What’s driving growth for the resilient flooring category? FLOOR Trends & Installation had the opportunity to ask at the Resilient Floor Covering Institute’s fall meeting where board members participated in a panel discussion moderated by Tanja Kern, FLOOR’s associate publisher and editorial director.
The panel included: Russ Rogg, president of Metroflor Corp. and current vice chair of RFCI, will become the new chairman in 2024; Herb Upton, vice president of residential at Shaw Industries, whose two-year term as chairman of the RFCI Board ends this year; Roxane Spears, vice president of sustainability, Tarkett North America, who will become the secretary of RFCI; Barron Frith, president of CFL North America and the current secretary/treasurer of RFCI, who becomes vice chair in 2024; and Bart Rogers, vice president of Roppe Holding Co., who will become the treasurer of RFCI in 2024.
Below are highlights of the conversation. Stay tuned for more coverage on additional topics in the coming weeks.
FLOOR Trends & Installation: What is driving growth in resilient today?
Barron Frith: I think if you look at the category, what's driving growth is affordability—affordability of the product and availability of the product, and the durability of the products. I see that as a major factor that continues to drive this category. And then you have the producers, you have 13 or 14 manufacturers from Asia producing here in the U.S. now. Affordability for the product is a big piece of continued growth.
Herb Upton: I'd like to add innovation—that’s what's been great in this space. Whether it's the stunning visuals, the acoustics control, the realism, the click system to do it yourself, the topcoats, it's really been an innovative category. And not to be pessimistic, we don't see the growth of any product like we have with resilient. It's kind of one of those once in a lifetime, and when I say lifetime, a career lifetime. You had the big surge of carpet. We saw where it covered 75% of the floor residentially, now it's around 33%. It had its boom in the 70s, 80s and early 90s. Laminate came up. It was big, it grew to a billion feet. When you look at resilient, it has had double-digit growth for the last eight years and it's over eight billion feet just from LVT side. It’s one of those Halley's Comets. It’s been driven by the industry, it's been driven by innovation, and it's really solved a lot of the customers issues that they did have with flooring.
FLOOR Trends & Installation: What role is sustainability playing in the growth of the category?
Roxane Spears: We find education, healthcare growing very quickly with the resilient business, and they're also being driven by sustainability. When we look at healthcare and education, particular indoor air quality, health and materials are driving a lot of the decisions for the major designers and architects as well as end users. We're getting a lot more demand for good indoor air quality, good healthy products and take back of our product. So that's driving how we're developing products, but also driving the volume of business as well.
FLOOR Trends & Installation: We’re seeing more investment in domestic manufacturing of resilient. Where do you see that heading?
Russ Rogg: Data has been indicative of imports being down pretty considerably year over year, which is probably not a trend that surprises anyone in this room. Speaking on behalf of our particular organization, we have made one investment here in domestic production, but we still rely heavily on importing product from all throughout Asia and even some European locations. And I think that's going to be a big part of our strategy going forward. I think we'll use domestic production and domestic investment as a supplement and what we do overall, but at the end of the day, it's still going to require imported products from various parts of Asia.
In particular for us, as an example, we've migrated to South Korea, and when I say that we've always been doing a degree of business with that country of origin, it's become a greater part of our business. We've also begun to do some business in Cambodia, and so I think that type of diversity is going to continue, but diversity doesn't necessarily mean that it's 100% domestic investment from a diversification standpoint. It's going to be all throughout all throughout the world, taking advantage of what is a global economy. Just to add just the sheer size of the category itself and the amount of square footage is being sold in the industry today, it cannot be supplemented with domestic. You'll see investments around the world, whether it be Cambodia, Vietnam, Europe, Turkey—wherever there's going to be continued investment around the world in this category.
Upton: The plants that have been commissioned, the demand rate has outstripped that capacity. We haven't been able to even keep up with the 13 or 15 plants that have been announced and commissioned within North America. Yes, I believe that we'll continue to invest in domestic production. It's where it can provide value to the organization, enterprise, the industry and the consumer in that play. But to Russ's point, this is a global product and it will be sourced for a period of time, but I do see more investment in domestic manufacturing. Again, it's got to be driven by innovation. It's more than just economics.
In 2022, 10% of the U.S. consumption of resilient products were those originated from the United States; 90% was coming from countries other than the United States. Even with the expansion of domestic production, it's still going to be, let's say less than 20% of what's consumed here in the United States that is produced here in the United States. Most of the added capacity here in the United States also appears to be in one predominant product category, which is SPC. There are some deviations from that, but so whether it's flexible drive back LVT or loose lay products or WPC, there's still going to be a considerable need for product coming in from other parts of the world.
FLOOR Trends & Installation: What are you seeing for resilient as it relates to housing?
Rogg: There is a shortage in the housing market. We've talked about 6 million homes deficit today, but we do recognize that the price points are way too high. That's been well demonstrated. We do see homes getting smaller and being more affordable to hit those price points. We also saw surges of build to rent, and that's good for the hard surface business because majority of those floorings are going to be hard surface, LVT. There is going to be a price point target to hit. It will be smaller homes to hit that $300,000 medium.
Spears: I think we're also going to see a strong growth in multifamily market just because of affordability in some of the metropolitan areas. One of the product lines for that that we see is strong growth is sheet vinyl. Sheet offers no seams in a kitchen, bathroom with LVT in the other rooms. It gives it a more affordability and a higher performance so that they're not replacing the flooring as often.
FLOOR Trends & Installation: What is your outlook for the commercial market?
Bart Rogers: We believe that commercial will be about flat to about 2% down. As for predicting for next year, there's still a lot of backlog out there. In Louisville, they have a large backlog of on tap, but they don't see anything coming out in about a six- to eight-month period. We usually look at the AI billing index, and when it starts to fall below 50, then we start to see that lull about 12 to 14 months out. We’re starting to see that and it's become more consistent in that lull. We actually think it'll be a lull until about probably third quarter of next year. All of us have just come off of great years. We're seeing that start to taper off now, and we think it'll start to come back in the third quarter of next year.
FLOOR Trends & Installation: Are specific commercial markets softening?
Rogers: Most of our businesses in the healthcare and educational field, some hospitality, and we're not seeing much of it in education as we're seeing in the hospitality of it. New construction, the owned hotels went crazy there for a little while. Now that's tapered off. Healthcare, non healthcare is really suffering right now. They're not putting a lot of money back into that at this point, just kind of maintaining what they're doing. So that's kind of where it is for us.
Spears: Commercially for us, we see education, healthcare, and life sciences continuing at a small pace, slow growth for next year. The other segment, hospitality, is what’s really slowed down, but they're going to be pushed by the owners, Marriotts and the high brands to do something by the end of next year because they've held off on doing any changes for so long because of the little market. It's a visual market. They have to appeal to the customer to get them in there. So if it's dated, it's going to have to change.
Upton: A lot of our focus and our market penetrations in corporate office, so we have a little bit more pessimistic view with the inventory and things that we've talked about today. I will agree with Roxanne, the hospitality boom, it slowed down. So, a little bit more pessimistic look of the commercial sector. Not anything dramatic, but five to 7% down.