Focus on Leadership - November 2012

Interview by Kemp Harr

Tarkett recently made the biggest deal of the year in the flooring industry when it purchased commercial carpet maker Tandus. That gave Tarkett its first carpet products and one of the most diverse product offerings in the industry. Jeff Buttitta, president of Tarkett North America, agreed to answer questions about this deal and how it positions Tarkett as it enters a brand new market. Buttitta was CEO of Johnsonite for 15 years before being appointed president of Tarkett North America in 2007.

Q. What is Tarkett’s strategy for flooring in North America?
A. Our goal is to build the global brand of Tarkett in North America by offering the widest array of products and services through our strategic brands that now cross both hard surface and soft surface categories. We achieve this by putting clients and homeowners in control of the design and selection process to create the ideal space.

Q. How does the Tandus acquisition compare to Tarkett’s purchase of Johnsonite in 2005?
A. Actually, the acquisition of Tandus mirrors the same criteria used with the Johnsonite and Centiva acquisitions. Our strategy is to invest in businesses that have strong brand recognition in growing and profitable segments, complementary product categories, excellent operating performance, strong management and common values. Tandus, Centiva and Johnsonite are all industry leaders with strong positions in most hard and soft surface categories, and that will accelerate Tarkett’s growth strategy.

Q. One common belief in this industry has been that a hard surface company would never buy a carpet company because of the traditional differences in the route to market. Do you plan to follow the traditional formula—direct on the carpet side and through distribution on the hard surface side? If so, how to you intend to make the distributors on the hard surface side comfortable that you won’t cut them out of the mix?
A. This certainly was a consideration in our decision. However, we recognized that the end user and architect and design community were changing, and were looking for companies that provide a broader range of products, services and warranties, and work with them more efficiently. In many ways a hard surface company is adept in managing numerous product categories and routes to market, so the addition of soft surface and its direct route to market feels natural to us.

Our hard surface distribution partners are important to us. For example, the Johnsonite portfolio is extremely broad and includes many product categories where some of our competitors sell only through direct channels. We have worked with our distributors to ensure we can respond efficiently in these competitive situations and have earned their trust over the years, and I expect that to continue.

Q. Now that Tarkett is a major player in both hard surface and carpet, how will you differentiate yourself from Shaw or Mohawk?
A. Our vision of flooring is to move beyond practical and functional floors to floorcoverings that combine aesthetic appeal, pleasure and comfort with a coordinated approach in design and color that will not compromise the design objectives of our customers. We have worked extremely hard over the years to provide perhaps the broadest coordinated product offering in the industry with vinyl, rubber, linoleum, accessories and now commercial carpet. The vast part of our portfolio is produced in the U.S. with strong, flexible manufacturing that provides us the ability to respond efficiently to the needs of customers, including products that meet a special need.

Q. Before Tarkett bought Johnsonite in 2005, its North American offices were based in Farnham, Canada. Now that you’ve purchased Tandus, is there any chance you’d move your headquarters to Dalton?
A. Nothing is going to change. Tarkett’s hard surface division offices are located in Chagrin Falls, Ohio near Cleveland, and will remain there. Tandus has a strong and historical presence in the Dalton area and its offices will continue there as well.

Q. In earlier discussions you told me that you plan to run Tarkett and Tandus as two separate businesses. In what areas will you seek synergies that will reduce costs and also improve service?
A. We plan to coordinate our designs and colors across our products. The Tarkett global footprint will also provide Tandus the foundation for international expansion in markets it doesn’t participate in today, as well as leverage the strengths of both companies in developing countries. We also plan sustainability initiatives that will provide customers more choices.

Q. In what ways will Tandus help you advance your sustainability goals?
A. Tandus is recognized in the market for its innovation in terms of sustainable development and design. It has launched an ambitious environmental and reclamation program known as the Infinity Initiative. Tandus was the first manufacturer to launch extensive third party certification programs covering recycled content. And Tandus had the first industry reclamation center. It also reduced greenhouse gas emissions and implemented other environmental management systems. This fits very nicely with our objective of being the environmental leader in our industry. Our progress in materials development, in reclamation and recycling and emissions can only be advanced by sharing experiences. Developing a comprehensive program consistent across all our North American businesses will be one of the first initiatives that our teams in Tarkett and Tandus will be working on.

Q. During the Tandus due diligence process, you probably identified a few areas that needed investment, post-acquisition. What are those areas?
A. We’ll be investing significantly to develop an unparalleled, coordinated portfolio of products. With Tandus in particular, we plan to invest in the latest manufacturing technologies in areas such as tufting to maintain our competitive edge. That will be one of our key initiatives.

Q. Today, Tandus’ business is focused entirely on the commercial market. How long will it be before we see residential carpet come out of this business?
A. We’ll continue to be focused on the commercial segment of the market. As carpet tile continues to expand, there may be a residential opportunity.

Q. You recently announced that you’ve hired Jeff Fenwick out of the furniture industry to lead your hard surface business. Tell us more about the strategy behind this decision?
A. We’ve been searching for a COO for our hard surface business for some time. I’ve been operating as COO and CEO for several years, and with plans to expand into carpet we felt the timing for a COO for the hard surface business was appropriate. I will focus on our North America strategy and on integrating the right areas within our hard and soft surface businesses.

Q. Many people know that Tarkett is owned 50/50 by the Deconick family and KKR. What role does each owner play?
A. They are very complementary, with KKR providing a global and financial perspective and support. While there are no family members involved in operating the business, the family provides a strong commitment to long-term ownership and growth. We’re fortunate that we have a strong mix of shareholders that work with our executive team on long-term strategy.

Q. Companies that succeed in branding usually focus in an area where they can carve out their own unique promise to satisfy an unmet need in the market. What will Tarkett’s unique selling proposition be in North America?
A. We have worked extremely hard over the years to provide perhaps the broadest coordinated product offering in the industry with vinyl, rubber, linoleum, finishing borders and floor finishing accessories. Our USP is that we can meet our clients’ design needs as well as their functional requirements. We’re also fortunate in that many of our end users and A&D customers have requirements that need to be met worldwide.

Q. Part of your career success has come from teaching your team to position flooring products more like the guys in furniture business position their products. Will that continue to be part of your strategy?
A. After I joined Johnsonite in 1990, there appeared to be an opportunity to elevate the value proposition of flooring. One of the differences between flooring and office furniture was that there were many specialty flooring manufacturers within a specific product category. In office furniture the value proposition evolved from specialty product categories to systems furniture, with all components working together, offered by one manufacturer. Most flooring manufacturers were focused on distinct products for a single application and, as a result, the designer was faced with the challenge of integrating different products and aesthetics from a variety of manufacturers. It wasn’t uncommon to hear from end users that flooring was seen as a cost and furniture was perceived as an investment.

We began to encourage our sales teams and channel partners to see how all the elements of the space work together—furniture finishes, wall and floor surfaces, for example. Today, many flooring manufacturers have expanded their offerings and are moving at a fast pace to a single source value proposition.

Q. What do you do for fun/relaxation when you aren’t leading Tarkett’s North American business?
A. Although I’m not sure I would call it fun anymore, I do find it refreshing when I can find the time to run. I used to run marathons but for now most of my running is on the treadmill. For enjoyment, family is very important in my life, and spending quality time with them helps complete me personally and spiritually.

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