Article Number : 3278 |
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| Date | 5/22/2008 8:36:55 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=3278 |
| Abstract | By Matthew Spieler It was a fun ride for close to a decade-and-a-half, but the economy finally caught up with the laminate industry in 2007 and the first part of this year. How so? For the first time since the category entered the U.S... |
| Article | By Matthew Spieler It was a fun ride for close to a decade-and-a-half, but the economy finally caught up with the laminate industry in 2007 and the first part of this year. How so? For the first time since the category entered the U.S. flooring market the sector as a whole is registering slower sales and units purchased than comparable periods from the previous year. Final figures are still being calculated, but based on initial research conducted by Floor Covering News, the category in 2007 saw a drop in sales of approximately 9% to $1.26 billion compared to 2006. At the same time, units are estimated to have fallen 11% to 940 million square feet. And as the housing and sub prime mortgage crisis continue along with consumer confidence slipping laminates, as with the rest of the industry, have not fared well through the first four-plus months of this year. There are some projects of the category being off as much as 20%, though most industry executives have it in the low double-digit range. “It is a tough market right now,” said Eric Erickson, Shaw Industries’ laminate category manager. “We are feeling the same impact that the rest of industry is feeling but it does vary depending on the market. The new construction market, for example, is getting hit the hardest, though we are feeling it in every segment.” There is a light at the end of the tunnel, he added. “We are starting to see some improvement in the residential replacement arena through the retail and home center segments.” Erickson credited the company’s introductions featuring its new Loc N Place products as bringing more value in this arena. Ed Duncan, Mannington Mills’ senior vice president of residential marketing, added, “By far, the economy has been the greatest challenge. This year we are living through the most significant downturn on the residential side of the business since the early 1980s.” That said, he noted, “There are still plenty of consumers in the marketplace for flooring, and our focus has been in creating and introducing products to gain those consumers’ attention when they do walk in the store.” High-end sells While sales are still being made, albeit at a slower rate than what the category is historically used to, manufacturers note there is a trend in the types of products consumers are purchasing. “The vast majority of our specialty sales come from within the premium and upper-mid price points,” explained George Kelley, CEO at Pergo. “This was true even before the market softened.” The sluggish housing market, he added, has challenged the laminate industry to create products that offer consumers meaningful, cutting edge technologies and designs. Pergo is meeting this challenge, Kelley noted, with the introduction of two premium flooring collections, as well as new ScratchGard Advanced—available on Elegant Expressions—a patented technology “that provides 30% greater scratch and scuff resistance and improved clarity for richer colors.” Milton Goodwin, vice president of laminate and ceramic products for Armstrong World Industries, agreed with Kelley’s assessment of the type of products consumers are seeking, noting more of the company’s sales “are driven by the high-end. Consumers want realism; and the only way to get that is to go after the high end—real wood widths, etc.” But, with fewer consumers in the market, he pointed out manufacturers need to give dealers products to differentiate themselves in order to capture more of the business that is out there. Using the Armstrong Grand Illusions and Bruce Park Avenue as examples, Goodwin said, “We differentiate our high-end products with very realistic looks and texture; installation is easier, and there is the credibility and quality inferred by the brand itself. Premium pads underneath and premium underlayment also give it the sound of a real wood floor.” Duncan, like some other executives, believe despite the tough economic climate there are still growth opportunities. “There are still plenty of consumers in the marketplace for flooring and our focus has been in creating and introducing products to gain her attention when she does walk in the store.” To do this, he explained, “Mannington introduced its biggest lineup of new products ever this year at Surfaces. We see this lull in the economy as a time to introduce innovative products that will keep the consumer interested in the category and put us, as well as our distributor and retail partners, in a good position for when things bounce back.” Kelley added, “We see the premium and contract/Main Street commercial markets as opportunities for growth in the coming months, which Pergo will capitalize on with our new Elegant Expressions and Commercial collections. They will equip our specialty retail partners with the premium looks and features they need to maximize opportunities for increased growth and profitability.” Goodwin mentioned because both the Grand Illusions and Park Avenue collections, which were introduced in 2007, surpassed internal expectations 20 fold, and “quickly became part of Armstrong’s best-selling launch since we got into the laminate category in the mid-1990s, the company is prepared to top it with its mid-year launch. “If retailers and consumers were wowed by Grand Illusions and Park Avenue, they will be blown away by what’s coming midyear, including high-quality whitewashed and handscraped floors in the new Armstrong-branded Coastal Living, Frontier Plank & Homestead Plank products, (Rustics Premium) and, on the Bruce side, new colors in Reserve Premium and Park Avenue.” Cost challenges While upper-end products are driving sales, those in the category will also admit the low-end, base-grade products are holding their own and that the middle continues to be squeezed, similar to looking at an hourglass. Yet, even at the lower price points, end users still want as much value as possible. Because there is still a demand for lower-priced products, manufacturers point to different factors that are challenging the industry as compared to those at the high end, which are mainly to produce as realistic looking and sounding product as possible. “For the low-end products freight continues to be a challenge,” said Shaw’s Erickson. “With fuel costs continuing to rise at such a fast pace on such a price sensitive segment of the business we are continually being challenged to find opportunities to be able to move and distribute products in a more cost effective manner.” In Shaw’s case, “Using the strength of our large fleet of transportation and national distribution facilities is key right now. This is our greatest opportunity for cost savings.” Goodwin added, “The biggest challenge in the industry continues to be the ever increasing cost of raw materials and freight; unfortunately these costs [need to] get passed along to the consumer.” What’s ahead While there is currently no real end in sight for when the economy will make a turn for the better, manufacturers are insisting they remain committed to adding new products and advancing the technological envelope as well as marketing to help drive traffic and sales. At Mannington, Duncan pointed to the company’s new Time Crafted Maple as a product “poised to do quite well this year. It’s a technological marvel— Mannington exclusive technology gives it a truly irregular edge so it looks even more like wood than some woods. The trend is still toward realism—so anything we do to add to that helps in the marketplace. Our new Diamond Bay collection speaks to that trend by providing incredible realism and clarity in a variety of exotic wood looks.” In addition to what he said early, Goodwin noted Armstrong “plans to keep the momentum going. There will be an emphasis on the hand scraped look—one of the best-selling visuals in the hardwood category. New premium floors also will be added this year with very unique, whitewashed looks that are exact replicas of unique looks borrowed from our premium wood flooring line.” With Pergo having just revamped its entire product line (FCNews, May 5/12), Kelley said, “This revised structure creates inherent possibilities for upselling and allows our specialty partners to fully leverage the power of the Pergo brand, an asset we are supporting through an aggressive marketing and advertising campaign.” In fact, at press time, Pergo officially launched its new Elegant Expressions and Commercial lines. “Product innovation has been and will continue to be integral to the success of this business segment,” he concluded. “Pergo has helped make laminate flooring increasingly realistic and durable. As the innovator and leading manufacturer of laminate, we will continue to be at the forefront of innovation in the category, offering new products and strong branding that will drive sales even in a soft market.” |