Hardwood Update: Engineered hardwood is taking marketshare
By Jessica Chevalier
Engineered hardwood is a category in growth mode. And, as such, U.S. manufacturers are actively expanding their offerings and streamlining their processes. With the increase in demand has come a trend towards onshoring the manufacture of engineered products.
In late 2011, Somerset Hardwood stopped importing its engineered product and began manufacturing at a new plant in Crossville, Tennessee. Then, in 2012, Mullican ceased importing much of its engineered hardwood in favor of manufacturing its product in a Johnson City, Tennessee plant. And just this July, Armstrong announced that it would close its facility in Kunshan, China and manufacture its scraped engineered hardwood in Somerset, Kentucky. The transition should be completed in 2015.
In addition, Shaw is currently in the process of expanding its manufacturing capabilities for engineered hardwood. The company is completing a $40 million expansion of its Epic facility in South Pittsburg, Tennessee.
It is also significant to note that many of the manufacturers with whom we spoke report that engineered flooring accounts for the bulk of their new product introductions over the last five years. This isn’t necessarily because these firms intend to move away from solid, only that they are busy manufacturing new products that are on trend with demand—and the demand is increasingly for engineered.
Says Paul Stringer of Somerset, “Over the last five years, approximately 70% of our new product introductions have been engineered. But, you have to understand, in a number of instances, we duplicated our very successful solid products with an identical engineered offering. That helped speed the acceptance of the product to market. In addition, we also have introduced wider planks in 6” and 7” offerings that are engineered only, and they have been very hot for us right out of the gate.”
If it’s any indication of the future of the category, Don Finkell, a veteran of the hardwood industry, came out of retirement to start a new company called American OEM. The company will sell only engineered hardwood, which will be manufactured at a prison plant outside of Nashville, Tennessee. Says Finkell, “Though my primary experience has been in engineered over the last 30 years, I have also run solid operations, but I just don’t see the future of solid, the way I see the future of engineered. I’m looking 20 to 30 years out.”
THE GROWTH OF ENGINEERED
In crafting this update, we interviewed 14 U.S. based hardwood manufacturers. Of these 14, six weren’t even in the engineered hardwood business ten years ago. These include Preverco, Somerset, Mullican, and Shaw as well as two firms, Finkell’s American OEM and DuChateau, that didn’t exist a decade ago and today focus solely on engineered hardwood.
Of the remaining manufacturers that we spoke with, QEP, Mirage, Model, Armstrong and Johnson all report significant growth in their engineered hardwood business. At Johnson, engineered hardwood accounted for 30% of hardwood SKUs in 2004 and today accounts for 70%. QEP, which had 30% to 40% of its hardwood SKUs in engineered product in 2004, reports that it is primarily an engineered firm today. And even Model, which is predominately a solid firm with only 10% of its SKUs in engineered product, has seen that number rise from 2% in the last ten years.
Mannington began selling engineered hardwood in the late ’80s and went to a full engineered line in 1995. And Kährs, which claims to have introduced the first engineered hardwood floor in 1941, is, and has always been, 100% engineered.
The only firm that has increased its solid to engineered SKU ratio is Max Windsor, which, now under the ownership of Peter Spirer, will be known as Max Woods. Spirer bought the assets of Max Windsor this January and is in the midst of rebranding the firm. Along with the name change, the company will introduce two solid hardwood SKUs to its traditionally 100% engineered lineup. Spirer explains that his hope is to penetrate traditionally solid markets where Max Windsor had little or no visibility under its former ownership. The introduction of these solid products isn’t representative of any larger changes to come. Rather, it’s just a strategy to make the new Max Woods a viable brand in all U.S. markets.
The reasons for the market shift toward engineered are many and varied, and opinions regarding the drivers of this shift vary greatly. Ask 14 hardwood experts why engineered is gaining marketshare, and you’ll likely get 14 different answers.
All agree that subfloor plays a large role in whether a consumer chooses engineered or solid. Engineered hardwood is typically installed over slabs, and solid is typically installed over a wood subfloor. Since the core used to manufacture engineered wood is generally made of cross-layered plywood pressed and glued together, it is more dimensionally stable and therefore less likely to cup or peak in the presence of the moisture that is sometimes emitted from concrete. And there is, of course, the fact that engineered hardwood doesn’t have to be nailed, a boon when installing over concrete. As a result of these factors, certain regions trend toward one hardwood type versus the other. The Northeast, for instance, has long been a solid market because most homes have basements and, therefore, wood subfloors. However, in the South, where most homes are built on slabs, engineered is more typically used.
No one denies that pricing also plays a significant role. Lumber prices have been escalating with demand since the recession. Because engineered flooring uses only a hardwood veneer, rather than a full hardwood profile, it is more insulated from rising lumber costs, so the pricing on engineered SKUs has been more stable than on solid SKUs, and the increase in pricing has been less dramatic. In fact, according to several industry experts, hardwood prices spiked as much as 25% in recent months, but have settled closer to 12.5% due to industry pressures from a deal struck by Home Depot. With consumers still somewhat price-oriented following the downturn, engineered product appeals to their concept of value.
The fact that the profile of engineered wood is thinner than solid hardwood, typically 3/8” or 1/2” rather than 3/4”, contributes to the fact that it is a cheaper product to produce and offers another significant boon as well. Engineered hardwood is often selected for remodel projects, regardless of the subfloor type, because of its thinner profile. At 3/8” or 1/2”, engineered wood is about the same thickness as most residential carpet. Therefore, if a customer is replacing soft surface with hard, engineered flooring creates an even transition between flooring types.
The engineered category has also benefited from the improved finishes on the market today, especially those applied in the factory, which typically offer greater durability (wearability, scratch-resistance and dent-resistance) than those finished on site. Engineered hardwood is almost always factory finished, and this offers a measure of insurance in protecting a consumer’s investment in hardwood flooring.
The popularity of wider formats is also moving the market toward engineered. With their dimensionally stable cores, engineered hardwood products can achieve widths of up to 8” with no compromise to quality. However, the width of solid products typically maxes out at 4”, as wider products can cup and peak.
In addition, the DIY movement could be luring some consumers toward engineered hardwoods that are available with a click installation system. Though the manufacturers with whom we spoke don’t believe that DIY accounts for a large portion of hardwood sales, it moves the gauge slightly. Typically, these sorts of sales are restricted to the big box and home center channels and are notoriously difficult for manufacturers to track.
Also, with its durable finishes and improved performance in the presence of moisture, engineered hardwood often makes for a better choice than solid hardwood for installation in kitchens and bathrooms. And so, as consumers are increasingly choosing to use hard surface flooring throughout their home, engineered hardwood may be gaining share due to its use in these locations.
For those consumers who are concerned about sustainability, engineered can be attractive due to the fact that, tree for tree, it uses less lumber than solid hardwood. However, Milton Goodwin, vice president of product at Armstrong World Industries, isn’t convinced that engineered is truly more sustainable than solid, all things considered.
“You still have to cut a tree down,” he says. “With engineered, you cut pine for the core, use glue and energy to make it. In addition, there’s a lot of engineered product imported, so you have to consider energy in transport as well. In addition, some manufacturers use problematic glues, though ours are formaldehyde free.”
Finkell points out, however, that engineered hardwood makes more efficient use of raw material because it is thinner, so there is more finished product per board foot of lumber. Whether or not engineered is, technically, a more sustainable product depends on many factors; however, regardless of the details, the fact that it is often billed as such may be a selling point for some consumers.
Engineered products were included among Mannington’s first hardwood introductions in the late 1980s, and, as of 1995, the company became an exclusively engineered supplier. The company produces about 80% of its offering. Panels are made at its plant in Epes, Alabama, and finishing is completed in High Point, North Carolina. The company makes its own core but sources its veneer. It has been working with the same veneer purveyor for over 20 years, and its veneers are typically northern U.S. species.
Click products accounts for only a small percentage of Mannington’s engineered lineup, and the bulk of that is sold through private label.
Dan Natkin, director of wood and laminate business, has noted an increase in the size of jobs using upper end products, particularly on the remodel side of the business. Whereas a typical job used to be 500 square feet to 700 square feet, today they are often 1,500 square feet to 1,700 square feet, indicating that customers are using engineered hardwood throughout their homes.
Mannington is one of the few manufacturers that offers exotic veneers, though they account for only 6% to 7% of SKUs. Says Natkin, “The Lacey Act really impacted that business, as did the change in interior decors towards rustics. We are very careful what we source and from where they come.”
Mannington’s veneers range from 1.6mm to 3.2mm, and the bulk of business is in the 2mm range.
Though Mullican Flooring is still primarily a solid firm, the company’s engineered offering has grown steadily since it was first introduced in 2005 and now accounts for 20% of total hardwood. As was stated in the introduction, Mullican imported its engineered product until 2012, when it moved part of its engineered production to Johnson City, Tennessee.
Mullican offers 2mm and 3mm veneers but says that the bulk of its business, an estimated 85%, is in 2mm product. The company reports that sales are up almost 10% this year, but that it has been a struggle to get there—and the year has gotten more challenging as it has progressed. All of Mullican’s engineered product is sold through distribution. The company reports that it has seen an increase in the use of engineered flooring by builders because the pricing has been more stable than solid, so builders can insert it into their program and be guaranteed that the pricing will remain accurate for a while.
Mullican offers a few exotic veneers, which account for a small amount of business, and a small number of click products as well.
Armstrong began selling engineered hardwood about 15 years ago and the category now represents a significant portion of the company’s hardwood sales, though solid is still an important business for the company.
Armstrong produces about 98% of its engineered offerings and imports the remaining percentage from China. The vertically integrated company recently closed the Chinese plant where it produced its scraped products and moved that production to Somerset, Kentucky. The transition was completed in late September. The company had been making its scraped veneers in China and shipping these to the U.S. to be attached to U.S. made cores.
Armstrong engineered hardwood products have veneers ranging from 2mm to 5mm, but the bulk of the business is at the 2mm range. The company reports that it has introduced many engineered SKUs over the last three to five years because of the growth of handscraped products—the fastest growing wood category for the company—much of which is engineered.
Armstrong products are sold in both the independent retailer and big box channels. It does not sell to Lumber Liquidators, which has taken share from both the big boxes and independent dealers. The company sells a good amount of click products, but click does not surpass its tongue and groove sales.
Armstrong has an exotics business, but reports that, for many consumers, these SKUs have fallen from favor. The business is significantly smaller than it was in 2006 and 2007.
Armstrong recently introduced a collection called Prime Harvest with identical visuals available in both solid and engineered. This concept is meant to combat a perennial problem for hardwood shoppers, who often find a visual they like, only to be told that it doesn’t come in the construction that they want.
Shaw Industries, owned by Berkshire Hathaway, introduced its Epic Hardwood platform in 2006. Epic is a cradle-to-cradle certified product that contains recycled content in its high-density fiberboard core. It is made in the U.S. from wood harvested from sustainably managed domestic forests. Shaw offers veneers ranging from 1.2mm to 3mm. It does not sell any click engineered hardwood.
Shaw produces hardwood under the Shaw, Anderson and Zickgraf brands and operates nine hardwood facilities. The company’s expansion of its plant in South Pittsburg, Tennessee will increase capacity by 60% and is expected to create 25 new jobs. The company reports that engineered business continues to grow more quickly than solid.
Shaw sells its Anderson hardwood line only through wholesale floorcovering distribution; however, it sells its Shaw branded hardwood direct to all market sectors. Both Shaw and Anderson lines are sold for commercial installations as well. The Zickgraf line is sold through distribution.
Mirage entered the engineered flooring market in 1999 with its Mirage Engineered brand. The company also has an engineered line called Mirage Lock, which allows for a floating installation and accounts for about 20% of Mirage’s engineered sales. In total, engineered hardwood represents 50% of Mirage’s total offering, whereas a decade ago it accounted for just a few SKUs.
Mirage, a Canadian firm, makes all its hardwood flooring, including engineered, in its Saint-Georges, Quebec plant. The company creates its own veneers but purchases its plywood and HDF core. All the company’s veneers are 4mm, which means that they can be resurfaced, and are 100% dry sawn. The sale of exotic species veneers is declining and now represents less than 10% of Mirage’s engineered hardwood sales.
Mirage launches all its new products in both solid and engineered formats.
In 2007, Mohawk Industries purchased the assets of Columbia Flooring. With this acquisition, Mohawk gained a hardwood production facility located in Danville, Virginia, which today produces the vast majority of engineered hardwood products for the Mohawk, Columbia and Century brands, along with the Q-Wood brand. Q-Wood was launched in 2014 by the firm’s Quick-Step business, which features a renewable finish.
Today, engineered hardwood represents about 54% of Mohawk’s total hardwood sales. Mohawk purchases core and veneer in sheet from domestic sources and produces panels in the Danville plant, from which it cuts planks. The bulk of Mohawk’s engineered hardwood sales come from 3/8” planks.
Somerset made its first foray into the engineered hardwood market in 2007 by bringing in high-end product from overseas, but soon found that it disliked dealing with the long lead times and inconsistent quality that come along with importing. As such, it opened an engineered facility in Crossville, Tennessee in 2011.
The company continues to focus on upper-end engineered hardwood with profiles over 3/8”. All Somerset engineered products have a 3mm wearlayer with a sawn face. Products reach up to 78” in length with domestic veneers and tongue and groove installation systems. The company sources its core but creates its own veneers.
Interestingly, each of the company’s hardwood sample boards is half solid and half engineered to communicate to customers that they can have the look of a solid hardwood floor with the performance benefits of engineered.
QEP’s Harris Brand introduced its first engineered hybrid product, the long strip platform, in the early 1980s and its first true engineered platform in the early 1990s. Today, the company is primarily an engineered supplier with more than 80% of its hardwood offering in engineered. Over the last five years, 100% of its introductions have been engineered product.
QEP is a vertically integrated manufacturer. Veneers are made at the company’s Montpelier, Indiana plant, and the rest of the manufacturing process takes place in Johnson City, Tennessee.
All the company’s veneers are domestic species, and the engineered products are split evenly between click and tongue and groove, regardless of the sales channel. The Harris brand is exclusive to distribution, but the company also sells products through the big box channel.
Though the bulk of QEP’s sales are 3/8” product, it has noted a trend towards 1/2” product as of late. In addition, the company’s tongue and groove business has picked up share.
Peter Spirer purchased Max Windsor in January, after serving as a consultant to the company for five years. The company will launch its new name, Max Woods, and new look at the Surfaces East show in Miami this month. And, for the first time in a few years, the company will also be introducing new products, which will include its foray into solid hardwood.
Max Windsor sourced its products from China, and Max Woods will continue that practice. However, the new leadership team has worked hard to align with vertically-integrated Chinese suppliers and believes it has found some of the best with which to partner.
Max Woods will mainly go to market through dealer distribution but will use distributors to reach some markets.
DuChateau was founded in 2006 and has been selling engineered hardwood exclusively since that time. The company produces antique reproduction floors with a hard wax oil finish, which it both manufactures in a U.S. facility and imports from China and Russia. The company’s veneers range from 2mm to 6mm.
DuChateau’s floors are all installed via tongue and groove. The company has no exotic veneers and sells, predominantly, European oak. It also has American walnut, larch and ash veneers. The company’s products are sold through retail stores and distribution.
Like DuChateau, Kährs sells only engineered hardwood. The majority of its products are produced in Nybro, Sweden, where the company was founded in 1857, but Kährs also has factories in Finland, Poland, Croatia, Russia and China.
Engineered hardwood accounts for only 10% of Model’s hardwood offering. The company first launched engineered product in 2007. Forty percent of today’s offering features click systems. Model sells through specialized dealers and distribution. Its engineered offering is comprised of 1/2”, 8-ply products. The company buys the components from Quebec, then assembles them into engineered flooring in its own plant.
Preverco introduced engineered hardwood a decade ago, and today it accounts for about 40% of sales. The company designs and assembles the flooring in one of its own Canadian plants. Preverco’s products have veneers ranging from 2mm to 4mm; 4mm accounts for the bulk of business, though 3mm was the most popular platform a decade ago.
Johnson Hardwood entered the engineered business in 2001 and has seen a flip in the dominant construction of its hardwood products, from solid to engineered, over the last ten years, when it was best known for its solid exotic products. The company reports that it was faced with a major shift in material sourcing that caused it to rethink its product development. Johnson’s engineered products are all tongue and groove.
Johnson still has a substantial exotics business, which accounts for 15% of its SKUs and sales. The company manufacturers all of its hardwood flooring in China and offers veneers ranging from 1.5mm to 3mm. In 2015, it will introduce a 6mm veneer product. Johnson reports that 2014 has been a strong year, due to the stabilization of the housing market and the fact that homeowners are again investing in their properties.
American OEM, the newcomer to the engineered hardwood category, hopes to be fully operational by Thanksgiving of this year. Currently, Finkell and his 24 employees (12 of whom are civilian and 12 of whom are inmates) are dispersing samples of the products that they will be making, and Finkell reports that he is encouraged by conversations with potential customers. “We have a good business model, and, when we make product, we expect to do it well,” he reports.
Finkell took over a former furniture factory in a medium security prison to create his new plant. This is the eighth prison plant that he’s put together in his career, and Finkell reports that American OEM’s jobs are the only paid positions for inmates in this prison and pay a wage equivalent to what civilians are making in the local community; as such, they are highly desirable. Finkell anticipates training the employees, who are selected by the state of Tennessee through a lengthy interview process, from the ground up.
American OEM will complete every step of manufacturing, except the cutting of its veneers, which it will source primarily from the eastern U.S. It will offer products with veneers ranging from 1.5mm to 2.5mm. The OEM firm will manufacture products with whatever installation method its private label customers desire, and that may include click products.
Hardwood flooring prices depend mainly on raw lumber prices, which fluctuate based on a number of factors. According to Market Insights LCC, weather, global markets and political climate all impact the price tag in the hardwood flooring aisle.
Copyright 2014 Floor Focus