Vinyl: Industry Update - February 2012

By Darius Helm

Who would have thought, ten years ago, that vinyl would soon be the most dynamic flooring category in the industry? Back then, the
category was in the middle of a long-term decline in marketshare, and no amount of design could hide the hideous plastic gleam that characterized vinyl flooring.

Today, with improvements in technology and design, coupled with the rise of two sub-categories—luxury vinyl (LVT) and glass-backed sheet goods—and boosted by a tough economy pushing homeowners and end users to price points that fall below the price of wood and ceramic tile, the vinyl category is enjoying something of a renaissance.

The U.S. vinyl market hit $1.57 billion last year, according to Market Insights/Torcivia, posting about 2% growth over 2010—mind you, every category except laminate was up last year. Sheet goods accounted for an estimated $658 million; VCT made up another $314 million; luxury vinyl tile and plank hit $500 million; and the balance, about $98 million, was in lower-end peel and stick tiles.

Last year, luxury vinyl grew by 13%, split about 55% residential and 45% commercial. Sheet vinyl was flat, with a slight decline in the commercial market and small gains in the residential market—led by growth in glass-backed sheet vinyl, which accounts for about 25% of residential sheet sales. The VCT category was down last year; the K-12 education sector and the retail store planning sector, key VCT markets, have both been slow.

One of the biggest issues facing vinyl producers, whether their category is losing or gaining share, is raw material pricing. It’s a factor in any type of manufacturing these days, but products made largely out of fossil fuels in facilities powered by fossil fuels are becoming steadily more expensive to make. All the big vinyl flooring manufacturers recently announced price increases, but those increases generally don’t cover the full raw material increases—because it’s a buyer’s market right now—and that leads to shrinking margins.

There is no reason to expect raw material prices to decline. Global demand for fossil fuels is accelerating, and most of the new oil coming out of the ground faces higher extraction costs. There’s also a bottleneck on the processing side, with not enough capacity to meet demand. It was about a decade ago that crude oil prices started their escalation, so this isn’t new to manufacturers. It’s the new normal; for manufacturers to sustain their businesses, they must constantly do more with less.

GAINS IN LVT AND GLASS-BACKED SHEET
While both glass-backed sheet vinyl and LVT are making significant gains, they are each taking marketshare in very distinct ways. For glass-backed sheet, it’s taking share almost exclusively from felt-backed sheet, and because glass-backed has higher average price points, it’s not competing against the base grade, commodity priced felt-backed vinyl, which is heavily used in the builder market.

Luxury vinyl, on the other hand, is taking share from hardwood, sheet vinyl, ceramic and laminates—mostly laminates—and it’s also taking share in both the residential and commercial markets, while glass-backed vinyl is a residential product.

Tarkett wasn’t the first to bring glass-backed vinyl to the U.S. market, but its entry with FiberFloor in 2004, made in Quebec, marked the first North American production of glass-backed vinyl and that was when the race really began.

Every domestic sheet vinyl manufacturer now produces some form of loose lay sheet flooring. And now that IVC has opened up its Dalton facility, Armstrong converted a felt-backed plant, and Shaw is also getting into the game, the stakes are higher than ever. The next few years will see more competition in this category than ever before, and it’s likely that the price point range may also broaden to capture more share from felt.

A key selling point of glass-backed vinyl is the loose-lay installation. It’s a technology that works best on slab constructions and can be problematic over wooden subfloors—the subfloors will shrink and swell with the changing seasons but the glass-backed vinyl will not. Glass-backed vinyl has been the dominant sheet offering in Europe for many years, and it’s worked well there because the percentage of houses with wooden subfloors is much lower.

Here in the U.S., the majority of glass-backed floors are installed with full spread adhesive, particularly with product channeled through independent flooring retailers. The cash and carry channel, like home centers, caters more to the DIY market, and a lot of that is loose laid.

While most of the glass-backed vinyl in the U.S. is manufactured domestically, LVT is both produced domestically and imported from foreign markets, largely from the Pacific Rim. The volume of LVT produced in Asia is steadily climbing, and it’s leading to a very wide range of qualities and price points. There are many established LVT specialists in the U.S. market, most notably Centiva (now part of Tarkett) and Amtico, which both produce in the U.S., along with Karndean, Parterre and Halo, which produce overseas. Then there are the firms that make a range of vinyl products, like Armstrong, Tarkett, Mannington, Congoleum, Gerflor and now IVC and Shaw, and they all offer some form of vinyl tile. There are also several newcomers, one of which is FreeFit, which makes its product in China, a loose-lay luxury vinyl with a backing that grips the floor.

LVT has been taking share from all corners of the flooring market. Enhanced, realistic visuals and convincing textures have helped LVT become an attractive substitute when natural materials like hardwood, ceramic and stone are unsuitable because of budget and performance. Tile and stone looks are still a much bigger part of the business than wood looks, but wood designs are gaining in popularity, in part because there are so many applications where hardwood would look good and have a positive impact, but where it is ultimately impractical, like high traffic areas or applications where there’s plenty of opportunity for water damage, like retail stores, restaurants and even hospitals. LVT provides a solution for these applications, one that is generally more affordable and requires less maintenance.

Most of LVT’s share has come at the expense of laminate because they have similar target markets—consumers or end users who want faux looks in tile and plank formats. Laminate flooring had the corner on that market for a while, but consumers are increasingly going for LVT, which generally costs a little more but promises better performance and a visual that is at least as good as the best laminates in the market.

INSTALLATION DEVELOPMENTS

Laminate flooring and engineered hardwood first introduced the public to the idea of floating floors. Glueless click systems took it one step further, greatly simplifying installation, and laminate producers quickly and unanimously embraced that concept. Click systems then spread to engineered hardwood, though not with nearly the same unanimity, and then to LVT. When it hit the luxury vinyl category, some producers licensed existing click systems and others came up with their own concepts. Some use glueless systems while others have pre-applied adhesives on modified edges to connect tiles or planks to each other. In the last couple of years, manufacturers like Karndean, Gerflor and FreeFit have come out with LVT products that don't even attach to each other--they have backings designed to make them hug the floor.

Between full spread traditional adhesives and glueless floating floors lies a broad range of installation systems, including full spread and pre-applied pressure-sensitive adhesives as well as spray adhesives, some of which are releasable.

On the sheet side, the builk of the flooring goes down with full spread adhesive, and traditionally that's a latex acrylic. In this market, we're also starting to see more spray adhesive. It's greener, which is a big plus in the commercial market though still largely irrelevant in the residential market, and it costs about the same. It also offers other advantages, like heat welding the same day and rolling heavy loads on the floor the day after installation. One challenge is that, because it's such a thin layer compared to liquid adhesive, that subfloor preparation must be immaculate to prevent irregularities from telegraphing through.

Installers tend to use full spread adhesive on glass-backed products out of either habit or for security. Installers don't want clients coming back to them with problems, and they often feel more secure if it's glued down. And there is certainly anecdotal evidence of glass-backed vinyl rippling around heavy objects like refrigerators. How often this occurs is hard to say, but it's a safe bet that this only happens over wooden subloors.

ENVIRONMENTAL UPDATE
It’s encouraging to see that so many vinyl flooring producers are embracing the greening of their industry. While progress so far is modest compared to the carpet industry, the most fundamental milestone has already been passed: vinyl producers clearly understand that this is a road they must travel down to remain competitive in the long run.

Being forced to confront their products and address concerns has also helped readjust the mindset of those in the vinyl flooring industry. Perception problems surrounding vinyl, from the plastic look of the product to concerns about its environmental burdens, are not limited to consumers—these perceptions also impact the manufacturers themselves.

Five years ago, you couldn’t get a vinyl manufacturer to talk about sustainability, because so many truly believed that their product could not compete in a green market. Now we’ve got players with post-consumer reclaimed vinyl in their flooring (Mannington, Centiva, Azrock and Parterre), some that offer bio-based content (Armstrong and Gerflor), and some that have high total recycled content (Parterre, CBC Flooring’s Salto). Both Mannington and Tarkett’s Azrock have VCT reclamation programs.

Just as importantly, manufacturers are starting to look at one very green characteristic of PVC—the fact that it’s a thermoplastic and can be remelted, making it potentially fully recyclable—to figure out how to tweak their products to take full advantage of this characteristic. Much of this involves examining the additives and seeing what new chemistries may increase their products’ recyclability. (The logistics of the actual reclamation are another matter.) These new adhesive systems, including glueless, are already a step in the right direction.

One additive being examined is the plasticizer. What’s generally used on products in the U.S. is a phthalate called DINP. While there’s no science implicating DINP as a health risk in flexible vinyl (like vinyl flooring), phthalates themselves are in the crosshairs of many environmental groups because of implications from studies of DEHP, a plasticizer with a low enough molecular weight to leach from the vinyl. DINP, at a higher molecular weight, has not been shown to leach from vinyl.

Manufacturers are starting to develop alternative plasticizers. It started about a year ago with Centiva coming out with phthalate-free plasticizer on its Victory series, then Gerflor introduced a bio-based plasticizer for its Symbioz homogeneous sheet vinyl. This year Tarkett is using a phthalate-free formulation on all the vinyl flooring that it manufactures in North America from virgin material—products made from recycled content come with whatever plasticizers were used to make them.

Vinyl producers have also fully embraced certifications. Most are already FloorScore certified or Greenguard certified for indoor air quality. Others—Mannington was the first—are certified to the multi-attribute NSF-332 resilient flooring assessment standard. Coming up next, and poised to catalyze the entire industry, are environmental product declarations (EPDs)—standardized disclosures of environmental impacts akin in many ways to nutrition labels on food.

NSF International, the organizing force behind the carpet and resilient assessment standards, is just now finalizing the product category rules (PCRs) for the flooring industry. PCRs essentially determine the rules whereby areas of environmental impact (like, for instance, carbon dioxide emissions, ozone depletion or fossil fuel energy use) will be assessed.

What PCRs do is enable the development of lifecycle assessments (LCAs) under a standard set of guidelines, which then can be used to create EPDs for products that clients can compare to EPDs from other products. When it comes to sustainability, clients have different needs based on their own environmental goals or the balance of sustainable attributes among all the elements of a project. It’s no different from shoppers in the supermarket; one with high blood pressure chooses the bread lowest in salt and cholesterol, while another with diabetes goes for the one with the least sugar.

Because the word “transparency” is often thrown around when talking about EPDs, it’s interpreted by some to mean the release of proprietary information, like product chemistries. The truth is that the PCRs form a semi-permeable membrane that keeps proprietary information in and lets out only the corresponding environmental impacts.

RFCI EFFORTS
The Resilient Floor Covering Institute (RFCI) is spearheading the production of EPDs for six resilient flooring categories. The process should be completed in the next few months, enabling manufacturers to get p roduct EPDs by the end of this year. It’s not cheap to get EPDs and demand for green products has been held back by the slow market, so it’s likely that the rate of adoption will closely mirror the growth of the economy.

The RFCI is also focusing on other concerns of the resilient flooring industry, most prominently the issue of domestic producers competing with importers. The group is working closely with the National Association of Manufacturers to create an environment that makes conditions more favorable to U.S. manufacturers.

As things stand, U.S. manufacturers compete in the market with a range of handicaps, like the second highest corporate tax rate in the world, cost of labor, and competing against subsidized foreign producers. Areas of focus include trade agreements and both taking advantage of and extending the research and development investment tax credit, currently slated to expire in July.

MANUFACTURER HIGHLIGHTS
The biggest player in the vinyl market is Armstrong, which has a dominant position in both the residential and commercial markets. Residentially, its sheet goods are 30% glass-backed and 70% felt-backed. The firm also has a substantial LVT business that, when combined with the firm’s lower end self-stick tile, accounts for over a third of the firm’s total residential vinyl sales.

The firm’s LVT offering includes gluedown products like Alterna, which is groutable, and floating floor products like Luxe Plank, which has overlapping edges with pre-applied adhesive. At the top of the line is Alterna Reserve, which came out last year. Led by Luxe Plank sales, Armstrong’s LVT business was up by double digits in 2011.

Over the last year, the firm has substantially broadened its glass-backed offering, including a wider range of price points, though entry level glass-backed goods are still a little higher than felt.

The big highlight in Armstrong’s commercial LVT is Natural Creations, which won an IIDA award for design excellence. Commercial LVT sales have been strong, helping to drive Armstrong’s commercial resilient business into positive territory in 2011.

Last year, the firm also came out with a heterogeneous sheet vinyl line called Rejuvenations that uses LVT print technology for a range of looks. In addition to vinyl, Armstrong manufactures linoleum and a PVC-free VCT alternative called Migrations, which has 3% bio-based content.

In 2011, Amtico, the market leader in commercial LVT, shut down its Stratica line of specialty (non-PVC) resilient flooring, doubled its 20 mil Spacia line and had the largest product launch in its history for the 40 mil Amtico line. The firm also relaunched its Spacia Access product, which is installed with non-permanent adhesive and is available in 18” carpet tile formats, making it ideal for raised access flooring. Also new last year was Spacia First, a 12 mil product targeting light commercial property management.

Business was strong for Amtico last year, with double digit growth driven by strong activity in the retail and healthcare sectors, which are the firm’s strongest markets.

Another LVT specialist is Centiva, which has been part of Tarkett since the end of 2010. The firm recently completed ISO 14001 certification for its Alabama facility. The firm is a leader in the greening of vinyl, with recycled content in all of its products, and now it’s using a phthalate-free plasticizer on its Victory line. Like Amtico, healthcare and retail are Centiva’s biggest segments; healthcare stayed fairly strong last year and the retail sector started to regain its strength. Centiva posted double digit growth.

Parterre, which celebrated its 20th anniversary last year, was one of the first firms to sell LVT in the U.S. market, along with Amtico and Toli. Following 5% growth in 2010, the firm was up an estimated 25% last year. Some of that growth was a result of a design partnership with Bentley Prince Street that was launched at NeoCon 2010 and really began to pay dividends last year. Healthcare and higher education are Parterre’s biggest markets, but it also got a boost from the multi-family market last year. The firm’s 3mm product features 45% recycled content—25% post-industrial and 20% post-consumer PVC.

Karndean, another LVT specialist, is a U.K. company with production in Asia, and it’s a leading global LVT producer. In the U.S., Karndean’s biggest market after Europe, product goes to both the residential and commercial markets. In 2011, the firm’s U.S. business showed strong growth.

The big news at Karndean last year was its introduction of Karndean Loose Lay, a luxury vinyl plank that features a backing designed for floating, glueless installation. The wave pattern backing holds the planks in place on the floor. At this year’s NeoCon, the firm will come out with loose lay tiles as well.

One of the newest players in the LVT market is FreeFit, which has been in the U.S. market for three years. The brand is made by GTP International, headquartered in Hong Kong. FreeFit, like Karndean’s Loose Lay, is a dimensionally stable product designed to hold its place on the floor. The backing has an embossed structure of small rings that help the product grip the floor. According to the firm, FreeFit entered the market with only three distributors, but it’s added 12 since then, covering all of the U.S. and Canada.

Last year the firm added to its original offering with the Intaglio line of sculpted LVT in six wood looks. It also came out with a coordinated molding program as well as a couple of tools for product installation and removal. At this year’s Surfaces the firm introduced two new lines—both tile and plank—and the firm is also coming out with HDCT, which features a high definition carpet tile design.

Another player fairly new to the U.S. market is Gerflor, a French producer of a full range of vinyl flooring products. Last year, the firm moved its U.S. headquarters and distribution center from Atlanta to Chicago, and it restructured much of its U.S. operation, from sales and management to customer service.

Gerflor’s U.S. business was until recently focused on the commercial and sports flooring market, but last March the firm introduced its residential line. One of the products the firm just showcased at Surfaces was Texline, a vinyl sheet with a polyester textile backing that offers increased stability and the ability to loose lay. Last year, the firm came out with Symbioz homogeneous sheet vinyl with a bio-based plasticizer as well as an LVT line called Creation that can be glued down or, as Creation Click, features a Gerflor patented vertical click system.

Mannington has one of the broadest vinyl flooring ranges in the U.S., targeting both the residential and commercial market. The firm makes felt-backed and glass-backed sheet goods, LVT for both the residential and commercial market, and commercial VCT.

On the residential side, Sobella glass-backed vinyl and Adura LVT continue to drive sales. Adura LVT is the firm’s fastest growing product. It comes as both a gluedown product and with the firm’s LockSolid click system. On the commercial side, healthcare and retail renovation projects have helped drive sales, particularly of LVT and sheet goods. VCT business is sluggish, in part because of LVT taking share from VCT in retail environments like supermarkets.

The firm’s VCT reclamation operation continues to grow. The challenge is getting enough material and doing it in a cost-neutral way. Unlike carpet reclamation, there is not yet an infrastructure of processors and recyclers to make the system work more efficiently.

Like Mannington and Armstrong, Tarkett makes a wide range of vinyl flooring. In fact, it has the broadest array of resilient flooring on the market, including residential sheet vinyl and LVT, and commercial VCT, VET, solid vinyl tile, sheet vinyl, rubber and linoleum. This year, the firm converted to a phthalate-free plasticizer for all virgin vinyl products made in North America.

On the residential side, Tarkett saw single-digit growth last year, led by higher activity in the multi-family market. Both FiberFloor glass-backed vinyl and Nafco LVT were up last year, with FiberFloor leading the way. The biggest part of Tarkett’s residential business is glass-backed vinyl, with LVT and felt-backed goods with an equal share of the balance.

Most of what Roppe makes is rubber flooring for the commercial market, but about a quarter of its offering is vinyl flooring, including tile, stair treads and wall base. Its vinyl flooring line includes a range of solid vinyl tiles, and its Northern Timbers vinyl wood plank comes in both glue-down and loose lay constructions. Northern Timbers planks and Northern Leathers tiles feature 39% post-industrial content and 33% post-consumer content.

CBC Flooring sells a range of commercial resilient brands in the U.S. market: Halo, Toli, Indelval, Salto and Ceres. Halo, Toli and Salto constitute the firm’s vinyl offering. Last year, Halo showed the strongest growth, thanks to gains in the retail, hospitality and multi-family markets.

In 2011, Toli overhauled its homogeneous vinyl tile lines: Linotesta, Viale and FasolPlus. CBC’s greenest brand is probably Salto, which has up to 80% post-industrial recycled content.

Flexco is another producer of both rubber and vinyl flooring, and last year the firm came out with Natural Elements Premium Vinyl Wood Plank and Luxury Vinyl Stone, which feature 72% recycled content and a wearlayer with nano-silver particles for an antibacterial finish.

One of the newest players in the U.S. vinyl market is the nation’s biggest carpet producer, Shaw Industries. Shaw sells both commercial and residential vinyl. On the residential side, the firm offers LVT, including StaTite, which uses a pressure sensitive, self-adhesive installation system, and Duratru glass-backed sheet vinyl. The sheet vinyl is private labeled from a domestic producer while the LVT comes from Asia. Product goes to market through all channels.

The firm has just come out with a 3mm groutable tile, and has also expanded its 2mm offering for the retail, mainstreet and multi-family markets. It also added a Chatham Plank, using a Välinge 2G click system.

The most significant new domestic producer is IVC, which completed its Dalton facility last year. According to the firm, it’s the largest sheet vinyl line in the world, with total capacity in excess of 320 million square feet. IVC’s glass-backed products feature a price range that hits price points previously held only by felt.

The firm also sells LVT to the U.S. market. While its LVT is currently outsourced, IVC has built an LVT facility in Belgium next to its company headquarters, and it should start manufacturing product later this quarter. The firm’s LVT goes to both the residential and commercial markets. Also for the commercial market, the firm offers Itec, a line of glass-backed vinyl.

Congoleum, which does most of its business in the residential market, makes LVT and sheet goods. The firm’s LVT, which is harder and has a higher limestone content than most LVT, first came to market under the DuraCeramic name, and the line has been extremely popular and has expanded significantly over the last few years. In fact, for the third year in a row Consumer Reports named DuraCeramic the number one resilient flooring product on the market.

Congoleum’s loose lay sheet vinyl is distinct from everything else in the market because it takes the glass-backed construction, which uses a fiberglass interlayer, and replaces it with felt. According to the firm, the felt interlayer allows for expansion and contraction, so it should work equally well over wood subfloors and concrete slab.

Sheet flooring specialist Lonseal focuses its product on the commercial market, and the firm has a strong position in the transportation sector. The firm’s TopSeal matte finish will be available on the firm’s best selling commercial products—LonEco, Lonwood Natural and Lonwood Dakota—in the spring. All new products will also feature TopSeal. The firm’s products are made in Japan.

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