Contract state of the industry

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Improved economy facilitates sector growth

by Jenna Lippin

With the help of a recovering economy, the contract/specified market awoke in the early months of 2013 from its slumber. With revived sales, many manufacturers are developing products that stray from the traditional designs so common in the contract realm while staying abreast of environmental and sustainability efforts. FCNews discussed the state of the contract industry with some of the industry’s commercial flooring leaders to get their take on the activity for the first part of the year and what they expect for the remaining two-thirds.

Overall, manufacturers of product for the contract sector have seen growth from last year. This may very well be due to the rebound of the economy, with many companies now having funds to support a move or remodel and, therefore, installing new floors.

David Vita, executive vice president at Bolyü, Beaulieu’s specified commercial brand, noted the company has experienced an increase of about 10% over the first half of 2013. Contributing to this growth is the “normal, day-in, day-out categories” which include “property management and corporate office buildings with a number of tenants. These areas have experienced increased activity, with people expanding spaces, renewing leases and even moving to new spaces, meaning increased occupancy. New carpeting is typically what property managers want in these situations. This was an ugly part of the market for the last few years…when we saw activity increase we were very encouraged.”

Interface Americas noticed similar success over the past five months, according to John Wells, president and CEO. The company saw an increase of 9% overall over the same period last year, “led by strong growth in the corporate office segment,” which was up 21%.

The upward progression of the economy is something that has affected the contract sector at Armstrong, as well. Dominic Rice, vice president of commercial sales and marketing, explained the increased activity is due to “a combination of two things: the general recovery in consumer confidence and new home construction combined with improving home prices. With more consumer spending, retail store owners are now reinvesting to help keep their spaces attractive and current.”

So far, 2013 has carried the most promise in recent years, according to Michel Vermette, senior vice president, commercial and international, Mohawk Industries. “It has been a tough five, six years, but we are finally coming back. The first quarter this year was off to a good start, and we are continuing to see middle-single digit growth and possibly more. We are particularly optimistic in the corporate segment, and hospitality has been strong recently, as well.”

Natalie Jones, vice president of commercial brand development and creative product for Mannington Commercial, also cited an improving economy lending to sales, noting thus far “corporate and healthcare [especially] senior living are performing well, in part because of optimism in the economy. We are starting to see good signs of recovery, such as people beginning to release projects that were previously on hold.”

However, Rice noted the questionable future of healthcare is creating some “uncertainty” when it comes to spending in that segment. “The industry doesn’t know the future of healthcare with the new program (Patient Protection and Affordable Care Act, commonly referred to as Obamacare), so that area is exercising caution with significant spending.”

While noticing some momentum so far in 2013, in categories “tied to healthcare and education, federal and state funding as well as the [healthcare act] makes the future a bit unpredictable,” agreed Jeff Kresjsa, vice president of marketing for Johnsonite.

Contrastingly, Interface reported some growth in government and healthcare, in addition to a considerable increase in hospitality and significant activity in the corporate segment.

And, similar to Interface, Bart Rogers, vice president of sales and marketing for Roppe Holding Co., noted the group saw a “nice uptick” in healthcare in addition to significant improvements in retail and hospitality.

Tim Baucom, vice president of commercial sales and marketing for Shaw Industries, summed up the variations in the marketplace, noting that “hospitality and retail are refurbishing to compete for travelers and shoppers,” which he believes will continue to exhibit strength for the remainder of 2013. And corporate will continue to be “robust with more hiring,” while education, assisted living and healthcare will vary as government spending has been low and because these segments are “driven by demographics.”

 

Hard and soft success

Carpet tile continues to be the product of choice in many parts of the contract sector, while LVT and rubber flooring are slowly making their way alongside the soft leader. According to Jack Ganley, president of Mannington Commercial, “modular carpet continues to take share from broadloom… we think modular carpet now represents greater than 50% of the commercial carpet market.” Recent trends suggest the shift from broadloom to carpet tile is still moving at steady pace (see related story on page 7).

Interface introduced carpet tile planks in 2012, and has noticed “rapid acceptance” of its skinny planks, according to Wells. “With their extended rectangular size of 25cm x 1m, they’re being installed on their own in interesting herringbone and ashlar patterns or in combination with our traditional square tiles. We think that’s a great use of the modular vocabulary.

“We’ve seen no drop in the rate of growth for tile,” he explained, “as it penetrates more segments such as hospitality and multi-family housing. While carpet tile has been firmly entrenched in the corporate market for a number of years, at Interface we’ve continued to drive conversion from broadloom to the institutional, healthcare and hospitality markets. We’re now seeing a lot of demand building in the ‘living’ category, which encompasses pretty much everywhere people live. So, while the overall soft surfaces market has remained flat to negative, modular has continued to grow and build share, even in the consumer market.”

Baucom noted Shaw is seeing carpet tile continue to grow faster than broadloom, “though the spread between the two is not quite as big.” Despite carpet tile’s popularity, the company will continue its development of both types of carpet product “in a market that competes on value of design, sustainability and performance.”

Bolyü’s product behavior can confirm carpet tile’s success; Vita agrees that it continues to be the largest growing product in the contract industry. However, the company has still witnessed significant activity around its broadloom product, as it is “finally picking up” and has “a lot of resources, equipment, and capital dedicated to it. The reason why we are where we are today and in the last part of 2012 is the activity around broadloom. We are a newer player on the block in terms of carpet tile (about five years), so even though it has been a drastic growth item for us, it’s on a small basis. I would say we are probably on pace to grow our carpet tile business roughly 30% in 2013.”

While carpet tile continues to take the lead on the soft side, LVT products are picking up steam in the hard surface contract market. As per Rice, Armstrong’s luxury vinyl selections, particularly its Striations Bio-Based tile, continue to stay strong, and this is for two reasons. “One is that LVT, to some extent, is more driven by the retail segment, which is showing signs of activity and recovery. LVT is also taking share in healthcare, education, and other areas where in the past a different type of product would have been used.”

New to the LVT game, Bolyü launched a line in late 2011, simply called Bolyü LVT. The company sources the product, which is manufactured by the Canadian company LSI. Be-cause it tends to lean toward the higher end, the product is adding brand recognition to Bolyü offerings and ultimately helps in other categories, such as broadloom. “In 2013 we became more aggressive with our goals because now we are further into our LVT ‘history,’” Vita explained. “There is no indication we won’t meet our [LVT] goals. Will we exceed them by 25%? No. But we will meet our goals and we’ve budgeted 50% growth in LVT for 2013.”

Rubber is a major player in the contract game as well (see related story on page 10), with leading manufacturers such as Johnsonite and Mannington continuing to expand and develop products using the material. Because of its softness, durability and reduction of sound, rubber has become a popular choice in various commercial segments, notably education and healthcare. Johnsonite’s Krejsa cited particular increases in the sports flooring category, as well.

Mannington’s Jones said the company is “seeing more specifiers interested in rubber flooring—especially in the healthcare market due to performance, comfort underfoot and aesthetics, but also because some people are looking for a durable and flexible choice that is a vinyl alternative.”

To answer the growing demand for rubber, earlier in 2013 Mannington released its first rubber sheet flooring, called Colorfields. The line is constructed of thermoset rubber with high indentation and slip resistance and color retention.

 

Transparency and EPDs

As sustainability, green trends and environmental certifications are on the rise, more and more specifiers are looking for transparency during their decision-making processes when choosing product. Environmental Product Declarations (EPDs), are becoming increasingly popular as end users not only want to know, but need to know the environmental and health impacts of flooring selections.

Armstrong’s Rice explained the company has been responding to “a greater desire and demand from customers for transparency. They ask, ‘What is your product made of? What is the environmental impact of your products?’ EPDs and lifecycle assessments are becoming increasingly important as greenwashing has been an issue in our industry, with companies making claims without substantiating them. There is absolutely a move toward transparency and the expectation that suppliers will provide customers with consistent information based on the environmental impact of a product.”

Answering to customers’ calls, Interface introduced EPDs in 2012 for practically all its products in all global markets. “We think that transparency, through ISO-certified, third-party verified means, is the key to allowing consumers to make their own informed choices,” Wells explained. “We have also seen more design specifiers asking about the social impact of the products they specify, increasingly moving beyond ‘just’ the environmental impact. We’re intrigued by this trend.”

Bolyü also continues to see green trends with EPDs in addition to Health Product Declarations (HPDs). “We are working on a corporate initiative to have a full disclosure HPD program, which includes life cycle cost analysis and mandatory full transparencies of raw materials that go into what we produce,” Vita said. “A couple years ago there was an enormous amount of environmental concern, but now more end users are taking into account the health side, so they are not simply considering environmental content but overall ‘goodness’ and what composes products.”

While Mannington has a history of commitment to end-of-life recycling, the company recently completed an EPD for rEvolve, a thermoplastic polyolefin backing that offers a high performance, non-vinyl option for modular carpet. Similarly, Mohawk is working on adding a higher percentage of recycled content to its carpet backing as it expands its Smart-Strand Contract line, which features a bio-based fiber.

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