Carpet Tile Update: Carpet tile's activity in the global market - Feb 2016
By Jessica Chevalier
A growing category in the commercial market for decades, carpet tile has found favor with the architecture and design community due to its willingness to evolve, its style-forward character and its ease of installation and replacement. While the category was invented by the Dutch firm Heuga, U.S. companies are responsible for growing carpet tile into what it is today in terms of style, construction and application.
Today, both in the U.S. and abroad, the carpet tile category has reached an interesting crossroads. Technology-wise, it is poised for even greater style and design breakthroughs, but share-wise, it finds itself cornered by both its own overwhelming growth in the corporate market and LVT’s rapid rise.
So, while there is no doubt that the category will continue to see expansion, Bill McWhirter of BMCW Associates, a UK based analyst of the global carpet tile market, believes that growth here and abroad will be restrained over the next year, with the U.S., Asia and Australia/New Zealand each at 4% to 5% and Europe flat to marginal, as the category capitalizes on its ability to substantially tap into additional sectors.
THE GLOBAL PICTURE
The U.S. is the largest producer of carpet tile globally. The World Map of Contract Carpet Tile, published by BMCW Associates, reports that in 2015 the top five largest manufacturers by volume were: Interface, 20%; Shaw, 13%; Milliken, 6%; Mohawk, 5%; and Tandus, 4%. Combined, these five U.S.-based companies accounted for nearly half (48%) of global volume.
Following the U.S., the list of producers by volume is as follows: China, Japan, the Netherlands, the United Kingdom, Belgium and Australia. Interestingly, 2015 marked the first year in which China surpassed Japan as the largest Asian producer. Says McWhirter, “You have American boys setting the standard, but the Asians are great copiers.”
The U.S. is the largest producer of carpet tile, and it also leads in global consumption, accounting for 34.2% of total volume, according to the 2015 World Map of Contract Carpet Tiles. China follows at 14.4%; Japan at 12.7%; UK and Ireland (combined) at 7.4%; and Australia and New Zealand (combined) at 3.5%.
In dollars, Santo Torcivia of Market Insights estimates that the U.S. carpet tile market was worth $2.028 billion in 2015, at mill sell price, and will reach $2.185 billion in 2016. It is also interesting to consider that in 2010 carpet tile in dollars accounted for 15.5% of the total soft surface market—broadloom and carpet tile combined—but in 2016, Market Insights estimates that it will account for 24.4% of the total soft surface market.
The global consumption of carpet tile has been steadily on the rise since 2010, and in 2015 was expected to reach 197 million square meters, according to the World Map, which indicates that the carpet tile category has had only one year since 2003 in which global volume fell, 2009.
The corporate sector accounts for the vast majority of consumption. In the U.S. last year, 52.6% of carpet tile was used in the office sector—down from 2009’s 57.5%—followed by 27.5% in the government/institutional sector; 18.8% in education and healthcare; 5.5% in retail; 4.3% in hospitality; and 1.3% in transport.
In Asia, the corporate sector accounts for a whopping 82.9% of carpet tile consumption, compared to 74.3% in Europe and 57.4% in Australia/New Zealand.
There are, however, signs that carpet tile is gaining acceptance in the segments of hospitality, education and healthcare, appealing to specifiers because of advancements in styling, ease of replacement and acoustic properties.
THE SUSTAINABILITY STORY
McWhirter reports that when he first went to China 20 years ago, he asked, “Does sustainability mean anything to you?” And he was told, “Sustainability means nothing; survival means everything.”
For much of its life, carpet tile has found success in gobbling up corporate marketshare that would previously have gone to broadloom. At this point, however, McWhirter believes that the category has, in some respects, gone as far as it can go in that regard, taking the bulk of high-end business and leaving broadloom with the value business, where carpet tile can’t compete on price.
McWhirter expects that 2016 may bring some significant changes for carpet tile. First, although industry experts have for years been discussing and anticipating carpet tile’s advance into the hospitality sector, this year and the next will mark the first considerable increase in carpet tile going into the hospitality market—both for public spaces and in guest rooms.
In the past, carpet tile has struggled in hospitality for several reasons. First and foremost, design-wise it could not create the sort of large-scale patterns that were preferred for public space applications, like casino carpet. Second, in guest rooms, carpet tile could not match broadloom price points, nor the plush feel underfoot. In addition, carpet tile, with its modularity and looped face fiber, has often simply looked and felt too corporate for use in the hospitality sector.
The reason that the category is finally making headway in the sector is, according to McWhirter, because manufacturers and their reps have finally catered their message to that market. Rather than emphasizing accessibility to cabling via raised access flooring, a big boon in corporate, they are instead selling the product based on how quickly and easily a hotel, for instance, could change out the flooring in a guestroom without interrupting service to guests, or pop out damaged or stained tiles with ease.
In addition, current technology in design tufting, especially Card Monroe’s ColorPoint tufting machine, has enabled manufacturers to offer customization to hospitality clients on a quick timeline and for relatively small quantities, enabling them to create unique looks that reinforce their branding. McWhirter notes that the ColorPoint machine is a game changer. The first ColorPoint products were introduced to the market by Interface in 2013. According to the World Map, “The company [Card Monroe] uses the strap line. This changes everything. This is probably true as this technology, available in loop pile or cut and loop pile configurations, enables designers to create vivid patterns with precise color placement with no buried ends of yarn. Pile heights are also controllable, allowing the designer to decide just how much cut pile to include in his/her pattern. Exact color placement and non-directional pattern capability will send carpet tile design in many different directions.”
What’s more, the fact that carpet tile is now moving beyond the square into plank and hexagon shapes is attractive to the hospitality designers, as some see these as less corporate looking. Interface led the pack in rolling out plank formats, and that may, in part, explain how they continue to maintain their position as the market leader.
Carpet tile has had an interesting evolution style-wise. When the category emerged, designers tried their best to de-emphasize its modularity, in a sense to make it look like broadloom when installed. In fact, McWhirter reports that when he started selling carpet tile for Heuga in the 1960s, potential customers simply thought the product was chopped up broadloom and couldn’t understand why the manufacturer was charging a premium for it.
In the ensuing years, perhaps in protest of that misconception, carpet tile began to embrace its modularity, with designers creating patterns that highlighted its lines, in a sense setting the product apart from broadloom.
Today, teams led by David Oakey at Interface and Reesie Duncan at Shaw create patterns that take hints from nature to turn into products that are straddling the line of inspired and innovative with the goal of not just putting something underfoot but positively impacting the inhabitants’ experience and psyche via the product.
COMPETITION FROM LVT
The carpet tile category has gobbled up high-end broadloom’s marketshare in the corporate sector to the extent that it may now find itself plateauing in some respects. In the midst of transition, a new competitor is challenging the category for share—LVT is coming in strong with widespread appeal, durability in the face of traffic and abuse, ease of maintenance and significant capacity. With companies like Shaw, Mohawk/IVC, Mannington, Armstrong, Nox, Tarkett and FloorFolio adding capacity in LVT within the U.S. market, there is no doubt that they anticipate that the category will gain ground not only in the residential market but in the commercial market as well, and some of that will certainly come at carpet tile’s expense.
LVT was at a disadvantage in the commercial market previously because its ingredient list contained phthalates, which are viewed with a degree of skepticism by some in the A&D community due to health concerns. In the last few years, LVT producers have engineered new forms of phthalate-free LVT, substituting teraphthalates or bio-based plasticizers, and that has made it much more appealing to the commercial market. However, concern about PVC itself remains a major factor.
Of course, LVT does not offer the same acoustic benefits as a soft surface product such as carpet tile, but the progress manufacturers have made with regard to attached cushioning has offered some degree of improvement, and that disadvantage may seem a reasonable trade-off for what some see as the significant advantages that LVT offers with regard to durability, maintenance and lifecycle.
LVT’s advancements in style play an important role as well. Wood, stone and tile lookalikes are becoming more realistic. What’s more, the category is evolving beyond simply copying other materials to create visuals that are style-forward, offering colors and looks that celebrate the material itself.
Carpet tile has managed to shave quite a bit off its price points over the years, making it more competitive in the market. Today, price points are relatively stable, in part because raw material prices have been relatively low and stable for carpet tile manufacturers as of late, and that is expected to continue for the next couple of years.
Manufacturers have worked to reduce product cost by removing face weight. Ten years ago, the average face weight was 28 ounces, but today it’s 20 ounces. And impressively, companies have achieved these reductions without compromising the performance or appearance of the product.
According to the World Map, the average selling price was expected to tick up to $18 per square yard in 2015. In the recession, prices reached the $15 per square yard range, though many manufacturers simply couldn’t get that low. Those that did moved a great deal of volume.
SIGNIFICANT STORIES IN THE U.S. MARKET
The recent months have revealed a number of newsworthy stories in the U.S. carpet tile market. First and foremost, December brought word of Engineered Floors’ merger with J+J Flooring Group, the seventh largest U.S.-based contract floorcovering business and a manufacturer of both carpet tile and broadloom. Engineered Floors was founded on the idea of targeting the value end of the residential market, particularly multi-family, with its polyester goods—it has since moved into nylon—while carpet tile is largely for commercial market use, so the merger makes sense in that it fills holes in each company’s soft surface portfolio without any redundancy.
Last August, Engineered Floors announced that it was searching for a site on which to build a carpet tile factory, so the company had already signaled its intention of moving into the market. Bob Shaw, founder and chairman of Engineered Floors, has stated that J+J will operate as an independent subset of Engineered Floors and that David Jolly will remain at the helm of the business.
It will be interesting to see where synergies between the two companies reveal themselves. A part of Engineered Floors’ success has been its commitment to operating with the newest, most efficient technology in the business, thereby maintaining tight control of energy, material and labor costs. Similarly, J+J is committed to efficient operation and manufacturing, becoming the first company in the industry to achieve Zero Waste to Landfill certification.
For years now, J+J has produced carpet tile in a joint venture with Mannington. The two share a factory in Calhoun, Georgia. Mannington, which finishes all its commercial carpet tile in that plant, reports that it does not anticipate any changes to the joint venture partnership as a result of the merger.
On the manufacturing front, Shaw has nearly completed its massive new carpet tile plant in Adairsville, Georgia, which is expected to start production in the third quarter. The plant, in which Shaw has invested over $85 million, will support the company’s global presence with carpet tile, supplying product to the North American, Latin American, European, Middle Eastern and African markets, as well as the Asia Pacific markets, supplementing what is made in the company’s Nantong, China facility.
In terms of capacity, the Adairsville plant will be three to four times bigger than the Nantong facility, which was opened in September 2013, and about three quarters the size of the company’s Cartersville, Georgia carpet tile facility.
The company chose Adairsville for its close proximity to the Cartersville plant and to the company’s commercial manufacturing in general, because it allows for efficiencies with labor. It also offers a manageable travel distance for the design team, which spends a significant amount of time in its plants during the design process.
The Adairsville plant will support the company’s cradle-to-cradle EcoWorx platform technology and will have the flexibility to create not only the standard square formats but also variations on shapes and sizes.
Late 2015 brought word that Interface is testing a residential carpet tile program with Home Depot. Through its 19 U.S.- and Canada-based Flor stores, the company already sells carpet tile to the residential market, but a collaboration with a retailer as large and widespread as Home Depot would, no doubt, get the product in front of more customers and start the average consumer thinking about carpet tile as an option for the home. Although carpet tile’s price point at retail is typically at the higher end, it is conceivable that the product might find a market with DIYers who want a soft surface flooring that they can install themselves, in the process foregoing the added cost of installation.
In addition, a well-constructed home center program would presumably offer customers the ability to easily build custom area rugs. Price wise, while carpet tile may come in at the upper end of the spectrum by square yard when compared to broadloom, it would, in many cases, offer a comparable price to standard area rugs and may offer Home Depot customers enough opportunity for customization to make it appealing.
It will be interesting to see what materializes from this program and what degree of success it has. Getting customers who are unfamiliar with commercial design to see carpet tile as something other than elevated samples or chopped-up broadloom and understand both the application and style benefits of the category may be a larger task than big boxes’ hourly jack-of-all-trades associates can handle.
Abroad, little progress has been made regarding the acceptance of carpet tile in the residential market. Says McWhirter, “Not much is happening in Europe, Asia Pacific, or anywhere outside the U.S. Typically, by the time carpet tile gets to the consumer, it is a much more expensive product than broadloom, and it is used more as a practical, hardwearing commodity item than it is in bedrooms, living rooms or guest rooms. I think the quest to sell carpet tile into the residential market is a hard slog.”
U.S. STYLE ABROAD
Do U.S.-made designs appeal to the taste of international clients? Today, the answer is yes, but that hasn’t always been the case. McWhirter reports that early on U.S. and international color palettes varied greatly.
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