Thomas Baert is the president of CFL Flooring, and he is also a founder and an owner of Domotex Asia China Floor. We had an opportunity to sit down with Thomas recently to discuss the company’s growth and its plans for the future. The following are some excerpts of that conversation, which you can listen to in its entirety here.
TF: CFL, which stands for Creative Flooring Solutions, is a China-based company. It has operation here in the U.S. Give us a little historical profile of the company, its brands, products and the growth the company has enjoyed over the last couple of years.
Baert: We started the company in 2004. It was founded by Woody Zeng and myself. Later, our CEO, Tom Van Poyer, joined the company. Originally, we were a wood and laminate company, but we gradually evolved into LVT. I think we were the first to make SPC in China and export it to the United States. We have grown from an Asian company into a global company and now have operations not only in China, but also have factories in Taiwan, Vietnam, and recently in Calhoun, Georgia. We aim to become a $1 billion company very soon.
TF: I understand you have some exciting news to share with us.
Baert: That is correct. When you're doing something right, there are always some people who seem to notice. We presently have 4,500 employees. We grew at a rate of 50% this year and have an amazing order booked for next year. But at the end of the day, it's not about us — it’s about our customers. We have an extremely loyal customer base, which is growing very rapidly. We need to be able to manage this growth and the only way we can do this is to make massive investments in factories around the world and do it now. For this reason, we have decided to attract an international private equity firm, who will come on board as a minority shareholder in order to professionalize and bring capital to the company that will permit us to make the investments that are necessary for the future.
We could have as entrepreneurs sold the company and run away with the cash, but we decided that this is really just the beginning, and the entrepreneurship of our entire team is alive and kicking more than ever. So, we decided, instead of selling, to get private equity on board that will allow us to make the investments in the United States and elsewhere.
TF: Can you expand on your growth plans?
Baert: First, we need to realize the SPC market and the rigid core market — WPC, SBC, NGO-type of products — are in a mass growth mode worldwide. In the United States, we anticipate it to grow 20% to 25%. Wood is rather stable, ceramic is stable, carpet is still on the decline, and as a result, we have been able to be on the forefront of these trends. It looks like this is going to continue and the market will continue to grow.
TF: You have made considerable investment in the Calhoun, Georiga, facility. Talk about that operation, the products manufactured there and the jobs the operation will produce.
Baert: We have invested close to $100 million in the United States so far. We have also purchased land adjacent to the plant, which will permit growth at the existing location. Capital expenditure is substantially higher because this facility has to be a good deal more automated than operations in Asia. Soon we will be employing about 300 people, which will likely double in the next couple of years. It is too early to talk about the next phase of investments, but this is a top-notch factory, with a high level of engineering, top-level people willing to work hard. It is great to see a situation when people start at the beginning and view the operation as their baby.
The factory is up and running and product is currently being shipped. COVID has been a bit of challenge. We were unable to send people to Asia for training, so, we had to rely in alternatives training methods, but now all is going and we are in massive production.
TF: It sounds like you feel extremely positive about the future in the U.S. and around the world?
Baert: Basically, I think rigid core products have been ready to happen. The trend has been there, and it is replacing the negative of aspects of original LVT locking system which was experiencing telegraphing. The disadvantage of the product was resolved in the way Asia invented extrusion, making rigid core flooring was a truly great product. And people jumped on it very quickly. What is even more interesting is where this is going, and what the next trend in this industry will be? I believe we are just at the beginning, and I believe a great many additional products will be introduced, which will make the category even more attractive to consumers.
TF: Talk about market share growth in this category and your expectations for future growth.
Baert: The U.S. flooring market is about $60 billion. In the last five years the market has grown from 6% to 23% in rigid core flooring. And it is expected to grow in the range of 30% to 35%. In reality the market size growth is there.
TF: What percentage of the products sold here in the United States is made in China?
Baert: China is still the massive producer, and if you add up all the capacity currently in the U.S., it's still minimal, I think it's still only 5% of production. Vietnam has become a factor in this industry, Turkey is also coming on as a producer and there are additional countries adding production as well. But China remains the place to be, bringing innovative products to the market. Flexibility in China is still enormous. Contrary to what we often see in the media, China remains the key and dominant place in the industry.
TF: The China market itself—how important is this market for the company?
Baert: The biggest market in China is ceramic—it’s the biggest market by far—but even in China installation has becomes a challenge. Ceramic also consumes a great deal of energy, so, from a sustainable standpoint, the product is not ideal. As a result, there is a gradual growth in demand for rigid products. We as a company are opening franchise stores across the country. We have a large team of salespeople covering the country and we believe the Chinese market may in the end become as large as the U.S. market. I don't think this is going to happen in a few years, but we see a clear trend that SPC products are highly appreciated and accepted in the market.
TF: With the new U.S. plant up and operational, will there be any change in the company’s marketing approach within the U.S.?
Baert: Our company has been growing rapidly as a result of our loyalty to our customer base, the distributor. And we are going to remain loyal to distribution. We will not be selling directly to retail. We go through distribution because we believe this is a segment that is fully complimentary with our position. We will continue to service the distributor because we feel distributors are prime pillars of our industry. They are closest to the specialty retailer, they offer the best training, are in the field on daily basis, and at the end of the day, the flooring business is still very much a personal business. And I think nobody does it better than distributors.
TF: Talk about the business environment in China, how COVID has affected the country as well as the supply chain situation there.
Baert: COVID in China was a major factor in the beginning. The Chinese government really jumped on this to control and basically has been able to limit the spread largely to Wuhan. Of course, there have been other places where it has popped up, but basically there was zero tolerance, and this has worked extremely well for China. I know a lot of people in the west don't believe this; they think the news in China is manipulated. To all of the people I talk to in China I ask the same question: Do you know somebody who have had [coronavirus]? They said, “no.”