Floor Covering Weekly June 9, 2014 : Page 1
Vol. 63 No. 11 A Hearst Business Publication June 9, 2014 $4 F LOOR C OVERING W EEKLY The Industry’s Business News & Information Resource Pages 4-12 Kahny drives Unilin’s hard surface strategy By Santiago Montero [Dallas] As president of Unilin North America, he is responsible for the manufacture of Pergo, Quick-Step, Q-Wood, Columbia, Century and the Mohawk brands of laminate, luxury vinyl tile (LVT) and hardwood along with a variety of end-use markets the company sells to. And yet, chances are you don’t know Matthew Kahny. In fact, chances are that you’re also struggling to understand the complex and seemingly overlapping brand identities and go-to-market strategies he presides over. In this first ever one-on-one interview, Kahny talks about his corporate mandate, his channel strategy and his powerful brand portfolio. Here at home, Kahny oversees all the com-pany’s wood, laminate and vinyl operations in North America where he is responsible for manufacturing, raw materials, marketing, HARDWOOD ’ TO BEAT PROTECTED WITH ARMORMAX ™ AND SCOTCHGARD ™ PROTECTOR ADVANCED REPEL TECHNOLOGY UP TO 5 X MORE WEAR RESISTANT 50-YEAR FINISH WARRANTY FABULOUS NEW STYLES AND COLORS THAT S TOUGH Matthew Kahny sales, in short, everything related to those products as well as sales and marketing for Mohawk hard surfaces. It is this “multi-Continued on page 18 Investment, innovation transform Mohawk flooring By Amy Joyce Rush [Dallas] Mohawk has completely trans-formed its hard surface business by using a template that has proven successful in the soft surface arena. By investing in acquisitions, technology and innovation, the company has likely doubled its laminate share in the U.S.; its ceramic tile business is reported to be at 35 percent to 45 percent; and, hardwood has grown more than the rate of the industry over the past three years, according to the company. RESILIENT AL W A YS LEAD CONTACT YOUR LOCAL MOHAWK REPRESENTATIVE TO TAKE ADVANTAGE OF ALL MOHAWK’S UNBEATABLE HARDWOODS. CARPET | HARDWOOD | LAMINA TE | TILE | AREA RUGS | MOHAWKFLOORING.COM/ARMORMAX | 877-ASK-MOHAWK “Mohawk has gone from a great U.S. carpet producer to a great worldwide flooring com-pany. It’s in a completely different place. I think about laminate — we have a great position, strong brands in all channels. Although we definitely held a leadership position in the lami-nate industry for years, we have now taken that presence to a whole new level,” said Matthew Kahny, president, Unilin North America. The strategy that guided the company through the recent acquisitions of Pergo and Continued on page 20 Periodical AmorMax with Scotchgard delivers one-two punch 19 For breaking news updated each business day, visit us online at www.fcw1.com Durability, cleanability
Kahny drives Unilin’s hard surface strategy
As president of Unilin North America, he is responsible for the manufacture of Pergo, Quick-Step, Q-Wood, Columbia, Century and the Mohawk brands of laminate, luxury vinyl tile (LVT) and hardwood along with a variety of end-use markets the company sells to. And yet, chances are you don’t know Matthew Kahny. In fact, chances are that you’re also struggling to understand the complex and seemingly overlapping brand identities and go-to-market strategies he presides over.
In this first ever one-on-one interview, Kahny talks about his corporate mandate, his channel strategy and his powerful brand portfolio.
Here at home, Kahny oversees all the company’s wood, laminate and vinyl operations in North America where he is responsible for manufacturing, raw materials, marketing, sales, in short, everything related to those products as well as sales and marketing for Mohawk hard surfaces. It is this “multibrand, multi-channel strategy,” said Kahny, that helps to best serve all the company’s different market segments.
One of Mohawk’s unique qualities, and some say one of its great strengths, is a federated model that allows each division within the company to operate independently. Kahny said, “Mohawk’s strategy has been to let the division operate with a lot of autonomy. The strategy is to harness all the great creativity and entrepreneurship that comes along with the separate division doing things differently, but where synergy do exists across the group, to take advantage of those synergies. That’s a real strength of Mohawk overall.”
One example of optimizing those synergies happens under the Mohawk banner. “Anything we do with Mohawk hard surfaces is very much in concert with what we do on the soft side of the business — promotions, programs, advertising — that’s all really closely coordinated with the soft side. Part of our strategy is, number one, we believe Mohawk is a great brand and, two, it gives us a package we can give retailers where we can bundle everything together. Customers can order carpet, wood, laminate, ceramic and get it all in one shipment. The more you can put on that truck, the better off you’re going to be and the better off our customers are going to be.”
The same approach undergirds the company’s manufacturing approach where best practices are shared between groups and even across product lines. “While I might not work with the Dal-Tile guys every day, we make sure that if there are things going on at the Dal-Tile factory, the guy running my wood plant is aware of those things too,” adding, “There is a lot of shared synergy in this federated model.”
In terms of brand positioning, the Mohawk brand is designed to be a full and complete product line that offers everything from commodity products through to the upper end — to meet all the needs the specialty retailer might have, from top to bottom, including all the products, the services and the programs that Mohawk brings to the table.
Meanwhile, at Quick-Step — one of Unilin’s flagship laminate brands that distinguishes itself through the latest in Unilin locking systems technology, advanced manufacturing that offers textures, beveled edges and a fashion-based product line — there is a completely different approach.
That difference is “a network of the finest independent distributors in the United States,” said Kahny. “And those independent distributors, each one does things a little differently, each has its own local stamp on how they go to market, they have their own relationships. So we have a brand and product strategy that is overlaid with a distribution model that lets us take advantage of the strengths of all these great independent distributors,” he said.
In contrast to those two, Mohawk and Quick-Step — both specialty retail brands — is Pergo which still dominates as one of the industry’s few recognizable brands among consumers and is sold primarily through the home center channel.
“It’s a little different positioning from a brand and product point of view, and a completely different strategy in terms of a go-to-market strategy. For us it was a perfect balance,” he said. “We already had a strong position in specialty retail and we want to continue to grow that and help them succeed. But at the same time, we had this opportunity — there is a lot of laminate sold through the home center channel — and we have this great brand, Pergo.” His challenge, he recognizes, is to maintain brand and product differentiation, and to help both sets of customers be successful.
“The way I look at it is, starting with the consumer but then up through our channel customers, we have a lot of people making decisions about how they want to buy product, what kind of products they want to buy, how they want to be serviced, what they want to put in their showrooms and what they don’t want to put in their showrooms and we try to use our multi brand multi-channel strategy to line up with all those different needs,” he said.
In wood, the same general principles apply — the Mohawk brand of hardwood floors is a broad and deep product line that offers a wide range of price points. But it offers some unique challenges of its own.
We are looking to get better at how we innovate and differentiate in wood which is a little more difficult because we are using very similar raw materials,” he said. “We are investing to be able to do a lot in terms of texturing, scraping and distressing, what I call visual differentiation, but we have also invested a lot in performance differentiation and that’s where ArmorMax and Scotchgard really come into play.” The company has also added wire brush capabilities as well.
It will be those types of investments, said Kahny, that helps Mohawk stay away from “me too” products into a more differentiated offering. This is also where having the Columbia brand — “American originals focusing on domestic species and unique textures and finishes” — helps maintain that differentiation.
“As an example, we invested in ways to automate scraping and distressing, and I don’t think a lot of companies have the ability to follow us on those investments,” he said.
Innovation as a differentiator
These investments — whether in hard surfaces or soft — said Kahny, will keep the Mohawk at the forefront. “When you talk about laminate, particularly over the last five years, how many people do you think invested in North America outside of us? Not many. I’m not just talking about buying Pergo but also in new equipment, a new press. Other companies were not making those investments, but we were. That’s where being a part of Mohawk is a great value. Pergo, even if they wanted to have that strategy, did not have the financial ability or liquidity to do that.” There are many other examples across all the Mohawk divisions of these technology investments.
Kahny calls it, “a strategy built on innovation and a willingness to invest here in the U.S. to make it happen. It’s great to be a part of.”
His goal for the hard surface division is a simple one: “I want us to be the biggest and the best. I want our shareholders to think of us that way, our customers, our employees. We want to be recognized as a great corporate partner. If we can pull that off, we know we’ve really accomplished something. When I talk to my team, that is really what we strive for,” he said.
Investment, innovation transform Mohawk flooring
Amy Joyce Rush
Mohawk has completely transformed its hard surface business by using a template that has proven successful in the soft surface arena. By investing in acquisitions, technology and innovation, the company has likely doubled its laminate share in the U.S.; its ceramic tile business is reported to be at 35 percent to 45 percent; and, hardwood has grown more than the rate of the industry over the past three years, according to the company.
“Mohawk has gone from a great U.S. carpet producer to a great worldwide flooring company. It’s in a completely different place. I think about laminate — we have a great position, strong brands in all channels. Although we definitely held a leadership position in the laminate industry for years, we have now taken that presence to a whole new level,” said Matthew Kahny, president, Unilin North America.
The strategy that guided the company through the recent acquisitions of Pergo and Marazzi (in the first quarter of 2013) and even farther back to the purchase of Unilin and Daltile is also the leading principle behind creating ArmorMax for Mohawk branded hardwood, and the development of new brand Q-Wood under the Quick-Step division.
It was also what put Mohawk on the path to Continuum, the new and innovative process for PET that represents a $180 million investment.
On the hard surface side, although the company has significantly increased its domestic capacity in wood, laminate and tile production, the focus is also very much about bringing new innovations to market. “There is a compelling story around domestic manufacturing and that is partly capacity but it is linked to innovation, and that’s really important,” Kahny said.
Acquisitions bring market reach, synergies
Each acquired company has brought with it additional market penetration as well as certain synergies. In Pergo’s case, said Kahny, it brought three things to Mohawk’s laminate business. “There is value in that brand. The Pergo brand name has incredible household name recognition, even with consumers who have never shopped for laminate flooring,” said Kahny.
It also put Mohawk solidly in the home center business without jeopardizing the cache of Quick-Step and brand positioning of Mohawk laminate.
“Pergo (helped) with channel management and market penetration. Pergo was strong where we were weak and we were strong where Pergo was weak,” he said.
Both Pergo and Unilin hold intellectual property in laminate. “Adding Pergo’s existing knowledge- base and patent count to Unilin’s expertise has resulted in the largest holding of patented knowledge in the laminate industry,” said Kahny.
Unilin has also maximized the existing synergies between its Thomasville and Garner production facilities. Kahny said that the company has been able to take the best ideas in terms of materials and processes and has very effectively incorporated them into both plants.
But while Pergo had perhaps the most wellknown name in the business, it also needed some repair work. “Since the acquisition, we have been working to make sure the Pergo brand lives up to its product and service promises. We’ve also been looking at investments to shore up and revitalize Pergo,” said Kahny.
The acquisition of Marazzi gave Mohawk a commanding share of market in domestic tile, according to John Turner, Jr., president, Dal-Tile. In addition to strengthening its footprint here in the States, Marazzi had key strengths and synergies to offer Mohawk.
“Marazzi USA had a strong domestic manufacturing base and its sales efforts were similar by channel (company owned stores, independent distributors and home centers) but the distribution of those sales was very different than our legacy business,” explained Turner.
Like Pergo has in laminate, Marazzi had a stronghold in home centers. “To bring Marazzi into Dal-Tile / Mohawk was very complementary in the market and not disruptive from a competitive standpoint,” said Turner. “But the real synergy is leveraging the best practices of both organizations in the manufacturing and product development/R&D areas.
“Marazzi USA was widely considered a product leader and Dal-Tile was widely considered a sales and distribution juggernaut. Combining those strengths into a single group has positioned us as a dominant product leader with unmatched sales and distribution capability, and a North American manufacturing capability and capacity which is five to seven times larger than our next nearest competitor,” said Turner.
He added that integration of both leadership and manufacturing is beginning to produce the best products for each plant design and technology. The brands include Daltile, Marazzi, American Olean and Ragno
According to Turner, the company is adding two kilns of capacity now at the Sunnyvale, Texas plant to produce up to 48 inch length floor products. It also recently announced a $162 million new plant in Dickson, Tenn. “It will manufacture advanced floor tile products including color body and technical porcelain floor product,” Turner said, adding that the company is positioned as a leader in Reveal imaging digital decoration as well.
The Made in the USA story
Acquisitions have also changed the Mohawk/ Unilin Made in the U.S.A story. The investments and acquisitions have resulted in what Kahny said is a “complete transformation,” of the company’s Made in the U.S.A. story.
“Mohawk/Unilin now operates eight domestic laminate/hardwood production facilities that currently employ more than 1,700 people in the U.S.,” he offered.
Turner added that in the U.S.A. alone, Mohawk now has nine different tile plants and will soon have 10. “From mining operations to trucking to maintenance supplies, we are creating opportunities for American companies and American workers. And we cannot forget we have more than 250 company sales and distribution centers that employ more than 2,000 American sales people, warehouse people and customer service people,” he said.
Added Kahny, “There is always some place where labor is cheaper. The key to keeping production here at home in the U.S. is technological leadership. By effectively using technology, we are able to offer superior products, better quality, innovative value-added features and still keep prices competitive.”
Kahny said that while the company currently has a strong overall hard surface presence in the builder market, there is a lot of room for that market to more fully embrace laminate, particularly in the single family home market, he said. He also said that while laminate won’t be targeting all commercial installations, there are some areas such as hotel rooms that could present growth for laminate.
LVT is another area that has not been fully developed but Kahny said Mohawk will come to market having strategically invested in technology and innovation. It is currently building a plant in Belgium. Once that facility is up and running (it will serve the U.S. market as well as others in part to fill capacity initially.) Mohawk will look to open a plant here in the States.
In hardwood, Kahny said that the company is focused on expanding the integration of its current performance features such as ArmorMax with Scotchgard, DuraBeauty, SuperiorShield, PureBond, Opulux and Uniclic even more fully throughout both solid and engineered product lines.