Two West European countries, Belgium and Netherlands, are relatively speaking, small in population (11 and 17 million respectively). However, they are widely known to be very demanding and sophisticated markets where the consumer has a high awareness level of natural stone and there is a culture of using natural stone. In this interview with two of the biggest distribution companies, Mr Herwig Callewier of Beltrami and Mr Jos Simons of Michel Oprey & Beisterveld Natuursteen, we asked them on the situation of the stone industry and the latest trends in their respective markets.
After the severe financial crisis during the last few years, do you see a recovery in demand for natural stone in your market?
Herwig Callewier: Let us say that 2013 was the worst year for our market – this year is definitely better but we are still far away from a normal situation. We see most customers going for ‘cheaper’ products and the tough competition pushes the margins down; this leads to a challenging position for most wholesalers: lower turnovers with small margins forces most companies to take drastic cost cutting measures.
Jos Simons: There is indeed at least a recovery. But 2014 is clearly a transitional year. We are still not near the pre-crisis levels! The experts are expecting a stronger recovery in the coming years. What we see in 2014 is that some customers are already doing significantly better than last few years but also that some are still struggling to survive. The differences between the customers in performance are really huge! We are in the tail of the crisis, but the risks are not over yet.
The Benelux countries may be relatively small in population but the consumers have a reputation for being extremely sophisticated in terms of knowledge of natural stone. How does that reflect in your approach to selling natural stone?
HC: It is true that Belgium has a very long tradition in limestone and the public knows and appreciates those products very much. The imported alternatives from China, Vietnam and India are very popular nowadays and that is why a lot of trading companies without any stone history or experience import those products too. So, I believe that the genuine stone importers should emphasize their expertise, knowhow and experience to the public in order to guarantee the best possible stone selection.
JS: It is a fact that, in general, our customers are well prepared when buying natural stone. In our own showrooms (where we help the customers of our dealers) we tell the end users the advantages and ALSO the disadvantages of natural stones. Some people are looking for something that natural stone just cannot offer. In our opinion it is better to be honest about these things too, in order to avoid disappointments in the future. We offer the possibility for the end users to have a look at the ordered material before delivery. This approach and our honest information means that there are hardly any complaints with these customers. Customers who are less informed are more often disappointed with the delivered material, because their expectations were not realistic. This is caused mainly by poor or incomplete information provided by the dealers, were less knowledge of natural stone is available on natural stone.
What do your customers understand by quality? After the crisis is there a difference in behavior of the customers?
HC: As I already mentioned, we see a consumer that is looking for the cheaper product. It’s our duty to offer a decent quality even in the lower range of stones.
JS: Technical problems (bad cutting, out of angle, chipped edges because of bad packing) are obvious to everyone and here the producers (factory) must take on their responsibility. More difficult are subjective issues such as selection, color differences, etcetera. Here the importer must take the responsibility of informing their customers well of what to expect.
The crisis has made the market more dictated by the buyers. The ones who are still buying know that they are in a strong position and this forces the prices down dramatically. Margins are shrinking with all importers/wholesalers also becoming reluctant in introducing new materials, as this costs a lot of money! In general the customers are more demanding than before the crisis, but they are not willing to compensate this with appropriate prices. More service for less money is something that describes the current market quite well!
The Benelux countries are considered mature markets. In what kind of applications are natural stones currently most used?
HC: Natural stone is most popular in exterior applications such as driveways, terraces, swimming pool areas, landscaping.
JS: Flooring for indoor applications is still very important. But this application has shifted more from newly built houses to renovations. Projects are still important but there are less in number at the moment. Once a good project is there in the market the quantities are, of course, good. But there is no continuous flow of projects. There is, however, a continuous flow of demand in the segment of indoor flooring. Demand for natural stone in outdoor flooring suffered a lot from the introduction of 2 cm ceramic tiles. This is a real hype, especially in the Northern European countries.
Granite slabs for the kitchen industry has also suffered a lot. Firstly from quartz composite slabs but lately even more from ceramic slabs such as Neolith.
In recent years artificial materials have penetrated in a significant way the distribution networks of natural stone. Why is that so? Because of customer demand or because there is greater profitability for the stone dealers?
HC: For interior flooring, the ceramic industry has done a great job in imitating the natural stones in a stunning way: even for a stone professional it is sometimes difficult to see the differences. And the way they market their products is top class compared to very poor marketing by the natural stone industry. The profit margin made on ceramic tiles may be bigger in percentage; natural stone can give the same or a better nominal margin. But a lot of our customers promote the ceramic tiles more because it is easier for them… Here is a the big challenge for the stone industry- we need to train the tile sales people, provide them with the right marketing tools and convince them about the eternal beauty of our products!
JS: Both are true! In indoor applications there has always been a competition between natural stone and ceramic. But on ceramic tiles the importer as well as the dealers make a better margin and ceramic is the easier material to work with, with less risks of complaints after the installation. This even increases the actual margin made on indoor ceramic applications. For outdoors applications the introduction of 2 cm ceramics with very good technical specification concerning frost resistance, abrasiveness and non-slippery characteristics, has hit the demand for natural stone in exteriors very, very hard! Consumers are choosing massively the ceramic outdoor tiles because of these advantages. Furthermore, natural stone very often loses its color in outdoors. Ceramic does not have this problem either. Margins on outdoor ceramic stones are in general somewhat lower than natural stones in exteriors. But the fact is that there are seldom any claims which makes the ceramic very often the better choice for outdoor use. Especially in the northern part of Europa where there are, usually, a lot of freezing-thawing cycles every year that can ruin many natural stones, even when test reports are available from the producers that the stone is frost resistant…
Is demand for artificial materials growing with the market or taking away market share of natural stone?
HC: We have lost a big part of market share in the interior flooring market (to ceramic tiles) and in the kitchen worktop sector (to engineered stone). In the exterior segment, we have captured a huge part of the concrete tile market share. With the recession, we have also lost ‘value’: as already stated, most customers go for cheaper products, so it means we need to sell a lot more square meters of tiles to get the same turnover!
JS: For sure ceramic is gaining a lot of market share from natural stone at the moment! The effect will be less on indoors applications as the competition between ceramic and natural stone has always been there. But outdoor ceramic (which is new in the market) is clearly gaining on natural stones (and is still only at the beginning stage!), and with slabs also the ceramic is, for many people, the better option against quartz composite or natural stone. Moreover, the help that dealers or importers get from ceramic producers in terms of service (availanility of test reports, sampling, brichures, displays) is much, much better than from producers of natural stone! The natural stone industry can still learn a lot from that!
What are the natural stones most in demand currently?
HC: For my company the top sellers are Pepperino Dark, a Chinese granite, followed by Asian Blue, a Vietnamese limestone and in third place the Kandla Grey sandstones from India.
JS: In our region it is still grey, anthracite and black colors. But there is also a tendency towards cream and beige again. Granite is less popular at the moment, limestones and marbles are clearly more in demand. Unfortunately the price is still a very important issue for the consumers….
How have the rising costs in the Chinese stone industry affected your purchases from that country?
HC: So far we did not feel it too much as the Euro has remained quite strong compared to the US Dollar and the transport prices (containers) remained rather cheap. Therefore the prices of Chinese, Vietnamese and Indian materials didn’t vary too much. The very strong competition in our markets also forces us to lower the margins, if necessary.
JS: In our company we deal with all price categories. We have cheap (China, Brazil, India), medium priced (Spain, Turkey, Italy, Greece) and expensive products (Israel, Italy, Canada). As the Chinese products are mainly in demand because of the good prices, a lot of customers are changing from natural stone from China for ceramic. Volumes in cheap Chinese items have dropped dramatically during the last few years. This is a process that is still continuing!
How do you see the market for natural stone evolving in the near future?
HC: Very difficult to predict, but we are trying hard to improve the sales of interior stone products, to win back a part of the share that we lost to ceramic tiles. We also hope that the Belgian authorities will start investing again in public projects where they usually use big quantities of stones for paving – since 2 years this market is really down due to the tight budget control.
JS: It will not be easy to cope with the ceramic tile producers in the future. Digital printing techniques make it not only easy to copy natural stones, but the copies also get better all the time. Some materials look better in ceramic as they are able to “delete” the “flaws” that are unavoidable in the natural stone! Further, ceramic is much more ahead in terms of promotion and marketing. It will be a hell of a job for the natural stone industry to be as professional as most of the ceramic producers are. Be ready for a dramatic change! The producers relying mainly on the Chinese market for selling their blocks should “brace for impact” once China starts to import less blocks than in the last few years. And the first signs that the stocks are building up to inconvenient levels in China are increasing … They forgot about their regular customers that used to buy a few containers a year, but they might be screaming for them again within a few years. I hope for them that these types of customers will still be interested then, after being neglected for so many years!