By Louis Iannaco
Volume 27/number 15; December 3/10, 2012
The term “cautiously optimistic” is a well-worn adage, and when it comes to what the future may hold for the ceramic segment, it begs to be used yet again. After doing somewhat better than expected in 2012, industry executives who spoke with FCNews feel better times may truly lie just ahead, even though some admittedly have used that refrain before.
Entering 2013, executives said digital technology has and will continue to make an impact in the coming months and years. Also, larger formats and rectangular designs will continue to grow, as will the emergence of thin tiles. Top players also generally see good things for the housing market, the great dictator of growth or shrinkage in the segment.
Mark Shannon
Executive vice president, Crossville
We’ve had a strong 2012. Overall, trends have been positive across the board; we had solid product launches. This has been the year to see the fruits of our progressive sustainability practices as we enjoyed important industry recognition and milestones. We’ve spent the year honing our marketing strategies. Today, our team is working smarter and closer than ever with distributors to take Crossville to the next level.
We have a positive outlook for 2013 though there will continue to be economic challenges. Our industry is constantly improving and evolving in terms of technology and design, as well as branding and messaging.
Crossville is planning some exciting, new chapters in the coming year. As we gear up for what’s next, we’ve perfected our branding and messaging, including a fresh approach to marketing hybrid products that fit commercial and residential markets. We’ve also continued to fine-tune programs and product development based on our customers’ priorities. As we proved with our launch of Laminam by Crossville in the large panel porcelain category this year, we are ready to take the lead on great opportunities in the market. Look for more of the same in the coming year.
Often our biggest challenges are self-made because we move quickly and aggressively on key opportunities. Our Laminam launch is a prime example. That endeavor came together fast and furious, and we had to pool resources together to make it happen. It was a major effort but well worth it.
Lori Kirk-Rolley
Senior marketing director, Dal-Tile
In spite of a challenging economy, Dal- Tile sales have exceeded our expectations. 2012 has seen growth in tile in both dollars and volume. We estimate growth from 4% to 6% for the industry overall. Sales have been steady throughout the year with strong growth in the housing market, which has helped sustain our momentum. Commercial and remodel growth has also been steady, adding to our overall success.
We anticipate growth for 2013 similar to that of 2012. Housing starts will continue to be strong, which will help drive the growth. Residential remodels and commercial activity will continue to steadily increase, beating GDP growth. However, we continue to anticipate pricing pressure as consumers continue to look for value priced products.
Customers continue to look for total design versatility in the products they choose and with each new collection the Daltile and American Olean brands bring such design freedom through a variety of styles, graphics, sizes and innovations. The range of design possibilities is truly endless, allowing us to meet the varying needs of residential and commercial audiences.
The Daltile brand is preparing for an extensive product launch, which will include new color-body porcelains, as well as additions to our limestone, marble and natural stone collections.
Trends in tile take some time to get seeded, but once one is identified, it tends to evolve and last well beyond its origination. One of the major trends we’ll continue to see is the use of larger sizes as manufacturing capabilities become even more sophisticated. We may also see resurgence in smaller tiles, a favorable design staple as homes decrease in size. We anticipate the various shapes of tile will continue to evolve. First we had squares, followed by planks, which raises the question of what’s next?
As a company, Dal-Tile strives to enrich the lives of others and give back to our communities. In 2013, we will continue to seek out opportunities to provide our time, talent and products, such as joining Habitat for Humanity to assist families in need of decent, affordable housing.
We’re currently closing the second annual Daltile Interior Design Scholarship, presented by the ASID Foundation. Students are competing for over $25,000 in scholarships, with the grand-prize winner receiving $10,000.
Looking ahead, there will be more suppliers of digital printing, thus expanding the spectrum of color that can be achieved on a tile. Also, manufacturers of digital printing machines will continue to find ways to combine other printing technologies in order to create even more sophisticated products. These offerings closely emulate not only natural stone looks, but also textiles, woods and other visuals that benefit from depth of color and sophisticated graphics.
Dal-Tile recently opened a design studio in Dallas (FCNews, Oct. 8/15), which sets a new standard of service and technology for the professional designer. It embraces visitors on a sensory level, enhancing the tile and natural stone selection process by engaging all of the senses.
We’re constantly reviewing and adjusting our sales strategy to find better ways to service our customers. Making necessary adjustments to improve efficiency and speed of our manufacturing process and supply chain are top factors in achieving customer satisfaction.
Within the category, the inflation of the cost of goods is a big challenge. In 2012, we saw continued downward pressure on pricing in the face of rising material costs, which will continue to be a challenge in the months ahead.
To meet these challenges, we continue to look for alternate sources for raw material to reduce costs, and every effort has been made to consolidate freight to reduce overall costs.
Jonathan McIntosh
President and CEO, CoMc
Sales were up in the home center channel for SnapStone, and relatively flat in the specialty retailer channel with Avaire. The growth in home centers is a reflection of more consumer emphasis on DIY versus the traditionally installed solutions.
We have observed cost increases for both raw materials and transportation, and have done our best to offset raw material increases with increased efficiency in our plant.
We expect to see single to low double-digit growth in 2013 in both the home center and specialty retailer channels. We anticipate significant growth in the commercial markets where our newly launched commercial Eclipse line is garnering strong interest from contractors and large national accounts. There is growing recognition of floating modular tile systems as a viable and profitable problem solving alternative to traditionally installed tile.
We are actively working to introduce additional commercial designs and formats with an emphasis on the popular 12 x 24 size. Our system represents a unique technology, and aligns perfectly with the shift to modular flooring systems.
We see the industry continuing to embrace technology in terms of leveraging service, communications and transparency. Social media continues to serve as a validation factor for new concepts such as ours. Our customer satisfaction levels are extremely high, and we are gaining online presence with customers validating ways our products can solve real problems.
We’re actively working with a number of tile manufacturers who have expressed interest in offering their products in our unique system. We help to differentiate as well as solve issues traditional installations cannot address such as moisture, asbestos encapsulation and selective replacement. Tile manufacturers can differentiate their product lines if they can offer an alternative installation system that has real value to their customers.
As a result of rising labor costs, currency exchanges rates and transportation costs, the cost for imported tile has increased, so we are looking at U.S. tile makers for collaboration. In fact, our Eclipse line is based on U.S. produced tile.
It’s hard to ignore the economy and housing as continued softness in both are primary challenges facing the flooring industry.
Secondary factors are increasing transportation costs. The flooring industry is traditionally slow to adopt new technologies, so for our company, the continuing challenge will be educating customers on the advantages of our new installation technology.
Jim Dougherty
Director, porcelain tile business, Mannington
Based on the previous five years, we were optimistic coming into 2012, but also pessimistic at the same time. We were coming off a pretty weak fourth quarter last year, so we were relatively cautious about how 2012 would wind up. We actually started out pretty well. We saw a little bit of a dip in the late spring/early summer, but, so far, the second half of the year has been pretty strong.
We don’t anticipate that to change but when you look at the housing sales numbers, it looks like the housing market may finally be rebounding. But we’ve thought this a couple of times and it hasn’t occurred so everyone is still very cautious, optimistically cautious or cautiously optimistic.
I do see the tile market, in general, growing in 2013. New housing does drive a lot of the tile usage but what we’ve also seen over the last five years is, because housing prices decreased, people weren’t really remodeling like they were in other downturns. In earlier downturns, new housing starts would slow but remodeling would come back because rather than build a new home people were reinvesting in their existing homes.
But in this downturn, with the prices of homes going down, nobody was reinvesting. Now home prices are beginning to rebound and with housing starting to grow a little bit, I believe 2013 could be a positive year.
For products and trends, we see a lot more use of inkjet technology in porcelain, as well as larger tile. It has been that way on the commercial side but we’re now beginning to see it occur in residential—and not just in the southern tier of the country; now it’s moving up north into the rest of country. We see a lot more rectangular shapes being used as well.
The U.S. is the largest importer of tile in the world. With the rest of the world still in a bit of an economic slump, I don’t see many companies investing in a whole lot of marketing nor do I see them investing in a lot of technology. There are companies doing it, and they are doing a lot of inkjet, which is kind of going through a second evolution. But if you’ve gone to Cersaie the last few years, there hasn’t been a whole lot of movement in terms of product looks and technology. And I don’t see any of that really changing.
For 2013, we’re positioning ourselves for success by improving our service model and making our products more readily available. That’s really going to be what we focus on throughout the year—making sure our customers and end users know we have product available, they can get it quickly and it can be purchased in multiple locations throughout the U.S. We’re doing this by beefing up our inventory and taking steps to make sure we have significant stock to handle the kind of swings we see in the market.
The other thing we’re focusing on is styling. We’ve really upgraded our style and design—our color palette. We’ve gotten into larger tiles and more rectangles.
We’ve been so challenged the last five years; what we’re really hoping for is the market to grow larger than we anticipated and that growth being the biggest challenge. The industry as a whole has scaled back operations to a point where there isn’t a whole lot of fat left. While it’s difficult to cut while you’re shrinking, it’s almost more difficult to grow because you don’t have any money, but we’re very prepared for that.
As far as new products for Mannington in 2013, we have a couple of inkjet projects being worked on. One is a really beautiful stone look, the other is a wood look in a 6 x 24 tile. It’s a great visual. The strength of our product line is that Mannington designs its own products—we’re designed for the North American market.
In the last few years, there has been a pretty broad divergence of what’s going on in Europe and the rest of the world in terms of design and what is happening in the U.S. Many companies are not really designing for this market anymore. Because of our downturn, many of the European mills have shifted focus to Russia and the Far East. They’re developing products more for those markets than they are for here. But Mannington specifically designs for North America.
So we feel we are in a real good position to take advantage of our styling, colors and the size availability of our products. Also, the availability of our decorative tiles allows us to really take advantage of the market.
Hector Narvaez
Executive vice president, sales and marketing, Marazzi USA Group
After a good start to the year and a slower pace from August through October, we should finish 2012 right at our expectations with strong results coming from our product introductions and some lift from the new home construction market.
Both dollars and square feet should improve in 2013 by an estimated 5%. The commercial market continues to remain strong, while the new home construction segment should continue to expand throughout 2013.
Marazzi will continue to add exciting products high in quality, design and value by utilizing all the technologies in which we have invested and brought to our production lines.
One of the biggest challenges is the over supply of low quality imports sold in the U.S. Marazzi constantly tries to educate distributors and dealers about the added value of the high quality and aesthetics we offer to combat these low quality imports.