‘Modest gains’ in 2015 set to prove relief of awaited ‘pent-up demand’

Home Inside FCNews ‘Modest gains’ in 2015 set to prove relief of awaited ‘pent-up demand’

December 8/15, 2014; Volume 28/Number 12

Resilient

By Jenna Lippin

To the dismay of many flooring executives, 2014 did not deliver the recovery numbers most of the industry thought it would. The so-called “pent-up demand” everyone cited in the anticipation of 2015 has yet to really show its face, mainly because of a slow start this year due to crippling winter weather.

That being said, executives predict that 2015 is set to show modest gains, with LVT continuing to take market share from other categories and multi-family construction leading the way.

Larry Browder CEO, Karndean Designflooring

LVT has exhibited tremendous growth in recent years and we project that the category will maintain this trajectory in 2015. The economic indicators show that the economy continues its slow but steady recovery, and as that continues we’re optimistic that LVT will have the strongest growth amongst floor covering categories in 2015.

For Karndean, growth is going to come through our continued commitment to innovative new products and our value proposition through our retail, distribution and commercial partners.

One of the challenges that we face is the introduction of low quality imitation products into the marketplace that are mistakenly being branded as LVT. Such products simply do not offer the same value, or measure of satisfaction over time, as products from Karndean Designflooring. Karndean has been focused solely on LVT for over 40 years, and we will continue to maintain our high standards amidst the ever-changing marketplace.

We’re eager about several product launches that are lined up for the coming years. We have exciting, focused initiatives across all channels.

Piet Dossche President and CEO, USFloors

Just like in 2014, I expect the LVT category to continue to significantly outpace the overall growth of the flooring Industry.

LVT in all formats is experiencing a very strong interest level not only from retailers, but also from the consumer. As more and more consumers come to understand and recognize today’s LVT is no longer yesterday’s plastic-looking floor but a beautifully designed and strong-performing waterproof flooring solution, the more this product will increase in popularity and sales volume.

Growth next year and for many years to come will be inevitable with the amount of capital investment and focus on LVT. As a result of all the new capacity coming on stream in 2015 in the U.S., a tremendous emphasis on product development, marketing, product awareness and sales push will be put forward by those mills which are—combined—investing hundreds of millions of dollars to boost the category.

This is all on top of the tremendous expansion in Asia currently underway. You’ll see a lot of LVT pushed into the U.S. market that will be looking for a home. This will drive the category hard and result in strong growth and market share expansion.

A rapid price and, consequently, a likely quality erosion could be the Achilles heel of this thriving product category as a result of the over capacity, which will be inevitable with all the investment in additional manufacturing both in the U.S. and on a global scale.

For USFloors, 2014 will be known as the year a totally new flooring category firmly got traction and became widely accepted and supported by retailers: CORETec. This product, with all its copies and knock-offs currently appearing in the market, is one of the latest innovations when it comes to LVT. I expect COREtec to continue to provide major growth for USFloors in the coming year and beyond. USFloors is proud to be the inventor of this new floor and, if supported and promoted by several of the larger manufacturers, I believe this new flooring will capture within the next five to seven years $1 billion of the total flooring output at the wholesale level.

Russ Rogg President and CEO, Metroflor

I don’t expect the industry to experience strong growth in 2015, perhaps in the range of 3% to 5% at best. I believe the resilient category will grow in the low double digits, around 10% to 13%, and almost all of that growth will be in LVT, with small gains in sheet.

I believe that residential remodel replacement business will be steady at best, with Main Street commercial and specified commercial business driving the majority of LVT’s growth in 2015. Our business is split nearly equally between dry back LVT and floating LVT, but we expect that our dry back volume will accelerate in 2015 primarily due to the advent of Aspecta, our new contract brand.

I think one challenge for 2015 will be that the overall economy will not grow as we might have hoped, and this is what I believe will affect the industry at large. For LVT, I think the prospects remain very bright. The category continues to win favor with residential and commercial audiences alike. The growth appears to be coming at the expense of other categories such as wood, laminate, carpet (in multi-family environments) and even resilient sheet goods. So even if the economy, and the flooring industry as a whole, do not experience significant growth, I believe LVT will continue to expand through market-share gains.

For Metroflor, the UniFit technology will be a big growth driver. It’s the next evolutionary step in making click LVT even easier and faster for installers and contractors. We have introduced UniFit in the company’s Engage line of plank and tile and will gradually convert our existing collections to this advanced new technology. We believe our entire network—distributors, retailers, end users—will reap the benefits of a quicker, cleaner and quieter installation process thanks to UniFit.

Expect to see a rejuvenated Konecto offering, which will spotlight the enduring role of Grip Strip technology in the LVT arena in general and our portfolio of brands in particular. We plan for Konecto to continue being an important part of the Metroflor growth engine.

Our distributors and the A & D community received our new Aspecta LVT commercial brand, launched at NeoCon last June, very favorably. We anticipate that the launch will bear fruit in 2015, giving us a solid foothold with the contract community. We anticipate that the healthcare, retail and multi-family segments will be especially robust for Aspecta.

Paul Murfin Co-CEO, IVC

I—along with everyone else in the industry—am sort of waiting for this “pent-up demand” that we think is there from the consumer. Unfortunately I don’t think we can rely on that. Next year will be slightly better, but this year was spotty in retail in particular, mainly driven by poor consumer confidence. Next year consumer confidence will hopefully grow a little; I’m not predicating a massive turnaround for 2015.

That being said, I continue to be very bullish about the resilient category. I think there is a general demand for value-oriented products, and resilient is very much a good value product. In my particular area, there is a continued shift from felt to glass, so we benefit from that. However, that doesn’t completely change the number for sheet vinyl.

I think what is happening in LVT is that—by virtue of its strong features and benefits—it is taking share from multiple other categories. Unlike products of the past, LVT is taking share from sheet vinyl, carpet, laminate and probably from ceramic and porcelain; it is growing at an above average rate. Plus it’s doing very well in both residential and commercial, so you have a double whammy there as well.

In terms of challenges, there is a very crowded LVT market, so I think the market will start to decide who the winners and losers are. There will also be an emergence of U.S. supply, probably later in the year rather than earlier.

IVC will continue to grow above market as we have done for the last few years. For us next year will be about underscoring the fact that now we’re a very serious contender in more than one product category in the industry [vinyl and laminate]. Our company has grown dramatically over the last few years, both in North America and Europe. We have a track record of growing in very mature markets. We will continue to grow in LVT, which is the headwind of growth for the [resilient] category.

The single-family market will do much better; if you participate in the builder market I think it will be good. We will continue to be strong in multi-family, apartments, etc., so we will see some growth but maybe not quite at the same pace we saw in 2014.

At IVC, 2015 will see our LVT plant come on stream, along with a new and broader product offering. Hopefully we continue to spread the word that we are a good supplier and [a company] to be taken seriously.

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