Strategic Exchange: Flooring contractors enjoy growth by offering a diversity of services - Nov 2018

By Kemp Harr

Hardly a day goes by that we don’t read some article reminding us that this current economic cycle is in its ninth year, and the end is imminent. Just last week, The Wall Street Journal proclaimed that the housing market is in its longest slump in four years thanks to rising interest rates and overheated home prices. But when you read the article, it points to an increase in the inventory of homes for sale of 4.4 months from 4.2 months a year earlier-not exactly a Chicken-Little statistic.

On the flip side, having just spent some time with two separate flooring contractor groups, the FEI Group and Starnet, and hearing about their robust and continued growth, one could easily think, based on their backlog of business, that this expansion cycle will extend at least until the third quarter of 2019.

Interestingly, both of these contractor groups, in their early stages, were focused on carpet installation but have now broadened their focus to provide other services to their client base. Thanks to this diversification strategy, the growth within both groups is far exceeding what we’re seeing if you average the entire flooring industry.

FEI GROUP’S 20TH ANNIVERSARY MEETING
The FEI Group met in San Diego in early October. After a brief celebration of the group’s first 20 years, the focus shifted to the “here and now and the next 20 years.” Once touted as the leading group of homebuilder and apartment-focused flooring contractors, the group now sees itself as “the largest network of interior finish contractors,” its members having added cabinets, countertops, window treatments, decorative plumbing fixtures, and kitchen and bath hardware. Some members provide paint crews for their builder clients.

Like many of the membership groups in this business, two of the advantages are consolidated buying power and peer networking. One area, however, where the FEI group excels is in people development. Over the years, this group has focused on building positive attitudes (with reminder coins) and on physical exercise by teaming up with workout partners. This year, the group announced its Climb leadership program, designed to further develop a select group of future leaders within the membership.

The theme of this year’s meeting, which attracted 550 guests, was Rock the Boat, where group members were asked to focus on charting their course, knowing the ropes and having the best crew. Another focus for the group moving forward is to be more important to fewer suppliers.

STARNET: STEADY BACKLOG OF WORK
Jeanne Matson, the CEO of Starnet, told me at the group’s fall meeting in San Antonio that several of the group’s members were having a record growth year, and many felt the backlog of work was going to keep them busy well into next year.

A record 400 members, vendors and guests attended the fall meeting, which for years has had more emphasis on education. Starnet, the largest group of commercial flooring contractors in the U.S., now has 178 members, five of which are new this year. The type of work that the members do for their clients continues to evolve beyond the core product and installation (P&I) business, which was the primary focus for the members when the group was formed 26 years ago. Today, a smaller percentage of the work involves carpet installation and, as the business shifts to hard surface, more time is spent doing surface prep, poured floors, concrete polishing, sealing and restoration work.

Sadly, this meeting will be Fred Williamson’s last meeting as a staff member, and he was recognized for the leadership role he has taken since he joined the group 13 years ago. Mark Bischoff, who left Mohawk to join the group back in April, has started taking over some of Fred’s responsibilities.

MERGING MASLAND CONTRACT AND ATLAS
Back in September, we ran the announcement that the sales forces for Atlas and Masland Contract were being combined into one operating division. As one can imagine, this creates a flurry of activity within the rep world as the weaker of two in any given market seeks to find a position with a firm that offers the potential for higher commissions.

Now, a month later, Atlas’ West Coast carpet mill is being consolidated into the Atmore, Alabama facility that produces Masland’s carpet. This is the second year in a row that a California carpet mill has been closed. While this is sad from a nostalgic point of view, it is understandable. Dixie competes in the commercial market with a formidable group of competitors-many of which produce carpet on a much larger scale. In addition, California can be an expensive place to do business. Carpet mills are not the only factories that are moving out.

By moving all of Dixie’s commercial operations to one location, the firm should be well positioned to compete over the long haul. For years, the Atlas brand has been known for its distinctive looks at higher price points. Hopefully, Dixie will still be able to offer the same range of styling, weights and price points under the Atlas Masland contract brand.

MOHAWK TO BUY ELIANE
Right before this issue went to press, we learned that Mohawk had reached an agreement to buy Eliane, one of the two largest porcelain tile producers in Brazil. We estimate that Eliane’s annual revenues are around $200 million. This makes Mohawk an even bigger player in the global ceramic tile business.

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

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