Carpet Tile Update - April 2009

By Darius Helm

Carpet tile accounts for a third of all specified commercial carpet and it continues to gain share, driven by factors like design flexibility, ease (and low cost) of installation and a strong environmental focus. At this rate, it will overtake broadloom in under a decade.

It’s more expensive than broadloom, it weighs more, and unlike broadloom it doesn’t lend itself to large scale designs, but all that hasn’t stopped carpet tile from steadily taking from broadloom and establishing itself as the industry’s most dynamic floorcovering.

According to Market Insights/Torcivia, carpet tile and six foot goods generated mill revenues of $1.3 billion last year. Six foot goods are manufactured in the same manner as carpet tile, with the same construction and the same backings, but they’re cut into different formats. Tandus, the single biggest producer of six foot goods, sells most of its carpet to the education market, but even there, carpet tile is taking share from six foot carpet.

Market Insights estimates that about $144 million of the $1.3 billion market is six foot goods. Commercial carpet tile makes up about $1.1 billion and the remaining $50 million or so is residential tile. Interface’s Flor and Milliken’s Tesserae and Legato are the only residential tile lines on the market.

Overall, the commercial market has decelerated more abruptly than the residential slowdown that preceded it, largely due to the banking crisis. Even though carpet tile continues to gain share from broadloom in this economic environment, the carpet tile sector will be down this year, likely by 8% or 9%.

Carpet tile has become such a competitive advantage that the 15 biggest commercial carpet mills, not including hospitality specialists, all sell carpet tile. All the others wish they did, and they probably will soon enough, likely following the route of some mid-size players that have their products made for them by big players like Shaw and Milliken. Once business ramps up enough, the next step is buying PVC equipment or polyolefin extrusion equipment to make their own backings.

Sector Performance
Carpet tile began its life as a utilitarian product in the corporate sector, and that sector is still where most carpet tile goes. But over the last decade, new designs and installation techniques have broadened carpet tile’s appeal and elevated its profile as a design element. So not only is it being installed instead of broadloom in high visibility settings in the office market, but it’s taking share from both broadloom and vinyl in the education and healthcare market because of its performance characteristics. 

The government sector—through the GSA—is another area of significant growth, in part because of carpet tile’s environmental profile. Carpet tile is also growing in the retail sector as well as hospitality, though it still has only limited applications in that sector. Nevertheless, many boutique hotels have taken advantage of carpet tile’s distinctive design capabilities in lobbies and other public spaces, and some restaurants have specified it as a soft alternative to hard surface flooring.

Carpet tile’s performance in the various commercial sectors largely reflects the overall condition of those sectors. For instance, the corporate sector has been hardest hit, led by tenant improvement. Financial services firms, insurance companies and professional services like law offices have suffered the most. The sector started slowing in the third quarter of last year and further decelerated in the fourth quarter. Large national accounts, including institutions like the big banks, have fallen into inactivity, and mills holding those accounts have taken a big hit. 

There are still big jobs out there, but they’re coming with much smaller budgets. Some subsectors, like technology and energy, remain fairly strong. Overall, the trend is toward renovating existing spaces rather than moving to new spaces.

Retail store planning has also taken a serious beating, and it was already slowing earlier last year as a result of fallout from the housing slowdown and resultant credit crunch for consumers. Furthermore, the sector itself is shrinking as a range of retail businesses close their doors. However, there’s a limit to how long retailers who do manage to stay afloat can go without a makeover—store appearance is simply too essential to a retailer’s success.

The hospitality market has also slowed. Carpet tile doesn’t have a very big share of this market, but its use is growing, mostly in the public space side of the sector. Carpet tile is not commonly used in guest rooms, even though its performance characteristics make it well suited for that application—carpet damaged by guests can be swapped out tile by tile instead of having to replace the entire carpet as in the case of broadloom. However, carpet in guest rooms is traditionally fairly inexpensive, so carpet tile cannot yet compete there effectively.

According to some carpet manufacturers, the big surprise in the hospitality market is the restaurant business, at least for now. There’s no good explanation for why restaurants would be performing well in this economic climate, so we’ll see how that market fares through the balance of the year.

Most mills report that the strongest sector right now is education. Carpet tile has been making great gains in that sector in recent years. It’s going into K-12 classrooms, sometimes instead of vinyl, and it’s used in corridors, lounges and other applications. In K-12 it’s all about performance, cost and maintenance, making carpet tile an attractive alternative to VCT. It’s taking share from six foot goods as well. 

In higher education, where aesthetics are more important, the average price point of carpet tile is higher than in K-12. It’s used in public space applications and also in dorms.

Many were hoping that the government’s stimulus package would help keep the education sector healthy, but in fact all of the funding specifically for school modernization and renovation was cut from the stimulus package. The overall education package was increased to compensate for the $20 billion in eliminated programs and wording was inserted to allow for use of the funding in modernization. However, state and local governments are not required to use any funds for this purpose, so it remains to be seen what their priorities will be.

Fortunately, many school projects are long and drawn out, particularly if they’re publicly financed, so there are plenty of projects out there already funded. That should help buffer this sector for much of this year, and in some cases for several years.

Mills report that work in the government sector is also strong. The GSA only purchases flooring that meet certain criteria, and increasingly those criteria relate to sustainability. As such, carpet tile is an increasingly popular choice for government projects and that sector should remain comparatively healthy well into 2010.

Like education, healthcare is a sector heavily driven by demographics—even more so than education, in fact. Baby boomers are starting to saturate the senior market, increasing the need not just for acute care facilities but for senior living facilities as well. Though it’s likely that some of the more high end assisted living projects, like continuing care retirement communities with a range of luxurious amenities, will be tailed back in the next couple of years, the growing ranks of retirement age Americans have to go somewhere, and one way or another that means new construction.

Carpet tile has limited applications in healthcare due to the specific requirements of much of the space, where only vinyl, rubber or linoleum can be used. However, in non-sterile settings, tile is taking share from broadloom and even from hard surface flooring like vinyl. It is used in both acute care and assisted living, in corridors, lounges and other public spaces.

International business also started tailing off in the fourth quarter of last year in most major markets. Business is down in Canada, though the Canadian economy remains much more healthy and stable than the U.S. economy. Business in western Europe as well as emerging markets in eastern Europe, India and the Middle East is also down significantly. There’s also been a significant slowdown in Dubai in the UAE, which for years has been the fastest growing development project in the world. The drop in oil revenues combined with the economic crisis and plunging property values has brought a lot of development to a grinding halt—and it doesn’t help that the projects, including several manmade islands, target the world’s wealthiest people, who aren’t quite as wealthy anymore.

Conditions are also tough in China and much of the Far East, though some mills report that their business in Japan is still comparatively strong.

The recent strengthening of the dollar compared to most other currencies has made it that much harder to pull a good profit from international jobs. For instance, last May, the exchange rate with the British pound was $2.10. Now it’s closer to $1.40.

Carpet Tile’s Green Profile
Nowhere is sustainability’s competitive advantage more evident than in the carpet tile business. On the surface, carpet tile doesn’t seem particularly environmentally friendly—it’s almost entirely made up of plastics, like nylon, vinyl, polyolefin and polyurethane—but that’s where the greening of the flooring industry began. In fact, it was due directly to carpet tile’s unsustainable environmental burden. A growing environmental consciousness among key industry leaders coupled with demand from the A&D community led to bold environmental declarations that were ultimately backed up by investments in research and development, new chemistries, and new equipment for reclaiming and recycling carpet.

Over the last decade, all of the big carpet manufacturers have aggressively redesigned their carpet offerings—both broadloom and tile—and in the process have reduced the environmental footprints of their products at a much faster rate than any other floorcovering category. Not only is most of the carpet tile sold by these players fully recyclable, but recycled content is high and growing steadily. Just about every element of a carpet tile can now be recycled back into carpet.

It looks like even this recession can’t stop the sustainability movement, though there’s no telling how much faster it would be progressing without this economic crisis. It seems as though the recession came right when the green movement was hitting its stride. It was finally filtering into the collective consciousness of property owners, presidents and CEOs that when it came to construction and renovation, the cost of a project was more than just the initial cost. And at the same time they were starting to understand that long term costs like maintenance, energy consumption, water use and waste were best addressed through sustainable environmental strategies. Going green was becoming synonymous with going forward.

By all accounts, much of that newfound wisdom is helping sustain the green movement at least through the early stages of this recession. According to the A&D community, green is still a high priority among its clients, though many projects that start out with ambitious environmental goals are suffering from budget cuts and the use of sustainable products, which generally come at a higher premium, are among the first to go.

The good news for carpet tile is that green is now so standard that it often doesn’t cost any more. Firms like Shaw and InterfaceFlor, and even smaller players like Beaulieu, don’t even make tile that doesn’t have a strong green story.

The bad news is that the successful greening of carpet—and it still has a long way to go—is heavily dependent on the health of the reclamation infrastructure, which has only been developing for the last few years and is far from stable. This recession, coupled with significant problems generating enough demand for reclaimed materials, has the infrastructure teetering dangerously near the brink. If solutions to the demand problem are not quickly addressed—and it relies largely on working intensively with the plastics industry in general—more entrepreneurs will go out of business and once again the industry will be left with no viable method of reclaiming and reusing carpet. 

Manufacturer Highlights
The largest global player in the carpet tile business is InterfaceFlor, which is headquartered in LaGrange, Georgia. Following the recession that started at the beginning of this century, InterfaceFlor quickly adopted a market segmentation and customer diversification strategy. Back in 2003, as the firm emerged from the recession, 70% of its carpet tile business was in the corporate office market. Now that market accounts for 40% to 45% of the firm’s business, and the balance is in markets like education, government, healthcare, retail and hospitality.

The fastest growing segment has been education, mostly in the K-12 market. The firm is also a big supplier to the GSA, which favors its green products. 

Total sales for Interface Inc. were flat last year at $1.1 billion. InterfaceFlor’s total global sales were up a couple of points to $947 million, and sister company Bentley Prince Street was down by single digits to $135.5 million. According to Daniel Hendrix, Interface Inc.’s president and CEO, following a healthy October, markets declined rapidly in November and December. The corporate sector, which had already slowed in North America and western Europe, declined rapidly toward the end of the year. In addition, multinational companies cut their spending in emerging markets like India and eastern Europe. 

The biggest news at InterfaceFlor is its recent Environmental Product Declaration (EPD), a third party certification based on a comprehensive lifecycle assessment. Many environmental experts believe that lifecycle assessments are the best way to quantify environmental footprints. The comprehensive assessment captures all the relevant data and requires a far higher level of transparency.

InterfaceFlor’s EPD is based on its Convert line of carpet tile that goes through a closed loop material management system that takes old carpet and turns face fiber back into face fiber and backing into backing. The line is already twice as big as what the firm introduced at last year’s NeoCon, with multiple patterns and over 60 colors of reclaimed nylon.

Another important InterfaceFlor innovation is TacTiles, the firm’s installation system that does away with traditional adhesives in favor of recyclable plastic squares that attach carpet tiles to each other. TacTiles were introduced in 2006 and have been embraced by the market for their sustainability, ease of installation and ease of removal and replacement.

InterfaceFlor’s residential business, Flor, is sold direct from the firm, largely through the Internet, as well as through catalogs. Last year the firm opened a 1,000 square foot test store in Santa Monica. Though there are tile products on the showroom floor, ordering is done onsite from the Internet. The model has been successful so far, and the firm intends to try out another test market. Flor tiles are medium to high end—$5 to $25 per 20” tile. The firm’s offerings include a Martha Stewart line. New this year is a wool collection of shag designs. Tiles are installed using the TacTiles system, though they’re called Flor Dots.

Bentley Prince Street, based in City of Industry, California, has traditionally been a broadloom producer, but in recent years the firm has been doing a thriving carpet tile business. Early last year, the firm started up its own carpet tile line—it has been relying on its sister company, InterfaceFlor, for backing its tile, and shipping product from LaGrange, Georgia to California had added to the environmental burden of its products. 

The firm now backs its products inhouse with a thermoplastic cushion with post industrial recycled content and plans on adding a hard backed tile with both post industrial and post consumer recycled content in the near future, made from the same thermoplastic polyolefin. The cushion backed tile is installed with a water based solvent-free product called Healthbond 8700, a full spread releasable adhesive, and its hard backed tiles will be able to use the TacTiles system.

Most of Bentley Prince Street’s carpet tile goes to the corporate market, though higher education is the fastest growing market. Retail store planning has suffered the most, though the corporate market is also down substantially, in part due to the reduction in work from large national accounts.

Shaw Industries makes broadloom and carpet tile with EcoWorx backings. EcoWorx is a fully recyclable thermoplastic polyolefin, and it is reclaimed, along with face fiber, by a chemical process (dissolution) for broadloom and by a mechanical process (elutriation) for carpet tile. The firm also offers EcoLogix, a cushion backed tile with 88% post consumer recycled content in the backing, including reclaimed plastic bottles. All of the firm’s carpet tile is either EcoWorx or EcoLogix.

Last year the firm added a second EcoWorx tile finishing line. EcoWorx tile is sold through both Shaw Contract and Patcraft Designweave.

The corporate sector is Shaw’s biggest carpet tile market, though it’s slowed significantly, particularly on the tenant improvement side. Fastest growing is education, both K-12 and universities, and the government market is also strong. Broadloom is still a bigger part of Shaw’s commercial carpet business, but if current trends continue carpet tile will account for over half of that business in well under a decade.

The firm not only reclaims its carpet tile, but it also recycles and reuses its nylon 6 fiber through its Evergreen Nylon Recycling facility in Augusta, Georgia, which depolymerizes nylon 6, reducing it to caprolactam, which is distilled and repolymerized. The final product is equal in quality to virgin nylon 6.

Shaw is one of the few floorcovering producers that works directly with raised access flooring manufacturers to create products that register precisely with the size of raised access floor modules. Raised access flooring is essential in many hi-tech applications and it’s also used in office buildings as a way of maximizing the efficiency of HVAC systems and electrical systems. Raised access flooring is an effective solution in new construction and can contribute to LEED points.

Another big player in the carpet tile business is Tandus, which also makes broadloom and six foot goods. Its carpet tile and six foot goods have a strong position in education, though corporate is still its biggest carpet tile market, despite the slowdown. The firm also sells carpet tile in the healthcare sector. Both healthcare and education have slowed.

The firm’s PVC hard backed tile, ER3, is fully recyclable, and the firm also has a fully recyclable cushioned backing called Flexaire, which is used on about 10% of its modular products. The firm’s latest backing, Conserve, is a hard backed PVC that weighs less than ER3 and also costs less. Though it doesn’t currently have recycled content, Conserve can be fully recycled into ER3. Conserve makes up about 20% of the firm’s modular offering. For jobs specifying PVC free materials, Tandus has Ethos, which is polyvinyl butyrate (PVB) reclaimed from the laminated layer in safety glass.

Historically, six foot goods have been the biggest part of Tandus’ business, but its carpet tile business has been growing so quickly that it now accounts for 35% to 40% of total revenues. 

Last year, Mohawk extended its carpet offering across all four of its commercial brands—Lees, Karastan, Bigelow and Durkan—in a wide array of compelling designs. While Durkan serves the hospitality market, the other three brands target all the sectors in the commercial market. Karastan is the high end brand, Lees is in the middle, with a focus on performance and innovation, and Bigelow is the value brand. Historically, Lees has been the brand associated with carpet tile, which today accounts for over 50% of its business.

The majority of Mohawk’s modular backings are hard backed PVC—Ultraset and ICT—and its non-PVC thermoplastic backing, Encycle, makes up close to 20% of its offering.

Like most of the carpet tile players, Mohawk’s tile goes largely to the corporate office market, which is slumping. Its fastest growing sector is government, though its education business is also growing. The firm also sells carpet tile to the retail store planning sector, which has been hit nearly as hard as the corporate sector. Mohawk also does a lot of international business, and that’s 70% to 80% carpet tile.

Milliken makes printed carpet tile, mostly for the commercial market, as well as broadloom for the commercial, hospitality and residential markets, and area rugs. Most of its carpet tile business is in the corporate sector, as well as education, government and healthcare. The firm also sells two residential carpet tile lines—Legato through Home Depot and Tesserae through independent distribution.

Its education business, which has a stronger position in K-12, has so far been holding up, while corporate business is down. 

Milliken has been investing in new product and backing systems. Its traditional backing is ComfortPlus, a cushioned polyurethane system, but its new backing, B2, is a flexible hard backed tile, also made of polyurethane, that the firm calls “gravity dominant” because it contours to the imperfections of the floor. The carpet tile is installer friendly and can be trimmed with scissors.

Over the last couple of years, Milliken has made great strides in its carpet designs, both in tile and broadloom, and this year the firm is offering an entirely new design approach, which will be showcased at NeoCon in Chicago this June.

J&J/Invision has been making carpet tile for about 20 years, though it only re-entered that business in earnest in 2004, and its biggest market is the tenant improvement segment of the corporate market. The corporate sector overall has been the fastest growing sector for the firm, though its been suffering since last fall, so this year J&J/Invision is focusing more on the education, government and healthcare sectors. 

Over the last five years, J&J/Invision’s carpet tile business has grown rapidly, and it already accounts for about a quarter of its total production. The firm offers a lot of designs in both carpet tile and broadloom. 

J&J/Invision’s traditional carpet tile is backed with Nexus, a PVC hard back, but now it’s coming out with eKo, a fully reclaimable polyolefin. It was introduced in January on a limited basis and last month the firm came out with its first product with that backing—Impulse II, a recolored offering of one of its biggest selling products. The new backing is the result of a joint venture with Mannington called Modular Carpet Systems.

The new backing has a total recycled content of 40%—10% post consumer and 30% post industrial—compared to Nexus, which has recycled content of 15%.

Beaulieu’s commercial business is largely broadloom, but its carpet tile business has been growing much faster. In fact, it’s growing so fast that it could account for half of its commercial carpet business, not including hospitality carpet, within a few years. The firm’s Nexterra hard backed carpet tile is nearly unmatched in post consumer recycled content. The backing is mostly composed of recycled polyester bottles, along with some ground up glass, for a post consumer content of 85%, which translates to 60% to 69% recycled content for the total weight of the tile.

Because carpet tile is a relatively new business for Beaulieu, the recession hasn’t had the same impact on the firm as it’s having on the larger carpet tile producers, and so far this year its carpet tile business has been healthy. Most of the tile is sold to the corporate sector, though its higher education business is growing quickly and it’s even making gains in the retail sector, in select markets.

Last year, Mannington launched 18 new carpet tile products, and its carpet tile offering continues to be the growth engine for its commercial carpet business. The firm’s Infinity RE backing system, a hard backed PVC, offers 10% post consumer content composed of carpet tile reclaimed through the firm’s LOOP program.

The firm has also just introduced Revolve, a polyethylene carpet tile produced through Modular Carpet Systems, its joint venture with J&J/Invision. That tile will also be reclaimed through a separate waste stream.

Most of Mannington’s carpet tile goes to the corporate sector, but education is growing faster, mostly in higher education. Healthcare is also growing, but carpet tile has more limited applications in that sector. The firm also sells to the retail market, which has been slow, along with the corporate market.

Masland Contract has only been in the carpet tile business for four years, but its carpet tile, with distinctive bold styling, already accounts for 20% of its total commercial carpet business. Most of its tile goes into the corporate sector, and it also supplies the retail, hospitality and government sectors. Corporate business stalled in August, while hospitality business experienced a more gradual slowdown. Government business has been strongest.

The firm makes its carpet tile inhouse with a PVC hard back. One product selling well is Runway, a lighter weight tile that offers a lot of value. It’s also a quick ship product.

Constantine’s carpet tile business has also been growing rapidly. Last year it accounted for about a third of the firm’s carpet business, and this year it will be closer to 40%. Most of its carpet tile goes to the corporate market, which is also its fastest growing market. Sales this year will probably be flat to slightly down, which would be a good result in this market.

The firm makes its tiles inhouse with a PVC hard back with embedded fiberglass, and it includes 33% post industrial content. However, Constantine’s focus has been on the face of the product, developing new looks. Last year the firm introduced Framing, a shearing technique that produces a crisply framed border to the tiles. This year Constantine is coming out with Channeling, which uses the same shearing technique in dramatic bands across the face of the tiles.

Blueridge has been in the carpet tile business since 2001, when the firm acquired Lowe’s, a modular carpet specialist. Carpet tile accounts for close to half of the firm’s commercial business, and it goes mostly to the corporate sector, as well as education, healthcare, retail, and government. The government and education sectors are strongest right now, though healthcare is also relatively strong. 

Like most carpet tile players, Blueridge has seen corporate business grind to a near halt. Fortunately, the firm is small enough that it can hunt around for untapped markets and pick up enough business to keep busy. Blueridge’s carpet tiles are backed with a hard back fiberglass reinforced PVC with 40% recycled content from Celceram, a coal fly ash.

Canada’s Kraus Carpets started making carpet tile last year with three entry level styles for a total of 24 SKUs. Its PVC backed tiles are outsourced from a U.S. mill and they feature 30% post industrial recycled content in the backing and 20% post industrial content in the fiber, though that can go as high as 30%.

Following last year’s successful introductions, which performed well in Canada and the U.S., Kraus is adding two new patterns, Neolithic and Intervention.

Fortune Contract, which is known for its broadloom in the corporate sector, has been selling carpet tile for about seven years. It’s mostly high end tile and it’s backed by Shaw. Its carpet tile also goes mostly to the corporate sector, though it is also used in high end hospitality. 

Copyright 2009 Floor Focus 

Related Topics:Mannington Mills, Mohawk Industries, Masland Carpets & Rugs, Shaw Industries Group, Inc., The Dixie Group, Karastan, Beaulieu International Group, Interface