Some called it the perfect storm; some the year of dynamic forces colliding; and some simply used terminology not fit to print. But no matter how one defined it, 2008 was not a pretty picture; more like how Rocky Balboa looked after his first go-around with Apollo Creed.
The year, which many hoped would halt the slide of the previous 12 to 14 months, will go down as one of, if not the most difficult the industry has ever experienced. And if once again not for the commercial sector faring better than average, the year would have been an utter catastrophe.
In total, sales and units of flooring both declined, not just for a second straight year or by double digits but to lows not seen in at least a decade. Sales of all floor coverings dropped 11.6% to $19.743 billion, the first time this figure has dipped below $20 billion since the start of the millennium. This is on top of a 9.6% fall in 2007. And like the previous year, sales would have been much worse if not for numerous price increases and surcharges to try and offset rising energy and raw materials costs.
Units consumed fared even worse, with the collective total falling to 19.67 billion square feet or 13.4% as Americans tightened their spending budgets and put off large projects such as remodeling. Like sales, this drop follows a 13.8% fall a year earlier.
What saved the industry from falling off the cliff altogether was the specified contract market, which was purring along for the first two-thirds of the year, growing in the mid to high single digits compared to 2007. It gave it all back, and possibly some more, in the final third when the financial and automobile markets began to collapse (see story on page 5 for full details on how the commercial segment fared in 2008).
While the federal government finally declared the U.S. economy entered into recession in December 2007, most flooring executives say the industry really began its downturn in the fall of 2006, with some going back a few months more, pointing to when the new housing market first began showing signs of weakening.
Regardless of when things started to head south, in 2008 the industry continued to buckle under the weight of an eroding housing market, price pressures at both ends-end users pushing for lowers costs while raw materials and cost of doing business expenses skyrocketed-falling consumer confidence, and a weakening economy. Throw in the unprecedented financial disaster that hit in September and hurtled the world into recession, and all hopes the flooring industry would be able to pull out of the doldrums died with most people's retirement accounts.
All categories down
No flooring category was immune to the onslaught of negatives but those that focused more on residential and builder markets and the luxury segment were hit the hardest. (Editor's note: See pages 12 and 13 for individual category sales and volume numbers for the last five years.)
The hardwood category took the hardest punch-being the most tied to the builder segment-with sales falling 24.8% over 2007 and units dropping 21.6%. Hit hardest was exotic woods both because of their inherent higher prices and new laws coming into existence pertaining to the harvesting of logs.
Not all was lost in the wood arena, as some areas of the industry showed positive movement. For example, bamboo. Increasing in popularity for nearly a decade, the product continued its upward mobility in 2008 and, for the first time, is shown on its own in terms of types of species sold (see graph on page 15). Cork also showed positive gains, though not enough to stand on its own.
The popularity of these two wood types has more to do with the environmental movement than anything else as both are at top when it comes to eco-friendly traits. And, while sales of exotic species slowed, American consumers still proclaimed their desire to make their homes unique as sales of 'domestic exotic" species other than the traditional oaks and maples gained market share.
One other bright spot in wood was the growth of mechanical locking systems being incorporated into the product. First introduced for laminate products about 10 years ago, these g.....
Economy finally affects commercial market
Third quarter collapse causes "relatively flat" 2008
After escaping what had made life in the residential sector so rocky for the first two-thirds of 2008, the commercial market was finally hit by the faltering economy, making business for the year what can be best described as flat.
The most affected segments, carpet wise, were corporate and retail followed by hospitality, while government, healthcare and education fared better overall. As a matter of fact, many view the government sector as not only having done well in 2008, but as one of the few commercial segments doing well so far in 2009.  With broadloom accounting for more than two-thirds of all flooring in the commercial market, the corporate arena saw modular tile once again taking market share from wall-to-wall. Carpet tile, according to several mills, was actually up while wall-to-wall sales suffered.
In 2008, carpet sales have been estimated to be approximately $3.5 billion in specified commercial, with another $900 million in main street sales.
In hard surface, ceramic tile and resilient, buoyed by technological advancements in recent years, remained the segment's strongest sellers with hardwood and laminate lagging behind. While ceramic tile may be down between 15% to 20% in 2008 in both dollars and square feet, it continues to do well when comparing it to sales of laminate and hardwood.
In laminate, of the estimated 20% that is commercial, approximately 5% to 7% of that is main street business. Retail continues to be a strong segment for commercial laminate, followed by healthcare and hospitality.
In hardwood flooring, commercial sales in both dollars and square feet for 2008 came in at $405 million and 171 million, respectively. The bulk of commercial hardwood sales were for school gymnasiums and retail stores.
Also in 2008, 54% of commercial sales of hardwood flooring were solid, while 46% were engineered products. Engineered wood flooring is growing in commercial, albeit slowly, as it has some distinct advantages including the ability to be installed with gl.....
Scoring Flooring methodology
The statistics presented in this study were derived from an extensive research project undertaken by Floor Covering News.
Figures were gathered from a variety of sources to develop the most plausible and credible results. Sources included, but were not limited to, published governmental records (both U.S. and foreign sources); filings from public companies; extensive and confidential interviews with top officials from all levels of the supply chain-manufacturer, distributor, retailer, installer, importer, agent, industry organization, buying group, etc.-historical trends and data; reports published by associations along with private conversations with directors, and previously published reports and stories in FCNews.
Some of the data came from sources such as the U.S. Department of Commerce, Federal Housing Finance Board, U.S. Bureau of Economic Analysis and other federal agencies. Foreign agencies as well as respected international organizations were consulted, including China Wood International, th.....
Despite difficult economic environment, carpet industry recovery efforts continue to progress
While carpet recycling may have 'decreased slightly" in 2008 from 2007, according to Frank Hurd, chairman of the Carpet America Recovery Effort (CARE), the industry 'should be proud of what [it] accomplished. In spite of the economic environment, CARE members continued to make progress towards our mission and goals."
Carpet recycling has strong, positive economic impacts, he explained. "For the first time in our annual survey, employment data was collected to understand regional employment impacts. In 2008 alone, our collectors reported 1,100 people employed directly in the business, creating an additional 2,200 indirect jobs in the local communities. This level of employment contributes significant dollars for local and state economies where these jobs are located.
"Equally as important," Hurd noted, 'the amount of carpet diverted from the landfill in 2008 means we have eliminated over 238,000 tons of greenhouse emissions from the atmosphere, which is equivalent to over 2 million barrels of oil not being burned, and 728,000 pine trees storing carbon for one year. Our members are proud of this accomplishment and the reduction in [the industry's] overall environmental footprint."
In 2008, the reported recycling and diversion of post-consumer carpet decreased slightly from that reported the year before, Hurd noted. A total of 292.4 million pounds of post-consumer carpet was diverted from landfills, in 2008, with 243.4 million pounds being recycled. Compared to 2007, this represents a 0.8% decrease in diversion and an 11.5% decrease in recycling. Although the level of diversion of carpet dropped versus 2007, the amount of decrease was better than expected, relative to business results reported by other industries in 2008, and given the tough economic environment faced by U.S. businesses. To put this in perspective, businesses suffered unprecedented downturns-the DJIA fell 31% over the course of 2008.
In speaking of CARE's commitments, Hurd said, "One of our key goals is to strengthen our network of entrepreneurs." In 2008, the CARE network of collectors increased to 58 from 56 in 2007.
The economic downturn of 2008 significantly impacted CARE members both directly and indirectly, he stated. "Our members were affected by the decrease in demand for post-consumer carpet nationally and internationally. Lower pricing for polymers and post-consumer carpet significantly impacted the profitability of CARE entrepreneurs. The stock market, housing market and automotive market were especially hard hit in 2008."
This downturn made consumers less likely to purchase both durable and discretionary items, items that typically use post-consumer carpet as a source of recycled content. "Our expectations are for continuing market challenges in 2009," Hurd said, "without significant improvements until sometime in 2010."
Survey results
There are several unique attributes of the data collected this year, noted Georgina Sikorski, CARE's new executive director. For example, more detailed data was collected regarding beneficial reuse of post-consumer carpet, providing a clearer picture of this aspect of diversion.
As it did last year, the survey gathered information on the type of carpet face fiber collected or handled by recyclers. This data shows a considerable diversity in the t.....
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