Focus on Leadership - January 2010

Interview by Kemp Harr

Frank Douglas, vice president of business development for Tennessee tile manufacturer Crossville, sat down with Floor Focus to answer questions about his background and what makes his company different from others in the industry.

Q: Tell us a little bit about your background prior to working for Crossville.
A: I’ve been working in the tile industry my whole adult life. After growing up in Chicago and serving a tour of duty in the Army, I immediately went to work for ceramic tile distributor F.G. Whitt Tile Co. of Memphis. While working during the day for Whitt, I attended night classes at the University of Arkansas and earned a marketing degree. While this made for long days, it allowed me to immediately apply what I was learning in school. After a few years, I went to work as an architectural rep for Design Materials—another tile distributor based in Jacksonville, Florida: Then I worked for Laticrete, started my own distributor business in Florida, and finally found my home here at Crossville 12 years ago.

Q: As you look back on your career, what did you learn that has contributed to your success today?
A: With Whitt, and when I had my own distributor business, I learned the basic fundamentals of running a business from soup to nuts. And when I started calling on design firms with Design Materials, I learned the true value of building relationships. This is huge when you’re working with specifiers. Also, when I came to Crossville, I brought over 20 years of hands-on distributor knowledge with me that gives our team a valuable level of empathy to that critical channel.

Q: Describe, if you will, Crossville’s unique selling proposition. What sets you apart?
A: Let me start with the soft side and we’ll get to the products later. Crossville is a small town company with an ambitious drive to win and a global perspective. Not only do we focus on growing our own people from within but we also work hard to train our distributors, dealers and specifiers. Long before I came here, the company started Porcelain Stone Institute with a wide range of short courses designed to help our entire multifaceted customer base sharpen their own skill sets and improve their effectiveness.

When it comes to distribution and customer service, we are pleased to have a strong distributor base and a very strong logistics program. We believe it is important to under-promise and over-deliver—we always strive to exceed customer expectations.

And when it comes to product, we’re well known for offering a wide range of “better goods” that are well suited for the American market. Much of our volume is on the commercial side of the business but we also service the larger independent retailers. We offer a combination of texture, color and styling that is unsurpassed by any other U.S. tile company. We also recognize that our products will transition into other flooring surfaces, so we often partner with other style leaders in the flooring category to look for synergistic design.

Q: What are the biggest advantages of being privately owned by the Curran family? Are there any disadvantages?
A: Actually, I’d call family ownership one of our silver bullets. The Curran family is not in this for the short term and with a long-range view comes several benefits. We enjoy very speedy decision making and close guidance on big picture decisions. And when it comes to economic cycles and capital investments, they are as passionate about being the market leader as we are.

Q: Speaking of investments, we’ve seen Crossville make some major investments in new production equipment during the recession despite a decline in overall tile demand. During these tough times, how do you decide where to make investments and where to make cuts?
A: We have always invested in our future and continue to invest in our future. Once you know where you want to be strategically, you start to look for windows of opportunity. We know that sustaining our leadership position requires continued investment in capacity and state of the art equipment, and our owners also recognize that. Last year, we enlarged our main factory, and added a new production line, part of the infrastructure to support the new press, the only one like it in the Americas.

We bought the best press money can buy but we also bought it when we could take advantage in the relationship between the dollar and the euro. And sure, we’ve had to watch our balance sheet but we’ve been very fortunate that most of our personnel cuts have been attrition cuts. We also shuttered a small factory that no longer fit in our core competency. We haven’t had to do much else in the way of cutting.

Q: Does this recession offer Crossville any particular opportunities or advantages?
A: Absolutely. With our domestic inventory, it’s getting harder (for distributors and others) to justify importing full containers of tile. With inventory right here, it’s a great opportunity for us. Nobody has as much domestic inventory as we do, and nobody has the same kind of logistics system. We can move tile to our customers very quickly.

Q: What initiatives have you implemented to ensure that your company will be stronger when the market recovers?
A: As mentioned earlier, we’ve made the necessary investments in infrastructure and broadened our capability. But just as important, we’ve continued to invest in our brand. As the market recovers, and we all know it will, our plan is to be well known and in high demand. We also plan to have the capacity to service that demand. We’re bullish on the long term.

Q: U.S. per capita usage of tile is four times less than it is in Italy (7 ft2 vs. 29 ft2). Why is that and what will it take to increase market penetration?
A: That seems low and it is. The funny thing is that it’s actually doubled since I’ve been in the business. I can’t explain it, other than it’s part cultural and the fact that carpet is so much more popular here than it is in other countries. As the American consumer evaluates the long-term benefits and fashion elements of tile, its penetration will continue to grow. We are already starting to see more of it in hotels, airports and other public spaces. Also this urban shift is helping and, believe it or not, the self-reflection that comes from an economic depression could help. Consumers are starting to save more and some are moving into smaller more refined spaces that provide a great opportunity for tile.

Q: Traditionally, manufacturers have sold to distributors who serve both tile contractors and retailers. How do you make decisions around how to optimize your sales and yet support the channels that best serve the customer (end user)?
A: All of these factors need to be monitored. The Internet will certainly have some bearing just like the home centers have. But since tile is a product that requires skilled installation, the dealers on the residential remodel side that know how to position tile as an installed floor will continue to do well. Speed to market is critical on the commercial side and that is an area where we stand tall.

Q: Do you foresee any changes in market dynamics (smaller, more specialized A&D firms, fewer commercial contractors, fewer specialty retailers, continued share growth with home centers, etc.)?
A: No, we don’t see major changes coming. We work very hard with the professional designer, the A&D firms, and will continue to pursue that no matter what form it evolves into. We don’t see a tremendous change in the way we go to market. We support our distributors and aggressively promote in our channel.

Q: What is your biggest market in the commercial business?
A: We’re very spread across the board. We have a very strong position with national accounts like hotels and restaurants, and automobile dealerships, people that are building multiple locations. We’re very aggressively promoting, and have been for some time, the sustainability side of tile, and are in many ways a leader in sustainability.

Q: What was your thinking around your tile take-back program?
A: We invested in some proprietary equipment that enabled us to crush tile. The waste from our factories was the only thing we were taking to the landfill. By investing in tile crushing equipment, we were able to close the loop, just like the carpet people recycle fiber, and not take this waste material to the landfill but crush it back into raw material and put it back in the body of the tile.

Q: Is that financially beneficial?
A: It’s the right thing to do, greenwise. It’s less material going to the landfill. It’s too early to tell if this will save us money, but it doesn’t appear to be costing us. Since we already have invested in the equipment to grind up our waste, the ongoing cost is minimal. But it’s too early to fully understand the financial benefit.

Q: Has the downturn affected your environmental priorities?
A: It hasn’t affected our environmental priorities at all. We’ve always tried to be responsible in our manufacturing, and this goes back to the 80s. It simply doesn’t change.

Q: Do you find that your customers are as interested in sustainable products as they were a few years ago?
A: We’re finding more and more that people are as concerned as ever, but with the current economy, people seem reluctant to pay a premium for a sustainable product. So we’re working hard to find a way to offer them green products that don’t carry a big premium.

Q: What’s your impression of the various green rating systems?
A: It’s getting better every day. There was clearly a lot of confusion and a lot of greenwashing going on at the beginning but it seems to be getting sorted out. We use a third party certifier for our green products. The market seems to be seeking a level where it makes sense.

Q: Is there anything you’d like to see happen in that regard?
A: We’d love to see some consolidation. We’d love to see some universal standard that we could all follow.

Q: Do you feel like there’s a lot of greenwashing in the tile industry?
A: I’m not sure there’s a lot of intentional greenwashing. I think it’s such a hot topic that everyone wants to be on board, and I think there are times when people genuinely believe what they’re saying, but it may or may not hold water. I don’t think there’s a lot of malicious greenwashing in our industry but I think there’s lack of knowledge that leads to some erroneous information being put out.

Q: What do you think the economic recovery is going to look like?
A: It certainly looks like it’s going to be a long, slow recovery. We don’t think the commercial market is going to be as devastated as it originally looked like. We see the housing market starting to recover, and we see some signs of sales improvement within our own channel.

Q: What are the key elements that have to be in place for a recovery as far as your business goes?
A: Housing needs to stabilize and start getting healthy again. That seems to be engine that really drives everything.

Q: What about the commercial side?
A: We need to see the employment figures getting rosier and just need to see we’re enjoying a sustainable recovery, so that all the segments can start improving.

Q: Do you see those signs coming now?
A: We’re just starting to see activity picking up from what it was a couple of months ago. And as I said earlier, we know it’s going to recover, it’s just a matter of when and to what level.