Article Number : 2002 |
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| Date | 5/22/2007 7:13:19 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=2002 |
| Abstract | By Matthew Spieler You know times are tough when even the laminate category is singing the blues. Every flooring segment is feeling the affects of a weaker economy... |
| Article | By Matthew Spieler You know times are tough when even the laminate category is singing the blues. Every flooring segment is feeling the affects of a weaker economy and escalating fuel and energy costs, but unlike previous downturns, such as the recession early this century, this is the first time laminate is feeling the pinch. Since laminate flooring first came on the scene in the mid 1990s, the category has enjoyed a very healthy growth rate and has outpaced the industry average every year, sometimes by as much as 15 times. But, this year is shaping up to be different than any the category has seen. At least that is how the first four months of 2007 have been, and something industry officials are hoping doesn’t continue for the remaining two-thirds of the year, as they search for ways to break the funk. Interestingly, while much has been made of the downturn in new housing, laminate officials are quick to point out this has not affected the category as much as it has other flooring segments. “The housing downturn hasn’t had a great impact,” said David Wilkerson, vice president of marketing for Shaw Industries’ hard surfaces division, “because laminate flooring is not a primary floor covering used in new residential construction. However, consumer demand for all types of flooring, including laminate, is soft at the present time so sales have been adversely affected.” Drive or decorate Tim Tipton, Formica Flooring’s director of national sales, added, “We’re not seeing an influx of home remodeling customers due to not purchasing new homes. What we’re seeing, however, are the consumers who have the money continue to spend. But, when you look at the lower demographics, the fuel cost increase for some are now equaling another car payment, so the choice comes to getting to work or buying a new floor.” In terms of sales for the first three months this year, it has been a mixed bag with companies reporting anywhere from a low single-digit downturn to flat to slightly above last year. One discrepancy comes in total unit sales and total dollar sales. Generally, more units sold, equates to more dollars. This has not been the case so far this year as greater sales of lower-end floors have meant more units sold but less money on the whole. “Overall units are up [low-to-mid single digits],” said David Small, marketing director at Pergo, “and dollars are down slightly. This is due to strong promotional activity and lower retail prices [low single digits].” Surprisingly, the one part of laminate that has plagued the category since the beginning, pricing, has not been a major factor in terms of causing lower dollar volumes. Generally speaking, industry officials are saying the average square-foot price has remained steady compared to the same period last year. There is, however, continued downward pressure at the low end of the spectrum. Though, many are hoping the enforcement of patents by the two major players—Unilin and Välinge—as well as a recent cross-licensing agreement between the two (FCNews, May 7/14) will lessen the impact of low-end imports flooding the market. The issue of price has more to do with the type of products being sold, as the mid-range keeps eroding. David Sheehan, director of laminate and resilient for Mannington Mills, observed, “We continue to see the ‘hourglass effect’ where sales are strongest at the high and low ends but weaker in the middle part of the category.” Milton Goodwin, Armstrong’s general manager of laminate and ceramic products, added that while the mid-price point remains the “toughest part of the business, it is still the largest piece. And we’re all doing what we can to improve it and make it more attractive for the consumer. That’s why we have one of the largest mid-end portfolios on the market.” Patent deal One initiative officials are looking at that can have a positive impact on both the low and mid price points, not to mention the category as a whole, is the agreement by Unilin and Välinge, as well as others, to end their legal hostilities and start working together. “It appears that ultra low-end Chinese products are no longer being allowed into the U.S. due to Unilin profile infringement violations,” said Wilkerson. “This will, hopefully, lead to a firming of prices at the low end of the market.” Bill Dearing, president of the North American Laminate Flooring Association (NALFA), noted, “With licensing enforcement it could be a boon to what is considered the middle.” Within the industry, this deal “is very significant if unlicensed joint material is held up either in shipment or frozen in inventory. For the consumer, correct licensing of all products is obviously a benefit.” He added while NALFA is not the legal watchdog agency of questionable material, it does assure the trade and the consumer of a definite protocol being observed regarding performance testing methods sanctioned by the American National Standards Institute (ANSI) when laminate product displays the NALFA Certification Seal. “Anytime a company protects its intellectual properties it is always good for an industry,” noted Tipton. “There are so many laminate manufacturers getting into this business with little regard to the integrity of the industry and the great strides the category has made. We who are heavily invested in the category need to protect those assets.” Because the deals are still relatively new, Goodwin said there is “a buzz in the background” of the industry, “but little impact on the day-to-day business, so far. We’ve always been front and center with Välinge and have never been affected. But for anyone who is now not licensed, they are going to have to get one, and that costs money.” He hinted that as more companies pay for the various licenses they will need to produce a competitive floor—from mechanical locking systems to different types of surface enhancements and everything in between—it may ease the downward pressure at the lower price points. It is simple math, manufacturers will need to charge more to make up the added cost of a license. New technology Since its start, the laminate category has been making technological advances in how the product is manufactured and installed. And, even during this tight stretch, mills have not let up on the innovation pedal. While the advancements have not come with the fanfare or to the extent they have in recent years, there are some officials noted that will help the segment be more appealing to end users. Juan Flores, president of Faus Floors, pointed to his company’s recent launch. “It’s the first porcelain laminate flooring in the industry with a technology that will redefine how the category views ceramic looks: Microgroutlines. The realism is great.” Mannington’s Sheehan, noted, “We continue to focus on innovations that improve the product’s aesthetic appeal. Specifically, those that relate to print fidelity and texture—features that help the retail salesperson tell the ‘trade up’ story to the consumer. We are well-placed with our NatureForm Optix technology and are working on future developments in that arena.” Others looked at the improvements in how the floor is installed. Wilkerson cited “the new locking technology [5G] developed by Välinge will have a very significant, long-term impact on the laminate market. It’s so easy and fast to install, professional installers and DIY consumers will quickly endorse it as their preferred locking system.” Goodwin referred to Armstrong’s Lock&Fold system as “the best technology out there. It makes installation so easy that the level of expertise needed to lay the floor correctly is greatly diminished. It not only opens the door to the DIY market more than it ever was, even professional installers will love it. They can now get done with a job faster or, they can turn it over to an apprentice and move on to another job.” Along with technological advancements that will have a lasting impact on the category, Pergo’s Small feels the news of his company being purchased by Pfleiderer AG will leave a notable mark for years to come. “The combination of Pergo/ Uniboard (see related story on Page 1) results in the largest market share laminate flooring manufacturer in North America and combines the premium brand name of Pergo with a high-volume, vertically-integrated manufacturing capability. “It’s a very positive event for the Pergo brand,” he added, “and a sign of continued consolidation within the laminate flooring market.” Looks come first While technology plays a key role in helping the category create new and exciting features to entice consumers, executives are quick to note it still comes down to the overall look and feel of the product. If it doesn’t look like the real thing, she will not buy it no matter how many bells and whistles come with it. “The key is offering a variety of looks that simulate visuals of the most popular high-end wood [and tile] styles,” explained Wilkerson. “The industry still sells an abundance of 8-inch-wide planks in opening price point styles but more and more upgrades are moving to 4- or 5- inch-wide planks with beveled edges. The surface textures can vary, as smooth finishes and embossed surface textures are both very popular. Goodwin agreed and noted there are generally certain types of surface textures found on laminate: filled face, which “is the buzz in wood,” standard embossing and handscraped. There are also certain styles, from the standard, more traditional laminate floor to the real distressed look. And all these can be captured in the traditional wood or tile look, or in the super high-end exotics and everything in between. No matter what trend mills capture in their laminate offerings, the one current constant is a focus to break the sales slump and bring the category back to the double-digit growth it has been experiencing for the past decade. “Only those who have a different business model will survive the combination of the house slump and cut through competition going on at this time,” Flores concluded. “We feel good being the most unique, innovative and differentiated laminate player out there. We are high end, we are global and we keep bringing new technology and edgy products every six months.” |