Hicksville, N.Y.—In discussing the state of distribution thus far for 2004 with FCNews recently, several executives spoke frankly about some of the challenges they’ve faced during the first eight months of the year as well as the opportunities that lie before them. “Knock on wood, we’re finding business to be healthy,” said Bob Weiss, president of All Tile in Elk Grove, Ill. “We’ve had new additions to almost all the lines we handle, including line extensions in laminate and hardwood. With Congoleum’s Xclusive we’ve got a great opportunity. We’re getting our new samples and displays out, and we think we’ll be ready for the fall selling season.

“However,” he explained, “among the biggest challenges we’ve faced so far have been the perpetual price increases. For the distribution channel, we need to have these in a timely fashion in order to turn them around to our customer base. When there are multiple increases throughout the year, it’s a challenge to make sure that our customers are given timely, accurate information which I know retailers—the people more dependent on carpet—are having even more of an issue with. “I was talking to someone recently who was really having problems because he has had to change prices seven times for eight large stores,” he added. “That’s tough. You lose money because you can’t quite get to all that stuff when sometimes, price increases are not held.”

According to Chris Freed, president of West Coast-based J.H. Freed & Sons in San Diego, 2004 “has been fantastic. It’s going to be the biggest year in our 25-year history. We just finished August, which was our all-time biggest month, and we were 70% ahead of August 2003. “Being based in California, green products carry a lot of value and we introduced a bamboo line this year,” he explained, “so, with the growth of bamboo, this is a really terrific opportunity for us.” Hard Surface Growth “We have two laminate lines in which we continue to see tremendous growth in,” he added. “One is Alloc. We also have the bamboo line, and an engineered wood flooring line. It’s Capella hardwood we introduced earlier this year and one of the unique things about it is, it’s a 3/4-in. engineered product that offers a lot of value.

Karndean, a luxury vinyl tile line from the UK, offers a tremendous opportunity as well for creating creative floors. “We’re seeing a strong move back to the luxury vinyl tile,” he explained, “as the consumer can be very creative.” “The year has been a roller coaster,” said Wade Cassidy, president and CEO of Florstar Sales in Wood Dale, Ill., “but when you smooth her out, it’s been an OK year. I wouldn’t put it in the category of a strong year. Overall, we are up over 2003. The hardwood flooring segment continues to be the driving product, along with ceramic tile. The builder market, that’s what’s really keeping us afloat. Retail sales are soft, overall. Cassidy believes advertising is key to getting the industry where it needs to be.

“The challenge is, to figure out how to make the industry like the milk industry’s, “Got milk?” We just need more advertising. When you look at consumer confidence, it’s pretty strong. So we have to create the desire and that behooves all of us in the selling chain. “From an opportunity standpoint, there are plenty in the residential remodel area, as well as in commercial,” he continued. “We think it’s like the sleeping dog. For us it’s a huge opportunity because we are very heavily into the commercial area. We’ve got a lot of A&D reps and a separate commercial manager as well. It’s market penetration, getting more of what’s out there but also to generate the desire and create opportunity.”

“I don’t think anyone is innocent,” he added, “but I feel the mills need to drive the product category and the brand so the retailers can take that message and carry it to the marketplace. We find that, generally speaking, dealers are doing a good job of advertising and are doing better than those who aren’t advertising. Are they more profitable? I don’t know, but you can’t succeed without growth. You just cannot save your way to success. “We’ve helped dealers in some smaller markets put together a 30- or 60-second cable ad and everyone chipped in,” Cassidy noted. “We are getting some business that way. We’re just trying to be more creative in how we get the message across. You don’t want to spend a lot of money and not get a return. But, on the other hand, you have to start somewhere.

“What keeps me up at night is,” he explained, “figuring out how to partner with our channels. A good partner can help profitably grow the business for all of us. The truth of the matter is, if it’s another $.50 a yard or a foot even where they’re installing 200 or 500 feet of wood, the consumer is not going to go crazy. And that can be the difference between a very profitable and healthy category and not.” Better Communication “The big thing is, we all have to communicate better and we have to drive the mistrust out,” he continued.

“The retailer has to understand the wholesaler is not out there to try and screw him, they want to help them. And, the wholesaler has got to understand the mills are not trying to screw them either, it’s a true partnership. But when things get tough, rather than sitting down and putting the cards on the table, a lot of finger pointing goes on and that’s not good for any of us. We’re trying, as a wholesaler, to provide more coverage with more people rather than less coverage. There is a balance there. Training is important as well.”

The way floors look today has impressed Cassidy. “All the products are getting more stylish and more high-tech. Take a look at this Masterworks technology on the vinyl side. We are an Armstrong distributor and we are much more familiar with that. From 10 feet away you can’t tell it’s not ceramic. I truly believe, if we were just bringing out vinyl, it would be like laminate was. Everybody would be talking about what a wonderful, soft, easy-to-clean stylish product it is, at a very reasonable price. The linoleum and vinyls—they are starting to come back. In talking to our retailers, there is more of a demand for them now.”

“This year has been excellent,” said David Rowe, vice president of Denver Hardwood. “We are doing very well. It’s an active market. “The cost of transportation has gone up dramatically,” he explained, “not only in pricing but in availability. It’s been almost a year ago now in which we were exclusively in tractor trailers and now we are going more and more with railway cars. Due to economics and lack of availability, both trucks and trains are becoming scarcer and prices have gone up.” Like Weiss, Rowe sees 2004’s price increases playing a significant role for business.

“There has been a lot of fluctuation in the market prices of hardwood. We have seen a number of price increases in the last eight or nine months. One of the things I am concerned with is, manufacturers pricing the product out of the market. People are starting to look to a less expensive alternative to wood. This is something I’m concerned with long term.” “We’ve seen a lot of activity in new residential construction,” he concluded. “According to my crystal ball, which has a six-month window, it’s going to be a strong market for us for several months to come.”