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Ceramic Tile Report Floor Focus : March 2023
Ceramic Tile Report Floor Focus : March 2023
3/8/23, 10:13 AM
Ceramic Tile Report
Jessica Chevalier from Floor Focus
The U.S. ceramic market is finding its footing following several years of upheaval.
For several years now, the U.S. ceramic market has been going through a period of transition with the expansion of U.S. manufacturing, removal of Chinese imports from the market through tariffs, significant instability in raw material sourcing and increases in raw material costs, and developments in technology that have enabled advancements in aesthetics and formats. And over the course of the last year, the market has worked to find its footing as a result of these dynamics.
At the same time, ceramic manufacturers and importers are fighting the same battles that many other flooring categories are—working to maintain ceramic’s market share, as LVT continues to steal square footage from virtually all other flooring categories; seeking solutions to the shortage flooring installers; and communicating its value to the various end user groups, many of which do not yet understand that, while costly up front, ceramic carries a significant useful life, offers great durability, and has a strong green story.
Another benefit of tile is its versatility, made possible through its significant range of styles and formats. “While LVT has grown share, ceramic continues to be competitive because it continues to innovate in surface technologies, exterior/interior products and wallcoverings, where other flooring materials don’t really play,” Greg Mather, CEO of Crossville, notes.
2022 MARKET
While the shift away from Chinese ceramic imports is not 2022 news, who’s making up that share of low-cost imports certainly is. Between 2013 and 2018, China accounted for 29% to 32% of ceramic import value in the U.S. In September 2018, the U.S. Trade Representative imposed tariff s and antidumping duties on Chinese tile imports; the tariff was increased in June 2019. As a result, in2019, Chinese tile imports dropped to 21%; in 2020, to 0.4%; and in 2021 to 0.1%, where they have remained since.
Filling that gap is India, which accounted for 0% of imports to the U.S. until 2018 and now accounts for 13%, and Malaysia and Vietnam, neither of which imported any tile to the U.S. until 2019 and now account for 2% each of the ceramic import total. Says Market Insights’ Santo Torcivia, “Brazil and Mexico have also seen growth (mainly in dollar value of imports), indicating that they might be going up-market. Also, Mexico and Brazil could be benefiting from Mohawk’s recent acquisitions of Vitromex (Mexico) and Elizabeth (Brazil), combined with its prior acquisition of Eliane (Brazil) in2018.”
Paolo Mularoni, president of Del Conca USA, adds, “India’s imports to the U.S. are growing dramatically, and I believe it’s unfair competition because the reality of how companies and industries work in India is completely different from how we operate here. Recently, an investigation by an E.U. commission on India has granted antidumping tariff s on Indian product. The percentages being discussed aren’t as huge as what happened with China, but the dumping was proven. Production practices in the U.S. and Italy are quite comparable in terms of environmental laws and labor laws, safety, and that is how we believe the game should be played.”
ONSHORING UPHEAVAL?
Has the U.S. ceramic market changed significantly with the establishment of new domestic production? The longstanding players with whom we spoke report that they haven’t experienced a great deal of upheaval as a result of the onshoring of production. Says Crossville’s Mather, “The transition hasn’t been dramatic. Initially, there was a lot of buzz around the new brands, but they have found their lane. And we have all re-established ourselves in how we do things. It forced us to be more proactive with how we establish programs and go after the market.”
Of course, with the growth of any industry comes the growth of supporting industries. “In 2017 and2018, we started to see a large number of equipment manufacturers increase their U.S. presence, especially trying to locate themselves close to the Tennessee region, and now we are seeing the same movement with the glaze suppliers expanding their U.S. footprint,” says Brent Shoemaker, vice president, technical, for MSI.
He adds, “With the expanding outdoor segment in the ceramic business, we see many U.S. manufacturing facilities making the investment to have the capability of manufacturing 2cm pavers. We are also seeing investment to manufacture large porcelain panels, both for interior use and for exterior cladding, especially as it pertains to the 6mm panels and their many requests in the commercial segment.”
As for what kind of a differentiator U.S. production brings to the market, manufacturers believe the desire for domestically made products is driven less by ideals and more by the desire for quality products with good availability.
He continues, “We realize that both Italian and U.S. manufacturers cannot compete in the commodity part of the market. Our industry is extremely capital intensive and needs efficiencies of scale, so we cannot play in the pure commodity section, but we still need volume to keep the industry healthy.”
By square footage, Spain, Italy and Mexico remain the top three tile importers of floor and wall tile to the U.S., with Spain importing an estimated 40,168,000 square meters to the market in 2022, Italy importing an estimated 35,038,000 square meters last year, and Mexico importing an estimated33,728,000 square meters.
In total, the landed value of ceramic floor and wall tile imports is estimated to have risen by 17.9%in 2022 to $2.9 billion, while domestic production value rose 7% to $1.46 billion, according to preliminary data by Market Insights.
In dollars, the U.S. ceramic market grew by an estimated 13.9% in 2022 to $4.3 billion, says Torcivia.
And in terms of square footage, “Despite the headwinds of inflation, rising interest rates, transportation difficulties of all types and overall uncertainty in the economy, tile consumption in square feet looks like it will end 2022 at the same level or even slightly higher than the prior year, ”says Michael Franceschelli, CEO of Florida Tile.
Adds Donato Grosser of Grosser Consulting, “If trends continue—and I don’t see why they shouldn’t—we will see India in two or three years as the number one importer to the U.S. There will always be a market for local manufacturers with the advantage of a quick delivery, but all expensive manufacturers will be pushed out of market. And that’s a shame. A product needs to maintain an image through advertising, and if they don’t, they lose it.”
The point remains, of course, as players have made significant investments in U.S. production over the last decade, it is imperative that the category continue down a path of growth in the U.S. market, because the advantages of U.S. production are largely centered on the convenience, service and availability of having product made where it is sourced.
THE BIG HURDLES
Labor remains a key challenge for the ceramic tile market. Of course, the labor shortage doesn’t impact ceramic exclusively, but as ceramic is a material that is almost always professionally installed, it does impact the category acutely. Several leaders in the business see the lack of qualified installers as the key challenge that the category faces in terms of maintaining and growing its market share. The fact is, manufacturers can produce the most beautiful products in the world, but if there isn’t a talented labor pool to install them, they will just sit in warehouses. While industry groups are putting eff ort into recruiting installers, the shortage remains a formidable challenge.
It’s been several years since Daltile introduced its click-together Revo Tile to the market. The system appears to be the most viable innovation with regard to easy-install ceramic technology, due in part to the fact that the company bringing it to market holds about half of U.S. ceramic market share. Daltile reports that the Revo Tile product is gaining strength, and Patrick Warren, vice president of Daltile, notes that since its introduction to the market “we have learned a lot. We came out thinking it was a perfect DIY product, and, as it has evolved, we have realized it has a fantastic fi t in smaller commercial and multifamily spaces as well.”
A second significant challenge for the ceramic category is education of retail sales personnel. LVT is on the tip of most RSAs’ tongues. Due to its current popularity and comparably low upfront cost, it’s easier to sell than ceramic—and that’s even before the elevated cost of ceramic installation comes into play. Unless end users educate themselves on their range of possibilities up front—including the lifecycle cost, sustainability, cleanability and durability benefits of ceramic—they may never fully understand the value proposition that ceramic offers.
How that education may reach the consumer in particular is unclear. As a category, ceramic does little consumer-focused advertising. In this month’s Tile Files , starting on page 89, Grosser discusses the Italian Ceramic Tile Manufacturers Association’s multimillion-dollar campaign to promote ceramic tile to the consumer in the early ‘80s, a promotional eff ort that had substantial payoff . “If one category has higher prices than another, it has to explain why to the market and spend more on promotion doing that,” says Grosser. “This year, Italy will export $700 million in tile to the U.S. In 1980, it exported about $80 million worth of tile to the U.S., but then it spent millions in advertising. Now, it has a huge share of the market and spends much less. But how will it keep its market share in the long run without explaining its value to the market?”
“One of the most important tasks confronting our industry is to educate specifiers of all types—residential, commercial, governmental—more thoroughly on the health and environmental superiority of porcelain and ceramic tile. For example, an in-depth comparison of accurate and factual EC3 (Embodied Carbon in Construction Calculator) numbers between various flooring types will reveal startling differences,” notes Franceschelli.
As of yet, the industry is not uniting around that goal. “We are still in a phase where there is a scatter shot approach around storytelling in our industry, but I think it will get more organized,” says Mather.
The U.S. ceramic market is unique in that it is composed of one very large player, owned by the world’s largest flooring manufacturer, and a host of smaller companies. In order to advertise properly and increase market share, you need critical mass, adds Grosser.
Along the same lines, Atlas Concorde CEO Federico Pifferi believes that it would greatly benefit American manufacturers to define the identity of American tile as a subcategory. “We need to find our spot in the market,” he notes. “When the duties on Chinese tile were put in place, many American tile manufacturers thought they could take advantage of that, but the vast majority of sales went to India, Mexico and Turkey, and part of the reason that happened is that U.S.-made tile needs to fi nd its spot in the market. Across the world, we have high-end, premium manufacturers and cheap commodity manufacturers; the U.S. is in between those and needs to identify its path forward.”
NEARING RAW MATERIAL RELIEF
For some manufacturers with whom we spoke, having the time to sit back and ponder the topics of installation and education is something of a luxury. The Covid era brought the first wave of supply chain challenges to the ceramic market, then Russia’s war on Ukraine brought the second. And while some of these headwinds have eased, they certainly haven’t subsided.
“The prices of raw materials have been very difficult to manage lately,” says Clark Cornelius, COO of Florida Tile. “The cost of operations for our raw material suppliers have increased due to the gas and energy [used for] the mining and drying of materials. Additionally, the specialized freight of raw materials has also increased. The volatility is significantly better in the U.S. than other parts of the world, and we expect costs to stabilize in the near future.”
For many European manufacturers, Ukraine supplied clay and various other raw materials, and for importers, it supplied finished tile, so many players were forced to fi nd new sources for those materials—in a time when their competitors were also seeking new sources.
Manufacturers with production in Europe have been hit especially hard by the cost of natural gas due to the war. Warren says, “Raw materials have been a challenge, no question. Materials, gas here and in Europe—those have been a tremendous headwind. The cost of natural gas, used to fi re kilns, has increased and has not come down. We spend a lot of time trying to navigate around those challenges.”
There is some indication of easier days to come. “Raw material prices have been stable since the last quarter of 2022,” reports Paulo Pereira, senior merchant for porcelain at MSI. “The cost of natural gas, which is crucial to ceramic tile production, is stable at a rate five times lower than its peak last year, which reached $300/barrel and is now down to $60.”
Pifferi adds, “2022 was a year of reactions. We saw double-digit price increases, and the market was completely unpredictable. Week after week, prices increased. And it was not only a matter of pricing but finding viable sources.”
PRODUCT TRENDS
Large sizes have cemented themselves as an important piece of the market. That being said, formats aren’t expanding as rapidly as they were a few years ago but instead are holding steady, with 24”x48” now something of a standard.
Gauged porcelain panels are also becoming more of a familiar entity in the market, offering the ability to be used in flooring, wallcovering, shower walls, furniture or countertops. Expansion of this format relies on the availability of labor technicians who are trained to handle, transport and install the material, which is still largely limited to more populated metropolitan areas, interviewees report. Gauged porcelain collections offer unique opportunities with regard to coordination between flooring, walls and other interior finishes.
EDUCATING END USERS
As product prices have risen, have U.S. suppliers of ceramic tile seen end users trading down? The answer to that question can be hard to deduce due to the nature of the market, as a trade-down may be from a mid-priced ceramic to a product out of the ceramic category altogether, such as LVT.
Hector Narvaez, vice president of sales, home centers and distributors for Daltile, reports, “I would say we have seen consumers trading down in certain segments. In the home center channel, there’s been a bit of that. The consumer sees their rent and bills going up, so they are opting for ceramic but may sway toward an opening price point. We still see commercial customers investing in product. And some customers feel that if they are going to invest, they want to get the best that they can.”
“I think there is always that customer who will trade down if the opportunity exists,” says Warren,“ and over last six to eight years, some have been trading out to LVT. But we have also learned that when we build a strong brand image, presence and technology, people will trade up to better product that lasts longer.”
Adds MSI’s Pereira, “I see consumers trading to competitive products, like LVT and entry-level laminate. The competition is stealing market share from the tile business as our prices have risen because we were most affected by the rising cost of natural gas.”
At the other end of the size spectrum, several manufacturers have noted the importance of smaller formats and product collections that offer sizing from small to large, providing specifiers and end users the opportunity to create sophisticated and coordinated designs with a variety of material formats.
Similarly, amid Covid, outdoor space took on greater importance both commercially and residentially, and manufacturers have catered to that trend with collections that include a variety of coefficient of friction ratings, so that users may transition from inside to out with a unified visual. The focus on outdoor space also means that pavers are becoming an important piece of many manufacturers’ portfolios.
Atlas Concorde characterizes the ideal collection of products today as an ecosystem, a package of solutions to meet the varied needs of specifiers and end users alike.
Daltile believes that innovative technology increases the consumption of tile, and Warren notes, “The most important five factors in tile are color, color, color, color and design. In the end, if you don’t have the product and format that is desired, you are out.”
THE MANUFACTURERS
Dal-Tile
is in a category of its own in the tile business, owning about half of the U.S. market, which means it is the company that can—should it choose to—bring significant change within the U.S. ceramic marketplace. Its Revo Tile technology is an innovation that has the potential to do just that. There have been other click-together ceramic products introduced to the market in the past by smaller players, but none have gained significant traction. However, with the manpower of its team and sales centers, the power of its marketing reach, the efficiencies of its scale, and the power of its ownership, Dal-Tile simply has the ability to make an innovation stick in a way that other companies do not.
In the U.S., Dal-Tile has three major brands: Daltile, American Olean and Marazzi. Another Dal-Tile brand that may be familiar to many readers is Ragno, which is aligned with Marazzi in Europe. All three of the major U.S. brands have long standing in the market, with Marazzi operating here for 40 years, Daltile for 75 years, and American Olean for 100. The Marazzi brand, which started in Italy, is 86years old overall.
In late 2022, Dal-Tile’s parent company, Mohawk, entered into an agreement to buy Elizabeth Revestimientos, based in Brazil.
In North America, Dal-Tile has nine factories with an output of over 1.1billion square feet annually across a wide range of products, including mosaics, quarry tile and quartz slabs. Ninety percent of what the company sells in the U.S. is produced in North America.
In the U.S., Dal-Tile targets the new residential builder, the commercial and the residential remodel markets via its company-owned service centers that cater to dealers, as well as through commercial partners, distribution partners, home centers and ecommerce.
The company produces gauged porcelain in Italy and is currently doubling that capacity, an expansion expected to come online this spring. Dal-Tile reports seeing good demand for those products.
Based in Italy,
Del Conca Group is comprised of Cerámica Faetano, Ceramica del Conca, Pastorelli and Del Conca USA. The company has three factories in Italy, with U.S. manufacturing in Loudon, Tennessee.
In 2022, Del Conca launched its Dinamika technology to the U.S. market. Dinamika allows the company to apply both the visual design and the texture in one pass. Dinamika products are made in Italy.
Mularoni reports, “Developing Dinamika took two years of testing, trial-and-error and eff ort. There were really quite a few habits that needed to be changed in the production process because it is made so differently than standard products.” The technology was rolled out at Cersaie, but Mularoni believes it isn’t yet widely known in the market.
In the U.S., Del Conca works through distribution and specifiers to get its products to market. It serves both residential and commercial clients. The company’s offering is almost completely porcelain.
American Olean’s Historic Limestone Lineage Blend on the wall and… »
Atlas Concorde, owned by Italy’s Gruppo Concorde, has been working to expand production both in the U.S. and Italy over the course of the last year. As for Atlas Concorde USA, the company began producing tile domestically in 2016and reached full capacity last year. The company is now expanding capabilities here, opening a second stage of production. The U.S. facility makes rectangular formats and pavers, which it notes are becoming an important part of the business.
At one of its Italian ceramic plants, the company broke ground to add large slab production and announced at Cersaie 2022 that it will make a similar addition at a second location.
Product-wise, Atlas Concorde recently added sinks and vanity tops to its package of solutions. “We are porcelain manufacturers, not vanity manufacturers,” clarifies Pifferi, “but the idea was to show how tile can be applied in additional destinations of use. The idea came to life because these are the things we are doing at our trade shows and in our showrooms.”
Atlas Concorde USA mainly moves its product through distributors, which either sell through their own locations or through dealers. This is the company’s most important channel. Atlas Concorde USA serves both the commercial and residential markets, noting that it designs more product targeting the commercial market but has a good mix overall.
In addition to its U.S. and Italian products, Del Conca has factories in France and Russia. Its French facility provides product to France, Belgium and other nearby countries, while its Russian plant services Russian customers.
Wonder Porcelain, owned by China-based parent company The Wonder Group, is transitioning toward a higher level of product than it had offered previously. The company introduced new luxury tiles at last year’s Coverings and will do the same at this year’s show. This isn’t simply a new offering for the company, but a new direction entirely.
“This is a major shift because many of these luxury items are only made abroad, so this sets Wonder apart from other manufacturers in the U.S.,” says Nicole Sullivan, marketing/brand coordinator for the company, adding, “We will design what customers request.” The company’s new approach includes exotic styles, such as an onyx look, which will be introduced at Coverings.
All Wonder’s products are made in Lebanon, Tennessee and go to the market through distribution. The company manufacturers sizes up to24”x48”.
Florida Tile, part of Italy’s Panaria group, reports that over the course of the last year, it focused eff orts on retention and recruitment, which led to substantial year-over-year performance improvements across the organization. These operational advances resulted in record-high fill rates and record-fast order turnaround times.
Debuted in early 2022, the company’s Kerlite Easy offers a dry-installation system created by Cotto d’Este, another Panaria group brand. The system features a sound-absorbing mat on which Kerlite 5.5mm or 6.5mm tiles are installed and grouted with a special filler that makes the surfaces stable, immediately walkable and water-resistant. Its thin, large-format ceramic slabs, with reinforced fiber glass mesh backing, can be installed over existing floors. In addition, the company offers gauged porcelain panels through Cotto d’Este.
Most of Florida Tile’s products are made at its manufacturing center in Lawrenceburg, Kentucky. It also sources products from its parent company’s production facilities in Italy, Portugal and India. In addition, it has selected premium products from supply partners in countries including Spain and Vietnam.
Florida Tile offers porcelain tile for floor and wall installations, as well as a growing assortment of ceramic wall tiles. It has noted increased demand for its 2cm porcelain pavers.
Once focused solely on the commercial market, Crossville is now also targeting residential sales. Crafting its portfolio, priorities and programs to go after that market, Crossville saw good strides last year with custom homebuilders and higher-end flooring dealers.
In addition, Crossville continues to gain traction with the innovation it is bringing to market, especially around surfaces and decorations, such as its Owen Stone line that features a leathered finish, as well as a couple of coordinating indoor-outdoor lines that offer an outdoor product with a50% higher DCOF.
Later this year, the company will introduce some new products with what it characterizes as even more realistic graphics.
In addition, Crossville will open a new service center in Miami, Florida in the upcoming months, with Mather noting that the company had coverage across the state except in Miami previously. In addition to its service centers, the company has distribution partners and some long-standing direct relationships.
Over the course of the last year, Crossville worked to beef up its quick-ship program of Laminam by Crossville products.
THE IMPORTERS
As an importer, MSI reports that much of 2022 was spent navigating through the turbulence of the market, noting that there were many challenges with freight, costs and logistics. However, the company reports that it was able to grow through these challenges.
Pereira notes that because factories were mostly oversold for a period of time, innovation an developments slowed as suppliers were simply focused on filling orders.
MSI targets the residential remodel market with products sourced from 50 vendors across four continents, including the U.S., which is a relatively new development for the firm and was motivated by the import challenges wrought by the pandemic. Pereira notes, “If U.S. manufacturers aren’t profitable now, it will be hard on them in the future as ocean freight costs are declining again.”
The company sells mostly porcelain products with a few ceramic wallcovering lines.
MSI offers its Stile collection of gauged porcelain with 6mm products for commercial specification for floors and walls; 12mm products for floors, walls and countertops, and 2cm products, developed mostly for countertops. “While one challenge is that the product is cost competitive to quartz or natural stone, the big challenge is fabricators, who are not yet comfortable working with porcelain, so they overcharge for installation,” says Pereira, who notes that, over the last six months or so, the company has received more inquiries about its gauged products.
MSI is privately owned by the Shah family, and, in January 2023, Manu Shah, founder of the company, announced he was handing the leadership roles over to his sons, Raj and Rup.
Recognizing the pending economic shift, Emser Tile put its 2022 efforts into not only making it easier for customers to do business with it but also investing in making it easier for its associates to conduct their daily activities. This involved moving more of its processes to digital, providing user-friendly options, and right-sizing its investments based on each market’s needs.
Introductions over the last year moved beyond the standard ceramic offerings to include its new Radiant porcelain series with LED lighting and its Empervious engineered shower system.
Emser began in Los Angeles in 1968 and now has 78 service and showroom locations across the U.S. The company has developed products, programs and solutions to support many segments of the market, ranging from residential, new construction and commercial to specialty markets such as kitchen and bath, outdoor living, recreational vehicles and modular housing markets.
Emser sources its products from over 95 factories and quarries in more than 20 countries, including Italy and Spain. Products reach end users via dealer-to-trade and dealer-to-consumer channels. ■
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