LVT Update-Focus on Rigid Core: An overview of the evolving rigid core market - Feb 2020
By Darius Helm
In the seven years since the first rigid core products hit the market, the category has transformed the flooring industry, taking marketshare from almost every other floorcovering type and propelling the LVT category past hardwood and ceramic to the top of the hard surface side of the business. Only carpet has a larger marketshare. These days, almost every large flooring manufacturer and supplier, including carpet and hardwood mills and even traditionally ceramic suppliers like MS International, has a rigid core program.
At Surfaces 2013, US Floors unveiled Coretec Plus, an 8mm wood-look product with a 1.5mm PVC cap and a 1.5mm cork back sandwiching a 5mm extruded core of PVC, bamboo, wood dust and limestone. US Floors called it WPC flooring, which at the time stood for wood polymer core. The construction, patented by US Floors, was inspired by an outdoor decking product that US Floors’ president, Piet Doscche, saw in China, and the flooring was produced through a partnership with a Chinese manufacturer. Coretec was the talk of the industry.
For a year or so, Coretec was the only WPC product in the U.S. market, but in that time, the Chinese manufacturing landscape came alive, looking to capitalize on the enthusiasm for this new construction. And they started experimenting, seeking out production strategies that were faster and cheaper. The SPC constructions they devised gave the soaring category a turbo boost. By Surfaces 2015, with a wave of importers already penetrating the market, a handful of other manufacturers (like Earthwerks and Home Legend) came out with rigid core products, and a year later the big players jumped into the fray-Mannington, Mohawk, Armstrong, Congoleum-along with countless new importers. At that point, just four years ago, the category really took off.
Today, there are hundreds of Chinese manufacturers of rigid core products, along with a handful in other Asian countries like Vietnam, South Korea, the Philippines and Taiwan, and in the U.S. there are about half a dozen either starting to churn out products or busy building facilities, including big players like Shaw, Mannington and Mohawk.
In September 2018, tariffs of 10% were applied to all rigid core products coming from China, causing a lot of chaos in the supply pipeline, though plans to raise the tariffs to 25% at the beginning of the year were repeatedly delayed until mid summer. Then, on November 8, 2019, the Office of the U.S. Trade Representative announced Section 301 tariff exclusions on click products, eliminating all tariffs on rigid core products imported from China. This summer, the exclusions will be reassessed.
If the exclusions are maintained, it could impact the prospects for these non-Chinese Asian producers, most of which need to import component materials like print films and wearlayers, so they don’t have the vertical integration advantages of many Chinese producers. This could cause some additional volatility in the market and potentially lead to huge overcapacity issues.
WPC, which was the first rigid core LVT, is characterized by its thick, extruded foamed vinyl core, topped with an LVT cap and backed with an acoustical pad, while SPC products are typically thinner (and more affordable), with a denser extruded vinyl core laminated directly with the print film, though there are some that also feature vinyl caps and others feature digital printing directly on the core. Both WPC and SPC almost always feature click systems.
However, it’s worth noting that these are transient definitions at best. As new products are developed, the clear line between WPC and SPC starts to blur, and on top of that there are innovations like magnesium oxide cores that seem to be begging for a third category. And there’s a growing body of rigid core producers that are creating their own acronyms as part of their marketing effort to distinguish their products, or are using the existing acronyms to attach their own definitions-while SPC is generally understood to mean solid polymer core, some call it a stone polymer core. The end result is just more market confusion, and all these acronyms are hurtling toward obsolescence anyway.
BY THE NUMBERS
By 2015, the U.S. LVT market had swelled to nearly $1.5 billion (at mill sell price), and it grew another 30% in 2016-it’s worth noting that traditional LVT was already the fastest growing flooring type before the advent of rigid core, so there was plenty of momentum in the category. From 2017 to 2018, the category grew by close to 40%, though some of that growth came from U.S. suppliers buying up inventory in advance of the 10% tariffs on Chinese products imposed in September 2018. And there was more buying after the tariffs were imposed due to the threat at the time of an increase to 25% at the beginning of the year. The LVT market grew to nearly $3.5 billion in 2018, with rigid core - or EVP flooring - products accounting for a staggering 63%. That’s $2.2 billion in rigid core sales (up from zero five years earlier).
The inventory build-up, along with confusion and hesitation in the market because of the uncertainty surrounding trade with China, slowed growth in 2019, with preliminary analysis from Market Insights suggesting a growth rate of only 14% to 15% for the LVT category, and rigid core growing at 19% to 20% and its share of the LVT category going up to 65%.
For 2020, assuming no more adverse events and an extension on the tariff exemptions, the LVT category may climb as high as $4.3 billion, with rigid core accounting for two thirds of the total-29% WPC and 37% SPC.
WHY HAS THE INDUSTRY FALLEN FOR RIGID CORE?
Rigid core LVT’s rapid ascent is unlike the trajectory of any other product in the flooring industry, and it derives from a host of unconnected factors. When it was first introduced by US Floors in 2013, Coretec WPC was touted for its ease of installation (compared to flexible LVT) and the ability to install it over imperfect subfloors, but other, more subtle factors played a central role.
Most notable is the heft of the product-it’s thicker and more substantial than traditional LVT-allowing it to be perceived differently by the consumer. It’s almost as though the construction helped slip the product across the invisible line separating resilient flooring from the more robust and rigid hard surface flooring types, like ceramic and hardwood, releasing it from the historical perceptions of traditional vinyl flooring.
On the surface, it would seem that rigid core products are as related to laminates as they are to LVT, in the sense that laminates are the only other multi-layered modular product in the hard surface category, distinct from ceramic tile and hardwood and even sheet goods and VCT, and the rigidity and ubiquity of click systems also draws the two flooring types together. And, of course, despite growth in tile looks, both rigid core and laminates are largely defined by their wood looks. It’s not hard to imagine homeowners at flooring stores struggling to distinguish the two flooring types.
Fortunately, the W in WPC was waiting in the wings to help address this confusion. The wood dust in Coretec’s original core wasn’t central to the marketing of the product, and subsequent formulations by other manufacturers tended not to rely on this ingredient. And fortuitously, in 2014 Invista launched its PetProtect campaign for carpet, orienting homeowners toward the performance of their flooring. It was a prominent and successful campaign, one that grew to include hard surface flooring too, and suddenly all the big producers were touting the protection their flooring offered against the ravages of pets and children and other household challenges-and the W in WPC abruptly came to signify waterproof.
WATERPROOF: LEVERAGING THE POWER OF A WORD
Many in the industry object to calling rigid core LVT waterproof vinyl flooring because they feel that it suggests that the installation itself is waterproof, like a ceramic tile installation. And this gives the impression that rigid core LVT floors can tolerate the same sort of moisture challenges as ceramic tile, which is not true.
Spills on a rigid core floor will eventually migrate down via the seams and damage whatever is underneath. And in that sense, it’s actually identical to a typical laminate floor-since both have impermeable top surfaces and vulnerable joints. The difference is that the rigid core flooring salvaged from a flooded floor is in fact fully waterproof (as is flexible LVT, by the way) and can be reused, while the core of laminate flooring will absorb water and ultimately deform and destroy the product.
But that’s not how consumers think. When they hear waterproof, the first image that comes to mind is a puddle on the floor, and they swoon at the concept that whatever that liquid is, it will not penetrate the floor. Waterproof to them means both that the floor material itself will not absorb the moisture and that the moisture will not penetrate to the subfloor. And by the time the sales rep disabuses them of this notion of ceramic-level waterproofing, their enthusiasm gets channeled into the idea of waterproof planks, a hardwood-look product that, unlike hardwood and laminate, can endure any form of liquid outrage and emerge whole and unblemished. Alternatively, the consumer accepts the waterproof notion and never questions it and believes that they have a waterproof flooring installation.
When the rigid core LVT purveyors en masse started defining their products as waterproof, with the table already set by the PetProtect campaign, it captured everyone’s attention. It certainly impacted the laminate category, which quickly threw itself into innovating water-resistant cores and joints, and, in the case of Mohawk, waterproof joints, but it also had a huge impact on the hardwood industry, which was already showing vulnerability to the demand for wood-look products priced lower than hardwood.
In 2018, U.S. hardwood flooring consumption fell by over 4%, and its position further deteriorated in 2019 with losses at least double the previous year. Only laminate flooring fared worse last year, and in fact the only flooring category that showed growth was resilient flooring. Some industry veterans are concerned that the next housing downturn could drive a huge shift to SPC in new home construction, decimating hardwood’s position.
The waterproof selling point has become so strong that many flooring retailers have done away with everything else, every other identifier. Not LVT or SPC or WPC-they just promote it as “waterproof flooring,” and it sells itself.
At the most fundamental level, rigid core flooring gives consumers the look they want and the performance they think they need at a price they can afford. In terms of performance, there’s an interesting parallel in the ceramic tile market. About 20 years ago, we started seeing all this porcelain on the market. Porcelain is stronger than traditional ceramic tile, and it is much more impervious. Consumers felt that they needed that higher-performing porcelain, even though everyone in the industry would, at least privately, declare that ceramic tile for all residential applications and most commercial applications was entirely sufficient. Nevertheless, that’s the way the market went.
Over the course of several years, porcelain came to dominate the offering, to the point where a traditional ceramic tile was perceived by many as not just inferior but also insufficient, which couldn’t be farther from the truth.
In the residential market, single-family new home construction remains the sector most immune to the rigid core trend, with hardwood remaining the dominant flooring of choice. A key rigid core selling point doesn’t necessarily translate that well to the home construction market-the ability to lay the flooring over an imperfect subfloor-since new home subfloors are, hopefully, perfectly flat already. However, the ease of installation may help it gain traction, considering the lack of experienced installers and how little training is required for glueless installation. Another advantage over hardwood is that there’s no need for acclimation. In fact, CCA Global’s builder group, FEI Group, reports that SPC is already becoming much more prevalent in this channel.
Meanwhile, the hardwood industry is trying to shore itself up, having lost substantial marketshare in the last couple of years to the rigid core category. Taking the National Wood Flooring Association’s new wood flooring definitions to heart, several manufacturers, including leading players like AHF Products, are switching from traditional multi-ply engineered cores to high density fiberboard, much like what is used in laminate flooring. It’s a less expensive formulation, and it meets the NWFA’s definition of a composite engineered floor.
Manufacturers are hopeful that this strategy will help them compete more effectively with products like SPC and maintain their position in key markets, like single-family new home construction. But at the same time, rigid core producers are putting hardwood veneers on their own products to also produce composite engineered flooring, which in their case has the advantage of being waterproof.
It’s too early to tell how it will all shake out, but one thing’s for sure-these developments will profoundly change the look of the hardwood industry.
RISKS OF COMMODITIZATION
It’s the lessons from another flooring category that most concern many of the U.S. flooring producers in the rigid core business, and that’s laminate flooring. Two decades ago, laminate flooring was still soaring and gaining share in the U.S. market, following its successful migration from Europe, where the category was invented. And even in those early days, there were industry leaders pointing to Europe and warning of the dangers of commoditization, but it happened anyway. Within a few years, there were laminates retailing for less than $1 a foot. Higher-end firms, including those doing high pressure laminates like Wilsonart, floundered and fell. Vertically integrated massive mills came to dominate the landscape, driving the market downward. The laminate market has been more or less declining since 2006.
To be fair, in recent years the laminate category has done an admirable job of upgrading its image. It’s still heavily commoditized, of course, but most of the suppliers have focused on adding value, mostly through performance innovations.
This time around, leading players like Shaw/Coretec, HMTX and Mannington are focusing heavily on the higher-end market, anchored with their WPC offerings. In fact, despite the massive growth in SPC products, the U.S. market is still dominated by WPC through Shaw and HMTX, the two biggest and presumably best vinyl plank flooring brands. And the biggest flooring retailers, the home centers, also mostly sell WPC. It turns out that it’s the smaller independent flooring retailers that are most actively adopting SPC programs.
The problem is that SPC has a much lower barrier to entry compared to WPC. Initial investment is substantially lower since there are fewer components. For instance, WPC’s print film and wearlayer goes on a vinyl cap that needs to be made or sourced and then attached to the core, while most SPC cores are only topped with a print film and wearlayer or in some cases the visual is digitally printed directly on the core. And those SPC products can be a lot thinner than any WPC, so they’ll use much less material, despite their denser cores.
Add to that the overcapacity of rigid core in the market as a result of the frenzy of facility construction in Asia, and you’ve got the ideal conditions for a commodity market, particularly if passion for the product starts to ebb, which it inevitably will.
Piet Dossche, CEO of US Floors and more importantly the inventor of the entire category of rigid core flooring, says, “Our Coretec brand and product was the disruptor of flexible LVT and the innovator of this rigid core LVT, and we take it as our mandate to guide the industry to preserve the long-term viability of this category to the benefit of the manufacturer, distributor and retailer alike. We cannot allow for this innovation to follow the path laminate flooring took and end up as a commodity.”
WPC manufacturers are counting on the heft of their product, its rich embossed-in-register texturing, its comfort underfoot and enhanced acoustical abatement, to sustain its perceived value and elevate it above the ballooning lower end of the SPC market.
Years ago, the laminate market took on that hourglass shape, with producers like Faus, Wilsonart and Formica, among others, driving growth at the higher end while the bulk of the category settled at the bottom, but in the end, that hourglass settled into more of a pear shape.
The challenge for the WPC producers is to be as distinct from the entry-level SPC market as possible, and that means not just marketing and branding strategies but also innovating and adding value. Under Shaw, the Coretec brand has pursued that with its Coretec Wood and Coretec Stone, introduced last year, that replace the vinyl composite core with a magnesium oxide (MgO) formulation. Coretec Stone offers realistic stone and tile looks, while Coretec Wood is actually topped with a real wood veneer.
The MgO technology was also developed in China-that’s where all the key innovations continue to take place-and it offers an inert construction that is more dimensionally stable, and it’s also fireproof. In terms of raw materials, magnesium oxide is fairly cheap, but by the time it is finessed into a workable form, including through the addition of stabilizing layers, it tends to cost more than standard rigid cores. Also, you can’t direct print on a magnesium core-at least not yet.
There are other areas for improvement as well. For instance, even rigid core variants of the best vinyl plank flooring are as susceptible as flexible LVT to scratches and scrapes-and more susceptible than laminates, so firms are researching ways of increasing that scratch resistance. In fact, CFL’s FirmFit has just come out with a new rigid core product, MTL, that uses a melamine layer, like laminate, offering much better scratch resistance than other rigid core products, and it has also unveiled a product that has a sound deadening layer above the core, not below. And manufacturers in general are looking at ways of enhancing their printing and embossing.
Direct digital printing on rigid cores is not necessarily an avenue for sustaining the higher end of the market, since it’s a process used on SPC, but the costs are still high, so it’s not a technology leveraged for entry-level products. And ultimately, digital printing helps producers be more agile by allowing for high efficiency shorter runs and custom designs. Though the final product falls short in terms of embossing, some texture can be conveyed through digital printing, and manufacturers are working on developing those textures further. With digital printing costs already starting to fall, this technology is likely to become much more prevalent.
Many of the bigger rigid core producers are offering a wide range of products. Novalis, for instance, which makes all of its rigid core products at its Chinese facilities, offers both WPC and SPC, in some cases with direct lamination and in others using a vinyl cap of 1mm or 2mm. A good part of its SPC business is sold through home centers like Lowe’s. HMTX sells its Isocore WPC products to Home Depot under its Lifeproof vinyl flooring brand. Shaw also has a substantial home center program.
DOMESTIC PRODUCTION UPDATE
Another differentiator is offering products made in the U.S. A handful of firms have made the investment, and for most of them it has been a learning curve, and they’ve been slow to get things going. The first one to go full steam ahead is Shaw, which reports that it started producing flooring from its facility in Ringgold, Georgia at full capacity toward the end of last year. Currently it is working on debottlenecking its vertically integrated process to increase both efficiency and capacity. The firm has also invested in extruders for an SPC line that should start up in the spring.
Ed Sanchez, Mohawk’s vice president of product management for resilient, reports that the firm started domestically manufacturing its SolidTech Plus SPC in the second half of last year, and production has been ramping up since then. This year the firm intends to expand its offering with tile styles. SolidTech Plus, unlike many SPC offerings, is enhanced with a PVC flooring cap.
Mannington is putting the finishing touches on its new facility in Calhoun, Georgia that will make both SPC and WPC. The firm has already done test runs and it anticipates producing flooring for sale in the next few months. The firm will start with production of its Adura Max WPC.
Other firms are also investing in domestic production, like Rok Plank, a new division of Turkey’s Trusa Tile & Stone, which started SPC production in Cartersville, Georgia last year. There’s also China’s Wellmade, which currently produces its HDPC (high density plastic core) rigid core product-patented in China and patent pending in the U.S.-in its facilities in Nanjing, China and is currently looking for locations for domestic rigid core production along the Eastern Seaboard. The firm, which also offers its HDPC with real wood and strand bamboo veneers, has its U.S. headquarters in Portland, Oregon with dedicated sales and service teams.
And at the end of last year, Nanjing MGM New Material Company announced that it was establishing GreenView Floors International in Adairsville, Georgia, where it will build a $26 million facility, creating about 240 jobs.
Also, South Korea’s Nox has built a new facility in Ohio, where it already has a flexible LVT operation, to manufacture rigid core LVT, and the firm reports that it went into full-scale production last month. In addition to its NoxGenesis rigid core, the firm also offers a looselay rigid core product targeting both the commercial and residential markets.
Finally, Novalis, which produces a wide range of LVT in China, announced last month that it is investing $30 million to build its first U.S. manufacturing facility, adjacent to its newly opened North American headquarters and innovation center in Dalton, Georgia. The rigid core facility is expected to start production in the second half of this year, and the firm expects that the operation will generate at least 120 new jobs.
While all of this domestic production is very promising, it’s worth noting that these investments don’t come close to keeping pace with investments in production taking place in China. Even once all of these U.S. facilities are up and running at capacity, the firms behind them will still rely on imported product for the bulk of their offerings. So for the foreseeable future, the success of the U.S. rigid core business will derive from strong partnerships with China.
Last May, the Multilayer Flooring Association (MFA), which was formed in 2016 to represent the interests of the rigid core industry, was integrated into the Resilient Floor Covering Institute (RFCI). Part of the reason was because the rigid core market has grown so rapidly that it exceeded the scope of the MFA. Fortunately, most MFA members were already members of RFCI.
A year after its formation, in December 2017, the MFA succeeded in developing a standard for the category with ASTM: F3261-17 Standard Specification for Resilient Flooring in Modular Format with Rigid Polymeric Core. And a pilot certification by the MFA with SCS Global Services, initiated in March 2018, was successfully launched last month. Assure Certified includes FloorScore testing for indoor air quality, manufacturer and chain of custody assessments, testing for heavy metals and orthophthalates, performance testing and onsite manufacturing facility audits.
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