Ceramic Tile Report: The U.S. ceramic tile market continues to reinvent itself - March 2017

PANEL PROLIFERATION
Manufacturers are currently utilizing a new technology that is changing the industry dramatically with regard to large-format porcelain panel products. According to Noah Chitty, director of technical services for Crossville, “The two processes used right now are Continua Plus from Sacmi-compaction between two large steel cylinders-and Lamina by System, which is compaction between two belt-covered plates. I wouldn’t call either traditional extrusion, which means forcing wet clay through a die to form a shape. These two players are in the U.S. market right now.”

Porcelain panels, sometimes called slabs, aren’t new to the market. Both Stonepeak’s Plane and Laminam by Crossville were introduced to the U.S. in 2012, and Florida Tile rolled out Thinner in early 2014. However, like many innovations, they have been somewhat slow to penetrate, both because the market needs to be educated on their applications and because there is a learning curve both with manufacturing standards and proper installation.

This spring, Daltile will launch its 5’4”x10’6” Panoramic Porcelain Surfaces, from 6mm to 12mm thicknesses, and Florim, Emser and Del Conca are producing large format products abroad with the intention of bringing them into the U.S. as well.

Marco Fregni, CEO of Florim, explains both the challenge and opportunity of the category. “For Florim Italy, we launched the new 12mm slab,” says Fregni. “This opens up a new business field that we have to start developing from scratch. This category opens us up to countertop and vanity applications. We launched the product at KBIS [the Kitchen & Bath Industry Show] in January, and it was a very successful event. A lot of people were interested, but there is a lot that we need to get up and running in the U.S. market. The beauty of a new business is that our final customer is a completely different one-fabricators or slab people. Very rarely will we find a customer that does both. So the approach is quite different; the logistics are different.” Florim is capable of making up to a 5’x10’ tile with thicknesses ranging from 12mm and 2cm.

In addition to developing sales strategies for porcelain panel sales, the industry must also focus on educating the installation community. This factor, too, is multifaceted because the products aren’t only used as flooring but also as cladding outdoors, as wall covering indoors, and as vanity and countertops, which means that the community needs to be educated about the technical aspects and installation of the product.

J.T. Turner, president of Dal-Tile, explains his firm’s approach to the issue, noting, “We have a full-blown national training program that we are putting on, working directly with any interested participant. We’re traveling the country and doing that, providing the tooling necessary to do the installations. We have identified a few of the best equipment suppliers that have the tooling necessary to handle the panels, and they are also providing training. We are doing that at all our slab distribution centers, and we’re adding another nine slab distribution centers-six this year and three possibly next year-which means we will have all of the major markets covered.”

He continues, “Cladding can get very complicated based on local building codes, because the panels can be directly adhered or mechanically anchored, but we do have two technical specialists that travel the country, working with large commercial contractors on those issues. If you can set it on the floor, you can pretty much set it on the wall. Counters are harder because of the mitering needed for smooth edges, sink cut-outs and fixture and faucet cut-outs. Those types of applications are better done by countertop experts.”

Crossville, too, has been working to get installers up to speed on porcelain panels. “Crossville has partnered with distributors and, in doing that, has solicited contractors in major markets to come to Crossville for training,” explains Greg Mather, president of Crossville, the first domestic manufacturer of porcelain tile. “For the last three years, we’ve trained around 400 contractors per year. It’s a two-day class. Participants go through a full installation as well as gain an understanding of what materials and tools are needed.”

There is no doubt that innovation in large-format porcelain products will continue and, perhaps, that it is the next big thing in tile. Innovations in printing and surfacing have enabled manufacturers to create panels and slabs that are virtually indistinguishable from marble, granite and quartz, which are costly materials. Some of these products, like Crossville’s Laminam, can also be used to skin an already-installed floor or wall surface, eliminating the need for demolition, which can add up to significant savings both in time and cost.

Says Mather, “We are still scratching the surface for potential for large panels. When designers first see the product, they are very impressed. Over the last 12 to 18 months, we have trained over 500 contactors, who are now more familiar with it and open to installing it. Now that people are learning about the product, we will see more and more applications for tile over tile, for external uses, as well as on walls where large, expensive stone slabs currently used. There is a tremendous amount of upside here.”

STIFF COMPETITON IN HARD SURFACE
Over the course of the last few years, there has been a great deal of discussion about competition both within the ceramic tile category, as a result of the increase in U.S. manufacturing, and from outside the category, with multiplying hard surface options, especially in the resilient market.

While some of the new U.S. production is up and running, Cilona doesn’t think that the market is yet experiencing those changing dynamics fully. “It will be some time before the new factories are up and running at capacity, and I don’t think we’ll see the impact of that until two years down the road because it will take a couple of years for them running to build inventory,” says Cilona. “What I see happening is that they are going to run production to meet what they think is going to be their growth. At a certain point, everyone won’t be able to grow, and that’s when things will start to happen. People will look at their inventory and pricing in the market, then the competition will really start. Right now, everyone is just getting their feet wet, building inventory, gauging market value for U.S.-made versus imported product.”

Mather points out that the ceramic tile market imports such a large percentage of its products now-70% by his estimates-that he doesn’t expect the import level to fall below 50%, even when all the new capacity is online. And Molina believes that the increase in U.S. manufacturing will be nothing but good for market players, “I believe in a general uplift of all boats in the marketplace. We feel that competition is always good. It makes things interesting. Del Conca is well positioned to compete nationally, and meeting the needs of the growing market. There is room for all of us.”

At the same time, while ceramic tile’s uninstalled unit price may be competitive with other hard surface flooring, installation costs add a pretty penny to the bottom line. Says Cilona, “One of the biggest barriers to ceramic tile is the installation cost. The product itself is priced competitively. I don’t feel like installers are, in any way, driving up the cost or hindering sales. A lot of installers aren’t making much at all-especially those working for large contractors; some are only getting $1.00/square foot. It’s just the inherent installation time, but that is a barrier. Ceramic tile is $5.00/square foot to install. When you compare ceramic tile to products that are easier to install or DIY, tile is by far a superior product. You are paying for what you get, and that’s why we have tried to promote lifecycle cost and the benefits of tile, the durability, the cleanability. That’s what you’re paying for.”

TELLING THE GREEN STORY
Is the coalition of U.S.-based ceramic tile manufacturers doing enough to promote the category’s inherent green attributes? Many in the industry believe that it is not. After all, ceramic tile is made of natural materials. It has a lifecycle of decades. It gives off no VOCs. However, the very fact that “green” is second nature to ceramic may be the reason why it is often overlooked. When an industry, like carpet for instance, has to work hard to green its product and practices, they work similarly hard to promote those achievements.

“Green is one aspect that the tile companies of North America really should have began promoting 20 years ago, in the way that other industries have promoted this aspect,” says Cilona. “I am a member of the Tile Council of North America marketing committee. We have a new initiative launching at Coverings that will be self-promotion. I’ve been fighting for that forever.”

Molina agrees that the ceramic tile industry could better communicate its green story. “Tile is probably the greenest flooring product ever made. As an industry, we need to elevate that message to the masses with some sort of national campaign. We need to do a better job promoting it.”

“Our industry has been bad at promoting itself, particularly in North America,” says Turner. “And we have not been good at promoting the green aspects. Currently, the Tile Council is launching the ‘Why tile?’ campaign, which ties back to educational resources for A&D and homeowners. It will focus on green aspects-both environmental and human health. You really cannot find another flooring product that equals tile with regard to sustainability; its CO2 levels are the lowest. When you tear it out and send to the landfill, it’s dust to dust. And now, we’re recycling it. It does not emit any significant or deteriorating chemicals. It has no VOCs; it’s not flammable; there’s no plastic. It has no restrictions on cleaning. It’s the most bacteria-free product you can put in-bacteria can grow on the surface but cannot bind or grow in it. The industry has done a lousy job communicating these benefits, and it is moving to change that.”

Lyza points to the Environmental Protection Agency’s inclusion of the TCNA’s Green Squared standard in its Recommendations of Specifications, Standards and Ecolabels for Federal Purchasing as a victory on this front. “The Tile Council, with the support of its members, has done a good job promoting sustainability, and there is a renewed focus on educating the consumer,” says Lyza. “The EPA’s announcement of its inclusion of Green Squared is a huge gain by everyone who has worked so hard on that. Now, the education continues. There is always more to do, but this inclusion will certainly result in good things.”

DOMESTIC MANUFACTURING & CONSUMPTION
Will the increase in U.S. production yield a similar increase in per capita usage of ceramic tile? While that is not necessarily the motivation behind moving production to the U.S., it is certainly interesting food for thought. After all, in countries where tile production is high, like Italy and Spain, per capita consumption is high as well, but it’s hard to tell the chicken from the egg here.

A few things, however, are certain. First and foremost, all factors being equal, Americans do like to buy American, and many see that factor as a differentiator in purchasing.

Second, due to logistics factors, domestically produced products are inherently greener. That may not tip the scales too greatly with Baby Boomers and even Gen Xers, but it is a significant factor for Millennials, who are concerned not only about sustainable manufacturing but also the humanitarian side of sustainability, which is to say that workers are being treated and compensated fairly and working in environments that do not put their health at risk. American manufacturing offers more certainty in that regard. Factor in ceramic’s lifecycle, and it stands to reason that ceramic can easily win Millennial hearts and minds.

On top of all that, ceramic has broken through a barrier style-wise, and many of the looks coming out of the mills today aren’t just more-of-the-same but legitimately interesting looks that are getting a second glance from consumers. The visual warmth of wood paired with the durability of ceramic is a hard combination to beat.

Several of those positives, however, may also be viewed as downsides for some American consumers. While ceramic tile’s semi-permanent nature means less cost in the long run, American consumers sometimes shy away from long-term commitment in purchasing. After all, America has long been a throw-away culture, apt to toss a few dollars at a cheap solution that fits the needs of today rather than delaying gratification and investing in something that will stand the test of time. Today’s style is often preferred to timeless style, and that quick-fix mentality is one that ceramic tile battles in the U.S. market.

Ultimately, there is-and will always be-a percentage of people who will opt for an inexpensive big box area rug not in spite of its limited lifespan but because of it-assuming they’ll be ready for a new look by the time it wears out anyhow. The same issue is at play here. Regarding ceramic tile, consumers may ask themselves whether they are ready to commit to a floor that will essentially become a part of the structure of their home.

In a sense, this becomes a larger concern with the proliferation of style and size options. Once, choosing a ceramic tile meant selecting from travertine or marble looks and choosing between a few varying neutral shades. Today, as the style offerings and formats have proliferated, the decision-making process has become more complex, and those who keep an eye on styling must also be aware that the fast flurry of innovation at present means that what is new today may be old news tomorrow. After all, those early wood looks that seemed so innovative when they launched are today’s commodity choice.

Ultimately, the U.S. market is chock-full of beautiful flooring products vying for the consumer’s attention, and, at the end of the day, though ceramic tile product cost is competitive, the category also costs more to install. That shouldn’t prove to be a deal-breaker, as long as those on the front lines of the industry are properly communicating the category’s many attributes.

All that said, many in the ceramic industry are seeing signs that category growth will continue. Says MS International’s Shah, “Ceramic tile continues to be one of the highest growth categories within flooring and in building products generally. The product has a lot of legs to it as the economy improves. In addition, the United States has one of the lowest per capita usages of ceramic tile in the world. Our expectation is that it will continue to grow. If the United States were to reach Canada’s per capita usage, that would provide approximately 50% growth of the industry.”

DOMESTIC PLAYERS
Dal-Tile opened its new Dickson, Tennessee plant in the third quarter of 2016. The plant produces high-end porcelain and, according to Turner, is manufacturing products that it previously had to import. In addition to its long-range plans to produce large sizes, the new plant has a sophisticated finishing end. “It’s the first plant we have with rectification and polishing as well as other unique finishing applications after firing,” Turner notes. “For us, it’s adding a lot of value at the high end.”

Across Dal-Tile, the company’s production is agnostic, and Turner explains that after the Marazzi acquisition, Dal-Tile optimized all its manufacturing to run more efficiently than either company was previously-having a plant run one size for all brands, for instance, which minimizes changes to the product line.

With regard to its new Panoramic line, the company reports that “2016 was the year of educating people about those products, and 2017 is about growing a business around them.” The business points to its more than 40 slab yards as an in-place means of getting the product to market.

In addition, Turner reports that Mohawk has reached an agreement to purchase the assets of EmilCeramica. The deal is currently in due diligence. Because the bulk of EmilCeramica’s business is in Europe, the company will be under the management of Mohawk’s European arm. The portion of business currently in the U.S. will remain branded and sold as it is currently.

Crossville announced last month that it was launching a new brand for its company-owned distribution division: Crossville Studios. The company has been adding distribution facilities over the course of the last few years. In early 2016, it purchased the assets of Design Materials Inc., based in Denver, Colorado, with locations in Denver and Albuquerque, New Mexico, and, in November 2016, it bought Capco Tile & Stone with nine locations throughout Colorado and Nevada. Crossville, which targets the A&D market through distributors, reports that it has “integrated into those areas because the distributors were looking to make ownership changes, and [Crossville] wanted to secure the path to market that we’ve established,” explains Mather.

Mather, who took the reins as president in late 2015, reports the company is currently focused on rejuvenating its product pipeline. The company had several new launches at the end of 2016, with more slated for 2017. (See our Surfaces Review on page 37 for more on Crossville’s new products.)

Florida Tile, the American arm of the Italian Panariagroup, has been in expansion phase for a while now. Over the course of the last year, at its Lawrenceburg, Kentucky production facility, the company brought a new kiln online, added a rectification line and added a new selection line for packaging. The company also increased the size of its Lawrenceburg distribution center by 100,000 square feet and expanded corporate office in Lexington, Kentucky as well.

In 2016, the company launched three rectified product lines, and new equipment will enable the company to soon produce tiles up to 36”.

Florida Tile serves the mid- to high-end of the market through independent dealers in addition to its 23 Florida Tile sales branches. Over the course of the last year, the company expanded its San Antonio, Texas and Salt Lake City, Utah branches, and it is in the process of moving its Fort Collins, Colorado and Seattle, Washington branches to more desirable locations.

In 2016, Florida Tile began distributing another Panariagroup brand, called Cotto d’Este, in the U.S. Florida Tile is solely responsible for the brand here in the U.S.

Believing that a factory has to be diversified, Del Conca utilizes a multi-channel approach to market, and, ultimately, its products end up in the hands of ceramic tile retailers across the U.S. The Italy-based, privately owned business-whose former head, Enzo Mularoni, passed away late last year-made investments in both its U.S. and San Marino factories last year. In its Loudon, Tennessee plant, which opened in March 2014, it doubled its capacity, installing two new large presses for large format tiles and building an efficient new kiln that doubled the output of the plant, which in 2017 will total 68 million square feet. The company reports that over the course of the next five years, it will invest around $125 million in its U.S. and Italian facilities.

The company also expanded into the exterior 2cm porcelain paver market and says that it is the first to manufacture these products in the U.S. In addition, it is introducing two new sizes of tile to its U.S. offering-8”x48” and 16”x32”-which it will unveil at Coverings. According to Molina, all products produced in the company’s Tennessee plant are designed for the U.S. market, and these looks complement what it makes in Italy.

Florim, which supplies its network of dealers through distributors and also services home centers through a separate business, has been busy developing the market for its 12mm thick porcelain panels. The panels are produced at a dedicated plant in Imola, Italy, which is ideal, Fregni explains, as the large products necessitate a large amount of production and storage space.

The company is also working to focus on design with its U.S.-made product, Fregni explains, “being more Italian in design but as a U.S. manufacturer.” This focuses both on styling and sizes. “In the U.S., the biggest consumption of tile is always in the 6”x24”, 12”x24” and 12”x12” formats,” Fregni notes. “Florim made a huge improvement because it can make 16”x32” and 8”x48”; we’re about to launch 24”x48”. Those are more like commercial sizes. We’re also providing the technical features, like monocaliber edging.”

Stonepeak, the U.S.-based arm of GranitiFiande, underwent a number of significant management changes last year, with CEO Rodolfo Panisi leaving the company in January and his replacement, Marco Carrucciu, leaving in June. According to Jenn Sabban, marketing supervisor for Stonepeak, the sales and marketing teams are currently in charge of the tasks that fell to the CEO previously.

On the product side, Stonepeak is currently focusing on its Plane line, expanding color options and offering technical training at its Tennessee plant. The company reports that it has expanded its Tennessee plant and hopes to produce Plane there by mid-year.

Wonderful Group broke ground last year on its Lebanon, Tennessee plant, and construction is almost complete. This facility should start production in April. In total, the Wonderful Group’s Tennessee facility is 750,000 square feet, with 500,000 square feet of that allotted for industrial operations and warehousing.

Wonderful Group, which produces 100% porcelain product, distributes in the U.S. with the portfolio of products that the Tennessee plant will produce. These were designed for the U.S. market and are currently being produced abroad.

The executive staff and critical employees of Wonderful Group with begin transitioning to Tennessee after the plant commences with production.

With its new San Diego, California and Long Island, New York distribution centers now up and running, MS International has a total of 24 distribution centers, servicing retailers across the U.S. and Canada. Some industry pundits estimate that MS International is now the largest importer of tile to the U.S.

The company is focused on, as Shah put its, “relentless pursuit of products, especially as they relate to the design and trend environment,” and the company spends a good deal of time marketing and merchandising the products that it chooses. Shah reports on how the advent of digital printing has impacted that pursuit, noting, “Our product line five years ago was effectively square tile that looked like stone. Today, we have everything from bricks to wood looks to marble-looking slabs within our ceramic tile line. We do see large opportunities for ceramic tile in categories that were not typically associated with the product. This includes pavers and countertops as well as stacked stone.”

Emser, which designs and markets ceramic tile, recently opened a new branch in Tampa, Florida, which brings the California-based company’s branch total to 71. It will soon open another in Suffolk, Virginia; in this large facility, the company will house its 4,500 SKUs.

As of 2008, Emser had 55 locations. During the recession, the company was in a holding pattern-neither opening nor closing branches. It began expanding again in 2013, which means it has added 16 branches in only four years. The company reports that it has aggressive plans moving forward and is actively expanding on the East Coast.

Outside of wood looks, Baldocchi reports that Emser’s number one growth category is “utilizing product for walls.”