A global shift in quartz surfaces

Details
Dates:
5 February, 2019
Big changes are coming in the supply chain of the popular hard-surfaces material.
A long-time notable in the market sees plenty of positives for fabricators and distributors.


thanks to Paul "Max" Le Pera and StoneMag.com
It should come as no surprise by now that the Trump administration maintains a primary focus on enforcing U.S. trade law. More than 137 countervailing and anti-dumping duty investigations have been launched since the beginning of the new administration.

Last fall, Stone Update published a comprehensive article summarizing the preliminary affirmative ruling by the Department of Commerce (DOC) on Chinese quartz manufactures dumping their product into the U.S. market.
The surfacing industry now waits until April 2019 when the DOC makes its final determination which will allow the International Trade Commission to issue its own final ruling. Everything from the entire investigation being dismissed to the preliminary ruling staying as the final ruling is still theoretically possible.

Whatever happens, this could be one of the best things to happen to quartz surfaces in the United States.
Let me explain.
I have had the good fortune to be woven into many layers of the building-materials industry in the past 25 years. From fabrication to distribution to product manufacturing, I’ve witnessed at least two distinct economic downturns and several product launches, of which quartz was one.

Back in the late 1990s, the marketplace effectively acknowledged only two quartz brands, both being nationally launched around the same time: Silestone® by Cosentino and Zodiaq® (now called, Corian® Quartz) by DuPont. I was fortunate to have been on the strategic-business development team (in both product design and marketing) to launch Zodiaq in the New York metropolitan area, and hence was able to learn the quartz-surfacing business from the ground floor up.

The International Surface Fabricators Association (ISFA), of which I’m vice president and member of the board, is addressing this paradigm shift in the quartz industry. As expected, there is rampant and widespread concern over the future of countless fabrication and distribution businesses, with them follow myriad employees tied into the success and growth of this product line.
What I want to share with you here is a vision of hope, reformation and possibility. I want to encourage focusing on a mindset of strategic re-positioning. As with most paradigm shifts, there comes change and, yes, some of it can be quite formidable. To paraphrase profound saying, “Life and business are 10% what happens to us and 90% how we react to it.”
" I want to encourage focusing on a mindset
of strategic repositioning.
"
It seems that the global supply of quartz-manufacturing capacity may not be sufficient to fill the potential void coming due to Chinese quartz manufacturers’ inability to survive the financial impact. That said, there are approximately 50+ other countries with Breton technology manufacturing quartz surfacing. Many factories are stepping up, putting on second and third shifts to actively try to keep the supply chain filled.

The vast majority of fabricators of quartz surfacing also fabricate natural stone, and a growing number are expanding into sintered surface fabrication. The “conversion base,” (i.e., this is a term I use to describe overall fabrication capacity) will have both surfacing and business options to consider.

It’s also time to evaluate key points of brands offering warranties:
  1. How long is the warranty, and is it transferrable?
  2. Will the warranty compensate you for installation and associated services or simply offer you a slab for replacement?
  3. What is the stain-resistance of the material? Not all quartz is created equal, and you should be aware of performance
  4. Is the warranty system built with integrity and reliability and is it relatively simple to make a claim, or does the manufacturer make it complicated and or cumbersome?
Dealing with Change

Embedded in the fabric of capitalism is change. Capitalism is eerily congruous with Darwin’s survival of the fittest. There’s a lot we can learn from this in business, and sometimes it’s a wake-up call to evaluate the whole of your business strategy.

Unilaterally resolving the quartz change is one way, but I want to suggest taking this opportunity to use a multi-layer analysis and evaluate more than just what new quartz brand you’ll champion, or further depending on natural stone to fill the potential void.

Streamlining operations, honing leadership skills for your team leaders and re-assessing your “go-to market” strategy is a way to create a new face for your company. It provides nutrients for your marketing approach to gain new exposure and offers a significant way to re-touch all of your customers with meaning.
The quartz product has an incredible value proposition, as acknowledged by Consumer Reports as the leading surfacing alternative back in 2006 and every year since. The product has a significant value proposition to the consumer … and for everyone in the transactional chain, including fabricators and distributors. This fact alone will maintain quartz’s sustainability as a viable offering.

Some companies where the primary revenue streams aren’t from quartz surfacing may suggest that it’s a commodity and fading away in the market. I suggest remaining weary of such claims. Paper clips are a commodity, but countless people like, use and need paper clips.

Quartz surfacing is inherently valuable to the consumer and, despite supply and demand correction for a maturing category, the aesthetic landscape of quartz remains largely unexplored. The virtual infinite color, pattern and texture matrix that exists will be the unwavering foundation to the quartz category.
The anti-dumping paradigm shift may in fact, strengthen the quartz category and force greater innovation to the line. By doing so, fabricators and distributors will always have a product, a value and most importantly, a “solution” to sell keeping the quartz industry strong, thriving and ever-growing.

For example, in going forward:
  • Who will champion quartz for the exterior?
  • Will quartz ever become truly translucent like an onyx or solid surface?
  • Who will finally create a full 1cm offering to champion vertical spaces such as bath and shower walls, wainscoting panel systems, partitions, etc.?
  • And, who will champion aesthetic and textural innovation leadership?
These are all latent areas of growth and value that have been denied widespread attention in lieu of fending off the “race to the bottom.” With such pressure somewhat alleviated, large manufacturers should begin re-investment in capacity as well as R&D on product innovation affording everyone in the enterprise chain opportunities to provide value and enhance the appeal to consumers.

The next several months will bear witness to many changes; some warranted, some unsolicited, but all nonetheless required. Be careful to not overreact. If you are a fabricator, talk to your manufacturers and distributors and press them for positive change and collectively challenge the global supply for strong, solid product, with innovation and the strongest warranty.

Coupled with operational efficiencies, this change in the quartz-surface market can be the impetus to revitalize your business and set it on a new – and long – path of growth.
If you are a fabricator:
  • Expand into sintered-surface fabrication and/or focus a greater percentage of resources on the growth of this line.
  • Expand into new routes to market by expanding into new construction, residential, countertop replacement, commercial and other areas. This risk-mitigation strategy can offer incremental income, as well as spreading the risk of loss and diversifying your company’s overall weighted average margin portfolio, which may ultimately be your saving grace for whenever the next economic recession hits.
  • Invest into your own differentiation more and more; what do you do better and offer that is different can leverage strategic alliances, co-branding and more. These may not supplant volume loss, but can absolutely augment sales and margin. This is more an optimization strategy, but always relevant.
  • Focus on efficiencies such as implementing synchronous-flow processes; concentrate on operational methodologies to alleviate production process constraints and increase cash flow and profits.
  • Consider strategic alliances with fabricators of solid surface, concrete and even laminate. If you do not want to expand into fabricating these materials, then create a synergy with strategic alliances by offering a wider breadth of options and the reverse should be part of the synergy.
  • Do not shy from aligning further or deeper with the North American brands. Your business is important to them and successful businesses needs partners who are forward thinking and present options and opportunities. It may very well be possible to “get what you want by giving them what they want.”
If you are a distributor:
  • There are many countries that can and would love to supply the United States with quartz surfaces. You hold the keys – your business volume -- and the sooner you can reach out to alternative sources, the better. (Contact Breton directly for its world map.)
  • Consider aesthetic development. Sacrificing volume for greater margin can be a powerful response to the anti-dumping dynamic unfolding. In the world of quartz, aesthetic is perhaps the most-brilliant frontier of margin capture, so doing more with less can be a good thing.
  • Aligning with brands that offer you greatest protection and value proposition, i.e. a warranty. These are absolutely “bankable” and are a competitive advantage.

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