By Louis Iannaco
Everyone knows the continued economic downturn has taken quite a toll on business, and the ceramic segment is no different. But fortunately for tile producers, this doesn’t mean all aspects of the industry have suffered. The world of ceramic has continued to advance in both fashion and state-of-the-art technology, making it one of the most exciting flooring segments to watch in the future.

Though tile has been a strong and growing category over the last decade or so, the last couple of years have seen things go south. According to FCNews research, it’s estimated the tile industry was down in sales by about 25% compared to the first three quarters of 2008.

“This year has been the worst year on record since 1980,” said Donato Grosser of Grosser & Associates, one of the industry’s leading consultants. “This year, if we get to 165 million square feet, we’ll be lucky, maybe even 155 million square feet, which means half of what the consumption was in 2006. Basically, in three years, we’ve lost half the market and the main reason for this has been residential construction. When the market was good, residential construction made up about 40% of the market for tile. That dropped by almost 80%. Residential remodeling also went down, as did commercial remodeling and new construction. All tolled, we are at 55% of what the market was three years ago.”

Lori Kirk-Rolley, senior director of marketing for Dal-Tile, a division of Mohawk Industries and the industry’s largest manufacturer and seller of tile, concurred with Grosser, noting the continued drop in sales “is driven by the large decline in housing starts, as well as the dramatic slowdown in commercial construction, with old projects being put on hold, new projects not being started and general lack of financing for commercial activity. We entered 2009 expecting a continued downturn, but the commercial market has performed worse than expected.”

While she estimates the year overall will finish down by similar percentages there is some light heading into 2010. “Housing starts are starting to bottom out. If the growth in housing starts materializing and if consumer confidence improves it should result in some increase for the tile industry heading into 2010.”

Commercial doldrums

Regarding the commercial segment, Kirk-Rolley noted, there is not much good news on the horizon. “All indicators point to a continued decrease in activity, which will depress tile sales well into 2010. As a whole, we estimate the industry will be down by a minimal amount compared to 2009. However, the decrease will be bigger in the first half, followed by improvement in the second half.”

Like Kirk-Rolley, Kim Holm, president of Mannington Mills residential business unit believes business will be down by one-quarter of what it was in 2008. “Certainly the category is down this year, and we anticipate that at year’s end, it will be about where we expected it to finish.”

Holm sees Mannington holding its own in 2009 and sees even better things for next year. “For 2010, we anticipate further contraction between 10% and 15%. With the modifications we are making to the Mannington program, though, we are looking for a solid 2010.”

He believes the economy is key, not only as it relates to tile sales in the U.S. but globally as well. “Labor, transportation and energy costs—all of these things as they play out around the world impact the tile business. That said, though, the other significant issue facing us is availability. As tile distributors shrink their inventories, they cannot support broad product lines as effectively, which will have a ripple effect, particularly as the economy begins to show signs of life again.”

Holm said Mannington has worked with its distributors to ensure dealers have access “to a broad range of products in a timely, cost effective fashion.”

Rob Tarver, vice president of sales and marketing for SnapStone/Avaire said, “We certainly feel that total tile volume will decrease once again in 2009—likely in the low double digits. The primary reasons are slow new home sales, slow retail sales, weak consumer confidence and a recent downturn in commercial.”

As a relative newcomer, though, he added, “Avaire’s business is growing —albeit slower than we would like. We are able to take share against not only traditional tile, but other hard surface products. We also allow retailers to expand their market opportunities into the D-I-Y segment. Our product is easy to install, inventory and sell.”

With residential construction having hit rock bottom in April, Grosser noted it has been “going up slowly since then and hopefully there will be some improvement in remodeling. Next year we should have a little better forecast than 2009. Recovery will be slow.”

Judging from a post-show report from the category’s best-known market, Cersaie, Grosser believes its performance shows positive signs. “Nobody expected such a good turnout and there were a good number of American importers. There were also many novelties that came out of the show, and with samples either on their way to America or already having arrived in stores, consumers will have many new choices and new designs coming from Italy.”

According to Rocamador Rubio, Tile of Spain director, the decrease in tile is not a surprise. “We knew this would be a difficult year particularly with residential construction, one of our key sectors, being so hard hit.”

Along with residential, she said during the first eight months of 2009, construction spending amounted to $629.5 billion, 11.9% below the $714.3 billion for the same period in 2008.

Also, key to this climate is consumer confidence, Rubio added. “People are naturally going to be much more conservative in their spending and large home repairs may not be at the top of their priority list.”

Despite the continued slump, she noted, “We remain confident in the U.S. market’s ability to recover and eventually flourish.”