RECENT DEVELOPMENTS IN THE US CERAMIC MARKET

According to an article published on Ceramic World Review issue 140/2021, the US ceramic market is set to see exponential growth over the next 2-3 years as the pandemic has left the market with pent-up demand. Here is the full text of article titled “The state of the US market”.

The final consumption numbers will be released soon, but we are estimating the US market will be down approximately 6% in 2020 versus 2019. We expect US producers will finish flat with respect to 2019, while imports will have declined. The good news is that the residential business, which accounts for 70% of the ceramic tile consumption in the US (both new and remodelling), is performing well, while the commercial market is suffering and is expected to suffer through most of 2021. A number of factors have led to a robust residential market in the US: the low interest rates and US government stimulus checks; the fact that homeowners are spending more time at home, even during vacations (opting instead for “staycations”, a period when people stay at home and go on day trips), hence leading to a savings surplus which in turn is being invested into their homes.

While all the focus has been on the impact of the coronavirus, it is important to understand that the US market is still settling into a new norm without Chinese imports, which at their peak in 2018 accounted for over 30% of US imports and ended in late 2019 with the introduction of anti-dumping duties against China. The US market is experiencing vast increases in imports from Spain, Turkey and Brazil, but new countries are now also increasing their US share of imports including India, Malaysia and Vietnam. The true impact of the anti-dumping duties against China is still fluid, which means we see US distributors filling product line gaps with suppliers capable of satisfying the immediate need for Chinese replacements. We expect this process to continue for the next 12-18 months as distributors continue to search the world for viable sources, all the while dealing with the coronavirus which has obviously slowed this process down. An important note is that the US distributors have a vast array of manufacturers to choose from and inventory is a key component.


“While the US manufacturers have been a large focus because of short lead times, Portobello America has seen an increase with additional distributors because of the company’s decision to keep with inventory stateside,” stated Mike Ward, Vice President of Sales with Portobello America.


The distribution channels


The US market channels are a continuous point of discussion as manufacturers attempt to discern which channels will grow in order to develop a strategy to grow with them. The United States market has traditionally been analysed in terms of three different channels: independent distributors, company owned stores and home centers, with about 30-35% going through each channel. However, over the past ten years a further two channels have been added: retail and mega distributors. The following is a quick snapshot of each.


Independent distributors: This category includes not only ceramic tile distributors but also floor covering distributors, which carry an array of different floor coverings including ceramic tile. We have seen this channel slowly decline over the years as buyers find more competitive and service-oriented channels to meet their needs.


Company owned stores: Daltile, Florida Tile, Crossville Tile and Interceramic are amongst the US manufacturers that have their own stores across the United States.


Home centers. The three main home centers are Home Depot, Lowe’s, and Menards.


Mega distributors: These are distributors who are national or have a very strong footprint in their geographical territory. We see many of these opening new locations or acquiring other independent distributors.


Retail: This channel is made up of just two companies in the United States: Floor and Decor and The Tile Shop. The Floor and Decor model continues to dominate the US market and is the fastest growing distributor within the United States.


Currently most of these channels have developed a safe and efficient process for their customers to pick up materials. Scott Maslowski, Daltile’s Senior Vice President of Sales, explains the company’s Tile Takeout Program: “With Tile Takeout, customers schedule a time for their order pickup online using ProExchange (or they can also call the location to set it up). When the customer arrives, they can ‘stay in their ride’ by calling the location to let the team know they have arrived on-site for their order. They then ‘skip the line,’ as our teammates bring their order directly to their vehicle curbside.”


Source: JLC based on FCW data


Materials and Trends


For more than a decade, we have seen the US consumer shifting to hard surfaces instead of the more traditional carpet, a trend that has been magnified with the onset of the pandemic in 2020. Many companies are researching anti-microbial features to present as attributes of their products in order to differentiate from their competitors and meet the needs of the end user.


The United States still is experiencing strong growth in LVT (luxury vinyl tile), with a market share that grew from 12.6% to 17.4% in 2019 and overtook ceramic tile, which remains steady at approximately 14%. Luxury Vinyl Tile has the advantage of lower installation costs compared to other hard surfaces and manufacturers claim the product is waterproof. However, we have yet to see the life cycle assessment for Luxury Vinyl Tile and its true performance in the long run.


The future of the US market


While stalled for a portion of 2020, the US market is set to see exponential growth over the next 2-3 years as the pandemic has left the market with pent-up demand. It remains to be seen whether we will see a steady recovery or a sudden burst of growth. The consensus is that the US market has always bounced back against adversity and there are no indicators showing that this lapse in growth will be any different.