Executive Forecast: Top figures weigh in by category

Home Inside FCNews Executive Forecast: Top figures weigh in by category

Resilient producers appeal to value, style to gain share

What was ultimately a false start to an upswing in the industry during the first and second quarters, 2010 has coaxed top executives in the resilient category to project a more conservative outcome for the coming year. However, it is one area that is expected to continue growing. The proliferation of LVT (FCNews, Nov. 22/29) and the advancement of fiberglass (see related story) has created a new value standard for the consumer when she shops floor covering. As one of the few segments capturing share in the residential floor covering market, modesty rules the 2011 diagnosis with an injection of optimism.

Bill Cralley

President, Tarkett Residential North America

The economy will continue to be tough, just as it has been for the past three years, so consumers will continue to be prudent with their remodeling dollars as they look for hard surface products that provide them with the utmost in performance and value.

We see our products in the vinyl category—particularly our FiberFloor in the fiber-backed class as well as Nafco in LVT—as leading the way to meet consumer demand for durable flooring products with enhanced design properties.

In 2011, we will introduce new product offerings and updates to our current collections, all driven with the emphasis to provide great design, style and quality while better meeting end users’ budgetary needs. We will continue to provide added-value programs and services to our retail customers, including building brand awareness, generating traffic for their stores and providing some of the best support materials and displays in the marketplace.

We will seek out new opportunities to provide better flooring solutions. For example, unlike competitors who began to build new facilities in North America to meet increased demand for products like fiberglass-backed vinyl, we already positioned ourselves for this growth category back in 2005 by investing in our sheet vinyl facility in Farnham, Quebec. Tarkett is now well ahead of the curve with a state-of-the-art facility that has already been through the startup phase and enables us to respond quicker to retailer and consumer demand while providing the latest product designs and introductions in a timely manner.

We’ve been working hard for the Tarkett brand to be perceived by all our customers–end users, installers, retailers and distributors–as the everyday performance brand that meets all of their needs. Our No. 1 goal is to provide the “ultimate flooring experience” by creating the best innovative flooring solutions. We see our responsibility helping to get buyers into our retailers’ stores. This means building consumer awareness for the Tarkett brand and providing them with the best-performing and best-value flooring products available.

Roger Marcus

CEO, Congoleum

For the last three years, putting aside the positives of LVT, people have predicted the following year would be better, but everyone’s been wrong so far; three for three. For the resilient category in 2011, it’s probably fair to say that no one knows. We basically have bottomed out but there are no guarantees that the first six months of 2011 will be better. All we can do is pray.

We’re not really bringing out any new product next year. Congoleum brought out five major product lines over the last 12 months and when we look back at those, we’re doing well with all of them but not great with any in particular. It seems like it was too many introductions over a short period of time. As result, product by product, we’re going to give a full court press, taking the products that have done well and make them great during the course of 2011.

We’re planning to grow by a modest amount but it will not necessarily come from an increase in the market. It will come from doing a better job marketing the products brought out in 2010.

We are going to be making some changes in marketing, though advertising is not necessarily a part of that. We’ll be taking different market approaches from last year to improve our penetration. We’ll continue with the social media arm of our marketing strategy. It is too early to tell if we’ve had any impact with that but it’s well worth having done what we did.

We emerged from bankruptcy this year; we’re out of jail and living like a regular citizen again, sort of readjusting to society. As we stated consistently when were in bankruptcy, from the standpoint of doing whatever was appropriate to do, our legal state didn’t prohibit that. We brought out more products, programs and displays during the 12 months proceeding our exit than ever in our history. With regard to capital expenditures or marketing there really isn’t any change for us with the exit because there was no change from when we were in bankruptcy.

Laminate mills conservatively optimistic about 2011

To say the recession has not been kind to the laminate category would be an understatement. The category that re-energized the flooring industry in the mid 1990s and helped propel it through the new millennium has suffered due to numerous, well documented factors—fewer shoppers, low-quality imports coupled with mass merchants driving the average selling price ever lower, cheaper wood prices which allow consumer to get the “real” thing and so on.

Despite acknowledging these challenges will most likely continue into 2011, the general feeling from executives at the industry’s leading laminate mills is that next year will experience positive gains, albeit small ones.

Fred Giuggio

Vice president of sales and marketing, Formica Flooring/Kronotex USA

The category over the last two years has dropped but we haven’t seen this in our numbers. Some of the large portfolio vendors talk down the category yet continue to attack it.

We expect the economy to continue to be a challenge in 2011. We feel our advertising and marketing is on point, and we’re going to work hard to send the message that buying a Formica or Kronotex floor is a value with excellent quality she can fit into her budget. We expect price will [continue to] be an issue, and are prepared to attack it.

We’ve committed $45 million to a plant expansion in Barnwell, S.C. This investment will also allow us to be quick to market with new technology as well as ideas and delivery of product that are made in the USA. We think this a tremendous benefit to retail.

This is important because we need to lift up the awareness at retail. Dealers have quit on laminate because pricing is low at the boxes and high at their stores. The retailer must be re-educated that this is a viable category when positioned correctly.

David Hartman

Vice president of sales and marketing, Pergo

We entered the year expecting an economic rebound, but it failed to materialize. However, we are conservatively optimistic about 2011. We believe economic and personal financial concerns will keep growth at moderate levels throughout 2011. We do not see a rebound in home products.

Design and performance innovations will continue to drive the category, and value-added benefits will become increasingly attractive to the consumer. As consumer demand for laminate and specifically the Pergo brand remains strong, and our global corporate realignment will make us increasingly more competitive in the marketplace.

We predict an increased focus on realism in 2011 with product innovations. The industry is also is focused on technologies that facilitate more efficient installation. New improvements in design, performance and distribution will all continue to grow laminate’s overall share of the North American flooring market.

Social media is becoming a key method to interact with and reach target consumers, and advertising and marketing continue to be crucial for building and maintaining brand awareness. In terms of consumer marketing, we have plans to develop a social media platform, including a Facebook page and Twitter account, to further engage with consumers and our professional partners.

Roger Farabee

Senior vice president of marketing, Quick•Step/Unlin

We believe each of our categories will be up. There will be slight growth but not significant; low single digits.

Next year we will be rolling out a merchandising system for laminate as well as hardwood and tile that will showcase all the product investments we’ve made. In the last few years we’ve invested in getting our aligned dealers’ systems where they need to be, now we are turning our attention to open line retailers.

Also for next year, the integration of Mohawk hard and soft surface will be much clearer. It wasn’t always easy for the consumer to see that our hard and soft surface products were from the same company, but I think that will be much more defined going forward.

Tile manufacturers invest in preparation for turnaround

While most tile manufacturers did not see economic conditions—namely employment and consumer confidence—rebound as quickly as they would have like, they continue to make investments in technology and look to do more of this heading into 2011. The advent of digital printing technology has made a tremendous impact on what manufacturers can create, and it looks like they will continue this trend moving forward. Manufacturers are also being challenged from abroad with an increase in imports from countries like China only adding to pressure on pricing, making what is already a difficult situation that much tougher.

Rob Tarver

Vice president of sales and marketing, Avaire

We expect 2011 to be an explosive growth year for Avaire. We have 90% of the North American market covered by a strong group of respected flooring distributors. In general, 2011 likely will continue to be soft with regard to building products, but all indications are recovery is under way and consumers are beginning to buy. The spring selling season will certainly be the best indicator of whether or not the downturn is over.

We see the trends continuing with format, design printing and glaze technology, and simplifying the installation process to save time and money (i.e., floating technology). We also see narrower grout joints continuing to gain strong momentum.

We are strong believers in social media and feel this medium has some of the most significant and cost effective means to communicate and reach consumers. Our company plans on being a leader with this forum.

Our most significant challenge will continue to be consumer awareness of our floating tile product line. Certainly, general economic trends are of concern, but those are temporary and we must be prepared for the turnaround.

Lori Kirk-Rolley

Senior marketing director, DalTile

Next year we expect the industry will still face challenges as the economy continues to slowly progress. We also expect to see moderate, single-digit growth as housing and employment start to rebound. An increase in imports from China and Mexico will remain prevalent.

Overall, the industry will become further exposed to more realistic stone visuals, including travertine and slate, that leverage sophisticated digital printing technologies. Concrete, fabric and other visuals will be imitated with minimal graphics that are part of sophisticated, monochromatic looks.

From a design perspective, we’re starting to see some interesting trends. Look for large and small sizes used together in design; for example, a floor pattern featuring both a large format tile and mosaic. A couple other rising trends are the use of rectangular tile sizes for both floor and wall applications as well as splashes of glass or metal accents that create upscale spaces for minimal dollars.

Investments in technology and marketing innovations, including social media, will be critical to success. For example, from a product standpoint, DalTile is leveraging sophisticated digital printing technologies with Reveal Imaging to produce the look of stone with the performance of porcelain tile. From a marketing perspective, we also see customers gathering information and looking for brand support online. A commitment to green building is also evident with real-time information available about recycled material content, manufacturing locations, distance-from-jobsite calculator and more.

As for challenges in 2011, we identify the cost of fuel and natural gas as a big one. Pricing is also an issue due to the increase of imports.

Sean Cilona

Director of marketing, Florida Tile

Our sales are up more than 10% from last year, but we believe 2011 will be the year with the strongest comeback. Even if unemployment and housing isn’t expected to rebound until later in the year, I think the credit situation will loosen up and things will start to improve for smaller businesses.

Over the last two years we have seen growth in sales and market share. People still need to buy tile and we are positioning ourselves to have the products and services that make it easier for our customers to buy and sell our tiles. From continuing to update our product portfolio, to increasing our commercial sales force, to investing in our production facility, we have created an organization that promotes growth.

Digital technology is still the defining element in glazing, and the continual acceptance of larger-format wall tile will grow even more. The companies that really want to impact their customers are going to have to make investments in technology.

One of the biggest challenges in tile, especially in a struggling economy, continues to be the competition with lower-cost flooring alternatives. There are hundreds of reports on sustainability and life cycle analysis and cost of ownership that show tile and stone are far more cost effective than any other type of flooring, but in the end people are looking at the short-term bottom line, and ceramic and porcelain tile is not the least expensive flooring to install.

Carpet mills continue to invest in a sluggish recovery

In broadloom, it continues to be about the economy and according to mill executives, jobs. After enjoying a relatively strong start to 2010, the rest of the year can best be best described as flat. And as for what executives see for 2011, all indicators continue to point to the economy and unemployment as key to the category’s health. This is not to say that manufacturers have not made investments and plan to do so in the coming year with technology, marketing and social media playing major roles. And with the performance of the commercial side being stronger than expected, there are signs of optimism for the future.

Ralph Boe

CEO, Beaulieu of America

In terms of business for 2010, what we’ve faced this year is counter to what we had expected. If the economy was truly recovering and people were feeling better about being able to hold their jobs, things might have been different.

Some of the reasons for this include unemployment, which is still extremely high, and foreclosures. We still have a large number of foreclosures, although the rate has slowed down a bit. But the overall consumer confidence level is not where it needs give the consumer the confidence to go out and spend money on deferrable items and clearly, carpet is a deferrable purchase.

At some point you would think things are going to turn around; we’ve been in this [recession] since 2006. I thought maybe after the election, with a better balance between the Congressional and Executive branches, consumers might have a better feeling. It may not have been long enough to see that, but I believe next year is going to be difficult. When you look at the number of homes still out there either scheduled to be foreclosed or in foreclosure, or where consumers are behind on payments that could put them in the foreclosure mode, there are close to six million homes that fall into those three categories. They aren’t going to be liquidated in that process in short order. They’re probably being done at 100,000 per month, so from that standpoint, you could have an overhang of several years.

I believe we are going to continue to see growth in polyester BCF. We’ve been expanding in that arena, and we are going to continue to do that in 2011. When you look at the economics of that compared to nylon, and on occasion, polypropylene, it has the lower-cost raw material, and in this type of environment people are looking for value. That is somewhat of a positive for most people who are in that business, and it also requires that we make capital investments that will put in different or new extrusion and also the commensurate twisting and heat setting that is required to process more BCF.

If you look at what we’re doing as an industry, there is going to be more attention on media presence with the Internet. I believe more and more consumers are shopping the

Internet before they call on retailers, so that is going to continue. That makes it incumbent on the manufacturers to make sure they have their products well represented online so consumers can readily get to them. We’ll be launching a brand new website in 2011, one that will be much more interactive. We expect it will give the consumer much more confidence to go out and purchase our products.

When you look at trends, I believe consumers in general are more concerned about the environment in their homes, and to that end, we continue to see great success with our Magic Fresh which we are using in more of our product lines and our Healthy Home, featuring Silver Release, which helps reduces the growth of bacteria in the home.

The biggest challenge we face is the volatility in raw material pricing. In 2010, we’ve faced significant increases in all of our raw materials and that is continuing to haunt us. We’re just not sure what we are going to see next year but, as long as the dollar is weak, the oil prices will be relatively high, and if that is relatively high, that in and by itself is going to keep the pricing of raw materials high. That means we are going to have some price adjustments during the year to help offset that.

Kennedy Frierson

Vice president, COO Dixie Group

In 2010, the commercial side of the business was better than anticipated for the industry and residential was worse. However, Dixie experienced a better year residentially than commercially, primarily because of growth in polyester and wool fibers and the changes in the big boxes relating to Stainmaster.

We expect 2011 to be another difficult year in terms of business environment. We have not seen anything on the residential side to indicate anything other than a very slight increase (2% to 3%). On the commercial side, we are optimistic we are beginning to see a recovery, although it is too early to be certain. We expect commercial to be up 5% to 7%. Modular tile continues to increase market share in all commercial applications and for us as well. Soft is the key for residential products.

The industry will continue to invest in technology in the areas of marketing and social media. As the world changes and the way we communicate evolves, it is important we understand these trends and use them to best engage and communicate to our customers.

The Dixie Group will continue to invest in new products during this protracted downturn. In addition to cost-cutting and a focus on operational execution to make sure we are able to weather depressed business conditions, we are investing in new products to help drive our top line.

Regarding residential carpet, the biggest challenge heading into 2011 is making this purchase as exciting and enticing to the customer as flat screen TVs and iPads. With the consumer’s discretionary spending smaller than it was a few years ago, we are competing against all categories for those limited dollars. The biggest challenge for commercial is investing in the technologies that allow us to move forward in the quest for sustainability in carpet manufacturing.

Tony Prespitino

Vice president, sales and marketing, Gulistan

We had low expectations coming into 2010 and realized from the get-go until the job picture turned positive, we were going to be bouncing along the bottom. You can talk stimulus all you want, but that’s a one-time deal. But on a positive note, it seems the people who are in the market are opening their wallets a little more.

Until the job situation is straightened out, I believe we will be seeing more of the same in 2011. There is a lot of pent-up demand, and right now people are taking advantage of the tax credits that are out there—in other words, putting new windows in existing homes, installing new heating and air conditioning. What we believe may happen is after this is done people will let out that pent-up demand on refreshing their homes, including flooring.

Soft fiber is still very hot. With the economy being the way it is, we are seeing people more conservative in their choices, so textures and friezes, which have always been popular, are even more so.

And they are dominating the style categories because when she does make her purchase, she wants something almost timeless that will last a long time.

Next year we will be investing on the equipment side—in new tufting equipment and twisting and heat setting. Because we started out 2010 so well, we went ahead and made the commitment to invest. By the time business had turned, the machines were already here.

On the residential side, it’s all going to be about remodeling. There is so much inventory right now I don’t see anything happening with new construction, but that’s not a market we play in anyway. I’m hoping as 2011 progresses, people will feel more confident in the economy and act on pent-up demand. At the end of the day, the biggest challenge and variable is jobs. People are going to be hesitant to spend until they feel good about where they are in relation to unemployment. As an industry, we are pretty well positioned to take advantage of the upturn, it’s just a matter of when will that happen.

Hardwood grows its arsenal for recovery

Hardwood is quite possibly the great unknown of 2011. One of the hardest-hit areas of the economic blight, it has taken quite a beating, from raw materials supply down to consumer demand for value. Top that with an investigation by the U.S. Dept. of Commerce and the International Trade Commission that will reach an outcome in early 2011, which has the potential to really shake up the mix.

Manufacturers however are moving forward with resolve as strong as the products they make, poised to compliment an anticipated overall stabilization of the building industry.

Neil Poland

President, Mullican

I think 2011 is going to be another tough year. We’ll have to create value for consumers to buy product. It’s going to be a battle to stimulate upgrade business but we’re hoping to do so with different styling and providing additional value to consumers at a reasonable price for an upgrade.

We will have two significant product launches in 2011: one with significant warranty advantages and the other with exciting styling and design in species and finishes new to solid wood flooring. Both should be blockbusters. We will also continue to spend money to stimulate sales for our retail dealers nationwide.

The category as a whole will be tough again. Consumer confidence in remodeling needs to improve. Right now consumers need to feel as if their investment in remodeling projects will get a better return. People also need to feel better about long-term employment so it will flow through into flooring business. Banks need to loosen credit policies and allow people to do business again.

This year we all experienced a shortage of lumber with high prices, especially compared to last year. We need a sustained pattern of growth on a slightly rising plane where people are going to have confidence to buy timber and turn it into lumber on a regular basis. When you have a weak market like this it doesn’t take much to create a shortage.

Luc Robitaille

Vice president of marketing, Mirage

We anticipate industry growth in 2011, more so in the second half. More stability in the economy overall will help fuel that but we don’t see any real significant increases in new single-family housing. We believe, however, that it has bottomed out and will marginally improve. A general pickup in all segments should contribute to overall improvement of the hardwood category.

We will continue to launch value-added products, including a major one that is currently being introduced to distributors, mainly engineered products in a new exotic line with some very trendy styles for high-fashion customers and newer colors for long-lasting appeal.

Research and development is a big part of what we do at Mirage. We’ll continue to address the needs of our dealers and consumers in the trends of today and tomorrow. We will continue to advertise as we did in 2010 to keep the brand visible. We will target various media outlets to help us reach the correct target audience for our products, and we will continue to hold sales events that support our dealer base, that create store traffic and sales.

It is still a very challenging economy, especially with new housing at historically low levels. An offshoot of our challenge is maintaining overall market share because this economy has brought a lot consumers to chasing price points and trading down to other types of floor covering. The biggest challenge is for hardwood to maintain its position in the overall industry.

Roger Farabee

Senior vice president, Unilin

I think our hardwood business has the potential to grow a bit. We took market share this year and believe we will do the same in 2011 because we spent a lot of money during this downturn over the last four years, introducing new products and merchandising, so we would be prepared for the turnaround. We’ve introduced a number of solid and engineered products over the last few years, so we are expecting to capitalize on that investment. We believe we have our product lines where they need to be. We have spent a lot of money on merchandising.

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