Article Number: 4120
Congoleum hunkers down while preparing for recovery
Congoleum for years has been one of the major players in the resilient flooring category. It has been at the forefront of innovation, in some ways inventing or re- inventing categories with products like DuraStone and DuraCeramic.
And of all the $100-millionplus companies selling resilient sheet and tile, Congoleum is the only one that sells the product exclusively. FCNews associate publisher and editorial director Steven Feldman recently sat down with president and CEO Roger Marcus to discuss the state of affairs.
So how are things? You guys seem to be flying under the radar lately.
Things are exactly as everyone says they are: extremely quiet. The fourth quarter of 2008 was probably one of the worst quarters I’ve seen since the company has been around.
Exactly how bad was 2008 for Congoleum?
Things started to weaken at the end of 2007. And we had forecasted the weakness we saw at the end of ’07 to be the level of expectation in ’08. The first quarter of ’08 was consistent with the downturn at the end of ’07. But starting in the second quarter, we saw things were going to be worse than the ’07 downturn levels. And in the fourth quarter it just fell off the cliff. So we had three downturns: Quarter four of ’07, the second and third quarters of 2008 and the fourth quarter of ’08.
Tell me some of the things you’ve done to combat the downturn?
It’s a twofold answer. The first two downturns were sort of like child’s play compared to the fourth quarter. In downturns one and two, we basically did the standard blocking and tackling: specials, promotions and reductions in certain levels of spending. It was in downturn three that we had to pull the rabbits out of the hat.
Specifically, we made the decision that we were going to lead with our strength and put our emphasis on our DuraCeramic line. Even though there are duplications in the market, none match, in my opinion, the color, design and performance features of DuraCeramic.
No. 2 was the decision to bring out our 2009 introduction package earlier than we ever have before. Some companies introduce products in November to pre- mpt Surfaces. We brought out our introductions in September to take advantage of the fall selling season. I believe we would have done worse in the fourth quarter had we not done so.
But probably the most powerful thing we’ve done is roll out AirStep Plus. The proper nomenclature for the fiberglass category is flexible floors. And what the consumer likes is not fiberglass; what she knows is she is getting something thicker and feels very flexible in the hand. And, as Congoleum for many years has prided itself on not being a follower, we think we will have the lead product for the whole flexible flooring market in AirStep Plus. It has all the features and benefits of the flexible flooring category but won’t buckle and doesn’t have the limitations that are not ballyhooed relative to the other fiberglass floors.
How are you budgeting for 2009?
We are taking the level that we were at for the fourth quarter of ’08 and assuming on an annualized basis that’s what ’09 will look like. As a result of that, we have created a core structure that allows us to break even assuming things get no better than we are currently experiencing. I’d rather be conservative. We really have battened down the hatches believing that the storm we are in will continue for a period of time.
Are you cutting back or stepping up product intros this year?
We will come out with a program on the same scale and again in September, so we can capture some of the fall business. Our emphasis going forward will be a greater focus on new product SKUs than existing product SKUs.
Can you give us an update on the litigation?
We have moved forward. We have pared down the issues to a much more manageable level. And with a little luck, based on what we know today, our hope is that we could see the end of the road in the latter part of the second quarter. The biggest issue facing us six months ago has been resolved.
How is it impacting business?
Honestly, it hasn’t been a distraction. It has not affected our service; it has not hurt the spirit of our employees, distributors or suppliers; it has not affected our rate of new product intros.
It really has not affected normal business in any way. When Armstrong was in the same situation, we didn’t reap any benefits, so I don’t think it affects us or anyone else.
Surfaces. Miss it? Or do you get enough mileage out of the Mohawk regionals?
From an exhibiting standpoint, I really don’t believe it has made a difference. I believe our distributors do a good job of getting our new products to the retailers. And, based on the system of coming out with our 2009 introductions in early fall ’08, Surfaces becomes secondary. I do like the idea of seeing customers, and I like the idea of a show. But I think the world has changed in having to introduce all your new wares at Surfaces, at least for us. It’s not as much the mileage of the Mohawk regionals as all our distributors pulling on the retail salespeople.
These days, is it a plus or minus being a resilient-only residential manufacturer?
It has its positives, vis-à-vis other product lines. The LVT category is becoming more and more popular. If you mentioned vinyl tiles years ago you would have gotten your head shot off. And I think DuraCeramic has been the leader.
Fortunately, we won’t have to go through the downturn in commercial that everyone else will have to go through. We’ve taken our pill and swallowed it. Many of our competitors have taken only half the pill with the other half still to come. We’ve put ourselves in a position to survive in a 100-degree heat wave. They’ve only been in an 80-degree heat wave. I think we will be in an enviable and unique position when residential breaks. And I think the benefit will go to the resilient category more so than anyplace else.
What’s the next great thing in resilient?
Glueless tile.
Anything else you’d like to say?
The bottom line is we are in an enviable position. We are sitting as one of the companies that can have the most benefit by the beginning of an economic turnaround. Being affiliated with a product that can take the greatest thrust of that turnaround and not be burdened with a significant commercial presence that can abate the residential turnaround when it occurs. As long as we can keep our nose to the grindstone and keep blocking and tackling, we’ll be in an enviable position when this thing goes away.
And of all the $100-millionplus companies selling resilient sheet and tile, Congoleum is the only one that sells the product exclusively. FCNews associate publisher and editorial director Steven Feldman recently sat down with president and CEO Roger Marcus to discuss the state of affairs.
So how are things? You guys seem to be flying under the radar lately.
Things are exactly as everyone says they are: extremely quiet. The fourth quarter of 2008 was probably one of the worst quarters I’ve seen since the company has been around.
Exactly how bad was 2008 for Congoleum?
Things started to weaken at the end of 2007. And we had forecasted the weakness we saw at the end of ’07 to be the level of expectation in ’08. The first quarter of ’08 was consistent with the downturn at the end of ’07. But starting in the second quarter, we saw things were going to be worse than the ’07 downturn levels. And in the fourth quarter it just fell off the cliff. So we had three downturns: Quarter four of ’07, the second and third quarters of 2008 and the fourth quarter of ’08.
Tell me some of the things you’ve done to combat the downturn?
It’s a twofold answer. The first two downturns were sort of like child’s play compared to the fourth quarter. In downturns one and two, we basically did the standard blocking and tackling: specials, promotions and reductions in certain levels of spending. It was in downturn three that we had to pull the rabbits out of the hat.
Specifically, we made the decision that we were going to lead with our strength and put our emphasis on our DuraCeramic line. Even though there are duplications in the market, none match, in my opinion, the color, design and performance features of DuraCeramic.
No. 2 was the decision to bring out our 2009 introduction package earlier than we ever have before. Some companies introduce products in November to pre- mpt Surfaces. We brought out our introductions in September to take advantage of the fall selling season. I believe we would have done worse in the fourth quarter had we not done so.
But probably the most powerful thing we’ve done is roll out AirStep Plus. The proper nomenclature for the fiberglass category is flexible floors. And what the consumer likes is not fiberglass; what she knows is she is getting something thicker and feels very flexible in the hand. And, as Congoleum for many years has prided itself on not being a follower, we think we will have the lead product for the whole flexible flooring market in AirStep Plus. It has all the features and benefits of the flexible flooring category but won’t buckle and doesn’t have the limitations that are not ballyhooed relative to the other fiberglass floors.
How are you budgeting for 2009?
We are taking the level that we were at for the fourth quarter of ’08 and assuming on an annualized basis that’s what ’09 will look like. As a result of that, we have created a core structure that allows us to break even assuming things get no better than we are currently experiencing. I’d rather be conservative. We really have battened down the hatches believing that the storm we are in will continue for a period of time.
Are you cutting back or stepping up product intros this year?
We will come out with a program on the same scale and again in September, so we can capture some of the fall business. Our emphasis going forward will be a greater focus on new product SKUs than existing product SKUs.
Can you give us an update on the litigation?
We have moved forward. We have pared down the issues to a much more manageable level. And with a little luck, based on what we know today, our hope is that we could see the end of the road in the latter part of the second quarter. The biggest issue facing us six months ago has been resolved.
How is it impacting business?
Honestly, it hasn’t been a distraction. It has not affected our service; it has not hurt the spirit of our employees, distributors or suppliers; it has not affected our rate of new product intros.
It really has not affected normal business in any way. When Armstrong was in the same situation, we didn’t reap any benefits, so I don’t think it affects us or anyone else.
Surfaces. Miss it? Or do you get enough mileage out of the Mohawk regionals?
From an exhibiting standpoint, I really don’t believe it has made a difference. I believe our distributors do a good job of getting our new products to the retailers. And, based on the system of coming out with our 2009 introductions in early fall ’08, Surfaces becomes secondary. I do like the idea of seeing customers, and I like the idea of a show. But I think the world has changed in having to introduce all your new wares at Surfaces, at least for us. It’s not as much the mileage of the Mohawk regionals as all our distributors pulling on the retail salespeople.
These days, is it a plus or minus being a resilient-only residential manufacturer?
It has its positives, vis-à-vis other product lines. The LVT category is becoming more and more popular. If you mentioned vinyl tiles years ago you would have gotten your head shot off. And I think DuraCeramic has been the leader.
Fortunately, we won’t have to go through the downturn in commercial that everyone else will have to go through. We’ve taken our pill and swallowed it. Many of our competitors have taken only half the pill with the other half still to come. We’ve put ourselves in a position to survive in a 100-degree heat wave. They’ve only been in an 80-degree heat wave. I think we will be in an enviable and unique position when residential breaks. And I think the benefit will go to the resilient category more so than anyplace else.
What’s the next great thing in resilient?
Glueless tile.
Anything else you’d like to say?
The bottom line is we are in an enviable position. We are sitting as one of the companies that can have the most benefit by the beginning of an economic turnaround. Being affiliated with a product that can take the greatest thrust of that turnaround and not be burdened with a significant commercial presence that can abate the residential turnaround when it occurs. As long as we can keep our nose to the grindstone and keep blocking and tackling, we’ll be in an enviable position when this thing goes away.
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