Healthier Choice Flooring, the Dalton, Ga.-based manufacturer of carpet cushion and underlayments, is making investments in manufacturing and adding new categories of flooring to its repertoire to prepare for future growth. The company is making a $12 million investment to build a 200,000-square-foot plant in the Dalton area that should be up and running within 18 months. It is also expanding its line of engineered wood flooring and adding luxury vinyl tile. We connected with Healthier Choice President Craig Poteet to learn more about the team’s growth plans for the company.
FT: Tell us about your manufacturing expansion plans and what led up to them.
Poteet: Anytime you’re talking about constructing a new facility, it’s exciting. We’ve been considering this expansion for a couple of years, and it actually took quite some time to find the right location. One of the prerequisites that we were looking for was access to rail service to the facility, and there aren’t a lot of building sites in and around the Dalton area with access to rail that are available, so that took time.
The reasons for expansion are really two-fold. The primary reason is we are interested in being able to purchase our raw materials in bulk via rail, and this location will afford us that opportunity. The facility will house a new manufacturing line where we produce our carpet cushions and our underlayment products. This will replace our existing manufacturing facility, and our primary consideration was to be able to bring in our raw materials and manufacture raw materials into finished goods. A secondary reason is we wanted to consolidate all of our distribution into one facility. Right now, we have four facilities in Dalton.
FT: Sounds like growth is prompting the need for more space.
Poteet: A few years back, Healthier Choice branched out into selling hard surface floors. We’ve seen the number of accounts that we’re selling to increase substantially, along with revenues. This has allowed us to have more direct contact with our retailers and be able to sell more products to the retailers that we service. Another reason for needing additional space is our latest move, our entrance into the luxury vinyl business, which we will introduce [in November]. We’re introducing a WPC product as an initial launch and we will introduce planks and tile. Eventually, we have plans to introduce rigid core products as well.
FT: Tell us about the process to consolidate your business under one roof.
Poteet: There will be at least two phases to the development, and the building will be a designed and engineered for 200,000 square feet. Our goal is to house both manufacturing of cushions and underlayment, as well as store all of the products that we are going to distribute. We have to have other warehousing locations, but we want to have enough space so that all of our inventory can be shipped from one location. Unfortunately, we’re having to shift from multiple buildings, and it sometimes necessitates that we have to shift some of our products from one warehouse to another so that we can load one truck for a customer at only one location, and we want to move away from having to do that. Some of the locations we own and several of them we lease, so we will probably stay in at least one of those locations, maybe two, until we move into the new space.
FT: Tells us about the need for rail access.
Poteet: We receive deliveries daily of our raw materials and it will dramatically reduce the frequency of delivery to weekly. Some of those products might only be received a monthly, but buying larger quantities by rail car clearly holds more material than truck tankers can. It will allow us to take advantage of buying larger bulk, which hopefully will help us maintain costs, and hopefully provide the lowest and best costs to our customers.
FT: Where is the pad and underlayment market headed?
Poteet: We continue to focus on manufacturing premium quality products. Our products are made of 100% new materials, and it is a premium. It has a very unique feel underfoot.. Also, one of the big differences with our product low-VOC emissions, virtually no odor to the product, and it really has to do with the way that we manufacture the product.
We will continue to focus our efforts on both the residential carpet cushion market and the commercial carpet cushion market. Our products are incredibly durable. We have a warranty that stipulates that the carpet cushion will not lose more than 10% of its overall thickness. It’s a proprietary formulation. We’re definitely not the lowest commodity price product out there, but really I think people are looking for something that sets them apart from their competitors, and the consumer is looking for something that’s going to make their carpet feel better and last longer and look better longer.
FT: How is this type of warranty important to the market?
Poteet: I was just actually a working on a project for a hotel in New Jersey, and the warranty was a big issue that they brought to the table. On the contract side of the business, in hospitality and other businesses, properties are just not being refurbished as frequently as they might’ve been in the past. So, that’s been a real growth opportunity.
That ties into the other side of our business—underlayments. More than half of all the products that we sell actually go underneath hard surface as opposed to going underneath carpet. As hard surface has become more popular, the amounts of acoustical underlayment has also dramatically increased. We have an underlayment that is designed or engineered to go under almost any hard surface. We manufacturer underlayments that would also be used underneath ceramic tile and stone. We also manufacture area rug cushion. It’s a foam cushion that’s ¼-inch thick and made out of 100% memory foam and it has a tremendous feel under foot. If a consumer has a large area rug, say a 10x12, this would give them the ability to have nice soft cushion as opposed to just something that prevents it from slipping and sliding.
FT: How is the hardwood business for you?
Poteet: We’ve seen steady growth ever since we introduced the product almost six years ago. It’s been the fastest-growing segment of our business. Of course, there is a lot of uncertainty with imported products, so we will have to monitor to see how that develops. We have been very fortunate to partner with a manufacturer who developed a line of domestically-made products, our American Choice collection. We just launched an extension to that collection, which we call American Signature.
FT: Interesting timing getting into the LVT business. Can you talk about that decision?
Poteet: Everyone knows about the growth opportunities in that category. We made commitments in the not-too-distant past to enter this category. The waterproof category is very marketable, and we wanted to market a better-quality product. The products we offer will be 8-millimeter or better—a high-density WPC. We see there are opportunities with better manufactured products to be offered into the market that provide better margins for the dealer. To some degree, it has been a race to the bottom on price. We wanted to go in a different direction. Our idea is not to offer the lowest entry-level position, but something a bit better. Something that is of better quality, at a really good price and a value for the consumer.
FT: What’s your outlook for 2019?
Poteet: We are very optimistic. It’s going to be a great growth year. We’ve seen really strong sales in our cushion and underlayment. In terms of overall market share, carpet may be diminishing, but we feel that consumers are spending a bit more on cushion.