Carpet: Residential Focus: Manufacturers report strong activity at middle to high price points – Feb 2022
By Darius Helm
Over the last decade, the residential market has taken on a bottom-heavy hourglass shape, with a relatively healthy upper end overshadowed by a ballooning at the entry level and a continued shrinking of middle price points. However, reports from 2021 suggest that demand in the middle to higher end may be going through a resurgence. The question now is whether the industry can parlay those gains into a longer-term trend and stop the slide in soft surface marketshare.
According to Market Insights’ Santo Torcivia, early estimates show that residential carpet grew by nearly 18% in dollars last year, while the total flooring market grew by about 21%. While this reflects a marginal marketshare loss by carpet, it also represents a meaningful slowing in that loss of share. And on top of that, the last time residential carpet grew by 18% was many decades ago. Mind you, that revenue growth comes with lots of asterisks, the most prominent being the slew of carpet price increases last year. Also, that growth is compared to 2020, which, despite the surge of activity in the summer months, did in fact lose at least two months of business in the winter and spring with the arrival of the pandemic. Nevertheless, in spite of the price increases, unit sales were also up last year, by about 6%.
Residential carpet growth in 2021was led by the residential replacement segment, with multifamily and single-family builder lagging behind but still showing growth. Multifamily business was slowed, particularly in the first half of the year, by the slowdown in apartment turns. And on the builder side, after a strong first half, some regions started to slow, in part due to supply-side issues, as well as labor.
Of those three residential segments, the higher average price points are in residential remodel, so that also helps explain the delta between unit and revenue growth. Beyond that, many manufacturers would argue that some of that delta was due to consumers actually buying better goods. The various mills Floor Focus reached out to all reported strong activity at the higher end of their price ranges. According to Jared Coffin, vice president of product management for The Dixie Group, its best-performing brand last year was Fabrica, followed by Masland, then Dixie Home. Fabrica is Dixie’s highest-end brand, with products wholesaling from about $40 a square yard up to $60 or so. Masland starts in the low $20s with a lot of business in the $40 per yard range, while Dixie Home goes from the mid-teens up to $40.
Mannington’s Phenix residential carpet business reports that its middle high end (high teens to low $20s at retail) was strongest last year, though not its highest end. For Mohawk, its higher-end Karastan and Godfrey Hirst brands were strongest. And for Shaw, the $15 to $23 per yard price point has been most active, and that includes the upper end of Shaw Floors and the first tier of its higher-end Anderson Tuftex brand.
Stanton, which focuses on the higher-end decorative market, reports strong activity across all price points, which for Stanton means from the low $20s per yard up to as high as $120 per yard-with the bulk ranging from about $30 to $65.
Engineered Floors reports that residential remodel was stronger than builder and multifamily business, and that its DW Select line of better goods, which wholesale from the high teens to low $20s, has been performing well. And Tarkett, which has only been in the residential carpet market for a few years-largely through its 2018 acquisition of Lexmark-reports solid activity across the board, from around $10 per yard wholesale up to the upper $20s.
Although carpet is still the largest flooring category in the U.S. market, it has been losing flooring marketshare for about 40 years. Back in the early ’80s, it had a share of around 80%. Then came the rise of hard surface, led by hardwood, then followed by ceramic tile and laminates, and over the last couple of decades, by LVT. Today, carpet’s marketshare (residential and commercial combined) is about 32%. Residential alone clocks in at 24%.
In the 1980s, carpet was mostly broadloom. Carpet tile, which was first developed in the 1950s, started to make a serious dent in broadloom’s soft surface marketshare in the 1990s in the commercial market-carpet tile now makes up 75% to 80% of all commercial carpet. However, residential carpet tile has not gained significant traction so far. The most successful residential carpet tile brand is Flor, which does about $20 million in residential flooring sales. Shaw, Engineered Floors and Foss have also introduced residential carpet tile lines in the last couple of years.
NEW PRIORITIES, NEW OPPORTUNITIES
Over the last few years, as carpet’s use in the home has steadily been reduced to the more private areas, leaving the higher-impact communal spaces to the likes of LVT, hardwood, ceramic and laminate, there has been a sense of an approaching equilibrium, where hard and soft surface flooring would find a natural balance that would slow or perhaps stop carpet’s loss of share.
Then came the coronavirus, which in a matter of months forced huge changes upon households, potentially accelerating the movement toward equilibrium. “The whole pandemic has made consumers think a little bit differently,” says Jamie Welborn, Mohawk’s vice president of residential carpet product development. With more people filling up the space more of the time, the need for both cozy retreats and quiet spaces (for both peace of mind and Zoom business and classroom calls) quickly became evident. And as people spent their stimulus money or savings to renovate and create saner surroundings, issues like softening noise (through the use of soft surface products) became a higher priority.
“Sound abatement and comfort are more important than ever in today’s environment,” says Brad Christensen, Shaw’s director of residential soft surface product management, adding that homeowners are currently willing to use more of their discretionary income on floorcoverings.
In general, the higher end of the market has been more buffered from the negative economic effects of the pandemic, and the current wave of inflation is also not as significant for those upper-income households. According to Len Andolino, an industry veteran who joined The Dixie Group a year ago as vice president of its new decorative division, two of the most important things happening right now are the explosion of apartments and of luxury real estate. All of this churn at the upper end is creating a lot of opportunities, Andolino points out. As wealthy homeowners invest in more luxurious homes, the homes they leave behind become the upgrades for another level of homeowner, and so on down the line-and all of these higher-strata homes are naturally primed for renovation.
TRENDS IN DESIGN
When it comes to what’s selling in the residential remodel market, most of the mills say there’s growing demand for patterned and textured products, as well as for more dynamic colorways. “Any pattern or texture is hot right now,” says Shaw’s Christensen, including modern takes on traditional designs, like textile patterns. Greys are continuing to go warmer, practically in earth tone territory. Christensen adds that some people are taking risks with bolder colorations.
Mohawk’s Welborn points out that so much can be done in terms of color and pattern these days. And when it comes to color, in addition to a good mix of increasingly warm neutrals, accent colors like blues and greens are also trending.
Stanton president Jonathan Cohen reports that transitional designs have been resonating with customers over the last five years, with color slightly prioritized over styling. Decorative products have become more important, including in its well-established and still-growing fabricated rug business, and sophisticated textures are likewise in high demand.
Also trending at the mid to high price points are rugs made from custom-cut broadloom. Many of the leading manufacturers offer programs for fabricating rugs from carpet, and it’s mostly patterned goods that are used. Stanton has been fabricating rugs in-house for decades, and reports that it’s showing strong growth. The Dixie Group also does fabrication in-house, and Coffin notes that the increasing volume of smaller cuts of broadloom it ships out reflects the growing volume of rug fabrication at the retail level.
One unique tufting machine that has opened up entirely new territories in design is Card-Monroe’s Tailored Loop, which was introduced about three years ago. To date, the firm has sold seven Tailored Loop machines, as well as several sample machines. Major firms like Shaw, Mohawk, The Dixie Group and Interface have purchased machines and started churning out product. Tailored Loop has received a lot of accolades for its ability to create realistic woven looks in a tufted construction, as well as for the crisp high-low textures it can create. However, it’s not a speedy machine, so it can’t, at least not yet, produce carpet at lower price points.
Tailored Loop is used in both the residential and commercial market. It’s well suited to the hospitality segment for public space applications, where it can compete with woven Axminsters. Were it not for the impact of the pandemic on the hospitality market, there would probably be a lot more Tailored Loop machines in use today.
Incremental enhancements of the technology are likely in the coming years. The firm’s most prominent invention, the ColorPoint machine-of which it has sold over 150-was tweaked a few years ago to improve its speed by 50%.
If consumers are in fact finding reasons for renewed appreciation of carpet in terms of generating a comfortable environment in their homes-and if they are drawn in by the color and design of today’s better goods-this could represent a huge opportunity for the category, one that would perhaps qualify for some sort of concerted, unified marketing effort aimed at consumers.
Carpet’s biggest growth opportunity in the spaces now dominated by hard surface is with fabricated area rugs. With a strong market for fabricated rugs over hard surface and for broadloom in the more intimate areas of the home, there is still a clear path toward cementing carpet’s current share of the home’s square footage and to do so with higher-price products that showcase elevated design and, in the process, change consumer perceptions.
“I believe the possibility is there for the right marketing campaign to spark consumer interest in the carpet category,” says Surratt. “Just as waterproof has struck a chord with the consumer in hard surface, understanding the need state and features that help carpet fulfill the consumer’s needs is paramount.”
Over the decades, there have been several promotional campaigns to boost the carpet category, often building from innovations at the mill level, and some have done better than others. The most successful carpet campaign in the history of the category comes not from a carpet manufacturer but from a fiber producer, DuPont (which later became Invista) and its Stainmaster brand, which was sold last year to Lowe’s. DuPont’s three-year, $85 million advertising campaign, launched in 1986, elevated not just its cationic nylon 6,6 fiber but the entire residential broadloom industry. Stainmaster focused on the stain resistance of its fiber (and its lasting performance) to turn the spotlight on a product that had previously toiled away in the shadows as an unbranded commodity. It was hugely successful, and while ensuing marketing campaigns from competitors managed to raise their own profiles, it came at the expense of cementing Stairmaster’s position at the top.
However, in recent years, the brand lost some of its luster. Even before it was sold to Lowe’s, the brand had been diluted by Invista’s expansion of Stainmaster to include, for instance, PET fiber. And many long-time supporters of Stainmaster in the independent flooring retail community were already growing disillusioned.
Stainmaster may have given the category a boost in the 1980s, but share loss continued. Around the turn of the century, carpet mills and independent fiber producers started focusing on residential soft fiber-most notably, Stainmaster’s Tactesse and Shaw’s Anso Caress. The soft fibers got a lot of attention, but the category continued to shrink. A decade later, another wave of soft fibers, ultra-soft this time around, swept through the market. Some fibers went too soft and were quietly eliminated, but many of the others, including from Shaw and Mohawk, have found a place in the market.
Around 2005, Mohawk introduced a new fiber type, SmartStrand (Triexta), which has successfully boosted its middle price points, and it also has a strong environmental profile, with 37% of its content bio-based. While the fiber may have helped shore up Mohawk’s carpet business, it’s exclusive to Mohawk.
The most recent Stainmaster campaign dates back to 2014, when Invista took its SolarMax solution-dyed nylon 6,6 and rebranded it as PetProtect, riding the wave of growth in U.S. households with pets. While the soft fiber strategies seemed more aligned with the trend of carpet retreating to the more personal and private parts of the house (bedrooms, dens, etc.), Invista’s PetProtect campaign instead went toe to toe with hard surface, staking a position as a floorcovering capable of handling the high-impact household zones. The campaign was largely embraced by the industry, and in a short time, a lot of manufacturers’ marketing materials started promoting products designed to perform well with pets. And all of a sudden, all of those pets, the Saint Bernards and Labrador Retrievers and long-haired Persian cats, started to creep into product shots, casually sprawling across the pristine broadloom in convincing “I belong here” poses.
It’s possible that the PetProtect campaign could have helped stabilize and even boost the carpet market, but it unfortunately coincided with the arrival of rigid LVT, which became the fastest growing flooring category practically overnight. And on top of that, the three big mills didn’t participate.
RE-EDUCATING THE CONSUMER
It’s common knowledge in the industry that today’s carpet offers unrivaled opportunities in color, design and performance, and at affordable price points. And it’s also well understood that carpet, with its reduced share of the home’s square footage combined with its lower or comparable square-foot pricing relative to hard surface, should in no way be an intimidating investment for homeowners. In fact, higher-end carpet is easily attainable for less than the square-foot cost of, for instance, most hardwood flooring.
But while everyone from manufacturers to distributors to retailers understands the math of the matter, along with what the category has to offer in design and performance, it’s not clear how the message is being channeled to consumers.
Some of the onus falls to the independent flooring retailers, including the many mom-and-pop stores that still haven’t made the switch to selling carpet to their customers by the square foot and not the square yard, which makes it easier for potential customers to see the affordability of soft surface. And some of it is due to the nature of the category right now, with the prevalence of lower-end PET products, which often eschew patterning in favor of simple overall textures.
Although it’s conceivable that better goods with more color and pattern will make strong gains simply from organic consumer demand, it’s likely that a unified marketing (and product development) effort would go a long way toward shifting consumers’ perceptions of residential broadloom and shoring up the higher price points. “Any marketing campaign for the benefits of carpet would be a positive,” points out Matt Johnson, senior director of residential carpet for Mannington. However, he notes that much of the marketing the public sees regarding broadloom “is marketing against it on HGTV shows.”
Shaw Industries has committed to investing $400 million in its Aiken, South Carolina yarn facility to yield more output of both PET and nylon 6 fiber. A lot of the investment is in automation from chip to yarn package throughout the extrusion, twisting and heat setting process, with processes like doffing becoming entirely automated. However, the automation technologies have not translated into a smaller workforce-the firm will be adding 300 jobs for a net headcount of almost 1,000 at the facility.
The firm is also expanding its blue-tinted LifeGuard spill-proof backing beyond Shaw Floors to include Anderson Tuftex in its Pet Perfect and Pet Perfect Plus programs. The backing has also evolved to provide a softer hand but still be impervious to moisture.
In terms of the likelihood of more rounds of industry price increases, Christensen says, “We’re cautiously hopeful that there’s stability on the horizon.”
Mohawk Industries reports that, while its high end was strongest last year, strength in the builder and multifamily markets drove revenues of lower-end products, while middle price points were most stagnant.
Over the last couple of years, Mohawk has introduced SmartStrand styles in Karastan using Tailored Loop technology, but at this month’s Surfaces it used the technology on SmartStrand/nylon blends.
The firm has invested in state-of-the-art extrusion and dye technology for its ColorMax fiber system to improve clarity and definition, and it has also invested in technologies for twist, luster levels and other effects.
A year ago, The Dixie Group hired Len Andolino to develop its Decorative division. His 35-year tenure in the flooring industry includes about 15 years with Couristan and ten with Stanton. Andolino has taken Dixie’s wool businesses in the Masland and Fabrica units and rebranded them as 1866 by Masland and Décor by Fabrica and is retooling them with not only unique imported products but also with a few products made from other fibers, including UV-stabilized polypropylene for indoor/outdoor carpet.
At Surfaces, The Dixie Group exhibited its new Decorative division in its own 1,200-square-foot booth.
Engineered Floors reports that one of its biggest market segments, multifamily, is poised for strong growth this year, following a year or so of challenging conditions. Last year, Dream Weaver was its strongest division, and its DW Select sub-brand has been strong and will this year feature an expansion of its TwistX proprietary yarn system. The firm is also expanding its solution-dyeing capacity.
Stanton, which serves the market through several higher-end brands, has introduced a new fiber, L.i.o.n., which stands for Luxury Indoor Outdoor Nylon. Last year, the firm introduced an indoor product using L.i.o.n., and this quarter it is introducing indoor/outdoor L.i.o.n. carpet.
Late last year, the firm unveiled its B2B and B2C visualization technology, which includes a side-by-side visualization mode as well as a tool for visualizing product on staircases.
Phenix Flooring, acquired by Mannington two years ago, has a substantial carpet business that is vertically integrated through Pharr Yarns, offering the only cationic nylon fiber system in the residential market. Almost all of Pharr’s production goes into Phenix, and it’s also starting to be used in Mannington’s commercial carpet lines.
At Surfaces, Phenix introduced several patterned products in its new nylon program, including a ColorPoint pattern.
Jason Surratt, formerly with Phenix and Mohawk, joined Tarkett last September as president of Tarkett Residential in North America.
Tarkett fully entered the residential carpet market with its acquisition of Lexmark in 2018 and all its products are solution-dyed polyester. Since a lot of its products are made on Lexmark’s hospitality equipment, it produces a lot of patterned goods and intricate aesthetics, with most of its products wholesaling from around $10 per square yard to the upper teens.
At Surfaces, the firm introduced 25 new styles and a new display.
Copyright 2022 Floor Focus
Related Topics:Shaw Floors, Coverings, Couristan, Mannington Mills, Tarkett, Shaw Industries Group, Inc., Interface, The Dixie Group, Masland Carpets & Rugs, Tuftex, Engineered Floors, LLC, Phenix Flooring, Mohawk Industries, Anderson Tuftex, Karastan