10 Questions With ....
If there’s a sharper, keener observer of the international stone industry than Anil Taneja, we haven’t found him or her. Nor are we likely to try.
Since the founding of Madrid-based LITOS Magazine in 1992, Taneja watched – and reported on – the changing market. Since 2011, he’s also served as director of the World Natural Stone Association (WONASA).
Now mainly on the 'Net, LITOSonline.com maintains a constant and shrewd eye on stone worldwide. It’s peppered with spot-on comments, often delivered in a wry and direct way. (Check the Moralemeter as a to-the-point example.)
Talk with Taneja for five minutes and you’ll see where LITOSonline.com gets its flavor, with a conversation that’s insightful, inquisitive, personal, sometime irreverent and always bluntly honest. It’s been our delight to talk with him at international trade shows; Stone Update asked him to share some thoughts as 2019 comes to a close.
What’s the status of the natural-stone industry in Spain, both for quarrying/processing and fabrication?
TANEJA: This is not a good moment for the Spanish natural stone industry. In some ways Spain is Ground Zero for the dramatic changes taking place in the industry as a result of the new materials. The biggest quartz manufacturer in the world is based in Spain and there are around ten big format porcelain companies in Spain, a number currently surpassed only by Italy. The local market is usually the first one where any company with a new product starts the sales efforts, since the problem of logistics is not as big an issue.
Another big drag is that currently beige is not as much in fashion and that has affected the whole industry built around Crema Marfil. Moreover, the Chinese are now buying a fraction of the blocks compared to their purchases a few years ago.
The Spanish granite processing companies are quite simply the most-efficient producers of slabs in the world, but they have reached a point where lower prices do not lead to increased sales.
The fabricators used to have an important role in advising the end customer what stone was more-appropriate for their needs. But they are now complaining loudly of being reduced to mere installers of artificial materials. The end customers, thanks to top-notch marketing, which has created brands out of these materials, have already decided what they want by the time the fabricator enters the picture.
So the situation is, even if the construction industry in many parts of Spain has had a decent level of activity till just a few months ago, it is quartz and the new generation of porcelain that have been specified in most cases, be it the residential or commercial segment.
What’s the impact of large-format porcelain slab in the European market?
TANEJA: For a new product that has essentially been in the market for barely 3 years in big volumes, it should normally be in the early stages of a product lifecycle. However, there are already many signs that the mature stage of the cycle may have been reached due to massive oversupply -- the ex-factory prices seem to be falling very fast.
One keeps hearing now and then of massive stocks building up in some of the big format porcelain factories. Unlike natural stone, one cannot stop the huge ovens in these factories just because a long weekend is coming up.
Its market penetration has been faster in the wealthier Western European countries. In the short-term, market share will likely continue to increase as the companies ramp up their logistics all over Europe.
The big-format porcelain game consists of two elements that natural stone people do not understand well enough -- logistics is a key element of competitive advantage, and so is marketing. Both of them require spending mega bucks, year after year.
Are you seeing more (and cheaper) Chinese quartz in Europe after the United States declared its 300%-plus tariffs?
TANEJA: The answer is yes. Europe is very diverse, so they are likely meeting with mixed success in different markets. There is always a market for the low-end price-sensitive segment everywhere.
I could be wrong but from what I am hearing, but in Germany they are not making much headway, and are having more success in East European countries. The Chinese salespeople are also making more and more visits to possible buyers in other European countries. Prices, needless to say, are so low that you wonder how long these companies can survive.
How do you see the U.S. market shaping up as we head into 2020?
TANEJA: This is a question best answered by Americans. From the outside we see a very strong U.S. economy, easily the most dynamic of all countries in the word (and I am not trying to quote your President). In recent weeks, however, more and more stone exporters all over the world have been commenting on some “softness” in the U.S. market.
Being a big country it is logical that the construction industry in the U.S. be more dynamic in some parts and sluggish in others.The great thing about the USA is that no matter what be the internal politics and all that media noise, the world of business continues unaffected (You cannot say this about most countries in the world). As of now.
As of now, I do not come across the word "bubble" very often in the US financial media, or in articles/interviews related to housing or construction. Maybe there will be a slowdown, who knows, but that is very different from saying there will be a recession. Needless to say, who on earth can really predict how things will be like a few months down the road in such a fast-changing world ?
Are you hearing any concern from Europe over the U.S. “Airbus” tariffs and possible effects on stone and quartz exports?
TANEJA: It is hard to know what people are really thinking. The word “tariffs” surely keeps some people jumpy and awake at night.
How can you plan for anything if, overnight, an important market can suddenly vanish due to high tariffs? Overall, the number of companies in Europe that are selling natural stone to the United States is not really all that much. Due to lack of payment guarantees from U.S. buyers, many European stone companies do not even bother to explore or sell in that market.
You’ve often indicated the natural-stone market needs to innovate. What’s the biggest thing that needs to change at the processing and retail (fabrication) levels?
TANEJA: The current business model, vulgarly summarized as being a "block to slab to tile" has lasted 3 decades now. How many business models last that long in any industry? This is the age of technological innovation on an unprecedented scale and speed, industry after industry has gone through serious disruption, there is market volatility, massive oversupply of any product even when you exclude China. And yet, many natural-stone-industry company owners still think they can continue to keep doing business as they always have, that their industry is so special it will remain untouched by all these forces.
Innovation is more than a just a fancy word. Innovation demands committing resources, both human and financial, on a sustainable basis, it means a certain culture of constant experimenting in a company. It means taking risks. A typical company nowadays simply does not have the resources to dedicate to innovation. The 2008-2009 crisis knocked the wind out of a very large number of natural-stone companies in Europe and elsewhere, the industry never really recovered. Many companies have been just limping along for over a decade, having barely survived the severe shock that occurred then.
But having said this, by now the industry should be experimenting seriously, for example, at least with more new finishes and new textures. The great virtue of natural stone which the industry has not capitalized so far, is that with a different finish or texture, the aesthetics of the stone can often change completely.
So if a stone is out of fashion, experiment with a different look! Do not people change their clothes every day and look different? Don't the car manufacturers keep tweaking their models all the time? The machines available nowadays offer an infinite variety of finishes and textures. So if you cannot afford these machines at least try to experiment with some new finishes and textures manually, on a small scale, and see what works.
And yet, go to any trade show and what do you see? By and large, the same old polished and honed and aged finishes in about 90% of the displays. So boring. And then we complain that buyers do not come to the shows. Why should they?
But innovation in the natural stone industry can go much further. Where are the new applications and new products developed by the industry? It is always the same word that granite people use: "countertops". Cannot the industry develop something else?
For example, why can we not have personalized dining tables? Every house that has a countertop has a dining table. That means hundreds of millions of them in the world. Why do not the fabricators, the retail level, engrave the family name in the center of a dining table that is made of natural stone? Or, in the corner of the table where little Nancy always sits for dinner, nd no one else can sit there,) engrave a puppy dog? Is any big investment needed to do this? No.
Just because this type of table does not exist, does not mean there will be no market for it. At least show the possibilities to a lady with small children in the home, this kind of thing is so personal, it is a profoundly emotional thing, if the idea catches on, the sky is the limit for the natural-stone industry. It can be a new motor for growth.
Or furniture -- observe closely what some Italian companies are displaying in the Marmomac fair in Verona. This is another potential market if we only show these things to homeowners, or interior decorators.
Now in the USA you have these suburbs and there is usually a garden at the back side of most homes. That is where American families spend their summers, with friends, with neighbors, the barbecue parties, over beer or wine, or whatever. That is where the memories of life are. In the end, this is what you always remember.
And what are the tables and chairs in the garden made of in the USA? Plastic! Can you believe it? Why not make them of natural stone During the fall and winter, as you look out of the windows of your home, you will still see that natural-stone table and the natural-stone benches in the corner of the garden. It gives a sense of permanence nothing else can.
In a talk in New York this year, before an audience of interior designers, I showed them images of all that I have mentioned above. Their response? Where can we find these products?
I do not know the U.S. market at a retail level, but having seen many fabricator units in other countries, one thing is obvious: We desperately need the help of decorators to create some space in the fabricators' installations for displaying natural stone as it should be shown.
People forget that natural stone has (or had, 'till recently) an image of being a luxury product. A luxury experience is an intrinsic part of the purchasing process of a luxury product. But what do we see? Many fabricators seem to think they are in the junk business; just look at the place where they receive customers.
What’s holding up that innovation?
TANEJA: The conservativeness of the people. The natural-stone industry is a risky business by its very nature. How the stone from the quarry will really be once you have made the huge investments upfront after having gone through mind numbing paperwork, you never know. In the factory you process the blocks and then only you may know what the slabs may be worth. And that too assumes the buyer does not look at the slab and starts pointing out "defects,” knowing fully well what natural stone is. There is a huge risk at the quarry level, a huge risk at the factory level.
This may also be the moment to say so -- there is also often a huge risk selling to American buyers, who often seem to think that just because they are Americans, they do not need to give any payment guarantees to their suppliers. Risk everywhere -- is it any wonder businessmen are cautious about doing new, untried things? But as the old saying goes, necessity is the mother of invention, so with things being what they are, hopefully the businessmen will realize they have no other option but to try out really new things.
Can you give me some examples where fabricators are realizing the importance of marketing?
TANEJA: Since last one or two years, having lost so much market share to the artificial materials, fabricators just about everywhere at least realize they need to offer something, but most of the time they still are struggling to figure out what it should be. Some fabricators have made efforts at developing an elegant showroom where they display the whole slabs and have created elegant spaces for this purpose. Others are more active in the social media. Some do make more efforts now to meet designers and specifiers.
I know of a company (they prefer to be anonymous) which spent $25,000 on just one copy of an elaborate catalogue, for a very special project, for a very special client. Some truly great masterpieces of the modern age in natural stone are anonymous, mostly because the client insists on secrecy, but how the marketing was done is also often kept secret. Too many wolves ready to copy, I am told.
It’s a fragmented industry in natural stone. What needs to change at international level? Can it change?
TANEJA: It is a very, very fragmented industry. Normally, after a crisis, there is an industry consolidation; in natural stone there has been further fragmentation after 2008. Many big companies are much smaller now compared to a decade ago. The small ones of then are now tiny. I think it will continue to be that way for quite some time.
It is, at heart, an industry of craftsmanship, that is what it has always been throughout human history. The new machines allow us to manufacture, say, 100,000 m²per month in a big-size factory, and we thought we have a big industry. But just compare the square meters produced with that of a typical ceramic factory -- we are peanuts, in size.
However, in spite of the tremendous fragmentation, it is also a very globalized industry in the sense that so many companies sell to such a large number of countries. A medium-sized company in this industry can be present in 25 countries or more. Go to a big trade show like Verona and Xiamen; you see exhibitors from so many countries, and you see visitors too from all around the world.
So, answering your question, at an international level, what we can realistically do is to exchange information and share ideas, and educate ourselves on the multi-dimensional aspects of natural stone. There is no way we can realistically even collectively match just 1% of the marketing resources of the big quartz and big-format porcelain companies. Just about every week I am told by people in my role as Director of WONASA, by well-meaning people, that we should get together and do a marketing campaign. Sure, I now reply; "Let us go for world peace! Let us ban all arms !" That would be easier than getting the stone people together and working together.
In fragmentation, there does exist a unique strength. If each of us, individually or as companies, dedicate a very small amount of time daily in social media, framing the choice for the end customer between a real/original stone and copycat/imitation/fake stone, in our own local languages, since there are so many of us, in the tens of thousands, we may eventually start getting the message across. Who, after all, wants a copycat/imitation/ fake product? And how much does this type of marketing cost? It does not even cost a cent. The fact that the artificial stone companies are mostly imitating natural stone s surely their biggest mistake if we know how to frame the choice in this way, we start winning.
But now is not the moment for the American fabricators to do this. Quite simply, they are making more money nowadays with the standardized artificial materials. It is more business there than with natural stone. But when the tide changes, as it eventually will, when the big-format porcelain companies start setting up their own warehouses and their own in-house fabrication units, and start competing with the fabricators, because it will be the only way to sell the millions of square meters they produce every month … then, yes, the fabricators may realize they need to return to their roots.