WPC Flooring Trade Group, NAFCD Presentations, Starnet: Strategic Exchange - Dec 2016

By Kemp Harr

Much has happened since our last issue. The Cubs have shaken off the curse of the billy goat and won the World Series, the presidential election took a last minute twist—proving just how inaccurate the 24 hour news machine and pre-election polls can be, and in the flooring business, we’ve got a new WPC trade association, the floorcovering distributor group (NAFCD) met in Chicago, Starnet held its fall meeting in Nashville, Neocon East was held in Philadelphia, the boutique hospitality show (BDNY) took place in New York and the Bridgeway Interactive/Creating Your Space meeting was held in Napa Valley.

The floorcovering business has so many trade associations that it even has a trade association for the leaders of the trade associations, and now we’re adding one more. But with all kidding aside, the new Multilayer Flooring Association (MFA) has been formed to represent the standards and interests of the suppliers in the wood polymer composite (WPC) business within North America. The seven founding members are Armstrong, CFL, Mannington Mills, Metroflor, Novalis, Torlys and US Floors. 

WPC flooring has proven to be the fastest growing category in the flooring business this year and, while the wear surface is a resilient LVT product, there are intellectual property issues and standards separating it from typical resilient flooring that must be addressed and communicated to retailers, contractors and consumers. More information on this new group can be found at multilayerflooringassociation.com.

Business conditions appear to be solid for distributors in the floorcovering business. At last month’s 45th annual meeting in Chicago, the NAFCD claimed a record attendance with ten new distributor members and 20 new supplier members. As part of the meeting, Heidi Cronin stepped in as president and Torrey Jaeckle took the roll of past-president. 

One of the highlights of this meeting every year is the presentation by Alan Beaulieu with ITR Economics. Interestingly, his presentation last month was before anyone knew the election results and yet he predicted that 2017 was going to be a better year for everybody in the room thanks to GDP growth of 3.5%. He attributed this growth to positive consumer sentiment, flexible interest rates, high employment, banks willing to lend, strong retail sales and continued commercial construction. Alan also predicted that the recent slump in housing starts was temporary and that residential new construction would start to climb again. One comment that I particularly liked was that the only way to pick up marketshare next year would be to advertise a compelling message.

A second and just as compelling presentation was made by Ken Gronback, titled The Age Curve. The essence of this presentation was that babies make future consumers, and by tracking birth rates, population figures and age related behavior patterns, many economic patterns can be predicted. If you recognize that the number of Gen Xers (those people born between 1965 and 1984) is 25% smaller than the number of Boomers before them and Millennials following them, it’s easy to explain why the housing market has been in a slump. Ken went on to say that when the median age of Millennials is 30 (or in about ten years), the U.S. housing inventory is going to be about 25 million houses short. 

While this bodes well for us here in the U.S. flooring business, the story in China is much different. China’s only-one-child mandate—which was just relaxed in November 2013—is going to have a huge negative impact on the country’s economy due to a reduced number of consumers and workers, especially with the burden of a large number of aging people who were born prior to 1979 when the plan was officially adopted.

Next year’s NAFCD meeting will be held at the Broadmoor in Colorado Springs, November 14 to 16.

Starnet continues to thrive as an active force in the commercial contract flooring business. In early November, 365 people—a new high—attended Starnet’s fall meeting in Nashville, Tennessee. The membership, which at last count was around 167 firms, is experiencing moderate growth despite lackluster demand within corporate, the largest sector, this year. Other sectors, like healthcare and education, are bringing steady work, and the hospitality sector is strong.

Members we spoke with are seeing growth in the upper single digits range, but this is due to a broadening of the services they provide and not because of an increase in demand for commercial flooring. The members are positioning themselves as flooring resources and not just installation subcontractors. Add-on services include post-installation floor care, surface coatings, and concrete prep. In fact, several members have made the necessary investment to enter the concrete polishing business. There is also a heightened focus on managing the specification as more and more members add A&D specialists to their team.

This fall’s meeting, themed Focus on the Future, covered several of the topics that we’re seeing at various meetings we attend, like succession planning, benchmarking and hiring, training and retaining future talent. Starnet’s president, Jeanne Matson, pointed out that 62% of the member companies are family owned businesses, and selecting the next generation leader can be a daunting task. One very enlightening session was a panel of education focused facility managers, and it was encouraging to see how informed they seemed to be on floorcovering issues. I encourage you to read our facility manager article on page 39, which includes an interview with one of Starnet’s panelists. I also invite you to listen to our audio interviews with Jeanne Matson and Leah Ledoux for an update on Starnet’s budding national account program and to hear more about Starnet’s priorities for 2017.

Dal-Tile has completed the first phase of its massive porcelain tile plant 40 miles west of Nashville in Dickson, Tennessee. Today, the plant employs 205 employees, has one million square feet under roof, and—after the installation of a second kiln—will be able to produce 90 million square feet of tile per year using the four newly installed hydraulic Sacmi presses. While the first two phases of the plant are under roof, only the first phase has a concrete floor, as Dal-Tile continues to debate the configuration for the remaining phases. 

At this point, the plant can produce 24”x24” tiles and 6”x36” planks, but ultimately the plant will move to 24”x48” and on up to 72” formats. The plant has added the latest technology in digital imaging, rectifying and polishing, as well as installing the most advanced and efficient roller hearth kiln. When completed, Dal-Tile , the tile division of Mohawk Industries, will have invested $180 million and added 150 million square feet of tile capacity.

Floor Focus was invited to tour the plant along with Starnet’s board of directors and board of advisors the day before Starnet’s fall meeting began in downtown Nashville. John Cousins, Dal-Tile’s SVP of sales, reminded me during the tour that Dal-Tile is one of Starnet’s oldest vendor partners—joining Starnet long before the tile brand was acquired by Mohawk. 

“We are delighted to get the chance to show Starnet the investments Dal-Tile is making to produce the highest quality, most advanced tile right here in the U.S.,” John commented on the bus ride to the plant.

With the addition of this plant, Dal-Tile now produces tile for all of its brands: Daltile, American Olean, Marazzi and Ragno agnostically at seven plants in North America in addition to also importing some tiles from factories it owns in Europe. The seven core North American plants are located in Dickson, Tennessee; Florence, Alabama; Muskogee, Oklahoma; Sunnyvale, Texas; Monterrey, Mexico; Mexicali, Mexico; and Salamanca, Mexico. 

According to the Dickson facility’s plant manager, Brent Shoemaker—who was running the Muskogee plant prior to this assignment—Dal-Tile chose this location for three reasons: proximity to raw materials, proximity to customer base, and projected cost to operate based on labor rates and natural gas pricing.

While we’re on the topic of U.S. tile manufacturing, it’s prudent to point out that in rough numbers, almost 35% of new U.S. based tile capacity has already or will soon come on line in Tennessee. Industry pundits tell us that the additional capacity added by first Del Conca in Loudon, Tennessee (60 million square feet), and then Dal-Tile in Dickson (touted to be 150 million square feet when completed), followed by the Concorde Group’s Landmark factory in Mt. Pleasant (50 million square feet), and then Marco Polo’s Wonder factory in Lebanon (90 million square feet), adds up to 350 million square feet of additional capacity on an existing base of approximately one billion square feet.

So if consumption of tile in the country is growing at a compounded annual growth rate of 7%, what will happen when capacity outpaces demand? Granted, 60% of the tile consumed in the U.S. is imported, but with the strength of the dollar, that product from predominantly China, Italy and Spain will continue to land here at a competitive price. I’m not sure where things will shake out, but I’m hoping that we don’t end up with warehouses full of tile that end up being sold at a loss, ultimately hurting everyone in the business. 

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

Copyright 2016 Floor Focus

Related Topics:Daltile, HMTX, Metroflor Luxury Vinyl Tile, Armstrong Flooring, Beaulieu International Group, Creating Your Space, American Olean, Mannington Mills, The International Surface Event (TISE), Starnet, Mohawk Industries, Novalis Innovative Flooring, Marazzi USA