LVT, Mannington's centennial, J+J and Engineered Floors: Strategic Exchange - Jan 2016
By Kemp Harr
This is going to be an interesting year for the LVT business. Santo Torcivia at Market Insights estimates that $451 million has been invested in U.S. based LVT production in the last five years, and much of that capacity is either ramping up now or will soon be online. The biggest investments have come from Mannington, Shaw, IVC/Mohawk and Armstrong. But when you add it up, the investments by Tarkett, Nox and FloorFolio are also a factor. While the demand for this product is expanding at a healthy rate, this year will most likely bring us more domestic capacity than the market needs.
One important factor to keep in mind is that, with the exception of Centiva and Amtico, this flooring category was developed and perfected in Asia, and there is a huge amount of capacity in the Far East that will be seeking buyers, as some retailers choose to switch to a domestic supplier. Some of that capacity will most likely end up being sold through distributors as private label offerings. The temptation for companies that seek to gain quick marketshare will be to cut pricing to unsustainable margin levels. I’m sure I need not remind you that you get what you pay for and not all LVT is created equally.
When it comes right down to it, it’s up to the retailer to only offer products that are built to last and that are designed keeping the latest fashion trends in mind. Does the product have a tough wearlayer, is it embossed and registered, is the click system reliable, does it come with a warranty, is the styling distinctively appealing? I urge you to do yourself and the industry a favor and stay out of the basement with a product that will ultimately give the category a bad reputation. As with most buying decisions, you’re going to be happier in the end sticking with someone you know, like and trust.
MANNINGTON’S CENTENNIAL CELEBRATION
A hundred years is a long time, and it’s reassuring to learn that Mannington has been in business that long. While it isn’t the first flooring company to reach this milestone, it is the first family-owned, top-five company in this business to make it. In last year’s Floor Focus annual industry report, we estimated that Mannington’s total U.S. sales were $714 million. Today, it is a multinational company with 2,700 employees, and it is still owned by the Campbell Company. Keith Campbell is the fourth generation leader and Zack Zehner, who is being groomed to succeed him, is the fifth. Two other important statistics to point out: Mannington is one of the top 150 family-owned companies in the U.S., and only 1% of family-owned companies make it 100 years.
Right before the holidays, I sat down with Keith Campbell to reflect on the company’s historic past and the investments and strategic decisions the firm is making to succeed for another 100 years. One key takeaway from that conversation was that Mannington’s secret sauce will be nearly impossible for the other large competitors to emulate because they aren’t family owned. Much like Mannington, many of the downstream companies in this industry are multigenerational family-owned businesses—whether it be retailers, contractors, distributors or installation companies. And much like the leadership at Mannington, many of the principals of these family-run companies wake every morning with the same focus on core values and with an almost spiritual understanding that if you live by the golden rule—of treating people the way you want to be treated—everything else will fall into place.
Mannington’s path over the past 100 years has certainly forced the company to deal with adversity. Twice during that time, the company’s core manufacturing facilities have burned to the ground, and in one instance the roof collapsed due to blizzard conditions. In addition, the company has survived two World Wars, the Great Depression and several other economic downturns. It also survived the catastrophic failure of Mannington Gold, an upper end high gloss sheet vinyl product that was launched in 1990. While the product was developed with sound design thinking, it was heavily promoted with a no-questions-asked guarantee. If the product wasn’t acclimated prior to installation, it would wrinkle, and often the consumer would ask for their money back. Mannington stood by the warranties, and the claims of nearly $80 million nearly sank the company.
Through all this adversity, the Campbell family has made the right choices, often leveraging their own personal assets to pull the company through. And as in the case of Mannington Gold, they have proven to the marketplace that their values are honorable. This behavior has further endeared them to their distributor and retailer partners.
In the late ’60s, the Campbell family wisely decided to diversify its management structure and bring in seasoned industry professionals, and non-family members, to help lead the company. Today, Russell Grizzle, Ed Duncan and Jack Ganley make many of the important day-to-day decisions, freeing up Keith Campbell to work on the company rather than in it. This also gives Keith the time he needs to serve on the board of the Federal Reserve Bank of Philadelphia and as chairman of the board of Rowan University.
Mannington has a rich heritage in the flooring business, but it continues to lead in both the commercial and residential sectors because the leadership recognizes that flooring is a fashion business. And year after year, the firm comes to Surfaces and NeoCon with products that are on top of the game from a performance and a visual perspective.
ENGINEERED FLOORS’ ACQUISITION OF J+J INDUSTRIES
The news of J+J Industries’ acquisition by Engineered Floors right before Christmas is the end of an era for one of the industry’s long-standing family-owned companies. Back in July 2007, we celebrated J+J’s 50th birthday with a feature article, and reminded the industry about the day that Tom Jones came to sell J. Rollins Jolly a truck, which resulted in a partnership between two families that created a company that has remained family-owned for 58 years.
What started as a rug company in 1957 evolved into the seventh largest contract commercial carpet business with 835 employees and estimated sales of nearly $150 million. Today, J+J Flooring focuses on the specified contract flooring business with broadloom and modular carpet plus a composite textile flooring line called Kinetex. Just last year, J+J became the first carpet mill to be certified as a Zero Waste to Landfill manufacturer, and it was also the first mill to install a dyehouse water treatment system, which allows the firm to recycle 27 million gallons of water annually.
Sustainability is not the only area where J+J has taken a leadership position. Back in 1985, it was the first carpet mill to extrude its own fiber. Prior to that, back in the late ’70s the firm worked closely with DuPont and Pharr Yarns to create and launch the first cut-pile carpet to the commercial market, called Commercialon 4400. While it sounds crazy, this product actually performed due to its eighth gauge density and 44 ounce fiber weight.
We may never know exactly why the Jolly and Bethel families decided to sell their family business at the end of 2015—a year, I’ve been told, that was one of their strongest, so it certainly wasn’t out of necessity. There is a high likelihood that out of all the potential suitors, J+J felt that Engineered Floors—another family owned business—would take the best care of the business. While it is true that Engineered Floors has a few outside investors, I’ve been told that the majority of the company is owned by Bob Shaw and his family.
From Engineered Floors’ perspective, this acquisition gives the firm a five-year leap into the specified commercial market versus a greenfield operation. Let’s not forget that we were forewarned that Engineered Floors was planning to get into the carpet tile business back in early August, when the company announced it was seeking a site for a new carpet tile plant in northwest Georgia.
By buying J+J, Engineered Floors is picking up a well established brand with a solid reputation in a market sector that is conservative when it comes to trying new things. Architects and interior designers are much like engineers when it comes to specifying untried products for their coveted client base. In addition to the brand and reputation, Engineered Floors is picking up a handsome book of business as well as a seasoned sales force across the country.
What we don’t know at this point is whether the modular carpet tile plant in Calhoun, which is a joint venture between Mannington Commercial and J+J, will continue under that same arrangement when this transaction is finalized in late February. Up to this point, several components of Engineered Floors’ competitive advantage have come from running the newest equipment, and in a few short months, Shaw Industries will be firing up its massive new tile plant in Adairsville. Based on these dynamics, the next couple of months should be interesting to watch.
If you have any comments about this month’s column, you can email me at email@example.com.
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