Foreign Ceramic and Porcelain Tile Manufacturers Make the Switch to U.S. Soil
As the calendar year flips to 2007, it’s full steam ahead for the ceramic tile industry. As technology and innovation spark new products and new ways to use them with striking regularity, the ceramic tile market continues to flourish and prosper, with sales representing nearly 13 percent of the lucrative $24.5 billion floor covering industry.
But as with any industry, especially one that relies heavily on a global economy, there are challenges ahead. Here in the United States, those challenges are being met head-on with new ideas and new ways of thinking. Currently, 81 percent (*unit volume) of all ceramic tile is imported to the United States from world markets, namely Italy, Spain and Brazil, and it’s that very statistic that is at the heart of the recent changes and trends in the ceramic tile industry. Several economic factors, namely a sharp increase in the euro that has weakened the dollar, has led foreign ceramic tile manufacturers to look closely at building or purchasing new facilities on U.S. soil. Most who have looked clearly saw the advantages, and most recently Italy’s Panaria Group purchased Florida Tile and began building a new glazed porcelain facility in Kentucky. Florida Tile joins Crossville, StonePeak, and many others, who have all caught up with American Marazzi in recent years, which began manufacturing ceramic tile in the United States in 1981.
Of course, there is no oil in a ceramic tile, but the industry relies heavily on oil and its by-products to power the machinery and fuel the trucks and ships that bring over 70 percent of Italy’s ceramic tile products to world markets. These economic factors began to take hold in 2004, when sharp increases in the cost of raw materials forced manufacturers to raise their prices, further pinching margin for U.S. importers, distributors, retailers and ceramic tile dealers.
“When the Marazzi family decided to begin manufacturing ceramic tile in the United States people thought they were crazy,” said Hector Narveaz, vp of U.S. sales for American Marazzi. “But here we are, 25 years later and we’re still here. We’re still going strong. We’re still adding capacity. Right now, for a commercial tile distributor, doing business with a euro-based supplier is 30 percent more expensive right off the bat. The currency exchange has a huge impact, which is compounded by lead times, specialty pallets, ocean and freight rates. The bottom line is if a firm goes domestic that cash can be used for other things. It can be used to improve the business.”
Through all changes in the world economy, one thing has never changed: The United States remains the most lucrative consumer market in the world. With Italy and Spain’s ceramic tile consumption much closer to saturation than the expansive U.S. market, and the remarkable advancements in technology that has led to a highly specialized and diverse product matrix, the U.S. market has more room for growth by far than any country in the world.
“The U.S. market is the largest in world,” said Buck Burwell, CEO of Florida Tile, “everyone wants a share. Logistically, importing tile from Italy is a huge issue facing the industry. The expense-to-weight ratio is critical. A tile firm can spend 10 percent of costs on just freight alone. Given all the factors, and considering a balanced currency, it cost 35 percent more to bring products over from Italy than it does to manufacture them right here in the U.S.
“There are other distinct advantages. The U.S. market, because it’s so big geographically, places a great demand on distributors. That’s one of the most important factors. Panaria didn’t just purchase Florida Tile; it purchased Florida Tile’s distribution capabilities, too. If you can’t get product to the jobsite efficiently then you have a problem. The plants that are constructed here are state-of-the-art, and we are benefiting from the transfer of technology and expertise. But these products are being manufactured right here in the good ole’ USA. That’s a win-win combination.”
“American distributors are quickly recognizing that U.S. based production is a very important part of their product mix for the future and are quickly adding in new, innovative lines to balance out their portfolios,” says Paul Young, general manager of Mediterranea. “The technological capabilities of the U.S. factories have improved so dramatically over the past two years that it is now possible for us to make just about any product here that we were only able to make in progressive countries like Italy in the past. If you are a distributor and can carry much less inventory because it days from your reach, can obtain more turns per year on your inventory dollars, can obtain an innovative, high style at a price that is competitive with landed costs from Europe - you would remiss in not taking a serious look at this opportunity and trend.”