By Matthew Spieler
Overall sales may have started turning south since the third quarter began, but the consumer’s continued desire for hard surface products, especially tile, has helped the category maintain the healthy pace it set in 2005 when sales hit $2.344 billion, a 7.1% increase over 2004.

Jeff Lorberbaum, chairman and CEO of Mohawk Industries, said in the company’s third-quarter earnings report that “bothresidential replacement and new residential construction weakened through the quarter and the commercial business continued positive trends.”

Its Dal-Tile segment, which accounts for approximately 25% of total company sales, had third-quarter sales of $501 million, 11% higher than 2004’s comparable period. For the first nine months of 2006, sales were almost 15% ahead of the same period last year.

“Even with the slowing industry growth,” Lorberbaum stated, “we anticipate increasing our share due to prior investments in sales, product and distribution... Our ceramic business is well positioned to grow faster than the industry.”

His prediction about outpacing the rest of the category may be correct based on research conducted by FCNews, which shows the tile segment showing gains between 5% and 8% for the year.

What appears to be making the difference to allow sales to grow in a slowing economy is per-capita consumption.

“The most positive factor influencing increased use of ceramic tile is the [growing] consumer and builder/general contractor confidence in the performance and durability of the product,” said Bart Bettiga, executive director of the National Tile Contractors Association (NTCA). “It is being used in more areas than ever before, including increased specification in exterior applications— pools, balconies, decks—and is also being used as the primary floor covering throughout many homes. In the past, it perhaps was relegated to bathrooms and sometimes kitchens.”

Jim Dougherty, executive vice president of sales and marketing for Florim USA, concurred, noting that in 1993 each American used an average of 3 square feet. Today, that figure is approximately 11 square feet.

Even with this increase, he feels there is still plenty of growth opportunity for the category. “The U.S. market is still immature when it comes to tile, so there is a lot of room to grow. The fact is, America is still looked at by the rest of the world as the No. 1 growth market for tile.”

That is one of the main contributors why foreign manufacturers continue to set up shop in the U.S.—by either building a factory or acquiring one— Dougherty said, whose company is part of Italy’s The Florim Group and in 2000 purchased the TileCera facility in Clarksville, Tenn.

While most people think it has to do with skyrocketing oil prices, he said the reason is that they want better availability in the U.S. “Warehouses work to a point, but setting up factories is something we’ll be seeing more of down the road.”

Domestic advantage

The availability factor is always an important component, Dougherty added, but especially so “when the economy slows. When this happens, lead times shrink so there is a greater emphasis on domestic companies who can provide a faster turnaround.”

Donnato Grosser of Grosser & Associates, one of the industry’s premier tile consultants, feels foreign tile producers will continue to set up shop in the U.S. This will come primarily from the larger mills that have the capital. Smaller companies will need to seek alternative methods for getting into or expanding their U.S. presence.

The numbers bear this out, he noted, especially in relation to Italian companies. In terms of market share, “Italians used to have 30% of the American market, today it is less than 20%. But, because of companies like Marazzi, Florim, Panariagroup and Granati Friandre either building or buying factories in the U.S., the Italians have 60% of U.S. capacity. This is how they responded to the introduction of the Euro. The country could no longer devalue the currency and prices shot up 30% in a year. By manufacturing in the U.S., they are saving 25% on shipping and duties.”

Even though the economy has an overriding affect on sales, there are a variety of challenges businesses have to face on a daily basis that play a larger role in their operations’ success.

Grosser said it is times like this when retailers need to be more careful in what they buy and how they merchandise it. This is especially true as more ull-line flooring dealers start making tile a part of their product offering.

“Floor covering dealers are carefully getting more into it, but many have not devoted enough space to be successful. They not only have their tile stuck in a little corner, they do not carry a large enough selection.

“Tile has become a fashion item, and you need to display it as such,” he continued. “But you need to have the right colors and textures for your market. Ceramic is not the first product bought, so it has to adapt to the fashion of the room.”

Knowing the fashion trends in your region will help you stock the proper products from a styling standpoint, but Grosser cautioned dealers to go with the best. “It’s easier to sell the high end because it has both the leading style and the quality to perform. Low-end products may look like the high-end ones but they will not perform as well.”

Labor shortage

One of the biggest issues continues to be shortages in killed/qualified labor and the educational resources to properly train people. “Education is a key component in our industry,” said Lesley Goddin, editor of TileLetter, “especially with carpet, wood and laminate installers now making the leap into ceramic tile.”

Proper training is especially important today, she noted, because “technology continues to mushroom in the installation end of the tile industry.” This includes everything from new formulations of grouts, thin-set mortars, waterproofing and crack isolation membranes, even today’s backer boards that are engineered to eliminate the organic material so hungrily consumed by mold in wet areas.

Bettiga admits NTCA members realize the importance of training to the success of their company. Yet, because of lack of quality trained people, “they have been forced to be on the job site more than ever and are caught at times with having little or no time to develop to proper installation training.”

Another challenge faced by dealers and contractors is the amount of people from other cultures now entering the installation field. The challenge has been the ability to effectively communicate with and train these groups. This is one of the reasons why many organizations are starting to make their training manuals available in multiple languages.

All this is being done, Goddin noted, because, “Though products today mean greater ease of installation and greater performance in the finished project, the products are only as good as skilled installers who know how to use them properly.”