot of effort went into compiling the numbers for this issue. We are confident that you’ll find them to be as good as any out there.

Steven Feldman

dustin aaronson associate publisher/ advertising director [email protected]

editorial reginald tucker managing editor [email protected]

ken ryan senior editor [email protected]

lindsay baillie assistant editor [email protected]

art/production frank notarbartolo art/production director [email protected]

sales associate nadia ramlakhan [email protected]

founder albert wahnon 1920-2011

Getting social with fcnews correspondents leah gross k.j. quinn nicole murray

columns jim augustus armstrong lisbeth calandrino david romano scott perron roman basi fcica nafcd

marketing mastery lisbiz strategies dear david retailer2retailer financial installments distributors’ view

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Copyright 2017 by Roel Productions, Inc. All rights reserved. Printed in the U.S.A. Material in this publication may not be reproduced in any form without written permission from the publisher. The opinions expressed by columnists do not necessarily reflect the views of member management. Single copy $2 U.S. subscriptions $25/yr. Canadian subscriptions $50 U.S./yr. Foreign via air $200 U.S./yr, foreign via surface $100 U.S./yr. Printed in the U.S.A. postmaster Send address changes to FLOOR COVERING NEWS, subscription Dept.,151 Fairchild Avenue., Ste. 2, Plainview, NY 11803 Floor Covering News (ISSN-10794174) is published biweekly by Roel Productions Inc., 550 W. Old Country Road, Ste. 204, Hicksville, NY 11801. Periodicals postage paid at Hicksville, NY, and additional mailing offices.

Managing multiple generations in the workplace BY MATT BEAUDREAU

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What’s your assessment of the first half

(Second of two parts) aged 20 and under, this group is urrently, five generations poised to change everything. Gen make up our society. Each Zers tend to be very entrepreof those five generations neurial and innovative, and has an active role in the marketthey’re very hard working. They place. Depending on the specific have also paid close attention to workplace, the workforce what the millennials went includes four to five generations. through. Following are the birth years But let’s not overlook Gen X. for each generation: As a manager, you need to under•Gen Z: born after 1996 stand a couple of things about •Milliennials (Gen Y): born this group. They are a skeptical 1977 to 1995 generation. They believe you, but •Generation X: born 1965 to they need to see the proof. They 1976 are an “action-speaks-louder-than•Baby boomers: born 1946 to words” generation. They want to 1964 see the data, which is great •Traditionalists: born 1945 because it makes them great leadand before ers and managers. Generation birth years vary by The other thing about Gen geography, and you’ll see varying Xers is they are the most loyal characteristics in difgeneration. However, ferent parts of the they are loyal to indiworld. The big viduals as opposed to events that affect a AL’S COLUMN organizations. You’re generation can be most likely to lose dramatically differthem as an individual ent across the globe to another organization or at least regionalized or national if something they’re tied to in in scope, and trends can hit at dif- your organization goes someferent times. For example, the where else. end of the millennial generation And don’t forget about the traand the start of Gen Z in the U.S. ditionalists. They tend to have a are closely tied to Sept. 11, 2001. very strong military connection. (That day marks the No. 1 genera- Many of them grew up during the tion-defining moment for millen- Great Depression, so they are the nials. Members of Gen Z cannot generation that’s most comfortprocess the significance of 9/11. able with delayed gratification. It’s always been a part of history Bottom line: Not everybody for them.) Also, being a millennifits in a box. As a business owner, al in Athens, Greece, with its cur- you need to understand how to rent unemployment situation, put these generational strengths can lead to different expectations together—rather than looking at and behaviors than being a milthem as hindrance—and look at lennial in Austin, Texas. it as an opportunity here to create Why are millennials getting the best communication you’ve so much attention? In the last ever had in your entire career. It’s two years, this group has become about your willingness to adapt the largest generation in the U.S. that’s going to make you succeed. workforce. Millennials are also We’ve got this new generation of the fastest-growing generation of buyers that are coming for us, so customers in the marketplace, it’s important to realize their buybringing the greatest lifetime ing and communication habits value. Even more important, milare different. Strategies and taclennials exhibit different attitudes tics that worked five years ago can toward employment, sales and completely fail with younger genmarketing, which are challenging erations—groups that have an many conventional strategies. increasingly stronger impact and Coming up right behind the determinant role in your business millennials are Gen Z. Currently or organization.

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( CALENDAR )

(RETAILERS REACT)

July 11-13 NWFA Intermediate Sand & Finish + NWFA CP Sand & Finish Testing This year business has seen steady growth with March and May being our Hosted by E.J. Welch & Co. biggest months. We are about 8% up in total sales over the 2016 first half. Elk Grove, Ill. Contact: Tricia Swindoll, The biggest growth category for us has been resilient with 86% growth, [email protected]; while carpet sales saw the biggest decline at 14%. I expect our second half 800.422.4556 Crest Flooring reports 65%-70% of its carpet sales can be attributed to the St. Jude collection.

should be similar to the first with slower, steady growth.

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—Josh Elder, Gainesville CarpetsPlus Color Tile Gainesville, Fla.

“

It has been an interesting six months. Our residential business has been thriving. We are still selling plenty of carpet, along with products such as Mannington’s Adura Max; sales are positive. Our commercial business is still lagging behind last year, which is an enigma to me. A good 65%-70% of our carpet sales are from the St. Jude Collection from Shaw.

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Matt Beaudreau is a certified keynote speaker at The Center for Generational Kinetics, headquartered in Austin, Texas. He is a millennial who has a reputation as a thought leader amongst his generation.

July 10 CFI Introduction to Carpet (5-week Residential Carpet Class) Forney, Texas. Contact: 816.232.4646; [email protected]

We have had a lot of growth the last few years; this year we have leveled off somewhat. We are flat with last year, but we are hoping we can get back on the growth track for the second half of the year.

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educating the industry

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8 I June 26, 2017

—Steve Weisberg, Crest Flooring Allentown, Pa.

—A.J. Boyajian, A.J. Rose Carpets & Flooring Burlington, Mass.

It has been an interesting first half of the year. The weather has been very mild so new construction is ahead of schedule and retail has been either feast or famine month to month. Our written sales and backlog are up compared to last year, but deliveries are about the same so that means the summer is going to be very busy getting it all installed. I am optimistic about the second half of the year, but I am a realist about forecasting anything these days. —Nick Freadreacea, The Flooring Gallery Louisville, Ky.

2017 started off with a bang—awesome traffic, great business and higher margins. May hit and traffic evaporated. We had a few issues with a power outage that closed our store for two days, then a fire across the street flooded our showroom with smoke. Since that time it has been [slow]. But even with slower traffic—and who knows why—our numbers are up 3%. I believe that is due to higher ticket purchases and higher margins that we, as a Carpet One store, are able to hold firm. —Cathy Buchanan, Independent Carpet One Floor & Home Westland, Mich.

July 12-13 CFI Residential Resilient Installation Training & CFI Certification Hosted by Carpet Cushions & Supplies, Davenport, Iowa. Contact: 816.232.4646; [email protected]

July 14 CFI Installation for salespeople Denver Trainer: Tom Jennings, WFCA vice president of professional development. Contact: 816.232.4646; [email protected]

July 18-20 NWFA Intermediate Installation + NWFACP Installation Testing Carpenters Training Centers New York Council. Contact: Tricia Swindoll, [email protected]; 800.422.4556 Aug. 6-8 Flooring America Summer convention, Salt Palace Convention Center, Salt Lake City. Contact: ccaglobalpartners.com; 800.450.7595

Aug. 8-10 Carpet One Floor & Home Summer convention, Salt Palace Convention Center, Salt Lake City. Contact: ccaglobalpartners.com; 800.450.7595

( REMEMBER WHEN...) The year was 2008. Randy Merritt, left, president of Shaw Industries, met up with friend and colleague David Wilkerson, then vice president of hard surfaces for Shaw, during the Flooring America convention. Merritt and Wilkerson arrived in Dalton around the same time and were roommates for the first month after joining Shaw. Today Merritt continues as Shaw president while Wilkerson is corporate director of sustainability.

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10 I June 26, 2017

Scoring Flooring Continued from page 1

Why has the growth been slow and steady and not more robust? For one, housing has not led the recovery from the recession and is actually lagging the economy. Also, in past recoveries there has always been a period of strong economic growth before it settles into normal growth mode. That has not happened with this recovery. (Editor’s note: FCNews does not include stone flooring in its aggregate total, nor does it account for ceramic wall tile. In addition, rubber flooring numbers now reflect solely sheet and tile flooring with no accessories or cove base.) Much like the past few years, the resilient category continues to be the locomotive powering the industry and luxury vinyl tile/WPC the catalyst for this explosive growth. In 2016, resilient posted the largest percentage gain of any flooring category, rising 19.7% to $3.499 billion from $2.924 billion in 2014. Since 2010, the category has increased a stunning 103% and is now at its highest point in history in terms of dollars. In the grand scheme of things, resilient now accounts for 16.5% of the total flooring market in dollars and 18.8% in volume after a 6.5% rise in units to 3.537 billion square feet. In 2015, resilient held a 13.3% market share in terms of dollars, which was up from 12.2% in 2014, 11.9% in 2013 and 11.2% in 2012. Interestingly, its market share in volume had stayed around 15% for eight consecutive years until leaping to 17% in 2015. That suggests resilient’s average price point has increased by virtue of the migration from felt to fiberglass sheet, along with the transition from residential/commercial sheet and vinyl composition tile (VCT) to LVT and WPC. FCNews research reveals just how much LVT along with its subcategory, WPC/rigid core, is driving growth of the segment. Sales have gone from nearly $750 million in 2012 to $948 million in 2013, $1.142 billion in 2014, $1.651 billion in 2015 and $2.161 in 2016. That represents respective gains of 26.4%, 20.5%, 27.1% and 30.9%. More telling, LVT sales have more than doubled in three years. It also carries with it a premium price tag as it comprises 62.5% of the category’s dollars but only 38.4% of its volume. To illustrate its

growth, those numbers were 53.2% and 33.6% in 2015; 47.7% and 26.4% in 2014; 43% and 22.3% in 2013; and 37.4% and 20.6%, respectively, in 2012. LVT increased significantly in both residential and commercial markets— dollars and square feet—in 2016. Residential LVT saw a 68.3% increase in square footage from 760 million in 2015 to 1.04 billion (including WPC), making up 76.1% of the LVT market. This number was 71% a year ago and 55% two years ago. The big increase can be attributed to the WPC bandwagon, which, to this point, is almost exclusively residential. The commercial market rose from 297.2 million square feet to 326.3 million square feet, a 9.8% increase. While residential brought in more dollars—$1.512 billion— last year, commercial LVT still performed well, posting a 12.5% increase, rising from $576.4 million in 2015 to $648.6 million in ’16. Proponents of the category say the versatility of LVT—tile or plank—makes it an ideal solution for any number of residential, commercial and projectoriented applications. This multi-tasking ability has allowed LVT to migrate into builder, multi-family and residential-remodeling applications. The large space in which LVT operates, in turn, has afforded manufacturers the means of introducing differentiated product across a wider front, ebbing the march toward commoditization. Originally, LVT became popular as a water-resistant, hard surface product ideal for mainly kitchens and sometimes spaces such as a laundry room. In the past, LVT would not be considered for bedrooms or other larger living spaces throughout the home. However, this perception has changed in recent years. As LVT grows, it is taking share from other resilient categories, especially VCT. But it is also nipping from sheet vinyl as well. Sheet vinyl—both residential and commercial—has grown only 2.4% in the last three years, going from $791 million in 2013 to $809.6 in 2016. It actually was down 0.5% from $813.5 million in 2015. Residential has led the way here, but if not for the

Industry market share (19.13 billion square feet) ($21.174 billion) 2016 Laminate 5.5%

Rubber 0.8%

Laminate 5.5% Rubber 0.2%

(0.7% in 2015)

(5.6% in 2015)

Wood 4.7%

(5.6% in 2015)

(1.3% in 2015)

(4.4% in 2015)

Wood 10.5%

Tile 12.1%

(10.1% in 2015)

(11.9% in 2015)

Carpet 41.5%

Tile 13%

Resilient 18.8%

(43.4% in 2015)

(12.7% in 2015)

Carpet & Rugs 58.7%

(16.8% in 2015)

(60% in 2015)

Resilient 16.5% (13.3% in 2015)

Rugs 12.2% (12.2% in 2015)

2011

($16.629 billion)

Rubber 3% (includes accessories)

Laminate 6.6%

(16.554 billion square feet) Wood 3.9%

Laminate 6.2% Rubber 0.2%

Tile 10.2%

Wood 9.1%

Carpet 48.2%

Tile 9.1%

Resilient 14.2%

Carpet/Rugs 65.3%

Resilient 11%

Rugs 13%

2006

($24.715 billion) Laminate 5.6%

Laminate 4%

Rubber 0.8%

Wood 4.4%

Wood 9.2%

Tile 10%

(26.36 billion square feet)

Rubber 2%

Tile 9.9%

Carpet 50.9%

Resilient 9.6%

Resilient 14.1%

Carpet/Rugs 66.8%

Rugs 12.7%

rebound in new home construction and manufactured housing, sheet vinyl would surely be down. The commercial market has taken the bigger hit, declining 16% in dollars from $254.24 million in 2013 to $213.5 million in 2016. However, the category was only down slightly in 2016, 1.2% to be exact, on the heels of a 1.4% decline in 2015. Sheet remains the volume leader in residential resilient sales with 47% of the market, down from 55.1% in 2015 and 60.2% in 2014, but it comprises only 26.7% in dollars, down from 38.9% in 2015. Carpet If you are looking for a bright spot in an otherwise flat year for carpet, there was builder and multi-family, in which the

carpet segments fared pretty well in 2016 vs. 2015, according to executives. However, with overall residential carpet dollars down a tick in 2016, executives say that points to a decline in the residential replacement carpet business— further evidence of carpet losing out to hard surface. FCNews’ research shows that carpet sales fell 1% in 2016 to $8.7813 billion compared with $8.87 billion in 2015. However, total volume—which includes carpet and area rugs—gained 1.2% to 11.22 billion square feet from 11.09 billion square feet in 2015. Residential carpet sales declined an estimated 1.5% in 2016 while units were up 1.3%. The commercial portion of the pie, meanwhile, dropped 0.5% in sales with vol-

ume falling about 1.5% year over year. The carpet story really hasn’t changed much in the last three years, except in 2016 commercial was softer than it had been in the previous two. Flat to a point up or two down is nothing to write home about, but it is a far cry from a decade ago when carpet was in the throes of a deep recession—as were other flooring segments— with double-digit losses in both sales and volume. Executives say carpet is doing well at the low end, where polyester has been dominant. However, some note that PET is contributing to the shrinking dollars in carpet in what they see as a race to the bottom and, consequently, a Continued on page 12

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12 I June 26, 2017

Industry sales (in billions of square feet)

(in billions of dollars)

2016 2015

2011

2016 2015

1 .78 72 99 1 3 $8 $2.5 $3.4 $2.76 $2.2$1.1540.176 8.87 97 24 1 9 $ $ $2.4 2.9 $2.6 .05 .137 60 7 $ $2 $1 0.5 8.00 $2.16 1.831 1.52 513 94 $ $ $ $ $1. 1.0 .504 $ $0

Carpet Tile Rubber

Rugs Wood

Scoring Flooring Continued from page 10

devaluation of the category. The high end ($14 and up) is said to be doing well, with soft luxury goods as well as stain and soil resistance resonating with consumers. Still, it is going to be a challenging

Resilient Laminate

road for carpet going forward. One leading executive said builders in the South and Southwest, which is seeing the greatest population growth, are constructing homes and apartments with much less carpet than in the past. On the bright side for soft surface is rugs, which for a

2 7 1 11.2 3.53 2.3 .898 .054 039 0 1 0.

Carpet & Rugs Wood

third year in a row outperformed carpet, with sales rising an estimated 3% over 2015. The area rug business, observers say, is benefiting from hard surfaces; however, many specialty flooring dealers say they are not yet reaping the full benefit of these add-on sales in the same as way furni-

98 5 0 11.0 3.26 2.19 0.815 1.034 244 0.

Resilient Laminate

Tile Rubber

ture stores and other outlets. Hardwood A strong residential replacement/remodel market, combined with improvement in certain sectors of the new construction market, contributed to another year of growth for the U.S. hardwood flooring cat-

2011

7 81 10. 2.4 1.38 .652 .02 22 1 0.2 0

egory. FCNews research shows hardwood flooring sales reached $2.23 billion in 2016, a 5.1% increase over 2015’s upwardly revised sales of $2.12 billion. Square footage sold likewise grew to an estimated 898 million square feet, a 4.8% increase over 2015’s 857 million square feet.

fcnews

June 26, 2017 I 13

( METHODOLOGY) he statistics presented in this study were derived from an extensive research project undertaken by Floor Covering News. Figures were gathered from a variety of sources to develop the most plausible and credible results at the time of publishing. Within every category, FCNews held numerous private conversations with high-ranking executives from many of the industry’s leading mills, groups and associations about the overall industry and their respective segment(s) of business. While these discussions were off-the-

T

Looking at the big picture, hardwood flooring represents 10.5% of total industry sales but only 4.7% of total volume. Compared to five years ago, wood represented 9.1% of total flooring dollars at the first point of sale and only 3.9% of total volume. Industry observers attribute much of hardwood’s activity in 2016 to the growing popularity and production of engineered floors. While solid wood flooring still remains the go-to product in certain parts of the country, several suppliers have introduced engineered hardwood products that replicate the overall thickness of ¾-inch solid wood flooring. The end result is the traditional solid wood flooring end user— builders and contractors, in many cases—can now nail down an engineered floor in much the same way they would a solid product and still be able to sand and finish multiple times. Right in line with the swing from engineered to solid is the move to prefinished from unfinished (traditional hardwood flooring contractors being the primary exception). FCNews research shows the share of prefinished products grew to nearly 60% last year— up from just 54% the year prior. Looking back five years ago, the ratio of prefinished to unfinished was just the opposite. The U.S. hardwood flooring market also saw a bit of a shift with respect to domestic production vs. imports. FCNews research showed imports from Canada rose slightly from 9% to 12% in 2016. At the same time, shipments from Brazil dropped from 5.6% in 2015 to just over 3% in 2016. Although China— which ships more engineered than solid product—still accounts for the bulk of imported hardwood flooring, its share Continued on page 14

record and confidential, the information gleaned from them was incorporated into the research to help arrive at the final figures. Other sources included, but were not limited to, published government records (both U.S. and foreign sources); filings from public companies; extensive and confidential interviews with top officials from all levels of the supply chain; historical trends and data; reports published by associations along with private conversations with directors; and previously published reports and stories in

FCNews and other credible media sources. Some of the data came from sources such as the U.S. Department of Commerce and other federal agencies. Info was also gathered from foreign agencies and respected international groups affiliated with flooring. Data available from U.S. industry associations and groups were also used. These include the National Wood Flooring Association, North American Laminate Flooring Association, Carpet & Rug Institute, Tile Council of North America and others.

These numbers do not include sundries or installation but represent goods sold at the key point of sale, meaning products that are private labeled from one mill to another are not counted twice. Also, in the case of the ceramic tile category, only sales of floor covering are included, which account for between 75% and 80% of the segment’s revenues and volume (the rest comes from wall tiles). In the case of rubber flooring, only sheet and tile flooring are included (no accessories, cove base, etc.). In some cases, percentages may not total 100 due

to rounding. Unless noted otherwise, all graphs and charts were derived from FCNews’ research. FCNews does not claim the numbers presented here to be exact and final. Governmental and company data is often revised—sometimes by more than 5% and as much as five years after being first published. That said, these figures do represent what FCNews believes to be the best and most accurate account of what the floor covering industry accomplished in 2016 in terms of sales, volume and other measurables.

fcnews

14 I June 26, 2017

Scoring Flooring

Commercial vs. residential breakdown

Continued from page 13

$21.174 billion

also fell slightly year over year. Ceramic The tile segment closely follows the overarching economic trends that impact all major Those drivers spending. include new housing starts, commercial market recovery, consumer confidence, credit availability and interest rate fluctuation. When those indices are positive, ceramic sales and volume follow suit. And so it was again in 2016, the seventh consecutive year of growth for ceramic, with sales rising 5.7% to $2.761 billion and volume increasing 5.9% to 2.31 billion units. The seven-year winning streak followed a dark threeyear period, during which time sales and volume plummeted an almost incomprehensible 20% or more each year, with 2009 representing the low point (24% decline in sales, 22.5% down in volume). The trend since 2010 has been that single-family homes grow ever larger, and multifamily residences continue to shrink. Since ceramic tile rep-

2016

2011

2015 Commercial (specified and Main Street)

30.2%

Residential 69.8%

Commercial (specified and Main Street)

32.8%

resents a greater percentage of the flooring used in a singlefamily home than a multi-family property, this has had a positive impact on the category. In 2016, growth occurred in all segments; builder and overall commercial each rose an estimated 7%-10%, while retail— the laggard of the group—was still up an estimated 2%-4%. Domestic production has been a big story in ceramic tile for the past few years, and 2016 saw several companies expand production or break ground on new plants. In March 2016,

(specified and Main Street)

Commercial

almost two years to the date that Dal-Tile’s $180 million, 1.8-million-square-foot facility was announced in Dickson, Tenn., the company’s first production run was completed, with large format 12 x 24 glazed porcelain tiles being produced. Commercial activity was up in most sectors with growth seen in hospitality, healthcare, education and corporate spaces. Commercial projects and spending continued its upward trajectory as well. The only discernable drag on ceramic tile is labor. Experts

Residential 67.2%

say growth was partially stunted due to continued labor issues in the marketplace. For the ceramic market to reach its full potential, more qualified tile installers are needed. As the flooring industry knows all too well, that is no small task. For now, however, achieving mid- to high single-digit growth will have to suffice. Compared to the 2007-2009 crater, the industry will gladly take it. Laminate In 2015 the U.S. laminate

37%

Residential 63%

industry began to see a significant drop-off in imports from China. At the same time, many European suppliers—particularly German laminate flooring producers—expanded production capacity to fill the void. Observers say that trend spilled over into 2016 where U.S. laminate flooring sales were estimated at $1.154 billion. Taking the pullback of Chinese product into account, that held growth to just a mere 1.5%— the lowest rate of increase of any hard surface category. Volume-wise, the category

fcnews

June 26, 2017 I 15

Total hard surface sales 2016

2011

2006

$9.82 billion

$6.462 billion

$8.994 billion

11.8%

35.6%

2016: 46.4% of total industry sales

16.9% 28.3%

2011: 38.8% of total industry sales

Tile 28.1%

grew at a rate of 2% to 1.054 billion square feet—a reflection of the rise in shipments from Germany plus the increased domestic capacity that came online toward the latter part of the year. “Europe has shifted from 14% to 19% while China fell from 26% to 21%,” said Travis Bass, executive vice president, Swiss Krono, which puts the domestic/import split around 60/40, respectively. The company, which has production facilities around the globe— including here at home—says its share of the market grew to 12%. Just as the mix of laminate sources has changed in recent years, so has the sales activity as defined by distribution channel. FCNews research shows the specialty retail sector accounts for roughly one-third of category sales. What’s more, observers say, many of the laminate flooring products sold at this channel represent thicker, highermargin items not typically sold at the average home center or mass merchant. This includes 12mm and 14mm products vs. the thinner, entry-level boards available at many home centers and discount merchants. All this spells opportunity for the independent or aligned floor covering dealer. The bigger story, though, was laminates' decline in terms of the overall share of hard surface activity. In 2011, for example, laminate flooring represented 16.9% of all hard surface sales and a little over 14% in terms of volume; last year, the category’s percentage of hard surface sales slipped to 11.8% in value and 13.4% with respect to volume. Meanwhile, competing products such as resilient and ceramic tile grew their respective shares of the hard surface market over that time period.

Tile 27.4%

23.5%

1.8%

26.4% Wood 25.2%

Wood 23.4%

Wood 22.7%

15.4%

7.9%

2006: 36.4% of total industry sales

carpet

16 I June 26, 2017

fcnews

Category cedes ground, but still maintains lead position By Ken Ryan

market share, is flourishing in the lower-end polyester arena. Conversely, experts believe Shaw and Mohawk are operating at some of the highest profitability levels ever experienced within the industry at the high end. Therein lies the rub in this hourglass market. The treacherous soft middle is in the $8 to $13 price range, which is dormant; below $8 and north of $13-$14 is resonating with consumers who are more style and design conscious. Meanwhile, at the upper end, soft is still percolating. Mohawk is in the fifth or sixth generation of Silk,

he carpet industry, facing the onslaught of exponential growth in hard surfaces in both the residential and commercial sectors, saw scant growth in units in 2016 while overall dollars fell. FCNews’ research shows carpet sales slid down 1% in 2016 to $8.78 billion compared with $8.87 billion in 2015. However, total volume—which includes carpet and area rugs— gained 1.2% to 11.22 billion square feet from 11.09 billion square feet in 2015. Rug sales were up 3%, marking the third year in a row in which the segment outperformed carpet. Within the category, residential carpet sales declined an estimated 1.5% in 2016 while units were up 1.3%. OEM & Other direct 7% Commercial sales, meanwhile, dropped 0.5% in sales and volOther ume fell by an estimated 1.5% retailers year over year. (incl. internet Despite the falloff, carpet Home 20% and area rugs make up 58.8% centers Specialty retail of the flooring industry in 12% 33% volume—the largest percentage of any flooring surface. There’s no doubt, though, that Contractors carpet’s dominance is waning (builders & little by little. In 2006, for commercial) example, carpet/rugs made up 28% 66.8% of the flooring market in units. “As an industry we have to do better,” said Tom Lape, pres- which means consumers conident of Mohawk Residential. tinue to validate the impor“Will it go back to where it once tance of soft fibers in their was? That is a longshot. Will it homes. Mill executives agree grow? Absolutely.” the industry must push innovation to the highest levels possiTale of two markets ble to at least forestall the conCarpet still has its strengths tinued growth of LVT/WPC and regionally—in the upper other hard surfaces. “Rather Midwest and Northeast—and than building products that fit at both the low and high ends of your assets, the industry needs the market. Engineered Floors, to build products that fit the which is now the No. 3 carpet customers’ needs,” Lape said. company in the business by “We have to figure out a way to

T

How carpet was sold in 2016

Overall

Other

create compelling products for our retailers, even if it is hard.” Price erosion Residential sales have lost some ground on price largely due to the influx of polyester. Price erosion is occurring in the builder and multi-family segments by virtue of the fact the average selling price is lower in these areas. Brad Christensen, vice president, soft surface category, Shaw Floors, said the shrinking dollars in carpet could be attributed to what he calls “the continuation of the race to the bottom in terms of PET pricing and overall devaluation of the category.” Observers believe the industry collectively needs to do more to promote the benefits of soft surfaces, even comparing its value to other surfaces. “We don’t need to give it away,” Christensen noted. In examining carpet’s loss of market share in recent years, it’s worth noting that 10 years ago the segment was mired in a deep recession, with double-digit losses in both sales and volume. While the recovery has been painfully slow, there have been signs of positive activity. Improvement in units can be attributed to a fairly robust builder market in both multiand single-family dwellings as well as in the return of home equities in the retail remodel sector. Builder/multi-family continues to outperform the overall market, with builder the stronger of the two. “We are cautiously bullish in the singlefamily builder segment for the foreseeable future,” Christensen said. Others noted that with the overall residential carpet mar-

Main Street 8.7% New residential 7.4%

2016 Commercial 36.2%

Other 1%

2011 Commercial 37%

Residential replacement 46.7%

Residential 63%

ket fairly flat, that means the residential replacement carpet business is declining. The culprit? The increased popularity and consumption of hard surfaces, which continue to encroach on soft surface territory. Experts say this trend might not be reversible, at least for many years. Blame it on demographics and an aging population that is moving south and west to warmer climates. This is not a new trend; it has been going on for decades. But what has changed, to some degree, is the fact that builders are constructing homes and apartments in these markets with less carpet than they have installed in the past. Adding to the challenges facing the residential replacement segment, the home center channel has been successful in driving volume with heavy advertising and promotions that offer “free installation” as long as consumers spend a certain dollar amount. For example, Lowe’s is currently offering consumers “free whole home deluxe installation” when they buy Stainmaster carpet and pad. While this free installation may be viewed as a gimmick (the price of installation is

often built into the product, experts say), it appears to be working. Recent financial reports from Home Depot and Lowe’s confirms the floor covering department has been a growth area for big boxes. Commercial activity Commercial carpet, which makes up 44.6% of the overall carpet market, was estimated at $3.923 billion in sales for 2016, with specified contract sales coming in at $3.23 billion and Main Street business at $698 million. [Note: For years a large percentage of mills considered level loop polypropylene a Main Street product, mostly installed in rental space/tenant improvement and low-end apartments and basements. Today much of this business has been lost to low-end polyester cut piles. These cut pile sales are reported as residential, not Main Street. As well, some mills break out Main Street from their specified business; others do not.] After two consecutive years of the commercial market clearly outperforming residential, soft surface commercial Continued on page 18

(by volume)

Residential

Other

2006

2015

Triexta

14%

18%

2006

Polypropylene

10%

(in dollars)

Soft surface market share

Carpet/rug fiber market share* 2% 2016 2%

Triexta

Carpet sales by end use

Nylon 35%

Polypropylene Other 1.3% 15.4%

Polyester

48%

Polyester 20.6%

Hard surface 33.2%

Hard surface 43%

7%

Polyester

39%

*face yarn only, based on quantity

Nylon 25%

Polypropylene

Nylon 62.7%

Note: Triexta was a new category in 2010

Carpet & Rugs 57%

Carpet & Rugs 66.8%

carpet

18 I June 26, 2017

Carpet Continued from page 16

backed off in 2016. The positive news is that carpet tile is growing, and in most cases at better average net selling prices than broadloom. But just as in the residential segment, soft commercial has felt the impact of hard surfaces—with LVT and its subsegment products infiltrating most sectors of the specified market. The consensus among executives is that commercial soft surface sales fell 0.5% in 2016 vs. 2015 while units dropped 1.5%. Where is the softness? Institutional, government and clearly the independent retail segment were down. One executive said of commercial retail: “They are looking at survival budgets, not five-year projections.” Healthcare and corporate were moderate to strong. In both segments carpet tile flourished. “Everyone loves carpet tile, from specifiers to installers,” said Ralph Grogan, CEO of Bentley Mills. “There are so many advantages out there vs. broadloom. When we introduce products we rarely ever introduce product that is

fcnews

Total carpet sales

Total area rug sales

(in billions of dollars)

(in billions of dollars)

$8.430

$8.696 $8.808

$8.870

$8.780

$2.401 $2.253 $2.309

$2.497

$2.50

Total carpet and area rug volume (in billions of square feet) 10.84

-1%*

11.06

11.21

11.09

11.22

3%* -1.2%*

2012 2013

2014

2015

2016

2012 2013

2014

2015

2016

2012 2013

2014

2015

2016

*Represents 2015-16 change

just broadloom.” At one point Bentley was predominantly a broadloom company. Today, nearly 75% of its business is in carpet tile. The company has also added LVT, albeit just 5% now but expected to grow. Rugs For the third year in a row, the U.S. rug business bested carpet, growing by an estimated 3% in 2016. Experts believe the segment was clearly buoyed by the growth in hard surfaces, which

led to add-on sales. The popularity of custom rug programs was also a driver. Most 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— get involved. What’s preventing more flooring dealers from reinvesting in rugs is the online world

as well as the space commitment. The ecommerce channel is still small but is growing double digits. Some flooring dealers have stepped up and are now selling rugs strictly online. In this way they are competing with home goods sites such as

Wayfair, Overstock and Amazon. The bulk of online area rug sales are said to be mostly in the $199 and under range, although that is anecdotal; if so, online sales are not likely to impact the better goods mills just yet.

Carpet recycling volume softens in 2016 DALTON—The Carpet America Recovery Effort (CARE) reported that its members diverted more than 488 million pounds of carpet from U.S. landfills in 2016. Unfortunately, that’s down nearly 6% from 2015’s total of 520 million pounds. Of the carpet diverted to recycling, 167 million pounds were recycled into carpet and other consumer products, 174 million pounds were sent back to the landfill, and 144 million pounds were sent to waste-to-energy and cement kilns. “[Statistics show] the carpet recycling industry is under mounting stress,” said Robert Peoples, executive director, adding that 2016 was a challenging year for CARE in terms of marketplace activity and demand for various fiber types. “Until oil returns to greater than $70 per barrel, we see continuing turbulent times ahead.” Three years ago, CARE reported a 52% increase in U.S. gross post-consumer carpet collections from 2012 to 2013, when CARE members diverted 534 million pounds of carpet. However, the landscape was much different back then. In 2013, the average price of a barrel of oil was $94.25. In 2016, it hovered in the mid $40s. At the

current price of $48, it is much cheaper for vendors to buy virgin material than recycled content. Experts say the industry would need a significant and prolonged increase in oil prices before the recyclers can profit. Since the economic downturn, the use of polyester has grown dramatically; the issue for collectors and processors has been finding an aftermarket solution for the polymer. CARE continues to refine its survey methodology. It began using a mass balance approach in 2013. This methodology focuses material flows by examining inputs and outputs in each step of the recycling process; 72% of recycled post-consumer carpet is manufactured into plastics. This category has grown over the past few years. The amount of material recycled in carpet fiber dropped 10 percentage points, from 13% to 3%. Carpet backing remained constant at 8% of end products manufactured. Furthermore, 11% of recycled post-consumer carpet pounds that were recycled went into new carpet. This is considered a true cradle-to-cradle process. The carpet recycling industry employed 1,215 people in 2016, down 6%, vs. the jobs reported in 2015.

resilient

20 I June 26, 2017

fcnews

LVT, WPC continue to seize market share By Lindsay Baillie

he resilient category continues to assert itself as a force to be reckoned with continues to generate substantial growth. FCNews research shows resilient sales in 2016 climbed to $3.499 billion (not including rubber), an increase of 19.7% over 2015’s $2.924 billion. This rise is almost four times the growth of the entire industry, which gained 5.1% last year. In terms of volume, the resilient category grew 6.5% to 3.537 billion square feet—the highest percentage of volume growth of all the other categories. Resilient’s dominance is even more evident when viewed through the prism of market share. In 2016, the segment accounted for 16.5% of the total flooring industry in dollars and 18.8% in volume— the highest among all hard surface categories, FCNews research shows. The main driver behind this dominant performance, industry observers say, is the continuous growth of LVT and its sister category, WPC/rigid core. Statistics show LVT, WPC and rigid core products made up more than half the dollars generated by the residential sector in 2016, capturing 48.1% and 19.52% of the sector, respectively. These percentages are key when taking into account residential resilient sales made up 63.9% of total resilient sales. Resilient’s astonishing growth in sales in 2016 is even more significant when looking at the category’s performance over the past few years. FCNews research shows 2016’s sales represent a 40.4% increase from 2014’s $2.492 billion and a 58.6% increase from 2013. To put resilient’s growth into greater perspective, the catego-

T

ry is up over $1.5 billion in the last five years (total resilient sales in 2011 were $1.931 billion). In terms of volume, resilient saw an increase of 6.5% from 2015’s 3.321 billion square feet. While not as aggressive as its percent of sales, this increase was nearly double the industry’s increase, which clocked in at 3.8%. Last year’s volume also saw a 22.5% increase from 2014. A look back five years ago shows resilient’s volume has increased by 49.9% from 2011, a year in which 2.36 billion square feet was sold. Industry observers believe there are several factors that contributed to LVT’s growth in 2016. “Compared to other flooring categories the LVT category has seen many design changes from additional looks, durability, availability and product makeup,” said John Wu, CEO, Novalis Innovative Flooring. “LVT has the perfect appearance and strength that allows a specific look at a less expensive price than upgrading to more expensive products.” Michael Raskin, president and CEO, Raskin Industries, cited the product’s ability to be used in multiple applications as a primary selling factor. “The product is suitable for both commercial and residential, which offers sheer volume in square footage. In addition, the product can be mass-produced, which keeps the supply stable. The category is now available in many subcategories, such as dry back, loose lay, WPC, rigid, etc., which organically increases market share.” Indeed, resilient’s ability to take market share from other flooring categories, such as laminate, hardwood and carpet, is well documented at the retail level. What’s more, the disproportionate increase of sales vs.

Total resilient sales (in billions of dollars) $3.499 $2.924 $2.035

$2.206 $2.492

$0.151 $0.152 $0.155 $0.161

2012 2013

2014

*Represents 2015–16 change

volume within the resilient category reflects the fact that LVT and WPC have been able to maintain strong average selling prices—a phenomenon not usually seen in many competing categories. “These numbers are indicative of the increase in average selling price of resilient products due to the rapid increase in WPC sales,” said Clark Hodgkins, director of resilient category, Shaw Floors. “The continued strong growth of WPC and the various rigid-core products are responsible for the large gains within the resilient category.” The product’s performance compared to competing hard surface categories is another factor driving category sales. “The fall of laminate flooring due to water and noise issues created a market for WPC and rigid-core products,” said Larry Browder, CEO, Karndean Designflooring. “The LVT industry has done a good job capitalizing on this.” Other experts agree LVT is growing at the expense of other categories. “In the flexible category the majority of it is in the

(by dollar value)

Tile Others 2.7% Taiwan 2.3% Korea 13%

Japan 4.8%

Korea 37.2%

Belgium 6.5%

France 3.6%

2.59

3.321

3.537

6.5%*

Sheet

Others 9.5%

2.43

2.888

19.7%*

Resilient imports by country of origin

Canada 38.4%

(in billions of square feet)

China 82%

2015

9.3%*

$0.176 2016 =Resilient

0.030 0.031 0.032

0.033

2012 2013

2015

2014

19.4%*

0.039 2016

=Rubber sheet and tile flooring

multi-family channel with a decent amount in the residential replacement in the smaller areas,” said David Holt, senior vice president of builder and multi-family retail and hard surface for Mohawk Industries. “But with the new intake of the new rigid vinyl products you have a lot of that going into residential replacement, and it’s going in at the expense of engineered wood and laminate.” The design flexibility of LVT, which is marketed as a multi-purpose product for a variety of applications, is also driving consumers away from traditional hard surface products. “The versatility of LVT— tile or plank—makes it an ideal solution for any number of residential, commercial and project-oriented applications,” said Amanda O’Neil, product manager, Armstrong. “This multitasking ability has allowed LVT to migrate into builder, multifamily and residential-remodeling applications. The large space in which LVT operates, in turn, has afforded manufacturers the means to introduce differentiated product across a wider front, ebbing the march toward commoditization.” Residential report With respect to end-use markets, residential resilient accounted for the bulk of activity in the category. FCNews research show residential resilient sales reached $2.236 billion, a whopping increase of 28.9% over the prior year. Most executives found the greatest growth within this category to come from replacement/ redesign in both multi- and single-family homes. However, some executives also cited an increase in the new home construction segment. Jonathan Klinger, chief

marketing officer, Tarkett North America, explained the residential market is roughly an 80/20 split between replacement and new construction, respectively. “Within new construction we believe most of the volume is in single-family homes. The reason for that is there is roughly double the number of homes being built relative to multi-family units, and homes have larger floor space.” Karndean’s Browder also attributed growth in the residential sector to replacement and redesign business, but he also highlighted a shift of LVT into builder applications. “Recently, LVT in the builder sector has started to show great promise, especially as the builder market for single-family homes has started to improve.” Broken down by category, resilient sheet was down 0.2%; however, fiberglass was up 4.8% and felt was down 6%. Residential LVT and WPC (including rigid products) made up a large portion of residential sales (totaling $1.512 billion). Meanwhile, suppliers say residential tile was flat in 2016, simply maintaining itself against the bigger LVT, WPC and sheet products. While LVT and WPC took home a larger piece of sales, sheet still dominated the residential sector in terms of volume. For 2016 sheet accounted for 1.156 billion square feet, or 47% of the category. Part of sheet’s appeal, experts suggest, is the cost as well as the aesthetic attributes. “Sheet vinyl is still a tremendous value and brings a lot of features and benefits to the end user,” said Eric Erikson, vice president sales and marketing, North America, Beauflor Continued on page 22

resilient

22 I June 26, 2017

WPC, LVT Continued from page 20

USA. “For the price point it’s hard to find a better value.” Some observers see a value proposition between LVT and sheet vinyl. “The glass sheet products have some of the same positive characteristics as LVT; they are waterproof and very durable,” said Jimmy Tuley, vice president of residential resilient for Mannington. “The other nice thing about sheet is you can [achieve] some looks that you cannot do with LVT. I think that there has been a nice improvement in the visuals of sheet vinyl. [Sheet] really has

beautiful visuals and you can get it at a decent price.” Functionality and affordability are two factors keeping sheet relevant in the residential sector. “It’s viewed as very functional and probably the most affordable category,” said David Sheehan, senior vice president of product management, IVC US. “For that reason it still commands a pretty large share of the marketplace in both the home center and specialty retail channel. Sheet is a great value proposition to the customer.” LVT and WPC are not too far behind, however, with a combined 42.3% of residential

volume. In fact, research shows WPC (which includes rigid core products) more than tripled in volume from 2015. Executives cite WPC’s features, ease of installation and various innovations as three of the product’s main selling points. “The features and benefits of WPC are hard to dispute: waterproof, kid-proof and petproof, to name three,” said Jamann Stepp, director of marketing and product management, USFloors. “The ease of installation including no acclimation required and the ability to install over most any hard surface substrate are properties that dry back and sheet vinyl

fcnews cannot offer. Minimal subfloor prep is yet another factor along with greater dimensional stability. The innovation within the WPC category is second to none: high-definition visuals, mixed widths and planks along with enhanced/deep beveled edges are properties and attributes not found in sheet or dry back products.” Executies such as Piet Dossche, CEO of USFloors, view rigid core as “a step up from solid LVT.” LVT is gaining more ground as it now finds itself in all areas of the home. “Originally, LVT became popular as a waterresistant, hard surface product

ideal for mainly kitchens and sometimes spaces such as a laundry room,” Armstrong’s O’Neil explained. “In the past, LVT would not be considered for bedrooms or other larger living spaces throughout the home. However, this perception has changed in recent years.” With respect to installation type, residential dry back LVT is down slightly from 2015, with a large portion of the market containing click and grip-strip, research shows. Again, experts say this shift is likely due to an increase in WPC sales, along with the ease of installation often offered by click and gripstrip products. Loose lay products had a small impact on the category. “Floating LVT—solid click and now rigid core—is becoming the preferred format in residential applications due to the ease of installation,” said Gary Keeble, director of marketing, Metroflor. “The advent of rigidcore products has enhanced the ease-of- installation proposition by reducing or eliminating costs related to subfloor prep and disposal of the existing floor in many cases.” While click is seen as a favorite, Lindsey Nisbet, head of product marketing and development, EarthWerks, explained both click and gluedown options have their positions in the market. “While there is clearly some overlap in the marketplace, the fact remains that no matter the specification, performance

Resilient tile vs. WPC vs. LVT vs. sheet market share (in dollars) Sheet 25.6%* WPC 13.2% Tile 11.9%**

LVT 49.3%

(in square feet)

WPC 5.7%

Sheet 37.7%*

Tile 23.9%** LVT 32.7%

*Sheet numbers include linoleum **Tile numbers include VCT and resilient tile

resilient

fcnews

June 26, 2017 I 23

Resilient sales by product type Residential ($2.236 billion) Linoleum 0.3% Sheet 26.7%

Residential tile 5.4% Linoleum 0.1%

Commercial

VCT 23.5%

Sheet 45.6% WPC 7.4%

WPC 19.5%

($1.263 billion)

(2.459 billion sq. ft.)

LVT 48.1%

LVT 32.5%

Sheet 16.9% Residential tile 14.4%

WPC 1.9% Linoleum 6.3%

needs or style, there is an LVT/P to fit any requirement. As development continues to be more advanced and styling gets better—and more realistic— LVT/P will [hold] the leader position in industry growth. There is literally a style for any need.” Some executives believe the glue-down market is still growing. “There are still several reasons to use a glue-back floor, especially when you’re going in to do new construction,” Mannington’s Tuley explained. “Things like being able to put cabinets over the top of the product or permanently attach it to the floor without moldings or transitions—and being able to do longer runs—all make glue-down a continued attractive product.” Mohawk Industries’ Holt acknowledged dry back has seen a decrease in the residential segment, but he adds: “There will always be a place for the product in two categories: multi-family and commercial.” Some executives also view dry back as the optimal performing product, as it does not have to deal with certain issues after installation. “The bestpreforming LVT, without a doubt, is a glue-down installation,” IVC’s Sheehan said. “In fact that’s why the commercial channel will always have dryback.” Speaking of commercial, observers believe dry back accounted for 73.3% of LVT/WPC business in 2016— 3.6% increase from two years ago. According to David Thoreson, senior vice president of commercial hard surfaces, Mohawk Group, dry back is viewed as a tried-and-true product for the commercial market. He also sees promise in loose lay. “Difficulties with click systems from various manufacturContinued on page 24

LVT 51.4%

WPC 1.2% Linoleum 4%

(1.039 million sq. ft.) Sheet 12.4%

LVT 33.2%

VCT 49.2%

resilient

24 I June 26, 2017

WPC, LVT Continued from page 23

ers have pushed the market consistently toward dry back but also loose lay. We feel loose lay will grab a noticeable share by the end of 2017.” Observers believe dry back will always remain king. “When you get into commercial applications, it’s a lot different from the residential side; you have things such as rolling heavy loads, foot traffic,” said Al Boulogne, vice president of commercial resilient, Mannington. “When you have something that isn’t glued down in those applications you’re opening yourself up to problems with gapping or peaking, or the floor just not performing as well.” Tarkett’s Klinger shared a similar sentiment and explained that dry back sales are mainly driven by the commercial environment’s strict needs. “It’s primarily driven by the fact that in a commercial environment the need for both the installer and the end customer is that the installation is as robust as possible and that it’s going to be able to withstand heavy traffic.” Commercial activity Not including rubber, commercial resilient saw a 6.3% increase in sales, according to FCNews research. While commercial sheet was down 1.2%, commercial LVT—including a small share of WPC—increased by 16.7%. Commercial executives attribute the category’s overall growth to several factors including an increase in demand from key end-use market sectors. “Healthcare was a pretty strong growth segment for us here,” Boulogne said. “It continues to pull through some serious volume on the resilient side. Two other segments for 2016: Hospitality is a segment that traditionally hasn’t really looked to resilient as a category but is starting to more and more. That was an emerging

segment growth for us. The other similar story is corporate. That has become a growth segment as well.” In perhaps direct relation to LVT and WPC’s percentage increase, VCT was down 5% in 2016. While some companies are concerned about VCT losing market share to LVT and other resilient products in the commercial space, others continue to see VCT as an opportunity. One of those companies is Armstrong, which recently completed a transaction to purchase Mannington’s VCT business. “[The recent purchase] gives us a good opportunity to increase revenue within the VCT category, which has historically generated above-average profitability within our product portfolio,” O’Neil explained. “VCT is a very important product for our commercial customers, and it is a significant category within the hard surface flooring industry. We expect this transaction will enable us to increase our VCT volume and make more efficient use of our production capacity and go-to-market structure.” Even though VCT claimed 515.7 million square feet in volume, some industry executives believe it will continue to face intense pressure from alternatives. “I think VCT is a category that is getting pinched by others,” Mannington’s Boulogne said. “LVT has a lot of performance attributes and price benefit vs. VCT. It’s getting harder for VCT to find its market position. LVT wins pretty easily in terms of style and design. VCT still has its places, but its getting pinched out as the market on the LVT side becomes more competitive.” Other executives agree. “Due to the durability, appearance, ease of maintenance and price, we believe that VCT will continue on a downward trend for now,” Novalis’ Wu said. “Building owners are getting a premium product for pennies more a foot in comparison to a

Residential sheet construction (by volume)

(in terms of dollars) Other 7.1%

Other 10% Felt 26.3%

Fiberglass 63.7%

Felt 29.7%

Fiberglass 63.2%

fcnews

Product origin Sheet

(in terms of dollars)

LVT (includes WPC)

Import 28.6%

Domestic 71.4%

Import 69.8%

Rubber bounces up FCNews research shows rubber generated $176.2 million in sales in 2016, a 4% uptick over 2015. In terms of volume the category accounted for 39.2 million square feet. Some flooring executives attribute the rise in rubber to commercial flooring’s shift away from soft surfaces. Others suggest rubber’s durability and sound control make it an ideal product for education and other highly populated/trafficked areas. “We’re seeing universities putting them in corridors and student unions,” said Mark Tickle, director of marketing, American Biltrite. “[University] libraries are the traditional place for rubber.” He explained that while rubber has traditionally been used in post-secondary schools, it is now making moves in primary schools. He cited rubber’s recent restyling—which includes newer organic visuals and colors within patterns—as a top influencer. Mark Bischoff, vice president of commercial sales, Tarkett North America, sees rubber being used in multi-use spaces because of its many benefits, including sound control, slip resistance, durability, flexiblility and easy maintenance, as well as thousands of texture, color and design options. “Another appealing attribute is the longterm performance record. Traditionally rubber flooring had been used in the most difficult and dangerous traffic areas of a building—the stairwells. Today, with updated visuals, that level of performance is welcome in many spaces across all segments.” Part of rubber’s charm,

Domestic 14.8%

Domestic 30.2%

• About 85% of residential sheet is domestic • About 75% of commercial sheet is imported • All VCT is domestic • All linoleum is imported

floor that requires more maintenance and usually costs 15 times more than the original price paid on VCT at the end of its life cycle.”

Import 85.2%

• About 67% of commercial LVT is imported • About 85% of residential LVT is imported (not including WPC) •All WPC is imported

proponents say, is it is suited to those end users that own their own buildings and are looking for long-term performance with minimal disruption. “Because of the unique sizes and shapes, vibrant saturated

LVT ($1.724 billion)

By origin

Import 85.2%

Domestic 14.8%

By installation method

Click/Grip Strip 39.7%

Dryback/ gluedown 53.5%

Floating 6.8%

color and depth of surface texture options, we also see rubber used in retail and hospitality applications looking for branded experiences or outstanding visual impact,” Bischoff added. Domestic vs. imports FCNews research revealed 85.2% of the $1.724 billion LVT market is imported—a number that stood at 78.7% in 2015 and 78.1% in 2014. VCT, on the other hand, continues to be manufactured in the United States. As was the case in prior years, many executives believe U.S. production has yet to affect the market shift in domestic vs. imported products. In addition, some observers explained that

even if a large shift toward domestic products did happen, imported materials and flooring would still be necessary to meet global demands. “The bulk of LVT continues to be manufactured in Asia, and with the current LVT demand in the U.S. and worldwide, the additional domestic capacity still wouldn’t satisfy it.” Novalis’ Wu said. Manufacturers with domestic facilities view any increase in domestic production as an opportunity to create price competition and drive innovation. “The more domestic manufacturers there are the less people will be looking to those imported products—which are really noisy in the marketplace right now,” Mannington’s Boulogne said. “Those that are making products domestically, it’s going to force us to be smarter about how we make [them] and be more cost competitive, but it’s also going to force innovation and I think we’re going to have to find ways to differentiate in a meaningful way to make sure we’re getting that share of the market.” Domestic production also provides a great product story as well as faster delivery times, proponents say. “Having a ‘Made in the USA’ print on the carton means high quality,” Raskin said. “In addition, once a product is selected, time and place become critical. Domestic production can cut lead times down by two-thirds.” Mohawk’s Thoreson explained that while LVT growth only offsets U.S. production, at some point the U.S. market will catch up and place pressure on manufacturers overseas. “As a result, the pricing will face significant downward pressure. Today Mohawk blends sourcing our commercial resilient collections with U.S. and believe in time U.S. production will take over all but the most specialized parts of our business.”

wood

26 I June 26, 2017

fcnews

New engineered platforms provide momentum By Reginald Tucker

he U.S. hardwood flooring category continued to hold its own against the intensifying pressure of comcategories—namely peting LVT/P, WPC and even laminate—all of which continue to make strides in replicating the look, texture and heft of genuine wood. FCNews research shows sales in 2016 reached $2.23 billion, a 5.1% increase over 2015’s upwardly revised sales of $2.12 billion. Volume growth was pretty much on pace with the increase in sales as square footage shipped at the first point of sale in 2016 reached an estimated 898 million square feet, a 4.8% increase over 2015’s 857 million square feet. (This figure was also adjusted based on new data released since the publication of last year’s Statistical Issue.) To put things in perspective, hardwood represented 10.5% of total industry sales in 2015 but only 4.7% of total volume. Compared to five years ago, wood represented 9.1% of total

T

flooring dollars at the first point of sale and only 3.8% of total volume. But looking at hard surfaces specifically, wood’s share swells to 18% in terms of value and 11.4% with respect to volume. Still, that’s a long way off from 2011, when hardwood’s share of the overall hard surface pie was 23.4% of value. The fact remains, observers say, that hardwood is still a popular choice for homebuyers and existing homeowners. Couple that with an overarching shift from soft goods to hard surface, and you have a scenario that bodes well for the hardwood category. “Last year was a fairly good year for hardwood,” said Brian Jones, vice president, product management, Armstrong Flooring. “As home values started to increase across the country, we saw the retail and remodel side of the hardwood industry beginning to grow again. While the new home construction sector did not reach the lofty highs that many expected, a modest movement helped to lift sales of hardwood

Total wood sales (in billions of dollars) $2.059 $1.816

$2.23

(in billions of square feet) 0.898

$1.943 0.685 0.726

$1.640

0.770

0.857

4.8%*

5.1%*

2012 2013

2014

2015

2016

2012 2013

2014

2015

2016

*Represents 2015-16 change

flooring to a respectable level in 2016.” Other industry observers attribute the category’s performance in 2016 to key market sectors. “Builder/new construction is still very important to the category, but residential replacement/remodel is where we’re seeing the greatest strength,” said Dan Natkin,

vice president, hardwood and laminates, Mannington. “As consumers have gotten a little more confident in the values of their homes, wood is really the go-to product from a consumer desirability standpoint.” Not all suppliers reported having the same experience. At Shaw Floors, for example, the ratio of residential replacement sales to new construction was almost reversed. “Builder/new construction sales accounted for the majority of our flooring sales for 2016, with the other being attributed to residential remodel/replacement,” said Drew Hash, vice president, hard surface category management. But that disparity didn’t leave the company any less bullish about the category’s performance last year. “We estimate the hardwood industry grew between 4% and 6% in 2016.” The same can’t be said for all end-use sectors across the board. “For example, in commercial, quite honestly, we see wood getting replaced by alternative products such as LVT,” Natkin explained. Much of the anecdotal reports surrounding the nonresidential market are in line with FCNews’ research. Newly compiled statistics show wood sales attributed to the commercial market sector slipped from 9% in 2015 to about 7% of sales last year. Engineered seizes share One trend that virtually all suppliers can agree upon, however, is engineered’s continued— albeit incremental—seizure of market share from its solid counterpart. While production selection has largely been a function of geography, histori-

cally speaking, the pace of innovation is slowly changing that. For instance, several suppliers have introduced engineered hardwood floors that replicate the overall thickness of ¾-inch solid wood flooring. The end result is the traditional solid wood flooring end user—builders and contractors, in many cases—can now nail down an engineered floor in much the same way they would a solid product and still be able to sand and finish multiple times. The only difference, proponents argue, is the end user has a more dimensionally stable product with engineered. This market shift bears out in the numbers. According to FCNews research, engineered wood floors represented 55% of the market—roughly the reversal of the breakout reported just seven years ago. Some industry experts put engineered’s share even higher. “Sales favored engineered hardwood to solid even more strongly in 2016 according to our research, putting the split at roughly 60/40,” Shaw Floors’ Hash said. The primary drivers for this, he noted, is the breadth of visual options in engineered as well as the growth in concrete slab construction in certain parts of the country. Either way you slice it, many suppliers are investing more money in the production of engineered products to meet end-user needs. “We have built the largest sawn-faced plant in the United States, in Arkansas, and we’ve added a brand new cold press along with other new technologies,” said David Holt, senior vice president, Mohawk. These investments, Continued on page 28

wood

28 I June 26, 2017

Wood

Wood

Continued from page 26

(average selling price per square foot) $2.50

$2.52 $2.47

$2.46

(in dollars)

he said, will support increased production of multi-ply product in a longer, wider format. “Much of the wood flooring market—with the exception of the Northeast—has moved to this new format. That’s where most of the growth has been— in engineered hardwood.” 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. The $40 million investment adds more than 60% capacity to the existing hardwood manufacturing facility. Mohawk and Shaw are not the only companies 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 acqui-

fcnews

$2.39

$2.37

$2.36

$2.48

$2.34 $2.31

$2.21

2006

2007

2008

sition of a 126,000-square-foot warehouse in Johnson City, Tenn. This latest expansion, marks Mullican which 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, stateof-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

2009

2010

align its engineered offerings with its solid products. The 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 BoaFranc, 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

2011

2012

2013

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.” Right in line with the swing from solid to engineered is the move to prefinished from unfinished (traditional hardwood flooring contractors being the primary exception). FCNews research shows the share of prefinished products grew to nearly 60% last year— up from just 54% the year prior.

2014

2015

2016

Looking back five years ago, the ratio of prefinished to unfinished was just the opposite. The U.S. hardwood flooring market also saw a bit of a shift with respect to domestic production vs. imports. FCNews research showed imports from Canada rose slightly from 9% to 12% in 2016. At the same time, shipments from Brazil dropped from 5.6% in 2015 to just over 3% in 2016. Although China—which ships more engineered than solid product—still accounts for the bulk of imported hardwood flooring, its share also fell slightly year over year. “If you look at engineered

fcnews

June 26, 2017 I 29

only, China accounts for more than 50% of the total sales in that category,” Mannington’s Natkin said. “No. 2 behind China would be Southeast Asia Cambodia, (Vietnam, Indonesia, etc.). South America has definitely declined from my early days in the category. At one time, there was a ton coming in from South America but not as much anymore. It’s more of a reflection of style trends as exotics have definitely cooled off quite a bit, although you can still find them. The visuals have definitely gone very euro-centric—a lot of white oak, domestic species being sold.” The drop-off in imported exotics species has become more evident in recent years. FCNews research shows the collective share of exotic species from Brazil and other areas fell from about 8% of the market to just about half that number. The root causes, industry observers report, have more to do with the changing tastes of North American consumers

How wood is sold By species Bamboo Other exotics Brazilian 3% cherry Maple 2% 8% 1%

Other domestics (includes hickory, birch)

21%

White oak 30%

Red oak 35%

By construction (in dollars)

Engineered 55%

Solid 45%

By finish type (in dollars)

Unfinished 42% Prefinished 58%

than supply/demand or natural resource issues. “The color trends shifted from reds to browns, and wider widths became much more popular,” said Bill Schollmeyer, CEO of Johnson Hardwood Floors. “Exotics became too expensive vs. domestic species and, for the most part, their colors and widths weren’t in sync with the trends. But I’m sure at some point they’ll come back into style.” In particular, the trend toward more rustic looks—an aesthetic not usually associated with exotics—is playing a critical role in the shift. “Exotics Continued on page 30

Wood flooring sales (by channel of distribution)

Wood imports by country of origin (at landed duty value)

Direct 6.8% Other retail 6.2% Contractors (wood flooring, commercial, builder)

24.7%

Home centers 27.6%

Southeast Asia 12%

Others 10.5%

Brazil 3.5% Floor covering stores 34.7%

Canada 12%

Source: FCNews research

China 62%

30 I June 26, 2017

Wood Continued from page 29

tend to have a smoother texture and they typically feature higher gloss levels,” said John Himes, president and CEO of Wood Flooring International. “This has made the market for those floors much smaller than it had been, say, 10 or 15 years ago. And with so much migration to texture, scrapes, wirebrushes and larger bevels across the country, more and more people are going to the rustic products.” Consumption trends Market shifts also occurred farther down the distribution channel. FCNews research showed floor covering stores increased their share slightly, growing to 36.6%. Sales attributed to the specialty hardwood flooring contractor also grew, rising from just over 24% in 2015 to 28% last year. Meanwhile, activity attributed to home centers fell slightly from 27.6% to just over 23%. Some industry observers believe those ratios change slightly depending on how dealers are categorized. “If Lumber Liquidators and Floor & Décor

wood are home centers, then that segment would be the largest,” (in dollars) Neil Poland, presiMain Street dent of Mullican 1% Contract Flooring, explained. Commercial “Wood flooring con7% tractors and specialty New retailers would also residential cross over quite a lot; 32% if you combine those two segments, that one might be your Residential replacement largest group.” 60% Others believe the market share attributed to home centers might be underrated. “Home centers— direct online, etc.—probably material costs. In 2013 and into only account for about 30-35% 2014, skyrocketing lumber of the category,” Natkin said, costs negatively impacted maradding that it’s almost the gins for many suppliers— direct inverse of laminate. “I including Canadian compathink that’s very much a func- nies—and forced several martion of the type of installation ket leaders to raise prices. But that goes on. Because hard- manufacturers report the raw wood floors are primarily pro- material pricing stability they fessionally installed, people experienced in late 2015 has tend to go to specialty flooring carried over into 2016. retailers and hardwood flooring On the whole, pricing seems contractors for their hardwood to be stable, although several choices.” domestic suppliers agree that Another factor that has pos- certain species—hickory, walitively impacted U.S. hardwood nut and white oak, to name a flooring manufacturers is the few—are showing modest inflacontinued stabilization of raw tion. “There is great pricing sta-

fcnews bility 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 in North here 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.” 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

Wood sales by end use

within certain segments from hardwood,” Natkin told FCNews. 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. At the end of the day, many wood proponents believe wood will continue to command a significant share of the hard surface pie. “Wood will always be a part of the marketplace,” Mohawk’s Holt said. “I don’t care how much vinyl, laminate or carpet is introduced, Americans have a love affair with wood. Everybody is trying to emulate wood, whether it’s ceramic, laminate or vinyl. Americans have had wood on the floors since the pioneer days, and they are going to continue to have them when I’m long gone.”

wood

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June 26, 2017 I 31

Demand for raw materials impacts lumber pricing By Reginald Tucker

or much of 2016 and the year before that, U.S. hardwood flooring suppliers reported more stable pricing trends compared to the 2010-14 period, which saw more volatility. This trend is based on a number of variables ranging from winter weather patterns in the top growing regions for lumber that will eventually be used for wood flooring to shifting demands for solid and engineered flooring in various markets around the country. But there’s another factor impacting the price and supply of lumber utilized for hardwood flooring: competition from other building material sectors that utilize the same raw materials, albeit different grades and species. Topping the list are cabinetry/millwork manufacturers as well as suppliers of materials for industrial applications (i.e., railroad tiles and pallets). A recent report from Matt Bumgardner of the U.S. Forest Service, Northern Research Station, shows production of eastern U.S. hardwood lumber is down precipitously from its lofty perch in the late 1990s, when output exceeded 12.5 billion board feet. After steep declines in 2000-01, the market leveled off between 2003 and 2006 before slipping once again from 2007-09. After hitting a low of 6.5 billion board feet in 2009, the lumber market has been steadily rising, hitting 9 billion board feet in 2015—the latest period for which statistics are available. One of the major shifts in U.S. hardwood lumber consumption over the 1991-2015 period, the report shows, is in the ratio of “appearance-based” applications (which include hardwood, cabinetry and millwork) to “industrial-based” uses. For example, in 1991, appearance-based consumption of U.S. hardwood lumber accounted for 48% of the business while industrial applications represented 40%. Fast forward to 2015 where industrial applications now account for roughly 50% of consumption with appearance-based usage down to about 37%. The reduction in U.S. hardwood lumber consumption has directly impacted employment in the sector. According to the Bumgardner report, there were more than 1,579 sawmills employing upwards of 23,590 people in the Appalachian region—a key growth area for

F

U.S. hardwood products. (Armstrong Flooring reports its solid hardwood floors are made utilizing Appalachian hardwood, prized for its tighter grain and consistency.) Looking at 2015, the number of sawmills fell by more than 28% to 1,128, with employment in the sector dropping nearly 27% to 17,231 workers. Industry observers cite various reasons for the decline, including increased automation and new technologies as well as a rise in imported raw lumber and finished flooring products.

laminate

32 I June 26, 2017

fcnews

Sourcing shift changes import/domestic dynamic By Reginald Tucker

gradual build-up of stateside production and capacity of laminate flooring in 2016—combined with an increase in Europeanmade product—was partially neutralized by the continued drop-off in imports from China that began in earnest in early 2015. The end result was a category that grew marginally in terms of value but slightly more with respect to volume. FCNews research showed U.S. laminate flooring sales eked out $1.154 billion in sales last year, an uptick of just 1.5%—the lowest rate of increase of any hard surface category. Volumewise, the category grew at a rate of 2% to 1.054 billion square feet—a reflection of the rise in shipments from Germany plus the increased domestic capacity that came online toward the latter part of the year. This represents a slight improvement over the 2014-15 period, which saw laminate volume decline to the tune of 3%. Sales-wise, laminate revenues grew a mere 0.17% over the same year-ago period. All in all, things haven’t changed that much from, say, five years ago. In 2011, for example, U.S. laminate flooring sales were about $1.094 and 1.02 billion square feet. These figures represent increases of just 5.4% and 3.3% in terms of sales and volume, respectively, compared to 2016. The larger story—even amidst the slight increases the category has seen since 2011 and year to date—is its decline in terms of the overall share of hard surface activity. In 2011, for example, laminate flooring represented 16.9% of all hard surface sales and a little over 14% in terms of volume; last year, the category’s percentage of hard surface sales slipped to 9.3% in value and 13.4% with respect to volume. Meanwhile, competing products such as resilient and ceramic tile grew their respective shares of the hard surface market over that time period.

A

Industry observers acknowledge the category’s mediocre performance in 2016. “We estimate the market was somewhat flat between 2015 and 2016,” said Dan Natkin, vice president of hardwood and laminates, Mannington. “We show the total category was actually down about 2%, in both units and dollars.” At the same time, Natkin acknowledges increased activity on the home front compared to the dramatic pullback from China that started in 2015 and continued into 2016. “The interesting thing is, with some of the new operations in the U.S.—and new capacity coming online— we think U.S. production actually picked up some share in 2016.” David Holt, senior vice president, Mohawk Industries, can attest to the shift. Over the past year the company has been investing heavily in its laminate flooring operations in North Carolina with plans to start up an entirely new plant in the fourth quarter. “We are adding capacity when others are scaling back,” he said. “We believe in domestic manufacturing, and we’re investing in various assets to make sure we maintain a leadership role. This will increase our laminate capacity as we continue to grow.” The changing import vs. domestic production dynamic is palpable—so much so that many industry observers are seeing an almost “about-face” turn with respect to the traditional laminate product mix. While FCNews research showed the share of domestic production of laminate rising from 60% to 64% in 2016 (compared to imports’ market share decline from 41% to 36%), some believe that ratio is even more lopsided. “The ratio appears to be shifting in favor of domestically produced laminate due to the

Total laminate sales (in billions of dollars) $1.109

$1.123

$1.135

(in billions of square feet) $1.154

$1.137

1.06

1.04

2012

2013

2014

2015

2012

2016

2013

increase in capacity that came online in 2016,” said Drew Hash, vice president, hard surface category management, Shaw Floors. “We estimate closer to a 70/30 split between domestic and imported laminate, respectively, with the likelihood of closing in on a 75/25 split for 2017 as domestic capac-

To some industry experts, the dramatic drop in imports from China reflects a paradigm shift. “What we’re seeing is a preference for European and domestic supply,” said Derek Welbourn, CEO of Inhaus, which has manufacturing operations in Germany. “As the domestic suppliers add capacity, the volume of imports will go down and the ratio of import vs. domestic will be reduced.” 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 QuickStep 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 produc-

(in volume)

Domestic 64% Import 36%

ity continues to increase.” Travis Bass, executive vice president, Swiss Krono, has the domestic/import split closer to 60/40, respectively. But even he’s in agreement that German producers increased their share the past year. “Europe has shifted from 14% to 19% while China fell from 26% to 21%.”

(per square foot) $1.28

(in dollars)

$1.10

$1.09

$1.09

$1.07 $1.06

$1.06 $1.05

2007

2008

2009

2010

2014

2015

2016

*Represents 2015–16 change

$1.30

2006

1.054

2%*

Laminate 10-year average selling price $1.15

1.034

1.5%*

Laminate sales by origin

$1.20

1.066

2011

2012

2013

2014

2015

2016

ing 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.” Sales by channel Just as the mix of laminate sources has changed in recent years, so has the sales activity as defined by distribution channel. FCNews research shows the specialty retail sector accounts for roughly one-third of category sales. What’s more, observers say, many of the laminate flooring products sold at this channel represent thicker, higher-margin items not typically sold at the average home center or mass merchant—a bright spot for the independent or aligned floor covering dealer. Some observers feel specialty retail’s share was a bit higher than that. “We feel it might be as high as about 35%-36% given the growth in new home construction,” Mannington’s Natkin explained. Shaw’s Hash agreed, citing the company’s internal research that puts specialty retailers’ share of the business in more or less the same vicinity. Despite this optimism, however, the fact remains home centers and mass merchants still account for the lion’s share of laminate sales. And, according to FCNews research, that share only grows with each passing year. In 2015, for example, home centers’ share of laminate flooring sales was about 45%. Last year Continued on page 34

laminate

34 I June 26, 2017 Continued from page 32

that number grew closer to 50%. Throw in warehouse clubs, home décor outlets and the like, and that number balloons to more than 60%. When it comes to actual profit margins, however, specialty retailers stand to emerge as the biggest beneficiaries. A cursory review of national home center laminate flooring pricing finds much of the products advertised target the $2.49-and-below range, while many specialty retailers and buying group dealers concentrate on the mid-to-upper end of the price spectrum (those products retailing in the $3.99-$4.99 realm). While many home centers can afford to draw consumers in to their stores using entry-level products as “loss leaders” with the hope that shoppers will browse and spend more money in other departments, specialty retailers— already operating on razor-thin margins—simply cannot win at that game. “We have had great success with our mid-level laminates meeting a great variety of customer needs and wants,” said Char Smith, manager of Grand Junction, Colo.-based Gallagher’s Flooring, a top-selling Quick-Step dealer. “We try not to compete with box stores on any product. For the most part, they are selling to people who are only interested in a price point and have no idea or concern regarding quality of product. In flooring you get what you pay for—just like anything else.” End-use activity Given laminate flooring’s accessible price points, it should come as no surprise that the

Laminate sales by end use

Laminate sales by channel

(in dollars)

(by volume)

New residential 12% Main Street 2% Commercial 0.4% Residential replacement 85.6%

HOME CENTERS

Laminate

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Lumber Liquidators 9%

Other 4% (includes IKEA, Floor & Decor, other liquidators, misc.)

Warehouse clubs 5%

Home Depot 28%

(includes Sam’s Club, Costco)

Lowe’s 14%

Laminate imports by country of origin Austria 3% Others* 7%

Canada 12%

China 60%

Germany 18%

Specialty retail 35%

* Includes Chile, Switzerland, Belgium, Brazil, Spain, Hong Kong

Menard 5%

product remains a perennial favorite in residential replacement applications. FCNews research shows the sector continued to generate the lion’s share of laminate sales— approximately 85%—last year. That’s up slightly from 82% the year prior but down from just over 88% in 2011. “Laminate flooring has always been strongest in residential replacement, and this continued in 2016,” Welbourn said. “We feel there has been an increase in new construction with better design by all laminate producers.” Meanwhile, FCNews research shows new construction accounted for roughly 12% of sales last year, up from about 9% in 2015. By comparison, new construction accounted for about 6.8% of laminate sales in 2011. “We see a rapidly growing acceptance of laminate products in new home construction,” Mannington’s Natkin said. He believes this sector may have accounted for as much as 15% of laminate sales last year. “Laminates have begun to take the place of entry-level hardwood in this sector.” Morgan Hafer, laminate

product manager, Armstrong, also sees activity in the new home construction sector as more builders look to laminate as an entry-level product. On the commercial front, she said laminate also has a place “because it looks and feels like traditional hardwood, but has the durability attribute necessary for Main Street businesses.” FCNews research shows laminate flooring continued to cede commercial market share to competing categories, presumably LVT and, now, WPC. Statistics also shows the contract commercial and Main Street markets combined accounted for just 2.4% of category sales in 2016—down from 4.2% in 2011. “There will be variation by segment, but laminate in general will continue to lose share to categories like LVT and innovative new multi-layered flooring products,” Hafer added. Indeed, the well-documented success of waterproof floors, LVT and rigid-core products have forced laminate manufacturers to step up their game. “There is no doubt these hot categories have stolen growth from the laminate category and others,” Inhaus’ Welbourn stated. “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 manufacturers, executives say, lies in improving upon waterresistant technology. This was evidenced by the various performance demonstrations conducted at Surfaces 2017. Proponents say it is only fitting given the innovations that originally inspired the creation of the laminate sector (i.e., improved

Source: International Trade Commission

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. Many concede that laminate—much like other flooring products—has lost some market share to WPC. But from the consumer’s perspective, suppliers believe laminate is still a viable product that’s relatively inexpensive and offers several key attributes end users are looking for—realistic-looking patterns and design with proven performance. The fact that the U.S. laminate industry is still a onebillion-dollar-plus category is also something worth noting. “We see continued growth for the laminate category at a pace between 2% and 5%,” Welbourn said. “We estimate the flooring category as a whole will have a higher rate of growth as the housing sector continues to recover.” The optimism suppliers feel is supported by the investments they are making in manufacturing and the capacity they are building. For instance, Kronospan USA is demonstrating its commitment to the U.S. marketplace by investing and building manufacturing plants. In 2015 the company purchased 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. Kronospan already operates a facility in Eastaboga, Ala., a site where the company manufactures MDF and HDF for manufacturers of laminate flooring, furniture, store fixtures, moldings, doors and other architectural applications. A fully integrated supplier,

Kronospan also produces specialty and decorative paper as well as other associated valueadded products. More recently, Kronsopan USA completed the construction of a laminate facility in Oxford, Ala. Once fully operational, this facility will add even more capacity to fuel distributor and retailer demands. Kronospan is not alone. The aforementioned investments Mohawk is making in its stateside laminate manufacturing operations is another prime example. “We believe in laminates as much as we believe in engineered wood,” Holt said. “With our hard surface offerings we service the builder trade as well as retail, so time to market is critical. And the only way you can say you service that builder market and retail market in a timely fashion is through domestic manufacturing.” Not to be outdone, Swiss Krono continues to expand its production capabilities. Last summer the company broke ground on a $230 million highdensity fiberboard mill and laminate flooring production expansion. This expansion—which will bring more than 100 new highly-skilled technical and management jobs to the Barnwell area—will allow Swiss Krono to produce 300,000 cubic-meters of HDF per year, which the company will use for laminate flooring manufacturing operations and sell to furniture, cabinet, fixture, door and other wood-based manufacturers. In total, the project will increase the company’s annual laminate flooring capacity by an additional 8 million square-meters. This latest investment by Swiss Krono comes on top of a $30 million infusion the manufacturer’s parent company made several years ago to build a melamine resin paper treatment plant in Barnwell, S.C. “All of this [supports] our move to be vertically integrated,” Bass explained. “Heretofore, we had outsourced our HDF production as well as our paper treatment.”

ceramic

36 I June 26, 2017

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Tile turns in another winning performance By Ken Ryan

he U.S. ceramic tile market, bolstered by steady growth in the all-important housing and construction markets, recorded its seventh consecutive year of growth in 2016. FCNews research shows sales rose 5.7% to $2.761 billion while volume increased an estimated 5.5% to 2.31 billion units. The 2016 numbers were off slightly from 2015, when sales rose 9.8% and volume increased 9.9%. Still, it was another stellar year for a category that continues to grow and evolve with some of the most innovative products influencing the market. Statistics show growth is coming from all precincts, with builder and overall commercial up an estimated 7%-10%, with retail lagging, yet still at 2%-4% growth. Even at the low end, the 2% increase in retail was in line with the U.S. gross domestic product (GDP) for 2016, which came in at 2.1%. The GDP is regarded as the most important of all economic statistics as it captures the state of the economy. To shed additional light on the ceramic category, tile is the third-largest sector in terms of dollars, representing 13% of all flooring in 2016, up from 12.7% in 2015. In terms of volume, ceramic tile represented 12.1% of total industry volume, trailing only carpet and rugs (58.7%) and resilient (18.8%). The seven-year winning

T

streak follows a particularly bleak period for ceramic. Hard to imagine that in 2009 ceramic tile was down a staggering 24% in dollars and 22.5% in volume. It marked the third year in a row that ceramic tile had sustained losses of 20% or greater. While other flooring segments also suffered during that stretch, ceramic was hit the hardest, as it is the most prone to housing swings, experts say. Clearly, these are halcyon days for ceramic, and there is not much on the horizon to suggest a slowdown. “Much like 2015 we continued to see growth in the ceramic tile market in 2016,” said Jason Roshel, senior director, product strategy, Dal-Tile, the Mohawk brand with roughly 40% market share. “There has been, and continues to be, tremendous growth opportunity for the tile category. Our industry tends to follow overarching economic trends, which impact all major spending. Key economic drivers include new housing starts, commercial market recovery, consumer confidence, credit availability and interest rate fluctuation.” Domestic production has been a big story in ceramic tile for the past few years, and 2016 saw several companies expand production or break ground on new plants. In March 2016, almost two years to the date that Dal-Tile’s $180 million, 1.8-million-square-foot facility was announced in Dickson,

Total ceramic sales (in billions of dollars) $2.38 $2.613 $1.938 $2.241

(in billions of square feet)

$2.761 1.76

1.98

1.99

2.19

5.7%*

2012

2013

2014

2015

2016

2.31

5.5%*

2012

2013

2014

2015

2016

(Wall tiles not included)

*Represents 2015–16 change

Tenn., the company’s first production run was completed, with large format 12 x 24 glazed porcelain tiles being produced. In June 2017 Mohawk announced a second plant in Dickson that would add 245 jobs at full capacity; it is scheduled to begin operation in late 2018. Construction on the new facility is starting this summer, with several other manufacturers following suit. Industry observers such as Rick Church, executive director, Ceramic Tile Distributors Association (CTDA), believe that what’s driving domestic production is increased demand and, more significantly, the new plants that are being developed and coming online. Most of

those new plants are owned by foreign companies who see the opportunity to produce in the U.S. and serve the market without having to export from Europe. By establishing a local presence, these companies have easier access to raw materials, enjoy closer proximity to their distribution channels and gain insight into trends influencing the U.S. market. Residential A stronger and still improving economy and housing market generally bodes well for the ceramic category, and that proved to be the case in 2016. New home starts rose for the seventh consecutive year and were at their highest point since

2007. The 1.17 million units started in 2016 represented a 4.9% increase from the previous year. As encouraging as the gains are, however, there is still ground to be made up to reach the pre-recession level of 2.07 million units started in 2005. New single-family home sales increased for the fifth consecutive year and hit 563,000 units in 2016, up 12.2% vs. 2015. While this recent growth is encouraging, new home sales were still down 56.1% from the all-time high level of 1.28 million units reached in 2005. Foreclosure filings, another key indicator of the U.S. housing market’s health, declined by 13.9% in 2016 to 933,000 units. This marked the sixth consecu-

Percentage share of U.S. imports (by square feet)

Source: U.S. Dept. of Commerce

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June 26, 2017 I 37

Tile imports vs. domestics (2006) (by volume)

Import 80% Domestic 20%

10-year average selling price (per square foot) $1.19

$1.19

2014

2015

$1.20

$1.05

(in dollars)

tive year-over-year drop in foreclosure filings and the lowest annual foreclosure total since 2006. “There is a strong correlation between ceramic tile consumption and new housing starts, which contributed to the continued growth of the category in 2016,” Roshel said. “One factor is the increased construction of new singlefamily homes, which have grown larger in size. These bigger, more expensive homes often use larger quantities of tile because it offers the style, design and luxury many homeowners desire without the maintenance concerns found in other materials.” Bob Baldocchi, chief marketing officer and vice president of business development for Emser Tile, said new home sales will continue to drive much of the growth in the market in 2017 and into 2018. Recent surveys show that homes are selling at a record pace due to tight supply. In May 2017, for example, the average house sat on the market for 27 days, which is the fastest reading since Redfin, a real estate brokerage, began tracking the market seven years ago. The tight supply is pushing home prices higher, which—while good for homeowners—could be a detriment to market growth given the higher entry price point. The median price of a home sold in May jumped 6.8%, which is about triple the average income gains and may already be hurting sales as affordability weakens. Baldocchi said labor, particularly the dearth of qualified installers in an expanding market, could dampen the full potential of ceramic. “Labor challenges need to be solved for demand in the market to truly be met. Labor solutions and availability still has a longerterm view.” Commercial activity was encouraging in most sectors, executives said, with growth seen in hospitality, healthcare,

$1.08

$1.10

2011

2012

$1.06 $1.05 $1.03 $.98 $.95

2006

2007

2008

education and corporate spaces. “Homebuilder and commercial segments showed continued signs of growth,” Baldocchi added. “Commercial

2009

2010

projects and spending continued on its growth path seen from the last couple years. Growth was slowed partially due to continued labor issues in

2013

the marketplace.” Imports vs. exports Imports in 2016 made up 68.6% of U.S. tile consumption

2016

(in square feet), down slightly from 68.7% the previous year, according to the Tile Council of North America. TCNA reportContinued on page 38

ceramic

38 I June 26, 2017

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Suppliers ramp up domestic production, capacity By Ken Ryan

eramic tile remains a heavily imported flooring product, with imports making up 68.6% of U.S. tile consumption (in terms of square feet) in 2016, down a tick from 68.7% in 2015, according to the Tile Council of North America (TCNA). A decade earlier in 2006, however, imports represented 80% of U.S. consumption. Industry observers say the trend toward lowering imports as a percentage of consumption as more product is made domestically is likely to continue as both U.S.-based and foreign countries begin manufacturing operations in the states. Advances in digital printing technology and increased investments in American manufacturing capabilities have helped elevate the cache of tile products made in the U.S. The biggest splash was made by market leader Dal-Tile, which began producing tile out of its $180 million, 1.8-millionsquare-foot facility in Dickson, Tenn. The Dickson plant will employ the latest advanced dec-

C

Landmark Ceramics, part of Gruppo Concorde of Italy, opened a porcelain tile plant in Mt. Pleasant, Tenn., in 2016.

oration technology, including the company’s Reveal Imaging capability, to produce ceramic tile. The plant will also have the flexibility to produce larger format and plank format tiles marketed through its five leading brands in North America: Daltile, American Olean, Marazzi, Ragno and Mohawk. The Dickson plant will feature glazed porcelain capabilities as well as technology to meet the need of the commercial market through technical color body products, plus in-line rectification and polishing to meet market requirements. Foreign investment is also

occurring in the U.S. The Wonderful Group, a tile and ceramics manufacturer based in China, is investing $150 million in a 500,000-square-foot manufacturing facility in Tennessee. Likewise, Landmark Ceramics, part of family-owned Gruppo Concorde of Italy, christened its North American headquarters in Mt. Pleasant, Tenn., in 2016, with a goal of producing high-quality porcelain tile 24 hours a day. The plant’s initial production run commenced June 30, 2016. Landmark Ceramics employs 130, including administration and sales staff, and will add around 40

more with the third shift that is coming online in 2017. “To invest in the U.S. market is always a good investment,” said Federico Curioni, Landmark Ceramics president. “We are able to reach the largest and biggest supplier when you make the product here. There’s only so much you can do from Italy. The United States is just such a vast market.” Add Florim USA, part of the Florim Group of Italy, and Florida Tile to the list of ceramic tile companies that invested

in new production equipment at existing U.S. facilities. Industry observers say among the benefits to selling domestically are quality control and quick supply. They note that domestic producers are less exposed to risks they cannot control such as exchange rate fluctuations and ocean freight price increases due to capacity shortages. In addition, domestic facilities offer manufacturers an ideal location from which it can ship to a majority of the U.S. population quickly and efficiently. Florida Tile, which touts its Made in USA story, manufactures the bulk of its products from its headquarters in Lawrenceburg, Ky., which it said is within 500 miles of 80% of the U.S. population.

Ceramic sales by origin

Ceramic sales by end use

(2.31 billion square feet)

($2.761 billion) New residential 25%

Import 68.6%

Domestic 31.4%

Ceramic Continued from page 37

ed that China remained the largest exporter to the U.S. (in sq. ft.) in 2016 with a 29.4% share of U.S. imports (in sq. ft.), followed by Mexico (23.4%) and Italy (19.4%). Spain and Turkey rounded out the top five with a 9.3% and 5.1% share of imports, respectively. Italy remained the largest exporter to the U.S. on a dollar basis (including duty, freight, and insurance) in 2016, comprising 35.8% of U.S. imports. China was second with a 24.7% share, and Mexico was third with a 12.6% share. The emergence of advanced technologies such as 3D printing, digital printing, anti-microbial glazes and nanotechnology have to some degree taken away

Commercial 20%

Main Street 10%

Residential replacement 45%

from global differentiation. Ten years ago new technologies or techniques for ceramics and porcelain product started in places like Italy and were more exclusively found there for a longer period of time. “Today the advancement, regardless of the country of origin, seem to go global very quickly,” Baldocchi said. “Global differentiation still exists but now it is experience, techniques, quality and design that might differentiate on ceramic floor tile.” [Editor’s note: The value of ceramic tile is calculated at point of entry into the U.S. In other words, it is recorded when it lands at U.S. ports. So, much of the increases seen in ceramic tile shipments was attributed to suppliers beefing up their inventory levels and not reaching first point of sale.]

commercial

40 I June 26, 2017

fcnews

Strong end-use sector activity drives contract By K.J. Quinn

Commercial market share

continued increase ($6.396 billion) in hard surface consumption led to another year of growth in Laminate the commercial market sec0.4% Rubber 2.8% tor in 2016. research FCNews Wood Retail showed the commercial 2.8% 6% Hospitality market sector generated 14% $6.396 billion in flooring sales—down slightly from 2015 but up nearly 20% Ceramic from 2011. Tipping the 12.9% Corporate scales is carpet, which genCarpet Education 47% erated roughly $3.923 bil61.3% 15% lion in sales, accounting for Vinyl just over 61% of the com19.8% mercial market. Observers Healthcare estimate more than 80% of 18% the business is generated from specified contract with the remainder coming from Main Street applications. By comparison, carpet accounted gained coverage in the hospitali- to represent $2.2 billion. significantly faster than triedfor roughly 58% of the commer- ty business. Still, broadloom Industry observers cite a broader and-true products such as vinyl cial market five years ago. remains a viable option for com- shift in the types of materials composition tile (VCT) and rubWhile carpet’s share of the mercial applications requiring a being specified for commercial ber. Resilient is the top seller, commercial market hasn’t luxurious look and feel. “You applications. representing roughly 19.8% of changed appreciably since 2011, can also get many different looks “We believe the movement total commercial sales (doesn’t the industry is seeing a shift in and can easily customize color from soft surface to hard sur- include commercial WPC) in the overall product mix. “Carpet options if you have enough faces, as seen in the residential terms of dollars but nearly 50% tile is claiming share from square footage,” said Carla category, is also working its way of the commercial hard surface broadloom,” stated Matt Miller, Remenschneider, RID, IIDA, into certain commercial seg- market, FCNews estimates show. president, Interface Americas, director of interiors, Fanning ments, such as hospitality and Leading the charge is LVT, citing two main factors. “Cost Howey, an architecture and corporate,” said Jamey Block, which maintained double-digit improvements and added engineering firm based in Armstrong’s vice president, growth and accounts for about options at the low end make it a Indianapolis. “You can also use resilient product management. 51.3% of commercial resilient more competitive, appealing the tiles to create wayfinding “Spaces that traditionally had sales and 31.4% of volume. alternative to low-end commod- elements.” been dominated by carpet, such “The ongoing preference for ity broadloom, and added design The commercial hard sur- as public lobbies and guest designing commercial spaces— at the high end expands the set- face segment put in a rooms, are now being covered by whether in education, healthtings in which it is used and pro- respectable performance as attractive, durable resilient care or senior living—to look vides wayfinding and purposeful well, reaching approximately products like LVT.” more residential in nature has space through design.” $2.473 billion in sales, FCNews Indeed, innovation is the brought popular, proven hard Broadloom remains ahead in estimates show. Much like soft name of the game in hard sur- surface products into the comvolume with an estimated 55% goods, hard surface commercial faces. Ongoing advancements mercial arena, as much for the to 60% share, a number that activity is also up from five years have enabled products such as realistic designs as for the duradecreased from the prior year as ago. Back then, resilient, ceram- LVT and ceramic tile to pene- bility and ease of maintenance,” hard surfaces and carpet tile ic, wood and laminate combined trate all market sectors and grow Armstrong’s Block said. Other hard surface categories are growing their share of Total nonresidential construction spending the market. Research shows December 2014 - December 2016 ceramic grew its share of the Value (SAAR, in billions of dollars) total commercial market to $700 12.9% in 2016. With respect to commercial hard surfaces, ceramic increased its share of the market from 27.1% in 2015 $650 to nearly 35% in 2016. Observers say the specified contract market generated the vast majority—70%—of the tile $600 business. “The greatest impact on the ceramic commercial market is the continued development of segments that use a lot $550 of tile in their structures, such as hospitality and education,” noted Gianni Mattioli, executive vice president, product market$500 ing, Dal-Tile. Manufacturing advances have enabled tile to enter commercial segments previously Source: U.S. Census Bureau

A

By category

Oc t. 16 De c. 16

Ap ril 16 Ju ne 16 Au g. 16

De c. 15 Fe b. 16

Au g. 15 Oc t. 15

Fe b. 15 Ap ril 15 Ju ne 15

De c. 14

By segment

reserved for carpet and other hard surfaces. For example, there is an influx of unique decorative facings, textures and modular formats. Digital printing technologies are allowing vendors to create 3D visuals that closely resemble wood, stone and concrete looks and apply different gloss levels of glaze, metallic and even texture. “We’re seeing more and more installations using gauged porcelain tile panels,” said Lindsey Waldrep, vice president, marketing, Crossville. “Because these products can be installed directly over existing surfaces such as old tile and stone, they offer exceptional installation advantages in terms of cost, labor and time savings.” Designers are finding usage for other hard surfaces, industry members say, although sales of traditional vinyl sheet and floor tile were impacted by softening market conditions last year. VCT remains a fixture in many commercial environments but is no longer considered a low-cost option due to high maintenance over the life of the floor. Workhorse products such as rubber and linoleum are positioned as healthy flooring choices for healthcare and education settings. Estimates show linoleum sales grew between 2% and 4% in 2016, with roughly 90% of sales coming from specified contract. “Performance encompasses all aspects of linoleum, from durability through being the best product for a healthy indoor environment,” said Denis Darragh, Forbo’s vice president, North America. “The value is simply the lowest cost of ownership of any flooring product.” Meanwhile, hardwood and laminates—which combined represent roughly 3.2% of total commercial sales—continue to carve a niche in certain retail and hospitality applications. “Laminate has a small share of the commercial market, although it is more popular in Main Street settings,” Block said. Overall, laminates’ share of the commercial market has been falling over the years. In 2011, the category represented just under 1% of commercial flooring sales; in 2016 that number fell to about 0.4%. Likewise, wood’s share of the commercial market slipped slightly from 5.5% of sales in 2011 to just under 3% last year.

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June 26, 2017 I 41

flooring purchases Education These qualities are welcome in educational facilities, where the passage of school construction bond measures are supporting K12 school construction, according to published reports. Dodge Data & Analytics predicts institutional building will advance 10% this year, resuming its expansion after pausing the previous two years. “We see an improvement in the overall business conditions in education, which fueled significant growth in that segment,” Forbo’s Darragh stated. Flooring needs are changing, in part, to adapt to the new design of school learning environments, which are moving away from traditional mundane looks. This is a major reason why products such as LVT, rubber and carpet tile are being specified in K-12 facilities at the expense of VCT. “Carpet tile is overtaking broadloom in education because of design trends and the ability to do selective replacement,” said Mike Gallman, senior vice president, commercial product, Mohawk Group. Keeping up appearances is especially important in higher education, where recruiting and retaining students often hinges on the quality of academic and living facilities, plus amenities. Industry studies have shown that even sustainability can be a deal breaker. “We are seeing an increased focus on sustainability in designs, which is impacting the decisions of designers,” DalTile’s Mattioli said. Premium flooring tends to be specified more in higher education, as private schools do not face the same spending restrictions enforced by tighter state budgets. Flooring types vary, as campuses encompass a wide range of end uses, such as dormitories, athletic facilities, class rooms and retail spaces. “Education is shifting from traditional products like VCT into more style forward products like LVT,” said Al Boulogne, vice president of Mannington’s commercial resilient business. “Lifecycle costs are starting to impact purchase decisions.” Healthcare Similar to education, healthcare is experiencing a spike in new facilities—specifically clinics, assisted-living communities and urgent care centers—as the business expands to accommodate the needs of an aging U.S. population. While durability, maintenance and budget are still important considerations for flooring, experts say, interior finishes are

changing as many healthcare providers strive to create more “homey” environments. “In senior living residences, for example, social and programmatic areas can no longer be institutional, but rather must reflect the needs of the residents,” noted Carol Tobin, principal, Tobin Parnes Design, New York. Research studies provide evidence that interior design can help influence medical outcomes. “Designing and building healthcare spaces to provide a soothing, quiet healing environment has proven to help patients

heal quicker,” noted Jim Bistolas, national healthcare segment director, Gerflor USA. “This results in better (patient review) scores for a facility, which directly impacts their bottom line.” There are commercial floors with a proven track record in healthcare, which help ease the minds of designers during the specification process, industry watchers say. For instance, resilient, rubber and linoleum are valued for their durability, maintenance, hygienic and slipresistant qualities. Modular carpet, ceramic, porcelain and terrazzo tile are commonly found in hallways, making it easier to Continued on page 42

Hard surface market share ($2.473 billion) Laminate 1.1%

Rubber 8.6%

Wood 7.2%

Vinyl 49.6% Ceramic 33.5%

42 I June 26, 2017

Contract Continued from page 41

maneuver rolling equipment and mobile aids. Healthcare is among the strongest markets for homogeneous and heterogeneous sheet goods, where it is used largely in operating and emergency rooms, areas which require floors with little to no seams. “Commercial sheet flooring showed some gains last year, and some of that was due to growth in the healthcare market,” Armstrong’s Block said. Corporate Flexibility is a common theme for flooring laid in corporate environments, the largest segment of the commercial market, representing about 48% of the business, according to FCNews research. Sales grew between 10% and 13% last year as an uptick in new construction, expansions and renovations along with rising corporate profits stimulated demand. Similar to healthcare, a major trend driving interior design in office spaces is creating an environment that makes occupants feel at home. “For design firms like us, a

commercial principal driver is to work with products that push the envelope of sustainability and design creativity,” said Montserrat Aguilar, CID, LEED AP ID+C, an interior project designer at Perkins + Will in New York. “We look to enhance the interior environments we design through the use of healthy materials.” Corporate offices is probably the most diverse in terms of product selection, observers say, as specs are based on the functional and design needs of the space. “We are seeing carpet tile going into some corporate areas that have had hard surfaces due to the noise factor and discomfort underfoot,” Ralph Grogan, president and CEO, Bentley Mills, explained. Retail Durability and style are prerequisites for flooring inside retail stores, a sector where sales and consumer spending drive nearly 70% of economic growth. Despite the fact that store construction was subdued and brick-and-mortar footprints shrank last year, interior redesign was quite common as retailers searched for new ways to attract and engage with cus-

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tomers. “A desire by customers for more authentic, sensory and tactile experiences in retail stores has ($3.923 billion) (1.8 billion square feet) fueled the trend towards natural, reclaimed and artisanal materials that add character and warmth to the shopping environment,” said James Farnell, Broadloom Broadloom Carpet tile Carpet tile RDI, international presi44.6% 56% 55.4% 44% dent, Retail Design Institute. “We have witnessed a departure from the classic cost engineered, mass rollout ‘cookie-cutter’ prototype model of the previous decade toward more localized design and sound deadening qualities. solutions that connect brands Hospitality “There are patterned goods you with the neighborhoods in which Renovation was rampant in the can do with broadloom that you they are located.” hospitality business last year, as can’t do with carpet tile,” Carpet tile and LVT are the major hotel brands invested Bentley’s Grogan pointed out. among the leading flooring millions of dollars to redecorate “The bigger patterns are more choices for retail spaces, experts existing properties and build difficult to achieve.” say. Broadloom, ceramic tile and new ones. “All major hotel chains Nature remains a powerful hardwood are being specified in are continuing to grow, with new influence in interior design and high-end spaces, while resilient, builds steadily occurring,” Dal- there is pent-up demand for laminates and rubber flooring Tile’s Mattioli said. “Additionally, flooring that replicates elements are utilized in other public areas. we have seen incremental new of the great outdoors. Hard surNiche, alternative floors—such business from boutique hotels.” faces such as stone, marble, as reclaimed wood and polished Flooring choices vary widely, porcelain tile, hardwood and concrete—are finding their way depending on application and LVT are on the radar, observers into a number of major store client. Broadloom remains the say, as designers seek to create chains as they offer a different surface of choice in guest rooms, modern, residential type looks twist to products specified in hallways and certain public in spaces which traditionally contemporary design. spaces, thanks to its plush looks specified broadloom.

Commercial carpet by product type

fcnews

housing

June 26, 2017 I 43

No records shattered, but progress nonetheless By Reginald Tucker

he U.S. housing market continued movement in a positive direction in 2016. Figures supplied by the U.S. Census Bureau show total housing starts reached 1.1738 million units last year—an uptick of 5.5% over 2015’s 1.1118 million units and nearly 17% over 2014. More importantly, it’s the highest number the industry has seen since 2007, when 1.355 million starts were registered. (If you recall, that’s the year before the housing market literally fell of the cliff.) For perspective, from 2008 through 2013, housing starts consistently dipped far below the 1 million contract benchmark, ranging between 608 million and 924 million starts over that time period. But things have turned around since then. Based on a geographic breakdown of total housing starts—which includes both single- and multi-family units—the South region led the pack with just over 584,000 units—up 5.2%, while the West generated the second-highest number of starts at roughly 290,000, up 9.5%. The Midwest region came in third with just a little over 182,000 starts, an increase of 19% over 2015, while starts in the Northeast actually dipped 16% to 116,000. In the bellwether singlefamily category, total starts in 2016 reached 781.5 million, an increase of 9.3%. The multifamily sector as a whole, however, did not fare quite as well last year, statistics show. Housing starts entailing five units or more came in a tad over 380,000 units in 2016, a 1.3% dip from 2015. Still, multi-family starts encompassing five units or more grew each year from 2009-14, starting with just 97,000 starts in 2009 and rising to just over 347,000 starts in 2014. Meanwhile, multi-family starts covering two to four units were flat in 2016, maintaining a meager level of just 11,500 ground breakings. The year 2016 also finished strong in terms of value. Data analysis conducted by the National Association of Home Builders (NAHB) shows total private residential construction spending grew 0.5% in December 2016 to a seasonally adjusted annual rate (SAAR) of $466.9 billion. After slowing in August and September the SAAR of spending on residential construction finished 2016 with its third consecutive

T

monthly increase. Private residential construction spending index Looking at 2016 as a whole, the value of all private residential construction put in place reached $456.2 billion (not seasonally adjusted) in 2016, 5.2% higher than the total for 2015 ($433.7 billion). In terms of housing sales, Business Insider called 2016 the “best year for the housing market since the financial crisis.” Total existing-home sales—completed transactions that include single-family homes, townhomes, condominiums co-ops—finished and 2016 at the highest level since 2006 (6.48 million), surpassing 2015’s 5.25 million, according to statistics released by the National Association of Realtors (NAR). “Solid Source: U.S. Census Bureau job creation throughout 2016 and exceptionally low economic growth, ongoing job eling activity is expected to reg- ers. According to a study commortgage rates translated into a creation, rising wages and favor- ister a 1% gain this year. piled by NAR, this group good year for the housing mar- able demographics. Moreover, accounts for 35% of all buyers, ket,” said Lawrence Yun, the builder confidence is up on Policy impacts up from 32% in 2014. That’s association’s chief economist. anticipation the Trump admin- Ultimately, observers say, con- more than the combined istration will help lower regula- tinued progress will be contin- amount of younger and older Outlook for remainder of 2017 tory costs going forward. gent on the political climate. boomers (31%). By comparison, All this bodes well for the hous“Regulatory requirements “Policy changes under the new Generation X represented 26% ing market this year, observers make up nearly 25% of the cost Administration—in its nature, of buyers. say, despite ongoing challenges of a new home,” Dietz sequencing and magnitude— The study, titled “Home facing the builder community. explained. “Given those con- will determine the direction of Buyer and Seller Generational Fueled by a growing economy, straints, it is hard to build a economic growth in 2017,” said Trends,” evaluates the generasolid employment gains and $200,000, entry-level house.” Doug Duncan, Fannie Mae tional differences of recent rising household formations, Other reports support a pos- chief economist. “Incoming home buyers and sellers. It single-family production itive outlook. NAHB is project- data suggest improving con- shows a growing share of homeshould continue on a gradual, ing 1.16 million total housing sumer spending, diminished buyers are millennials, and upward trajectory in 2017. So starts in 2016, up 4.9% from the labor market slack and advance- more of them are purchasing said Robert Dietz, chief econo- previous year’s total of 1.11 mil- ments in wages, but until we single-family homes outside of mist with NAHB, during an lion units. Single-family pro- can more clearly read the politi- urban areas. The share of miladdress to attendees of the duction is expected to rise 10% cal tea leaves, it’s difficult to say lennials buying in an urban or International Builders Show in in 2017 to 855,000 units and whether this late-cycle expan- central city area decreased to January. increase an additional 12% to sion will continue into its 17% vs. 21% a year ago while “While positive develop- 961,000 next year. Setting the eighth year. Thus our theme for fewer of them (10%) purchased ments on the demand side will 2000-2003 period as a bench- the year: ‘Will policy changes a multi-family home compared support solid growth in the sin- mark for normal housing activi- extend the expansion?’ If stimu- to a year ago (15%). gle-family housing sector in ty when single-family produc- lus policy is enacted, it would Overall, the majority of buy2017, builders in many markets tion averaged 1.3 million units likely add to growth but could ers in all generations continue continue to face supply-side annually, single-family starts are also be offset by potential tight- to purchase a single-family constraints led by the three ‘Ls’ expected to steadily rise from ened trade policy given the home in a suburban area, and – lots, labor and lending.” 56% of what is considered a typ- already historically strong dol- the younger the buyer, the older Dietz added that 64% of ical market in the third quarter lar.” the home they purchased. builders nationwide report low of 2016 to 75% of normal by the Another interesting tidbit: All things considered, or very-low lot supplies and that fourth quarter of 2018. Fannie Mae expects housing to While millennials may choose On the multi-family front, remain resilient and continue to live in an urban area as the rate of unfilled jobs in the construction sector is now high- NAHB is anticipating starts to its recovery in 2017, with afford- renters, the survey reveals that er than the building boom. hold steady in 2017 at 384,000 ability standing out as the indus- most aren’t staying once they’re What’s more, acquisition, devel- units, which would be 1,000 try’s greatest obstacle, particu- ready to buy. “The median age opment and construction loans units above last year’s pace. larly for first-time homeowners. of a millennial homebuyer is 30 for builders—while on the While this level is slightly above “Demographic factors, however, years old, which typically is the rise—needs to grow faster to trend, Dietz noted this pace is are positive,” Duncan said. “Our time in life where one settles meet demand, he added. “The sustainable due to demograph- research shows older millenni- down to marry and raise a famiindustry needs to recruit more ics and the balance between als have begun to buy homes ly,” NAR’s Yun explained. “Even workers and get more land in supply and demand. Also, as the and close the homeownership if an urban setting is where the pipeline, but it will take economy continues to grow, attainment gap with their pred- they’d like to buy their first NAHB expects mortgage inter- ecessors.” home, the need for more space time.” Indeed, for the third straight at an affordable price is, for the However, Dietz stressed that est rates will average 4.5% in these supply-side challenges are 2017 and 5.3% in 2018. year, millennials represented most part, pushing their search more than offset by continued Meanwhile, residential remod- the largest group of recent buy- further out.”

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44 I June 26, 2017

Scholarship awards Continued from page 4

mercial flooring contractor. “Each year we give out two to three scholarships; this year we are presenting the most awards we’ve ever given.” Kappel, the first called to accept the Greater New York Scholarship Award this year, is a senior at Bethpage High School. After graduation, she will attend Adelphi University with a specialty in law and paralegal studies. Sonja Meberg, a senior at Pleasantville High School in New Jersey, plans to attend Cornell University in the fall. She will study animal science on a pre-veterinary track. And Casey Morrow, a senior at Harborfields High School in Greenlawn, N.Y., has been accepted to Franklin and Marshall College, where she looks forward to bringing her athletic skills to the school’s volleyball team. Morrow has received awards for excellence in achievement in forensic science and marine science, and she has also participated in many Habitat for Humanity and Project Hope events around the country. Hope Ortiz, the first called up to receive the Francis J.P. McHale Scholarship award this year, is the daughter of Victor Ortiz (Tully Construction). Honored in absentia, Ortiz plans to attend Montclair State University, where she will pursue her ambitions to become an editor. Next up was Ailish Durcan, the daughter of Owen Durcan (member of Local 2287). She plans to attend Ramapo College, where she will major in nursing studies. A member of the Varsity Athletes Against Substance Abuse Club, Durcan ultimately wants to work with patients with mental health issues. Lastly, Megan Dicosta (daughter of Steve Dicosta, Local 2287), plans to attend St. John’s University, where she will study speech language pathology. Dicosta has participated in varsity soccer and track programs, performed in several theater productions at school—including the choir—and she has also volunteered at local charities. “With the help of the Francis J.P. McHale Scholarship and Greater New York Floor Coverers Scholarship programs, the recipients of the first through 29-year scholarships have completed their courses,” said Meberg, who noted the association has allocated more than $1.1 million to help students fund their college educa-

David Meberg presents to Amy Kappel, Sonja Meberg and Casey Morrow.

tion. “That’s a great accomplishment.” Honoring commitment and excellence In addition to the student scholarships, the Greater New York Floor Coverers Industry Promotional Fund also named the 2017 Honoree of the Francis J.P. McHale Scholarship Award. Established in 1985 and named after McHale—who rose through the ranks to become secretary treasurer of the New York District Council—the award recognizes a co-honoree from the management side and a member of the Greater New York Floor Coverers Association who has exhibited dedication and service to the floor covering industry. This year’s honor goes to John Mucciarone, a career master carpenter specializing in millwork. Over the course of his career, Mucciarone established himself as a proven leader with more than two decades of experience out in the field. After graduating Chelsea Vocational High School, Mucciarone

Royalty Continued from page 4

service of a West Coast supplier have Tuftex as a supplier.” A long tradition Founded in 1966, Royalty Carpet Mills had grown into a large carpet manufacturer with the addition of PacifiCrest Mills, Camelot Carpet Mills and Moda LLC—all acquired and added to its brand portfolio. Under Derderian, Royalty created a legacy for producing high-quality carpet products noted for their style and design. When Derderian passed away in 2013 at age 87, his daughter,

joined Local Union 32B, working in the maintenance department before moving into cabinet making. After five years of working as an apprentice with several renown master mechanics, he landed a job at a woodworking shop. There he learned drafting, millwork fabrication and installation. He went on to join Carpenter Union 608 and began working for one of the biggest construction firms in New York at the time (Anastasia White, which employed 1,200 people). Always seeking to learn more, Mucciarone decided to take classes at the Mechanics Institute. Mucciarone moved on to foreman of a prominent shop, National Interiors, in 1982. He quickly rose to the rank of field superintendent of National Interiors, overseeing over 85 carpenters in all aspects of national interiors contracts. He was also influential in the firm’s expansion into millwork from a primarily flooring-specialized company. While there, accord-

ing to Meberg, the firm’s expertise expanded dramatically. “When Frank McHale and the association wanted to have a co-honoree as part of this award, John was exactly the type of person they had in mind— people who started the trade, worked their way up the ladder and seized the opportunities that were given to them and took in to another level. We’re proud to have John as our honoree this year.” In his acceptance speech, Mucciarone graciously thanked the members in attendance, adding, “It has been an honor to be a part of this Greater New York Floor Coverers Association.” He recalled how his father moved the family from Italy to New York City in 1966, and how his parents taught him the importance of a strong work ethic. “My father, who is no longer with us, was a man who showed me that with hard work, education and dedication—anything is possible. My mother, who became the bread winner when my father

suffered an injury, showed me the true meaning of hard work. I can’t thank them enough for the opportunities they have given me.” Mucciarone also attributed his success to several key people he met over the course of his education and career, citing several individuals such as Steve Richardson, Steve Kerakis and Debbie DeLuca. Using his own example, he encouraged the scholarship-award-winning students to work hard and take advantage of the opportunities in front of them. “To this year’s scholarship winners, I say ‘Success is opportunity.’ Seek every opportunity and seize it. Remember: What you put in is what you get back. No one person paved their own way alone. The future is based on moments, people you meet and, most important, the support you get along the way. That’s from your family, friends, associates and yourself—you always have to be your own supporter. Take it from a guy who started from the bottom.”

Andrea Greenleaf, took the reins. Greenleaf had been running PacifiCrest, its commercial division, for the previous 20 years. With Greenleaf at the helm, Royalty became the only female-owned and led carpet mill in the U.S. However, on June 14, nearly 140 of the company’s 400 employees were called into a conference room in Irvine, Calif., and were notified that the plant was closing for good that day. It was reported that they were given just a few hours to leave. Greenleaf did not return calls or e-mails from FCNews seeking comments regarding

the abrupt closure or to confirm rampant industry speculation that a proposed deal to acquire Royalty broke down in the days leading up to the shutdown. Dennis Johnson, vice president of manufacturing, Royalty, told The Portverille Record that employees would be paid for 60 days and receive benefits as required by the federal labor rules regarding plant closures. In an email to the local newspaper, Johnson blamed the closure on the high cost of doing business in California. “This puts us at a huge disadvantage when trying to compete in an extremely competitive national market

and it gets worse every year.” Royalty owned three large facilities in Orange County. Real estate sources told the Orange County Business Journal that a deal is in place to sell those properties. John Lollis, Porterville city manager, said the closing was “very unexpected” and runs counter to recent conversations he had with Royalty officials. He explained that Royalty owns a piece of vacant land just north of the existing plant; when inquiries were recently made as to whether the land was available to be purchased, plant officials told him it may be needed for future expansion instead.

fcnews

46 I June 26, 2017

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Nadia Ramlakhan

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Ju n e 2 6

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Territories available throughout the United States and Canada. Experienced and Established Agents needed to represent Urban City Designs Mosaic and Laserjet products. Contact Michael: [email protected]

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Flooring Distributor—Tile/Engineered Wood. Experienced agents wanted for the following territories: •Texas •Louisiana •Mississippi Please contact Jesy Gonzalez at [email protected]

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D&M Flooring is seeking experienced and highly motivated Regional Sales Manager in the West Coast, Midwest, and East Coast. Must have strong relationships with key customers (Flooring Distributors, Retailers, Builders, A&D etc.) -Health benefits -IRA -Base salary + commission -Earning potential $100,000 plus Please email resumes to [email protected] www.dm-flooring.com

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PHENIX FLOORING IS GROWING AND IS SEEKING CANDIDATES FOR A TERRITORY MANAGER POSITION Territory: Central, South, and West GA including south Atlanta area This is an excellent opportunity for a knowledgeable, experienced Floorcoverings Sales Professional to align with a rapidly growing manufacturer. This position has an established account base. Candidates should live in the central GA market. Phenix is a privately owned company based in Dalton Georgia which specializes in the manufacturing and distribution of residential flooring to the nation’s top retailers. Benefits include: •Health, Life, and Disability Insurance •401K with Company Match •Paid Vacation Compensation: •Base Salary plus Commissions •Paid Business Expenses Interested Candidates may apply via e-mail to [email protected] or by fax: 706-279-8284 Phenix Flooring is an Equal Opportunity Employer

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Johnson Premium Hardwood Floors is looking for a unique candidate for a newly created Product Manager position. To be successful in this position, the ideal candidate would have outside sales experience in hard surface flooring, as well as merchandising and marketing experience. Responsibilities include: •Involvement in all merchandising and marketing functions of our hardwood, LVT, and Wall Panel product lines. •Assist our Business Development Manager with new product development •Oversee molding program •Frequent product line and sku analysis, both national and regional •Frequent display placement/sales return analysis •Develop and implement dealer promotions and spiffs •Implement marketing and merchandising plans for new product launches •Participation in national and Buying Group trade shows and conventions •Field travel with sales force for market intelligence and product training This position would be based in our City of Industry, CA office, and will require national and international travel. The ideal candidate will exhibit a unique mix of a "sales driven" focus along with strong analytic skills. To be effective in this position, the candidate must have strong excel skills, and experience with Dancik would be benefit. Please submit your resume, salary requirements, and a brief description of what you're looking for in a new position to [email protected] or contact Nadia at 516.932.7860 and refer to box #440.

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June 26, 2017 I 47

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Established European carpet manufacturer with warehouse in Georgia. Looking for sales agents. Require at least 3-5 years of experience. Multiple established territories in U.S. available. Contact Nadia at 516.932.7860 or [email protected] and refer to box 310.

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Benefits include: •Health, Life, and Disability Insurance •401K with Company Match •Paid Vacation Compensation: •Base Salary plus Commissions •Paid Business Expenses Interested Candidates may apply via e-mail to [email protected] or by fax: 706-279-8284 Phenix Flooring is an Equal Opportunity Employer

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