Resilient: LVT shows no signs of slowdown as catalyst for growth

Home Inside FCNews Resilient: LVT shows no signs of slowdown as catalyst for growth

Multi-family, innovative designs, meeting consumer demand maintain boost

June 29; Volume 30/Number 1

By Jenna Lippin

The resilient category continues to surge with no sign of stopping the momentum it has maintained in recent years. Major and smaller manufacturers alike have been investing more money into their resilient innovations, and, with many bringing manufacturing to the U.S., suppliers are becoming more efficient in meeting the needs for the numerous customers seeking these popular products.

How popular? The resilient category posted the biggest percentage gain of any flooring category in 2014, increasing 8.4% to $2.392 billion from $2.206 billion in 2013 and 17.5% from $2.035 billion 2012. More impressive, the category is up 36.6% from 2009’s $1.751 billion and is currently at its dollar high point in recent history.

The gain in square footage was not as pronounced—3.8% from 2.59 billion to 2.688 billion—due primarily to the fact that resilient’s growth is coming from the more expensive LVT vs. the declining sheet vinyl. Sheet took the lead in residential sales in volume with 60.2% of the pie, but only 43.2% in dollars—LVT came in at 50.7%—giving an interesting depiction of pricing in the resilient market. LVT owned 27% of volume, with resilient tile at 12.8%. Luxury vinyl tile/plank/flooring continues to lead the resilient pack, posting a 20.3% increase in sales from 2013 to 2014. It was the fourth consecutive year of growth.

Resilient now commands 12.2% of the total flooring market in dollars and 15.1% in volume. In 2013 resilient held an 11.7% share, up from 11.3% in 2012 and 10.8% in 2008. Remarkably, its market share in volume has remained relatively constant at around 15% for the last seven years.

On the resilient growth trajectory, LVT increased in both residential and commercial markets—dollars and square feet—last year. Residential LVT saw a 14.1% increase in square footage from 392.2 million in 2013 to 451.5 million, making up 55.2% of the LVT market in dollars and 63.7% in volume. The commercial market rose from 194 million square feet to 257 million, a 32.5% increase. While residential brought in more dollars—$630.5 million to be exact—last year, commercial LVT posted a bigger percentage increase, rising 23.6% from $413.75 million in 2013 to $511.25 million in ’14.

LVT installation

Installation methods are a significant factor in the LVT world, with more and more innovations being developed every year for increased efficiency, particularly in the click arena. According to FCNews research, however, glue down remains the No. 1 LVT installation option, representing 66.3% of the category in dollars. Click came in at 25.7% with loose lay/floating at 8%.

“Based on all channels, but mainly commercial and property management, glue down continues to play in high volume,” said Paul Murfin, co-CEO, IVC US. “When it comes to specialty retail, consumers are familiar with floating floors offered today because of laminate, but there is acceptance that a click product can perform very well, too.”

Michael Raskin, president and CEO of Raskin Industries, has observed continued strength in glue down on the commercial side, where people “feel more comfortable” with it. “On the residential side, I think there is [activity] across the board. Click products are more suited for residential use, but there is a still a strong market for glue down products priced under $1.50 on that side. In commercial they will come at a higher price point.”

Sheet report

Sheet vinyl—both residential and commercial—was down 4.5% in dollars in 2014 to $756 million from 2013’s $791 million. The commercial market took the big hit, declining 13.9% in dollars from $254.24 million in 2013 to $219 million last year. The residential segment was flatter than a pancake at $537 million (compared to $537.2 million in 2013). It now commands the lion’s share of the sheet vinyl market—71% in dollars and 86.8% in volume.

Most industry experts attribute the decline in sheet in certain applications to the strength of LVT, particularly with ease of installation and design options. “Homeowners, particularly those from the DIY or BIY market, find flexibility, modularity and opportunity in LVT products, which is really contributing to that shift away from sheet toward tiles and planks,” said Jeff Krejsa, senior vice president, Tarkett North America.

According to Joe Bondi, vice president, residential, Armstrong Floor Products, North America, tile—both LVT and VCT combined—is bigger than sheet in the commercial market. “Sheet goods are strongest in health care and education, with health care using a lot of homogeneous sheet in clinical settings. The growth of the health care market is helping keep the sheet category strong, because there are not a lot of products that can meet the performance requirements of [medical] applications. But LVT is making gains in every market sector. It offers plenty of design appeal, but just as important is its maintenance profile.”

Yet, sheet products’ inherent physical characteristics make it a viable option in certain applications, mainly because of what they mean to installation and durability. Within sheet, fiberglass products continue to rise above those of the felt-backed market, representing a whopping 72% of sheet vinyl in 2014, with felt at 23.9% and 4.1% for “other,” such as Congoleum’s AirStep and Armstrong’s StrataMax products.

“We still see struggles for the felt segment simply because of the benefits of glass,” Murfin explained. “As more and more people become familiar [with glass] the less they are interested in staying with felt.”

Dan Natkin, senior director of residential products for Mannington, said he has observed a continued adoption of glass vs. felt in the marketplace. “Glass continues to grow as felt continues to decline. I think a lot of it is heft in hand. There is a perceived value when you hold a 100 or 130 mil glass [product] vs. a piece of felt. Some of the shift is due to ease of installation; it is definitely easier to work with glass-backed sheet vinyl, especially in smaller areas—particularly in new home construction. Glass-backed [sheet] you roll up and throw out. It folds into place.”

Domestic vs. import

While U.S. production is becoming more popular in the resilient market, particularly with major manufacturers opening domestic LVT facilities, the share of imports remains considerable. Jonathan Train, president and CEO of EarthWerks, which sources product from Asia, estimates about 20% of LVT was made in the U.S. last year. Indeed, FCNews’ research found 21.9% of LVT was manufactured domestically in 2014.

According to Train’s observations, China was the largest supplier. “Most of the know-how and technology for LVT over the decades has come from Taiwan and Korea. A lot of the Chinese-run companies originated from entities that started in these other Asian countries. If you look at all the infrastructure around LVT business, a lot of it is based in that area of the world. It’s not necessarily what people say about [cheaper] labor driving imports—it is just that is where the knowledge comes from. The investment in the U.S. hasn’t come until recently.” Train expects U.S. production to rise about 40% between now and 2019.

Natkin agreed that the LVT divide of import/domestic production is rapidly changing; he also estimates a current split of 80/20. “But that is rapidly changing. Our plant is up and running. IVC is coming up, Armstrong is coming up, Mohawk is sourcing out of the IVC plant and has its own plant coming, Shaw’s plant is coming—there will be a [significant] influx over the next two to three years.”

Murfin expressed a similar sentiment, explaining that the “lion’s share” of product sold today is imported as “almost none of the U.S. factories are up and running except for Mannington and Tarkett. I think, of course, you will start to see the newer U.S. factories having an impact on the market.”

Obvious benefits come from domestic production, including shorter lead times and ease of meeting the significant consumer demand for luxury vinyl products. “At the end of the day what’s important to customers is getting the product when they need it and making sure that there aren’t any problems,” Raskin explained. “Quality is still No. 1, but the key advantage [of domestic manufacturing] will be time and place for logistics.”

On the sheet side, the domestic/import discussion largely centers on whether you are talking residential or commercial. Only 20.3% of commercial sheet (value) is made domestically (17.9% in volume), while 75.6% (value) of residential sheet (80.5% of volume) can be attributed to domestic manufacturing. That number would be even higher if you factored in Tarkett-branded sheet vinyl, which is produced in Farnham, Quebec, Canada.

Other contributing factors

A release of pent-up demand was expected in 2014 but didn’t quite deliver, but that disappointment did not necessarily have an adverse effect on resilient business. “Market recovery was below expectations in both the remodel and new construction sectors, which had a negative impact on the business overall vs. expectations entering the year,” Bondi explained. “However, new products, innovation in installation methods and continued improvements in design helped drive growth in demand for resilient products and strong consumer interest in the category.”

Industry executives report LVT continuing to post impressive figures due to its ability to take market share from other resilient products, along with other flooring categories overall, in all corners of the market. In addition, end users are now open to installing LVT in various areas of the home, meaning it is no longer limited to spaces like kitchens, bathrooms and laundry rooms.

“It is not just such a surge; it is year after year after year of surging for the last five to seven years,” Natkin said. “LVT is absolutely spreading throughout the home. Anywhere that wood or laminate can go LVT can go as well. [With LVT] you alleviate some of the concerns around moisture.”

In terms of specific growth segments for LVT, Natkin said, “On the new home construction side, LVT is a lot easier to manage in small spaces vs. trying to lay a big piece of sheet vinyl. When you look at where the growth is in new homes it is primarily in multi-family, as LVT is quickly becoming a product of choice there.”

Train noted that the growth of LVT in multi-family applications stems from the changing market in that segment with the demographics moving into these environments. “There are a lot of 20- and 30-year-olds who aren’t investing into homes—many because of student debt—so they are living in the multi-family environment, and they want a more interesting look and feel within the units themselves. A lot of these multi-family spaces are creating more common areas and interior spaces where LVT fits in well. It is great for establishing a theme or mood. You see more of these theme-based settings.”

Emil Mellow, vice president of marketing at Karndean Designflooring, believes LVT is on the upswing as laminate shows holes in its performance, particularly where moisture is involved. He also noted the “de-trending” of sheet vinyl. “It is really across the board: home building, multi-family and the whole commercial arena, which includes all segments in terms of retail, health care—particularly elderly facilities— and schools. It is perfect where you need a high performing flooring product. [They] hold up because of the wear layer, ease of installation and versatility, so you get an incredible look to the floor without the drawbacks you would get with natural product or the maintenance.”

Murfin also noted LVT’s growth in all channels as a significant factor in its market strength. “We’ve never seen this from a product before. There is growth for LVT in every channel: retail, DIY, property management, commercial—you name it. And it is at the expense of multiple categories as well. I think LVT is taking share from commercial sheet, VCT, high-end residential sheet vinyl, laminate, ceramic tile and carpet.”

Overall, the market shows consumer preference shifting toward hard surface, according to Kurt Denman, executive vice president of marketing and sales for Congoleum. “Resilient is poised to capture a significant portion of that shift because it offers an incredible value through price and durability. The value is further enhanced by all of the great design options that are available and in a variety of constructions that can deliver exceptional performance without having to compromise on design.”

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