Despite the housing slowdown in the U.S., the trend to make bathrooms
larger and more luxurious is benefiting the ceramic tile and sanitaryware
markets. However, dinnerware and pottery manufacturers continue to face pricing
pressures and steep competition from low-cost producers.
Florida Tile's Cotto porcelain floor tile is designed to
emulate the ambience and charm of handmade Mexican terra-cotta tile with
porcelain's durability and ease of maintenance. Photo courtesy of Florida Tile,
Mention the term "whitewares" and many
individuals automatically think of a shrinking U.S. market. Over the past decade,
numerous whitewares plants in the U.S.
have closed as much of the production has been shifted to low-cost
manufacturing regions such as China
But there are some bright spots, particularly in ceramic tile, where several
plants have come on-line in the last few years. High-end sanitaryware is also
providing some new opportunities. And while dinnerware manufacturers continue
to struggle, they have not given up just yet. Following is an overview of each
of these key whitewares markets.
Tile Benefits from High-Value Status
According to U.S. Department of Commerce figures obtained
from the Tile Council of North America, U.S. consumption of ceramic tile
increased 2.4% in 2005 to 3.27 billion square feet. However, imports also rose
5.7% to 2.6 billion square feet, capturing 80.8% of the market-up from 79.2% in
2004. Imports from Italy and
Spain fell by 6.5% and 0.3%
to 688,909 square feet and 364,535 square feet, respectively, while imports
from Brazil, Mexico, and
China rose by 14.3% (451,906 square feet), 23.8% (408,772 square feet), and
104.9% (225,157 square feet), respectively. In general, European manufacturers
lost market share to South American and Far Eastern countries, which have lower
Domestic shipments dropped 4.3% to 665.6
million square feet, while exports rose 6.2% to 37 million square feet.
These trends are having a mixed impact on U.S.
ceramic tile manufacturers. While several companies have expanded their
production facilities or broken ground on new plants, industry consolidation
has also continued.
Mohawk Industries reported that its Dal-Tile segment's
second quarter sales were strong as revenues grew 15% over the same period in
2005 from both volume and price increases. Dal-Tile's Oklahoma
capacity expansion started production at the end of the second quarter; the
company said that this expansion, along with another facility expansion in Mexico,
would support its expected future growth and allow it to produce a greater
portion of its sales requirements.
After being acquired by the Italian company Panariagroup
Industrie Ceramica S.P.A. in February 2006, Florida Tile broke ground in July
on a new $20 million porcelain tile factory in Lawrenceburg, Ky.
The first phase of the expansion is expected to be completed in May 2007. The
new factory will produce 40 million square feet of porcelain tile annually and
will reportedly add an additional 67 new jobs to the company's Lawrenceburg site.
However, production at the company's clay tile plant in Shannon,
Ga., will gradually be phased down as the
porcelain production in Kentucky
Panariagroup Chief Executive Officer Giuliano Pini said,
"Since the Florida Tile acquisition, the U.S. has become an even more
important market for our group and is the market with the most interesting
expected growth rate in the mid-term. For this reason, it is strategically
important to have an efficient production plant in the U.S. in order to improve the
service to our customers and to reduce transportation costs and duties."
The company said that its best-selling clay products will be either outsourced
or converted to porcelain.
Italian tile manufacturer GranitiFiandre reported that its
subsidiary, StonePeak Ceramics, experienced solid sales growth in the first
half of 2006, boosted by its acquisition of Trans Ceramica Ltd. in January
2006. StonePeak Ceramics celebrated its first anniversary in April.
GranitiFiandre is counting on StonePeak Ceramics to provide "logistical
advantages derived from the local production presence" in the North
American market, with savings on charter, transportation and customs costs.
In June 2006, the Italy-based Marazzi Group announced
plans to invest $50 million in an expansion that will double the capacity of
its plant in Dallas, Texas, and will include what the company
described as "highly efficient technological solutions." The
investment will reportedly allow the plant to become the second largest tile
production facility in the U.S. "According to the most recent sector
forecasts, the U.S. tile market will still show a strong growth in the next
years, driven mainly by the substitution effect that is favoring ceramic
products over more traditional flooring products like carpets and vinyl,"
the company said in a statement.
One trend that is continuing to drive demand for ceramic
tile in the U.S.
is its high-end, high-value appeal. While the soft U.S. housing market has affected
sales of other building products, ceramic tile is increasingly being used by
both builders and consumers alike to differentiate a home being placed on the
market, particularly in today's "luxury" bathrooms. Donato Grosser, a
longtime consultant to the ceramic tile industry, believes that the future of
the ceramic tile market in the U.S.
is increasingly at the high end and strongly becoming a fashion business.
"Customization, and the luxury looks that end users demand, is becoming a
greater reality thanks to technological innovations," he said. Many of
these innovations were highlighted at Coverings 2006 earlier this year,
including tiles that imitate precious metals and rare stones, wood, wallpaper
According to the Tile Council of North America, the average
square footage in homes rose 3.6% from 2004 to 2005. The two rooms that are
most often remodeled are bathrooms and kitchens, which also happen to be the
two rooms in which tile is most
This trend is expected to continue
despite the soft housing market.
Outside the U.S.,
the demand for tile also remains strong, particularly in Russia and Eastern Europe,
which have seen a significant construction boom over the past year.
Construction forecasts indicate that these regions are likely to see continued
growth in demand for ceramic tile and other building materials over the next
American Standard's new Cadet® 3
toilet features a permanent, antimicrobial glaze that inhibits the growth of
stain- and odor-causing bacteria, mold, and mildew on exposed surfaces, along
with an advanced flushing system and easier installation compared to other
toilets. Photo courtesy of American Standard Companies, Inc.
High-End Sanitaryware Sees Growth
Like ceramic tile, the sanitaryware industry is also
benefiting from the current trend to make bathrooms larger and more luxurious,
stylish and comfortable. High-end, "artistic" fixtures such as vessel
sinks are seeing a significant increase in demand. One report noted that the
2006 Kitchen and Bath Industry Show in Chicago
featured more vessel sinks than traditional porcelain or cast-iron sinks.2
Demand for other high-end bathroom products is also on the rise as consumers
increasingly look to achieve a "spa-like experience" in their
However, the residential construction slowdown in the U.S.,
combined with high energy and material costs, is pressuring sales and earnings.
American Standard reported that sales in its Bath
and Kitchen segment in the first half of 2006 were down 4.3% from the prior
year because of sales declines in the Americas. Earnings were also down
substantially, due to lower sales and production volumes, as well as higher
commodity costs. While the segment's third quarter sales were up slightly
compared to the same period in 2005, the company said that it continued to face
higher costs and decreased unit volumes.
One exception can be found with American Standard's new
3 toilet, which has seen good demand since it was
introduced earlier this year. The toilet features
-a permanent, antimicrobial glaze that inhibits
the growth of stain- and odor-causing bacteria, mold, and mildew on exposed
surfaces-along with an advanced flushing system and easy installation. The
solid demand for this product indicates that innovation can provide a key
advantage in a challenging market.
Other regions are faring better. The booming construction
market in Asia is boosting demand for all
building products, including sanitaryware. American Standard reported that it
won contracts for a variety of new construction projects associated with the
2008 Olympics in Beijing, including several
sports stadiums, the Qingdao yacht center, the Qinhuangdao football
training center and Marco Polo Hotel. Its Bath
and Kitchen segment also opened a new Bathaus in Guangzhou,
China, its fifth flagship
showroom in Asia.
Villeroy & Boch noted that its Ceramic Sanitary Ware
& Furniture Business Segment saw a 7.8% increase in sales in the first six
months of 2006. The higher sales were driven by Eastern European countries
(+23.5%), Italy (+27.4%) and
(+13%). The company also saw sales in Germany rise slightly (0.8%).
Villeroy & Boch noted that the overall German economy continues to enjoy a
strong upward trend.
Despite the current housing slowdown in the U.S., companies continue to believe that the U.S.
market has strong future growth prospects. In January 2006, Villeroy & Boch
took over the entire ceramic sanitaryware business of Grupo Industrial Saltillo
(GIS) in Mexico,
which involved three sanitaryware factories with a capacity of 2.1 million
units. Under the brand names Vitromex and St. Thomas Creation, the group
achieves annual sales of around US$60 million, roughly 45% of which is in the
U.S. market. Villeroy & Boch said that the acquisition will enable the
company to better serve the U.S.
market, which it views as its second most important export market after France. The
acquisition is also expected to help the company address the growing markets in
Central and South America.
According to a report from The Freedonia Group, demand
for plumbing fixtures and fittings in the U.S. is expected to rise 2.4% per
year through 2010 to $10.9 billion, supported by increasing applications in
repair and improvement markets in both residential and nonresidential
construction, and by an acceleration in new nonresidential construction
While residential markets for plumbing
fixtures and fittings accounted for nearly 70% of total demand in 2005, the
nonresidential and nonbuilding markets (such as recreational vehicles and boats)
will provide better growth prospects through 2010.
The South and West regions are expected to lead gains, as
higher income in these regions will support spending on plumbing products in
residential markets. Increasing nonresidential construction expenditures in the
South and West will also boost demand. Gains in the Northeast and Midwest will remain below those of the South and West
through 2010, due to a less favorable outlook for personal income and
The Freedonia Group also projects that demand for
plumbing products in China
will increase 2.8% per year through 2009 to almost 85 billion yen (~US$726.8
million), outpacing growth in most other parts of the world.4
Market advances will be driven primarily by healthy gains in building
construction activity as industrialization efforts continue and income levels
rise. Also aiding demand growth will be continuing trends toward larger
bathrooms and kitchens in residential markets. In addition, increasing demand
for greater living space, further privatization of home ownership, and a
rapidly expanding domestic consumer market will all contribute to market gains.
Residential markets for plumbing products will see the fastest advances, with
demand rising 13.88% annually to 47 billion yen (~US$401.9 million) in 2009.
Demand for plumbing fixtures and fittings in nonresidential applications will
rise 1.8% per year in the same period, benefiting from a healthy outlook in the
office and commercial and institutional building segments.
Dinnerware Markets Continue to Face Challenges
The dinnerware industry continues to face challenges from
pricing pressures, fierce global competition and changing consumer tastes.
In mid-2005, Department 56 bought Lenox for $190 million,
then changed its name to Lenox Group. Last year, Lenox said it would stop
making fine china at its Pomona,
N.J., factory and close 31 of its
61 Lenox stores after falling demand for fine ivory china dinnerware. The
company is still struggling to find its niche. While sales in the first half of
2006 were up as a result of the acquisition, losses were substantial. "We
purchased the Lenox business to diversify our product offerings and channels of
distribution, which provides our company with more opportunities beyond Department
56's core business," said Susan Engel, chairwoman and chief executive
officer. "Today we are even more committed to growing the business and
leveraging the opportunities made available through the Lenox acquisition. At
the same time, we continue to work at reducing costs to maintain the leanness
historically displayed by Department 56."
Lenox is also focusing on innovative marketing
initiatives to increase sales. In a new strategy, the company has signed four
leases at mall locations in connection with its launch of four new concept
stores called All The Hoopla, which will compete with stores such as Crate and
Barrel and Pottery Barn. These stores will market and sell all of the Lenox
Group brands (Department 56, Lenox, Gorham and Dansk) in a single-store format.
The first All the Hoopla store in the nation opened in Twelve Oaks Mall in Novi, Mich.,
in September and features a range of products, including dishes, silverware,
stationery, gourmet food, drink mixers and tabletop villages. Two more Hoopla
stores were expected to open in Florida
around November 1, and the fourth store is slated to open in 2007.
Lifetime Brands Inc., which purchased Pfaltzgraff in
2005, has also found dinnerware to be a challenging market. The company
reported that its York-based direct-to-consumer division is struggling and is
projected to post an operating loss this year. Division sales were below
expectations for the quarter ending September 30, and business reportedly
suffered from misaligned retail inventories and unsuccessful merchandising
initiatives in the company's Pfaltzgraff Factory Stores, as well as its
Faberware Outlet Stores.
According to Unity Marketing, the entire tabletop market
rose 3.1% to $9 billion in 2005 compared to 2004 levels. However, this growth
lagged behind the overall housewares market, which grew 4.5% to $36.9 billion
in the same period.5
Pam Danziger, president of Unity
Marketing, said that a change in consumer taste is largely to blame for the
tabletop industry's struggles. "Too many tabletop companies have been slow
to pick up on the shifts in consumer preferences," she said.
"Tabletop marketers have been notoriously product driven. But they must
listen to the consumer and adopt a consumer-centric business model."
According to Danziger, consumers' tastes have shifted
toward a more casual, but luxurious, way of setting the table. "People
want tableware they can dress up and dress down depending on the occasion. This
affects marketers at both ends of the pricing spectrum, as people want tabletop
that is better than everyday, but more casual than formal dinnerware."
Tony DeMasi, an internationally known tableware and
giftware expert and founder of the Worldwide Tabletop and Giftware Association,
agrees. "Formal dinnerware is quickly losing its share of the market,
while casual is expanding to include 'semi-formal,' 'everyday dinnerware' and
'good dinnerware/bridge dinnerware.' Good/bridge dinnerware is capturing the
market because it consists of product that has the properties of 'casual'-i.e.,
durable, easy to care for and popularly priced-while having a 'sort of formal
look' in design. As a result, we're seeing many of the established formalware
companies, such as Wedgwood, Lenox and Noritake, move their design and
marketing emphasis to 'bridge dinnerware,'" he said.
DeMasi said that pricing pressures will continue to be a
part of the future landscape, with stores such as Target and Wal-Mart driving
price trends. "Celebrated clothing and home furnishings designers have
given cachet and respectability to products from price-conscious mass
merchants," he said. He also noted that private-label branded merchandise
has largely lost its appeal among consumers because it is typically made in the
same offshore factories as all other products and therefore has the same
However, focusing on design can continue to give
companies a competitive edge, regardless of where the product is manufactured.
"Manufacturers that can't compete on price when it comes to production are
upping the importance of design," said DeMasi. "An innovative design
can provide a marketing edge for about six months before lower-priced knockoffs
begin flooding the market."
Editor's note: The foregoing information
(except where noted) was compiled from personal interviews and publicly
available information in annual reports and news releases.
Design elements such as texture and bright colors are in
high demand in pottery products. Photo courtesy of Danny Meisinger, Spinning
Earth Pottery, Gardner, Kan.
SIDEBAR: Pottery Benefits from Unique Appeal
Large pottery producers that rely on high-volume sales
are facing the same challenges as manufacturers in the dinnerware market.
Jeremy Willis, managing director of Pottery Supply House Ltd., Oakville, Ontario,
that a good portion of slipcast production has moved offshore because companies
simply can't compete on price. "In general, pottery producers are moving
away from high-volume production to lower-volume, high-value products to try to
retain their market share," he says.
Pottery that is designed with emotional appeal and caters
more to consumers' personal tastes tends to be insulated from broad economic
trends and pricing pressures. According to Anne M. Bracker, vice president of
Bracker's Good Earth Clays, Inc., Lawrence,
Kan., certain galleries in
certain regions will always do well, regardless of what's happening with the
overall economy. Additionally, "many potters have the flexibility to
change directions midstream. If their products aren't selling well at one
gallery or show, they typically can shift to another venue or change their
products to better suit the market," Bracker says.
One trend Bracker has been seeing across the pottery
market is a desire for more texture in finished products. "Pottery
producers are actively seeking new tools that will allow them to easily modify the
texture of the clay. We've seen strong demand for products such as our new Slap
Stix, which are hard, textured plastic paddles that can be used to accent
thrown and handbuilt pieces," she says.
Other tools that can be used to create specialized designs
are also in high demand, as potters continue to look for ways to create a unique
niche for their products.
According to George Debikey, vice president and director
of technical services for American Art Clay Co., Inc., Indianapolis, Ind.,
color is also playing an important role in product design. "While earth
tones were popular for quite some time, consumers are now looking for brighter
colors, particularly reds and yellows. As a result, we're seeing an increased
use of underglazes on pottery, as well as on sculpture," he says.