Putting the State of the U.S. Ceramic Tile Market into Proper Perspective

This installation pairs floor borders by Questech Metals with Crossville porcelain stone tiles.

Without question, 2002 has been a difficult year for most sectors of the U.S. economy, yet the ceramic tile market remains consistent with the previous year’s sales, according to figures compiled by the Tile Council of America (TCA). To gain insight into the state of the U.S. ceramic market, National Floor Trends interviewed Bob Daniels, president of TCA. In his responses, Daniels examines the current state of the U.S. ceramic market, its long-term outlook, and the challenges facing the industry as U.S. companies battle for market share with their European counterparts.

Q: How has the slowing of the U.S. economy affected the ceramic tile market?
A: Virtually every major tile consuming country is experiencing an economic slowdown, with the possible exception of China. The U.S. has few barriers to trade, therefore imports have gobbled up over 75 percent of the market, fueling much of the recent growth.
Exporting countries are aggressively pricing their product to penetrate our market. According to Capital Economics, Italy -- by far the foreign producer with the greatest penetration in our market -- exports more than 151 million square feet of product to the United States. Second is Spain, with 85 million square feet, followed by Mexico’s 65 million square feet. Brazil sends nearly 48 million square feet of product to U.S. shores, and Indonesia exports about 13 million square feet to the United States.
The ceramic tile industry remains vibrant. A year with no significant decrease in sales, despite the sluggish U.S. economy in 2000 and 2001, portends a bright future. In the near term, it may be hard to predict the sales levels, but in the long run tile is a winner.
The U.S. is the ninth largest producer of ceramic tile in the world. It is the largest importer on a yearly square footage basis, and is the fourth largest consumer of ceramic tile on an absolute basis.

Q: Has the strong showing of the U.S. real estate market affected the growth of the ceramic tile market?
A: No doubt, the strong showing for housing construction and the low interest rates for mortgages and home equity loans have helped to sustain ceramic tile sales despite slowing construction of commercial buildings.
Consumer spending on remodeling is anticipated to continue to grow. This forecast is strengthened by people who are choosing to invest in their homes instead of the equities market. In addition, approximately 21 million homes built in the 1970s are entering peak remodeling years, and aging baby boomers are reaching peak earning power.
The National Association of Home Builders’ (NAHB) most recent consumer survey, “What 21st Century Home Buyers Want,” identified ceramic tile walls (55 percent) and a separate shower enclosure (69 percent) as a desired bathroom feature.
And according to Harvard University’s Joint Center for Housing Studies’ report, “Improving America’s Housing,” growth in the home-improvement market should accelerate relative to home building over the coming decades.

Q: What is the forecast for 2003?
A: The earlier forecast for 2003 called for substantial growth. Recent sluggishness has lowered these forecasts to a growth rate of about 4 percent.

Q: Did the market share of the U.S. ceramic tile industry grow, relative to foreign manufacturers?
A: The market share of U.S. producers declined in recent years. Foreign manufacturers have added capacity and aggressively pursued the U.S. market due to their need for dollars and slow home-country market conditions.

Q: How can U.S. ceramic tile companies take market share from foreign producers?
A: They must produce desired products and maintain competitive production costs through automation. Trade barriers must also be reduced (generally non-tariff barriers).

Q: Has DalTile’s partnership with Mohawk given them more marketing muscle to seize market share? If so, at whose expense was market share gained -- foreign manufacturers or other U.S. producers?
A: It is too early to tell how the effect of the Mohawk-DalTile merger will manifest itself. Certainly, they are very large and have multiple opportunities to exploit their size.

Q: Who are currently the top U.S. producers of ceramic tile? How much of their sales volume is actually produced in the United States, as opposed to being made in Mexico or overseas?
A: The top five U.S. producers are DalTile, Florida Tile, Laufen/U.S. Ceramic, Crossville, and Florim. They do not indicate how much of their tile is imported vs. produced domestically.

Q: How did ceramic tile design trends in the United States change in 2002? Does our market still follow trends that originate in Europe?
A:The demand for porcelain tile has increased. The trend is towards larger tile with natural looks. Art and decorative tile is increasing in popularity, but is still a small square-footage market. Quarry tile and mass-produced mosaic tiles have decreased in market share. Italy develops most of the world’s tile-making equipment and thus has a head start on product introduction.

Q: What formats, colors and textures are most popular among ceramic tile consumers in the U.S. market? Do prevalent trends still break down along regional lines?
A: The category with the largest market share is large format (12-by-12 inch and larger) glazed floor tile with water absorption less than 5 percent. Porcelain tile with water absorption less than 0.5 percent has increased in market share. Both of these categories are produced by the dust-pressed method and fired in roller-hearth kilns. Major product demand in the high-fashion segment is for ceramic tiles that emulate natural stone products.

Q: How has the aggressive expansion of big-box stores into the residential ceramic tile market impacted smaller, independent dealers in America?
A: I feel that the big-box stores have taken market share from small retailers more so in the carpet area, as ceramic tile requires more knowledge to sell and install. But the big carpet producers are now responding by adding tile to their product lines. The big-box stores have helped the market grow but at the expense of weak retailers.

Q: What new U.S. products have had an impact on the ceramic market?
A: U.S. tile producers have developed products to fit into niches such as water-jet cutting, jobs with trim shapes, glass tile, artistic and custom tiles, swimming pool shapes, exterior cladding, etc.

Q: What are some methods that retailers can use to increase their sales of ceramic tile?
A: This is not a simple question, but they can hire experienced tile salespeople and installers if they plan to install tile. Showroom designs and the use of the showroom are critical. And they can get knowledge through training programs.

Q: What are the key selling points of ceramic tile compared with alternative flooring materials? In other words, what advantages does ceramic tile offer?
A: When choosing ceramic tile for your home and/or office, there are seven areas where, in my opinion, ceramic tile outperforms competitive surfaces. First is its beauty -- ceramic tile’s vast selection of colors, styles, textures, shapes, and sizes add beauty and style to any space or design theme.
Then there’s its design versatility. A combination of sizes and shapes allows for freedom of expression and custom design. Adding decorative artistic tile that is hand-made and/or hand-painted offers consumers a limitless palette of textures, colors, shapes, and style to create a custom expression.
Tile is a low maintenance floor covering. It resists dirt and stains, and requires little effort to maintain its like-new appearance. In addition, tile is known for its water resistance. Glazed or unglazed, ceramic tile’s composition permits little or no accumulation of moisture, depending on the tile and/or glaze combination.
The fifth advantage of tile is that it’s environmentally friendly. Ceramic tile is inhospitable to germs and bacteria, not to mention allergens. Sixth, tile is quite durable. A properly selected tile will outperform most, if not all, non-ceramic finishes created for the same application. And the last key advantage of tile is its fire resistance. Ceramic tile is essentially burnt clay that doesn’t burn and give off toxic fumes.

Q: How important are displays to the ceramic tile selling process?
A: It is important for a consumer to be able to visualize how the installed product will look. This is not easy with individual tiles, so some displays and a lot of pictures are needed to show off the beauty of tile.

Q: What are organizations such as TCA and the Ceramic Tile Education Foundation (CTEF) doing to help the industry do a better job selling, specifying and installing ceramic tile products?
A: TCA publishes the Handbook for Ceramic Tile Installation and the American National Standards Institute’s (ANSI) standards, A137.1 and A108/118/136 for ceramic tile and ceramic tile installation. These three publications work in tandem to give manufacturers, architects, designers, distributors, contractors, and installers a guide to reference industry consensus standards and installation methods.
The Ceramic Tile Education Foundation (CTEF) fills an educational gap in the more than $7 billion U.S. ceramic tile market by providing classes ranging from eight-hour seminars to 40-hour hands-on tile installation-related courses for architects, designers, sales personnel, remodelers, contractors, and independent installers.
Dealers who want to do a better job of selling tile should try to learn more about installing ceramic tile and become familiar with the language used by installers. The more product knowledge you have to share with information-hungry consumers, the more sales you will make. For instance, you might take a course on how to use the TCA Handbook and how to understand ANSI standards.