Shaw updates, Schönox and Fuse,WF Taylor HQ: Strategic Exchange - July 2016

By Kemp Harr

The Brexit vote created excitement recently, when 30 million U.K. citizens cast a vote, ultimately in favor of leaving the 28-nation European Union by a 4% margin. It’s been interesting to watch the financial markets’ knee jerk reaction as $2.08 trillion in paper value was wiped off the global equity markets the following day—the biggest daily loss ever.

It’s quite likely this topic will be in the news for the next several years, since the U.K. will apparently have to invoke Article 50 of the Lisbon Treaty, which then triggers a two-year withdrawal process. I mention this since the state of the global economy certainly has a bearing on our economic health here in the U.S., but I also believe this decision, if not reversed, will weaken the European economy overall.

Closer to home, it does appear that our economy—especially in areas related to flooring sales—is continuing to grow, albeit at a muted pace. It was great to see last month that the Q1 GDP was revised a third time to show growth of 1.1%. Unemployment is low, even though some would argue that our method of counting doesn’t tell the complete story. Housing sales numbers, both new construction and resales, are now at post recession highs. Housing starts are up 10% year to date, and existing home sales are up 6% over the previous year.

LIRA, the leading indicator of remodeling activity, projects that home improvement spending will continue to accelerate until at least the end of 2016. And the Architecture Billings Index in May was 53.1, the highest score in nearly a year. This is a leading indicator, so commercial project work could be strong for the next couple of years. This increase in architectural design activity contributed to the high energy and attendance growth at NeoCon in Chicago last month, with registration up 6% to 53,000 attendees. And according to our sources, many of the attendees were working on active projects.

CREATIVE CUSTOMER ENGAGEMENT
Most business people know that if you spend time entertaining your customers and showing them you care about their business, they will buy more from you. We’ve all heard the old adage that people buy from people they know, like and trust. In many instances within the flooring business, this entertainment takes the form of dinners and golf outings, and for many of the bigger firms, it’s usually centered on an annual meeting where everybody travels to a resort location.

Last month, I was exposed to something a little different in the realm of customer entertainment. Shaw Industries is hosting a series of intimate outings this summer, designed to entertain its dealers and show them the investments Shaw is making to be a better flooring supplier. These three-day events are called the Shaw 360 tour. As part of this program, which is running for about six months this year, Shaw is reaching out to its more dedicated residential dealers and inviting them to travel to the West Georgia/East Tennessee area for an all expense paid trip that includes dinner, drinks and daily tours.

Stops on the tour include Shaw’s brand new LVT plant, its recently upgraded hardwood factory, a carpet mill, a distribution center, and a product development and design center. In the end, customers get to see how much money and talent Shaw has been investing to remain their preferred supplier. Just as important, they get to see that these floors are being made by Americans, using some of the most modern equipment in the business, in communities where these factories are the lifeblood of the region. And in the case of hardwood, the guests learn more about the handscraped prison program that drastically reduces recidivism by giving the inmates a skill, an income and a purpose. Probably the strongest impact of the trip is getting to see firsthand who is making these products and what these jobs mean to their lives.

Naturally, the trips also include dinners and social time with some of Shaw’s leadership and an opportunity for customers to feel the sincerity that the firm puts into its channel relationships.

SCHÖNOX ENTERTAINS FUSE ALLIANCE BOARD IN GERMANY
Another example of travel and entertainment money put to good use happened in mid-May when adhesives and floor prep company Schönox HPS North America hosted the Fuse Alliance board of directors and their spouses on a six-day, all expense paid trip to Germany. Now, we’re talking real money when you consider what it takes to fly 17 people in business class from the U.S. to Germany and entertain them morning, noon and night for almost a week.

Nevertheless, this was probably a wise investment. Schönox North America is still a relatively young firm that’s in the early stages of building marketshare in the U.S. And Fuse Alliance’s 85 commercial contractor members can have a significant impact on its sales. The guests had a memorable trip to Germany with a group of their peers and saw the firm’s manufacturing investments and demonstrations for its growing product line.

As Geoff Gordon, executive director for Fuse, told me after the trip, “Schönox is the real deal in Germany. It was great to hear their story and see first hand the investments they’ve made to solve the issues we face during the installation process; plus, you wouldn’t believe all we learned about Germany.”

W.F. TAYLOR MOVES HEADQUARTERS TO DALTON, GEORGIA
In case you didn’t catch the news from just over a year ago, W.F. Taylor, one of the largest domestic producers of adhesives in the flooring industry, was purchased by Dominus Capital, the same private equity firm that bought Bentley Mills from Interface four years ago. Taylor was started in California by a chemist named Wally Taylor back in 1977, and for 16 years prior to the purchase by Dominus was privately owned by the Raidy family. The firm’s first product was carpet installation adhesive, but today the company compounds adhesives for the installation of a wide range of hard and soft flooring products. Over the years, Taylor has built a strong sustainability brand by manufacturing products that have a minimal impact on indoor air quality at the installation site.

Last month, the company made the news again when it cut the ribbon on its new headquarters right off I-75 in Dalton. For years the firm has operated production facilities in Dalton and in Fontana, California, and now it has decided to move its headquarters closer to the center of the flooring business. It’s no secret that over half of its revenue comes from private label glue that it sells to some of the biggest names in the flooring. This move not only gets Taylor closer to its customer base but also away from California, which has been in the news lately for chasing off many businesses headquartered there.

When I attended the ribbon cutting last month in Dalton, new CEO Dan Pelton hinted that there was more news in the pipeline in the form of acquisitions that would bring more clarity to Taylor’s growth plans in Georgia.

SHAW’S $24 MILLION COMMERCIAL CREATE CENTER
On the same week as Taylor’s event, Shaw hosted a ribbon cutting 50 miles down the road in Cartersville, Georgia for its Commercial Create Center. It was obvious that this amazing $24 million, 67,000 square foot facility has been in the planning stage for quite some time.

This new facility will serve as the marketing and product design offices for Shaw’s commercial flooring business, with two of the three levels serving as the headquarters for the Shaw Contract and Patcraft brands. Renderings of the new facility, which is being designed by Gensler and built by Chattanooga-based EMJ construction, show a modern glass structure utilizing the latest thinking in open workspace design. This new structure is expected to be LEED Silver certified. When completed in the fall of 2017, it will serve as an inspiration center for Shaw’s customers as well as its own employees.

Randy Merritt, from a podium in the middle of a grassy field right down the street from Shaw’s plant 94, told the audience that Shaw has invested over $300 million in the last year on new plants and upgrades. He also mentioned that Shaw is the largest employer in Bartow County, where the Create Center is being built. Soon, Shaw will be hosting another event at the grand opening of its $85 million T-1 modular carpet tile plant, which is in the process of ramping up to full production.

If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.

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