By Louis Iannaco
The economic downturn that began in late 2006 has continued to negatively affect the flooring industry, and the tile category was once again no exception. However, while sales might be down, other aspects of the tile arena remain vibrant. With advances being made in new technology and the continued focus on home design and fashion, the ceramic tile segment’s future remains as one of flooring’s brightest lights.

While the desire to add the design elements only ceramic can bring into the home continues to rise, sales are down for the second straight year following more than 10 years of unprecedented growth. According to industry consultant Donato Grosser of Grosser & Associates, sales of all tile (floor and wall) in the first half of the year “was 22.5% lower than last year’s first half (from 125.2 million square meters to 97 million square meters). Dollar sales are down 18.1% (from $1.441 billion to $1.181 billion).”

David Portales, foreign trade and export promotion director of ASCER, agreed with Grosser, saying, ceramic tile industry sales in 2007 “decreased almost 15% from 2006, following the path of almost all floor covering categories (carpet, wood, etc.), and this year we are predicting a similar situation. The most effected portion of the business in the U.S. was the residential segment of the construction sector.”

Italy and Spain, two of the largest exporters and players in the ceramic tile industry for generations, along with Brazil, have experienced difficult times recently as well. As Grosser noted, sales of Italian tiles in the first half of 2008 were down 26% from last year (from 25 million square meters to 18.4 million square meters), while dollar sales were down 18.3% (from $358 million to $293 million). Sales of Spanish tiles were down 45% (from 11 million square meters to 6.1 million square meters) and Brazilian tiles were down 49% (from 15.4 million square meters to 7.9 million square meters).

Sales are still on the decline for the Spanish ceramic tile market, Portales concurred. “The decrease in the floor covering consumption and sales has affected U.S. ceramic tile imports and also the Spanish exports to the U.S. in 2007, which were approximately $200 million. This was a 27.99% decrease from the previous year in 2006. The prediction for 2008 is about the same according to what has been seen so far this year.”

He also mentioned how the current state of the economy is affecting business. “The recent data about the U.S. economy,” he explained, “will probably mean a slower recuperation than everyone (including Spain) was hoping for a few months ago.”

And as Lori Kirk-Rolley, Dal-Tile’s senior director of marketing noted, “We expect 2008 sales in both dollars and units to be lower than 2007, by approximately 15%.”

Like other flooring segments, the residential sector has been adversely affected the most. Generally, markets are what we expected, Kirk-Rolley noted. “The residential segment is very soft given the issues on the builder side. As reported by the NAHB, housing starts were down almost 30% through August. The commercial segment has been steady, but is starting to show signs of slowing in the long term. Currently, urban development in many major markets continues to positively impact the multi- family and hospitality sectors of the commercial segment.”

Portales noted how Spain’s tile manufacturers are looking very closely at the developments and current economic situation in the U.S. “They are holding tight and waiting optimistically for the economy to recover and get back to normal growth. They are not making drastic cuts in marketing and advertising as some might expect, but being substantially more cautious, as most businesses are in this situation.”

Kirk-Rolley noted how the economic environment is causing nervousness and uncertainty in the residential marketplace. “On the commercial side, the credit crunch may take a toll on activity in the longer term— as there are many projects under way that still have to continue through the finishing phase, which is when the tile is installed. Also, many of our customers are small business owners who are being impacted by the tightening of credit.”

But while times are tough, research, development and the design of new products marches on undeterred. From Mannington’s perspective, noted Jim Dougherty, director of ceramic business, the tough economy has “encouraged us to become more aggressive, working with distributors to implement programs that drive sales. Additionally, our logistics program certainly has helped Mannington’s tile business grow, and we’ve had validation that our award-winning styling and design team is focused on offering the right products—tile visuals that appeal to the tastes of the American consumer.”

The future

As dire as the current economic situation might be, experts realize nothing lasts forever. The U.S. economy has always shown a great capacity to recover, and Spanish manufacturers, like the rest of the world, are optimistic, noted Portales. “They expect that by mid to late 2009 and, certainly by the beginning of 2010, the housing market will bounce back to its normal or near normal growth, and following suit, the ceramic tile industry will go back to the positive growth we saw over the last decade or so.

Per capita tile consumption in the U.S. is still very low compared with Europe, he mentioned. “As time progresses, U.S. consumers are appreciating the use of tile more and more—a positive for Spain, which is still the leader in technological advancements which go hand-in-hand with innovation and diversity in hi-end design.”

Kirk-Rolley believes, the tile segment will begin to see signs of an eventual rebound soon. “We expect the industry to once again shrink in size for the second year in a row, which has not happened since 1990/91. We are very cautiously optimistic that we will begin to see an up tick in the latter half of 2009. However, because tile is not installed until the late stages of construction projects, we don’t anticipate that a significant recovery will happen for the industry before 2010.”

Dougherty agrees, saying because transportation and logistics play a huge part in the overall cost, “we don’t anticipate this to extend beyond next year. We anticipate that 2009 will again be a challenging year, but 2010 should plateau and then the market should begin to grow.”

Portales believes much of the future upswing in tile is owed to the recent growing role played by designers and architects. “They have both opened up the gateway in the past few years of thinking of tile not only exclusively for the bath and kitchen, but to specify in many other rooms be it residential or commercial. Patios, living rooms, bedrooms, basements all bode enormous potential for the diverse use of tile.

“Hospitality venues such as hotels, restaurants and spas have led the way for tile to be used in many creative avenues recently,” he concluded. “There is a huge potential for growth when the economy starts steadily climbing again.”