Modular Carpet Report - February 2012

By Jessica Chevalier and Darius Helm

Despite the slow commercial market, carpet tile sales continue to rise and take share from broadloom. Last year, the carpet tile business got an extra boost as a result of growth in the corporate market, where tile now commands 50% of the soft surface marketshare. In addition, new designs and innovations are helping carpet tile make gains in most of the other commercial sectors.

Most experts agree that carpet tile accounts for well over a third of all commercial carpet sales, though its volume share is quite a bit smaller because of higher average price points. The total U.S. carpet tile market is estimated to be over $1 billion.

Entry level broadloom accounts for a lot of total carpet volume, but carpet tile cannot yet effectively compete at those low price points. That’s part of the reason why carpet tile has been slow to penetrate, for instance, the guest room part of the hospitality business, where it would otherwise be a good fit.

However, carpet tile manufacturers have made great inroads in lowering the cost of their products, much of that through lowering face weights. But the mills have been doing this for years now, so advances these days are made in smaller and smaller increments.

Carpet tile’s marketshare is strongest in the corporate and institutional sectors, along with the government sector. It’s also gaining share in the retail market, and in healthcare, both acute and assisted living. In the education market, carpet tile is stronger in higher education than K-12, so the slowdown in K-12 over the last year has not had much of an impact on carpet tile growth.

It’s worth noting that there has been very little new construction in the commercial market, and the vast majority of work is in renovation projects. It looks like some of the work out there was from projects delayed by the credit crisis and finally coming back on track.

Another weak sector for carpet tile is hospitality. Some of the boutique hotels and those catering to younger clientele have been drawn to carpet tile’s modern fractured look for their public space design, and despite the price point barrier it’s also appearing here and there in guest rooms, where carpet tile manufacturers have for years been touting factors like low installation waste and swap-outs of damaged tiles as advantages carpet tile holds over broadloom.

Mind you, the one sector in which carpet tile has made the slowest penetration is the residential market. Milliken and Flor (an Interface brand) are the only two mills that have made it their business to specifically target the residential market. Milliken’s are loose lay and Flor’s use TacTiles to attach to each other for floating floor installations, so both are well suited to the DIY market. But the idea is still new to the buying public, and designs are still evolving, so it’s hard to tell the potential of carpet tile in the residential market. Flor, however, is betting that people are starting to see the attraction of carpet tile—the firm has opened seven stores across the country in just over a year, and is planning to build more in 2012.

Many of the carpet tile players sell their products internationally, though the dominant player on the world stage is Interface, which has three Pacific Rim facilities. Tandus and Milliken also make product in China, and by next year so will Shaw. China’s the biggest foreign market right now, followed by India and Latin America—where Brazil is by far the largest regional market. Business in Europe is still middling, much like the North American market. However, parts of the Middle East are still strong.

Everywhere, margins are under pressure. Raw material costs are on a relentless rise, driven by crude oil pricing, rising global demand for polymers (such as engineered plastics in the automotive industry) and limited refining capacity. In this global, interconnected marketplace, anything and everything sends impact waves through the industrial community, from weather patterns over cotton-growing regions to political alliances in the Middle East.

BACKINGS CONSTRUCTION EVOLUTION

Carpet tile backings generally feature a spunbonded nonwoven polyester primary backing into which the carpet is tufted, followed by a dimensionally stable secondary system--generally PVC or polyolefin--or a polyurethane cushioned system. A handful of mills have also used woven polypropylene primaries, like what's used in broadloom for select products. Shaw's backings are largely polyolefin, while InterfaceFlor's are PVC. Mohawk, Tandus, J+J, Masland and Mannington do largely PVC systems, though most also offer non-PVC. Two mills make the bulk of their products on cushioned backings: Milliken and Bentley Prince Street. Beaulieu's Nexterra carpet backing, recently dematerialized by 40%, is largely made of recycled PET (from drink bottles) and glass. It's a hard back, but the reengineering has also made it more flexible.

Propex, the world leader in woven polypropylene backings, recently came out with a woven polyester called Isis designed specifically for carpet tiles. According to the firm, the dimensionally stable product offers better stitch lock than nonwovens, which opens up design possibilities, and increases throughput. Most of the big mills are testing out Isis. Some see potential in design, and some see potential in dematerialization. However, Isis is priced higher than traditional nonwovens, at least for now, so it may not be an effective tool for mills whose aim with lighter face weights is to compete against broadloom at the lower price points.

The other important feature of carpet backings is their sustainability. In fact, the flooring industry's first large scale foray into sustainability was in carpet tile backings, and they just get greener every year. Recycled content of over 50% is now fairly common, and sophisticated reclamation infrastructures have been developed to reclaim and reuse carpet tiles. Now we're starting to see high volumes of face fiber with significant recycled content, so the entire product is going green and percentages of virgin material are steadily failing.

Carpet Tile Innovations
With clear paths toward sustainability becoming manifest in both backings and face fibers, manufacturers have been turning their attention to another significant portion of the material content associated with carpet tile—adhesives. A number of ingenious technologies have been developed by the big mills.

InterfaceFlor, for instance, came out with TacTiles five years ago, and according to the firm about half of all current installations use the system, which cuts down on adhesive use, subfloor prep and down time, and makes reclamation a cinch. Last year, Shaw introduced LokDots, which adhere the tile to the floor with a huge reduction in adhesive volume, also reducing down time and easing reclamation. Bentley Prince Street is working on its own version of TacTiles for its NexStep cushioned tiles. Tandus has an applied adhesive on its ER3 backings for a peel and stick application. Mannington has a similar system, though packaging the tiles back to back eliminates the need for a film to peel off. Milliken’s TractionBack is an adhesive free system, featuring a friction coating that inhibits lateral movement.

Later this quarter, J&J Industries will introduce TileTabs, a non-liquid tile installation system that the firm has been working on for two years.

By and large, the movement is away from traditional liquid full spread adhesives, though they still account for the majority of carpet tile installations.

DESIGN TRENDS

Well into the 1990s, tile design was still in its infancy and the looks were basic and fairly uninteresting. People didn't really know how to design it. Should it be designed like a relative of broadloom or was it a totally different animal? Designers muddled along for a while until they started looking at the modularity of tile as a design tool and not a limitation. The quarter turning of tiles may not be appealing to some, but it represented a severing of the yoke, freeing carpet tile to pursue its own aesthetic path.

Biomimicry emerged through InterfaceFlor, representing a major design trend, and by the turn of the century all the big mills were delving into the ever-widening array of design approaches. Now designers love creating carpet tiles, because it's all about forging new territories, and in recent years the category has established itself as an engine of design innovation.

In the last couple of years, following behind the trend in ceramic tiles, rectangular formats have appeared on the scene, most notably by Shaw. Mills are also coming out with more sizes in the square format. We'll probably see more developments in format in the next couple of years.

In part because of this expansion in design possibilities, there are almost too many design trends to name. Also, many of the mills, from smaller players like Masland to the likes of Tandus, InterfaceFlor and Shaw, each have their own unique perspective on designing tile.

When it comes to color, there are a few clear trends. One is bright colors as accents, in part to complement the range of low-key neutrals, particularly greys, that dominate the field designs. Different forms of teal are strong right now, as are purples, and orange seems to have secured a spot for itself.

THE TOP TEN PLAYERS

Shaw Contract
When it comes to the U.S. commercial market, Shaw and InterfaceFlor are the market leaders. Shaw makes square and rectangular carpet tiles with EcoWorx recyclable polyolefin backings. The firm also offers EcoLogix cushion backed tiles.

The biggest news in Shaw’s carpet tile business last year was the introduction of its LokDots releasable pressure-sensitive adhesive beads, which replace traditional full-spread wet adhesives. According to the firm, LokDots use 97% less adhesive than traditional installation systems. The adhesive beads secure the tiles at intervals along the floor.

In 2010, Shaw came out with its first rectangular tiles (18”x36”), and high demand for the format led the firm to add several new styles over the last year.

Shaw’s biggest commercial carpet tile sector is corporate, which rebounded last year. Shaw’s corporate business was up by an estimated 25% in 2011, and most of that growth was in carpet tile. The firm’s second biggest sector is education, which also posted double-digit growth last year, mostly in higher education. Another big sector is healthcare, where Shaw’s broadloom has a stronger position than tile—though it’s shifting toward tile. The firm also saw some growth in retail last year, as well as in hospitality public space jobs. The slowest sector in 2011 was healthcare.

Shaw also announced last year that it will open a carpet tile facility in China. The firm is scheduled to beginning building this year, and the facility should start producing tile for the Asia Pacific region in early 2013. It’s Shaw’s first carpet tile facility outside of the U.S. The firm does a lot of international business, with solid growth in South America, East Asia and parts of the Middle East.

InterfaceFlor
Interface Inc. is the biggest carpet tile producer in the world, and it has two businesses in the U.S. commercial market, LaGrange, Georgia based InterfaceFlor and Bentley Prince Street (BPS), headquartered in City of Industry, California. Both make carpet tile, and BPS also makes broadloom. Interface also has operations in Malaysia, China and Australia.

InterfaceFlor sales started to rebound in mid 2010 and were up in 2011, with strong activity in the first two quarters, after which the pace ebbed. The corporate sector, InterfaceFlor’s biggest market, accounted for an estimated 50% of the firm’s sales last year. The large corporate market was strong, as was tenant improvement. The second biggest market, education, has been tough, but it’s still a solid sector. Most of the education work has been on the remodeling side. Healthcare has also been solid, with some good traction in assisted living.

Five years ago, InterfaceFlor came out with TacTiles, adhesive PET squares that attach carpet tiles to each other for dimensionally stable floating floor installations. According to the firm, about half of all InterfaceFlor installations last year used TacTiles instead of full spread liquid adhesive.

By dematerializing adhesive volume, both TacTiles and Shaw’s LokDots vastly reduce the environmental footprint of their products. The most significant difference between the products is that TacTiles attach to each other for floating installations while LokDots adhere the tile to the floor.

The firm made Fast Company magazine’s October United States of Design issue, as one of “Thirty Companies That Get It,” in a group that includes firms like Apple, Tesla, Twitter, Livescribe, Jet Blue, Nike and Herman Miller. InterfaceFlor also made a big splash in the design community last year with its Tapestry technology, which produces lower weight products with high design capabilities. The product that has received most of the acclaim is Raw, an organic look with a distressed industrial feel.

Another Interface business, Flor, sells carpet tile to the residential market. Until recently, most of the activity was in catalog and online sales, but the firm has been adding brick and mortar locations at a brisk rate. There are seven stores now—Dallas, Houston, Chicago, Santa Monica, Atlanta, and two locations in New York City, one in Brooklyn and the other in SoHo—and there will be more this year.

Mohawk
With a raft of new products rolled out, carpet tile represented over 50% of Mohawk’s new product introductions in 2011. The corporate sector is the largest for Mohawk, and it is also the fastest growing in terms of dollars. By percentage, healthcare is the fastest growing segment. Carpet tile was a growth spot for Mohawk in 2011, an overall good year for the business.

With vibrant colors in high demand, especially for accents, Mohawk has added over 50 new colors to its carpet tile products over the last year. This month, the company also launched its first Sorona SmartStrand offering in modular carpet with its What Moves You collection. Sorona has performance characteristics that are similar to nylon, but its environmental footprint offers a 30% reduction in greenhouse gases, and 37% of the fiber’s content is derived from rapidly renewable sources. The carpet tile are fully recyclable at the end of their useful life.

Tandus
Tandus makes broadloom, Powerbond six foot goods and carpet tile. The smallest part of its business is broadloom. Carpet tile and Powerbond each account for about 40% of the firm’s sales. The bulk of the firm’s carpet tiles feature its ER3 PVC hardback, though it also offers using a chlorine-free vinyl (polyvinyl butyrate) called Ethos, and a lighter weight PVC backing called Conserve. Ethos demand has grown over the last year, as has the firm’s FlexAire cushioned tile offering, which has a high texture retention rating. Ethos has been available since 2004 on Powerbond, but it’s only been offered on carpet tile in the last three years. Also in high demand are the firm’s 24” tiles.

The firm’s ER3 backing features a releasable peel and stick installation system that, like LokDots and TacTiles, reduces the total environmental footprint of the installed product and also allows for easy reclamation.

Tandus has just come out with its first 18”x36” tile program, and the firm anticipates that the format will work well with its Sero design technology. Sero yields carpet tiles cut from a larger Powerbond format for unique looks that can be installed for a wide range of organic designs, from free flowing to the fractured feel of slate.

Last year, Tandus’ U.S. carpet tile business was up by double digits, thanks to growth in the corporate sector, the firm’s biggest market. Internationally, its biggest market is the Pacific Rim and India, followed by South America and Europe. The firm has a carpet tile facility in China.

Bentley Prince Street
Carpet tile grew to over 40% of BPS’ overall business in 2011. Fifty percent of the company’s carpet tile business is
in corporate, which was the fastest growing sector for the firm in 2011, and BPS expects this to continue in 2012.

Over the last year, the company has added to its collection of tile formats, offering every tile design in a 24”x24”, 18”x36” and 36”x36”. This maximizes design potential for the end user. In addition, the company launched 45º tiles that help reduce waste by utilizing all of the tile in the border and fill. BPS also increased recycled content in all of its carpet tile products.

BPS’ carpet tile business was up slightly in units last year, and the company saw growth just shy of 10% across the board.

Mannington
Mannington makes commercial broadloom and carpet tile. The carpet tile is made through a joint venture with J+J/Invision, and it now accounts for over half of Mannington’s carpet revenues. The firm offers both a PVC hardback and a PVC-free polyolefin systems, with most of the demand for the PVC tile. Mannington has NSF-140 Platinum certifications for both systems.

The firm’s alternative to liquid adhesive installation is FreLock, a preapplied adhesive. Tiles are packaged back to back, eliminating the need for a protective layer of film.

Its biggest sector, corporate, also showed the most growth last year, and the retail sector has also been up, with the bulk of the activity in remodeling. The weakest sector has been the K-12 segment of the education market.

Most of the firm’s carpet tiles use Antron 6,6 fiber, but the firm has recently come out with a nylon 6 offering using Aquafil nylon at more competitive price points.

Milliken
Milliken had a number of new product introductions last year, including Rinascita recycled leather tile, and Isos, a 100% wool tile. Rinascita, a collaboration with Spinneybeck, is made by taking scrap leather from various industries, grinding it, mixing the grind with natural rubber, then reforming it to tiles with leather visuals. The product is composed of 95% recycled content. Also committed to green manufacturing, Milliken is now utilizing 100% of the methane generated by the Spartanburg county landfill.

Milliken’s largest and fastest growing sector is what it calls workplace, which encompasses private and public office space. The hospitality and K-12 education sectors are also growing. With regard to education, the company is seeing greater investment in interiors as schools strive to create top-notch 21st century learning environments.

J&J Industries
J&J Industries is made up of two brands, J+J/Invision for the commercial market and J+J/Templeton for the hospitality market, from the firm’s 2010 acquisition of Templeton. J+J/Invision saw 10% growth in its carpet tile business last year. Tile now accounts for approximately 40% of the company’s sales revenues, and the corporate sector is its largest and most active segment. The hospitality sector is its fastest growing sector through the firm’s new J+J/Templeton brand. In both the corporate and hospitality sectors, the majority of activity has been due to refurbishments.

Last year, J+J/Invision installed a large-scale water filtration/reclamation unit that allows it to reclaim 90% of the water used in its commercial dyeing operations. The system reduces corporate water use by over 60%.

Beaulieu
Last year, Beaulieu consolidated its three brands under the Bolyu name. Previously, each of the three brands had its own salesforce and each had a modular tile component. Now, there are 150 styles under the Bolyu name with one salesforce and management team representing it. Bolyu’s carpet tile business saw double-digit growth over the last year and now represents 30% of the company’s total offering.

In addition, the firm enhanced its backing system, which resulted in a 26% reduction in water usage, a 41% reduction in electricity costs and a 44% reduction in natural gas consumption. In addition, Beaulieu’s carpet tile now contains a minimum of 40% post-consumer recycled content.

Masland Contract
The Dixie Group has several businesses, mostly focused on the commercial market, and its commercial division, Masland Contract, makes both broadloom and carpet tile. The firm has been making tile for about five years now, and its products are notable for their bold styling.

The firm’s carpet tile revenues for 2011 were up an estimated 18%, with most of its products going to the corporate sector. Other big sectors are government and retail, and the firm also does some business in the healthcare and hospitality sectors. In hospitality, it’s mostly public space and restaurants.

Masland’s carpet tiles, which target the upper end of the market, are PVC backed. Average recycled content is about 21% of the total weight of the product, 11% post-consumer and 10% post-industrial. Face fiber is all Antron nylon 6,6.

In just five years, carpet tile has come to account for close to 25% of Masland Contract’s total sales.

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