Tilecast News w/e 05 July 2024

[00:00:01] Speaker A: Tilecast news, features and analysis brought to you by diary Vitaladict. [00:00:20] Speaker B: Hello, Tile edicts, and welcome to this week's edition of Tilecast. It's weekending, the 5 July 2024. Last week we talked quite a lot about what was happening in the UK. Jo, you were at the installer exhibition in Birmingham this week. What's going on in the rest of the world? Did anything happen last week while you were there? [00:00:39] Speaker C: Okay. Yes. Well, the story I'd like to start with concerns the transom capital group acquiring Virginia Tile company. People who've followed Tilecast and Dario Vitality will know that I've been tracking the growth of big groups over the past few years and there does seem to be a general move that big is better, and particularly of companies that weren't necessarily focused on the tile industry. Acquiring tile companies as part of either a broader tile portfolio or increasing specialization in the tile arena. Transom Capital Group are one of those. [00:01:14] Speaker B: Obviously, they're an american group. [00:01:16] Speaker C: Yes, sorry. They're an american private equity firm based in California. Been selectively adding to their portfolio of the companies that they own and they've been majoring on the tile company. So the Virginia Tile company follows last year's acquisition of Galaha, which is not spelt like Galagha, but G, all e h e R. And the idea is to create a national flooring and tile product distributor which has got sort of four key USP's range, how many different products they sell, innovation. So being at the cutting edge of flooring, design, merchandising. So offering a very visual and easy to get brand concept and then the, probably the key to it all, fulfillment and logistics, customer service, in short. And Gallagher is the largest floor covering distributor in the western USA, the third largest in the USA overall, and was acquired by Transom last year. So Virginia Tile is a logical step in the development of this group. [00:02:23] Speaker B: So this is for the United States or for North America in general or are they going worldwide? [00:02:29] Speaker C: No, at the moment it's just the USA. But, you know, the USA is a massive market. This is big news for the tile industry when you have somebody which has a strong tile brand joining a big flooring brand. I'm particularly interested because the, the combined new combined company is going to be led by Sunil Palakodakti. Very difficult name to say, but who's going to be the chief executive? The interesting thing is that this guy was previously the CEO of Architectural Services group. So he's used to working with cutting edge surface materials and he's hugely experienced so are Rick Coates, who's the president of Gallagher, and David Burke, the chief financial officer. So they've got a really strong team at the top, they've got some strong brands and they've obviously got cash behind them. And ambition. And ambition. So that, you know, this is the way I see it's going. And we obviously talked recently about Mohawk. We've talked about the other, the other global brands that are being established, and this is another one. And it's. I think it's interesting where these acquisitions are taking place at the moment. So if we follow on with the next one, which is a UK based one, with Stonegate tooling acquiring national Masonry, you might think, are these tiling brands? Well, they're very important in the worktop sector, and the worktop sector is where the logical growth of the tiling industry is going to come from. We saw that recently at installer show. We're going to be seeing it at other events around the UK, and it's very important that the fabricators, who are really the people who are driving this market, have access to not only great machinery, but great advice. And that's really where Stonegate and national masonry come in. For those of you who don't know them, National Masonry has been around for 30 years and is the uk source of Marmo mechanica machinery, who's best known for their sort of cutting edge polishing machines. One of the interesting things about national masonry's business was it was focused on enabling fabricators to save money on costly repairs by part exchanging existing machinery for newer and more cutting edge machinery, which you can obviously see why that's going to be a service that people enjoy and this is going to carry on. But the other thing is they've been a constant source of support, guidance and advice on the all issues surrounding polishing. And that's going to become increasingly important as this market develops, because it is those kind of companies that will help create the kind of high quality fabrication environment that's going to make the worktop market a success going forward and allow it to compete with natural stone and all the other solid surfacing options out there. [00:05:16] Speaker B: So they're a business to business operation. [00:05:18] Speaker C: A business to business operation, and I think the key points about them, and it was interesting to see that there were representatives looking for innovative new ideas at installer show last week. They have got five pillars for their business. So one, we've already mentioned service, advice, innovation, support and solutions. And basically those are going to be the five things that are going to drive the UK and worldwide worktop market going forward. [00:05:48] Speaker B: So are they able to offer a service to tiling retailers or who are they working with? [00:05:55] Speaker C: Largely, no, this is largely working with the trade, with people who are processing these slabs and sheets and adding value to them and making, creating bespoke solutions for kitchens, bathrooms, commercial contracts, that sort of thing. But we're going to see more and more of that because one thing the Internet is very good at is exposing people to these new materials. But it's one thing to see a fantastic three meter by one metre sheet, quite another to process it, to make it the. The perfect worktop for your kitchen or the countertop for your bar. And that market, the growth of that market is going to be driven by people who really understand how to process, polish, finish these materials. [00:06:38] Speaker B: But they will be a competitor to tile manufacturers, presumably? [00:06:44] Speaker C: I don't think so. The tile manufacturers are very good at producing these fantastic porcelain slabs, but. But they can't do it all themselves. I mean, people aren't going to take them straight off the continua plus line and stick them on the wall or put on the work top. They have to be fabricated. The value is really added, by the way. They are the bespoke manufacturing by third party. And this. I think it's going to be a really, really exciting market over the next five years. But it's not. It's one where you have to invest deeply in training in knowledge and in technology. [00:07:16] Speaker B: You mentioned online, and there obviously has been a lot of online growth recently. Has this affected? I mean, you mentioned one big showroom being opened a couple of weeks ago. What's happening as far as retailers and online versus showrooms, or are we seeing both being. Having different purposes? [00:07:39] Speaker C: Right. Well, it's a good question, and you might be forgiven for thinking that online is going to completely rule the roost and it's going to turn traditional retailing on its head and drive it out of business. I don't think in the flooring sector widely, and in the tile sector in particular, that this is going to happen. In fact, I would argue that the best players are the ones who are going to invest heavily in their showrooms, both in opening new showrooms and in creating better and better showrooms going forward. And I think this doesn't matter whether you're dealing with consumers, people who are going to be buying tiles for their own homes or you're talking to the contract market, to architects and specifiers, where you're going to be showing cutting edge surface solutions, there is still a lot to be said for the showroom, because you can compare different materials, you can look at different material combinations, you can look at how colour works with tile. And, yes, I mean, they're fantastic sample offers by the leading online companies, but even those, as we've seen with Tile Mountain, opening another showroom, there is only a certain amount you can go with a single sample, and I'm, you know, I don't believe that you can. There's a limit to how many samples you can send out around the country and make sense of it, so you still need a showroom. And the latest one I want to talk about is America's floor source, who are opening an absolutely massive one in Columbus, Ohio. So it's another american based one. We'll have to use american proportions for this, but this is a huge retail showroom that showcases a complete range of flooring products, from standard displays to room set layouts. What is interesting is that this showroom is really trying to be all things to all men. So it has interactive displays, such as a putting green with artificial turf. It's got a doghouse clad in luxury vinyl tile flooring that anchors a pet friendly area. There's also a special part of the showroom that's aimed at builders called the studio, which is designed to have a sort of residential style and offers private meeting places where contractors can meet with their prospective homeowners and talk through surface solutions, which is great. There's also space in the new headquarters building for meetings and education, because it's. One of the aims is that you have to educate the contractors going forward. So I think it's really interesting, and in sheer size, this is 265,000 sqft. So it's big. [00:10:14] Speaker B: That's big. Is that for the state of Ohio, how big a catchment area? [00:10:21] Speaker C: Yes, it is. And Columbus actually happens to be a very fast growing market for flooring. But America's floor source is part of AFS Group, and this is another one of these companies that's on a rapid growth trajectory. They've been going around 25 years, but in the last two or three, they've been turbocharging their growth. They're innovative. I like some of the things they're doing. They have a mobile floor source vehicles, set of floor source vehicles. You can basically, you can bring the showroom to the customer's house, which I think is really interesting. And in a huge country like America, and in some of the parts of America where you're just never going to build a showroom because there just aren't enough footfall, this is a great idea, but they've also been hoovering up regional companies to create a bigger group. So they've. In May this year they acquired Lewis flooring home. So they're a flooring countertop cabinet company from Chicago. Also earlier this year they bought CN's flooring, who are from an Illinois based hard surface retailer. And last year they bought MK interiors from northern Kentucky, JP flooring from Cincinnati. So they're on a growth thing. And I think they are playing into this kind of narrative that I'm building, that you're going to see more and more, both big national players and international players in this market space because people want a one stop shop for their flooring and solid surfacing applications. And what's interesting is that these brands are choosing to create big bricks and mortar showrooms to really get across what they have to offer. But that. [00:12:02] Speaker B: Is it just floors or are they doing all surfaces as well? It just happened to be the name of the company. [00:12:09] Speaker C: They are. It's. Yes, it's quite a wide definition of flooring. So it is more than just flooring. And I think we're going to see more of that. I suspect that there are going to be certain product categories such as kitchen and bathrooms and tiling, or it's going to be complete flooring portfolios or it might be other architectural surfaces. But interestingly, it's not just the retailers and distributors who are investing in showrooms. We're seeing quite a lot of manufacturer led showroom developers. I mean, I could go on and on about this because this is something I follow a lot, particularly in London in the Clerkenwell area. We've seen there, you know, the big multinational brands like Rack and Cosentino, developing really fantastic stores. And we've watched like the Iris group recreate their, their showroom and add in new surface finishes. We've seen Mirage, Marazzi, Cesar do it, but the, the latest is Florin, who've been in London since 2020. They've now moved to a news showroom in St John's street. And this is, uh, interesting because Florim have always had a whole load of different brands. So casa Dolce, casa casa, move rex. This one is a mono brand space. It's, it's a florin space. So they're, they're not shining a spotlight on the different brands, but more on the overall feel and look of the Florin brand on the different surfaces that they offer. It's much more of a library kind of space and it's also like nearly all of them. It's a place for meetings and dialogue. They're reflecting the fact that a lot of the architects and designers they deal with now have a lot of staff who work from home. So it's good to get them out of the. Find somewhere else to meet. But the other thing that I think is interesting about this is this new store in London is just one of the many that Florim have been building over the last 15 years. I mean, they started with Milan in the 2009, then they went to Moscow in 2014, New York in 2015, Singapore in 2019, and then follow that with Frankfurt, Abu Dhabi, Paris, Rome. And they've been. They've recently completely revamped their Milan show, which is, you know, their real flagship. But they're about to open a similarly stunning new space in Rome. So it's very interesting to see these biggest groups creating these showrooms in the world's design capitals, really nuancing their brand presence, showing a lot of faith in bricks and mortar, and particularly with florim. It's how they are treating the brand. And this sort of mono brand treatment, I think, is very interesting. [00:14:48] Speaker B: Excellent. So I gather this also some news from Australia, right? [00:14:52] Speaker C: Well, I mean, it's kind of news and it's not news, but the ban on engineered stone, which has been rumbling through ever since there was a big class action there, is now in place. So basically, Australia has banned the manufacturer, supply, processing and installation of engineers stone worktops, panels and slabs. [00:15:12] Speaker B: And that's across the board? That's any engineered stone? [00:15:15] Speaker C: It's across the board, yeah. And it's basically, the ban was predicated on the need to prevent silicosis, the lung disease caused by exposure to respirable crystalline silica. It doesn't apply to the control trolled processing of previously installed engineered stone worktops or other products for the purposes of removal, repair or modification. But basically, as a new build material in Australia, it's over. And that's not the end of it. Stronger regulations on all crystalline silica substances will come into effect in Australia from the 1 September. So this is a ball they have picked up and they are really running with, and they are taking a rather more radical approach to it than anywhere else in the world, as I'm aware of. But, you know, this whole focus on silicosis is something that the whole of the industry have to be aware of, because it is not just this engineered stone that has a potential issue. I mean, in Australia, the editor, I mean, as you may know that I write for Tarl today, the australian magazine. The editor, Betty, has now ask me what is the silicon content of the tiles I'm writing about? It's a big issue there, but it's a different. They are taking. Australia is taking a different approach to the rest of the world, it's true to say. [00:16:35] Speaker B: And is the rest of the world just ignoring this issue or are they taking a completely different approach? [00:16:42] Speaker C: We're certainly not ignoring it, but I think the attitude, I mean, it's a difficult one to nuance and I really only understand what's happening in the UK and to an extent in the United States. I hear what's happening in Europe, but it's a nuanced thing. But basically, I think our approach is going to be. The answer is not to ban it, but to process it safely. And so we're talking about, yes, we are fully aware of unfettered dry cutting without personal protection equipment is a no no. So I think in the states and here and probably right across Europe, the focus is going to be on proper training, wet cutting, proper PPE controlled processing environments and stopping the kind of abuses on site that could cause danger. So, as I say, unfettered dry cutting using discs which project a lot of dust into the air. Now, obviously, like in anything, you know, training is only good as, as it's implemented and there's always going to be a risk that, you know, cowboy operators could still cause a health risk. But I think greater awareness there will be some standards coming through and the key to it is going to be training. And that's where the National Tile Contractors Association America or the Workdoc Fabricators Forum in the UK and other bodies are going to be absolutely pivotal here to driving up standards. [00:18:09] Speaker B: I mean, are they going to tackle this as far as the consumer's aware, though, because it often needs to be pulled through as well as pushed, doesn't it? [00:18:15] Speaker C: Right. Yes, well, that, I think remains to be to be seen, but I think inevitably there will be issues in that you're going to see. No doubt there's going to be lobbying from it, from consumer groups. But first and foremost, I think what's going to happen is we're going to see more and more training, awareness, and the best of contractors will highlight it to their customers because they've obviously, as a commercial benefit, if you've gone through all the training, you've got all the equipment, you're going to want to shout about it. And I think that's what's going to happen first. So it's interesting that the National Tile Contractors association in the states is on a massive tour across 17 states this July, and it's delivering an extensive range of standards based educational workshops and training initiatives to the industry. And I think this is the way it's going to go. The interesting thing is that these sessions are open to installers, contractors, but also to sales personnel who are selling these things to consumers, and also to architects and interior designers who are specifying them. And so they are trying to make this a closed loop education system. But one thing you will see, and if you look up any of this online, you're going to come across a four letter acronym that probably doesn't really resonate with a lot of tar cast listeners, which is GPTP. And there is no explanation. And that is because now in the states, they don't talk about slabs and porcelain panels, it's gauged porcelain tile panels. And so that's what that four letter acronym means. Interestingly, they obviously think that it's now so well established that we'll all recognize it. I knew it was, I knew the GP bit, but I just wanted to make that clear to everyone. That's what we're talking about. [00:19:58] Speaker B: Okay, well, we'll just have to keep following that story, I think, and certainly see what Europe and the UK make of it and how they're going to take their plans forward. We're not particularly good in the UK at training tilers, as we know. So whether we're going to be any. [00:20:13] Speaker C: Better at worktop fabricators, I'm actually relatively optimistic about this, because the fabricators that I have met, and admittedly I haven't met hundreds of them, because there aren't hundreds of them, but they are all, I have found, quite generous. They believe in the value of training, they are determined to keep quality standards high, and they are willing to invest their own time and money in driving quality standards. So if it's being led by the fabricators, it's got every chance that this is succeeding. What we now need is to make sure that consumers and the people in between. So retailers and distributors are also clear about the issues. And it's just nothing, a price thing, because when it, when the only focus is on price, all these other things tend to go out of the window. If we can stop there being just a focus on price and really look at both the quality of the completed work surfaces and the health and safety issues, we've got a fighting chance of developing this market into what it could possibly be. [00:21:15] Speaker B: Back to the US. Are there some more statistics on housing in the states that have been recently? [00:21:22] Speaker C: There have. I mean, I'm not going to go into vast amount of detail. They'll be posting stuff up on diary of a towel addict in the next few days. The american media outlet floor covering news is particularly good at chewing through all these reports and coming up with floor covering specific statistics. And I generally find that they are more credible than a lot of the individual market research companies because they, they are able to contextualize it and they take a lot of different sources and they find the inconsistencies. But basically 2023 was not a great year in the states. The whole flooring sector was about 8% down to. It's still huge. I mean we're talking $3.2 billion as against $3.5 billion. But it's a rare blip in what has been a fairly remorseless growth trend in the states. And I think in time we will see that it was just a blip rather than a new downward trend. Like anywhere else, elections are terrible for confidence for contractors and so house builders and other developers tend to sit on their hands and don't exploit their land banks while they're waiting to see what's going to happen. And obviously in America that's, you know, we're still six months away from the next election, but the. Everybody seems to think that it's going to rebound once the elections out of the way. But it was even in volume terms, it's not just the price. There was a 6% decline in volume to 2.3 billion. So it hasn't been a great year. [00:22:58] Speaker B: Right. We'll put a reference to where all these statistics have been sourced from, both on the footnotes to the podcast and you'll presumably put it in your news report. [00:23:09] Speaker C: I will do. I'll be posting it up. Dara vital edit going forward. [00:23:12] Speaker B: And finally, UK election happened this week. Change at the top. [00:23:18] Speaker C: Yeah, I mean thankfully it's all over. And it does appear that Keir Starmer and the new Labour team have hit the ground running, which is extremely good news because one thing that the construction industry, the tile industry needs is some clarity. The idea that there is a plan that everyone knows what they're going to do, they know where and how much the investment is going, where the investment's going and how much it's gonna be. And I would say that the industry has been reacted very positively overall, which is also good news. So the Federation of Master Builders have been very positive. Brian Berry, the chief executive, has highlighted the pledge to build 1.5 million new houses and to upgrade 5 million existing homes. Like everybody else, he sees these as ambitious targets. They're very much planning to hold labor to their promises, but there does seem to be a general consensus that they actually might all come through on it. There are still some huge issues to be overcome, not least a planning system that is creaking and has a massive skill shortage. But I think what I've been reading various different reports from different trade bodies and professional organizations, the things that they are picking up on are that there needs to be a big push to build on brownfield land, that there needs to be a lot of redevelopment of the one to 2 million substandard properties in the UK, and that somebody somewhere has finally got to come work out how we're going to build new houses. And one of the answers appears to be much more prefabrication using factory housing methods and less kind of bodging it on site. [00:25:01] Speaker B: Okay, well, again, another one to watch. I think as time goes on, I'm sure we'll be reporting lots more on the housing market in the UK. [00:25:08] Speaker C: I think there will be. I mean, one of the issues is going to be how we can balance these ambitious targets to build more and also meet our obligations to cut carbon emissions. And sometimes they appear to be slightly in opposition to one another. But all in all, yeah, I think there's one thing we can hope for is that there is a drive. We know what's going to happen for the next five years and that's going to help people invest. [00:25:36] Speaker B: Excellent. Well, we love to end on a good note, so I think we'll call a day there, though. Thanks, Jo. [00:25:41] Speaker C: See you next week. [00:25:43] Speaker A: You've been listening to tilecast, produced by Diary of a tile addict. To ensure you don't miss any future episodes. Don't forget to follow us. You can also find show notes and receive updates on newsfeeds, articles, podcasts and videos direct to your inbox by subscribing to the diaryofataledict.com website. Get the Inside track a diary of a tile addict.