Hicksville, N.Y.—Laminate floors may not be flying out of dealer showrooms like they were in the late 1990s, but the category more than held its own during the first six months of this year. In fact, considering all that has happened since January—an economy that remains sluggish, a war in Iraq, escalating raw material and energy costs, a lousy winter in the nation’s most part populated region and a highly devalued dollar compared to the Euro—manufacturers and those associated with the segment were, for the most part, pleased with how the year’s first half worked out, leaving many to believe the second six months and beyond will be just as good if not better.

Final figures for the first part of 2003 were not yet available as FCNews went to press but, based on in-house research and interviews with those close to the source, it is estimated the category grew between 5% and 7% during the first three months of the year compared to the first quarter of 2003. And, with many reporting that business started to pick up even more during the second quarter, the segment could end the year in high single digit or possibly low double-digit growth if the trend holds. “The category did fairly good considering the economy and everything that has happened this year,” said Bill Dearing, president of the North American Laminate Flooring Association (NALFA). “And, from what we are hearing, business improved in the second quarter, so we expect overall volume to pick up, especially when compared to last year.”

One trend Dearing hopes will have continued during the first half is the average selling price of laminate floors. He noted in 2002, the average price per square foot improved for the first time since NALFA started tracking category figures. And, since the association does its calculations based on the first point of sale, one would think the numbers should continue to drop, but it did not, leading many to speculate the fly-by-night companies are making less of an impact than previous years “I would suspect the container lot sales have decreased for a couple of key reasons,” Dearing said. “Dealers have found out it’s not worth the troubles and potential problems by dealing with a company that has no back-up or support in the event a claim comes in. They would rather deal with a known credible supplier; one they know will be around to help them in case of troubles.

“Plus,” he added, “due to the growing differential between the dollar and Euro, the cost of bringing in goods from Europe has risen considerably.” That means, for those companies that have been bringing in the cheaper, less quality goods it may have come to a point where it is now cost prohibitive. While it cannot be said for certain if the devaluation of the dollar in recent months has impacted the flow of the very low-end goods from overseas, it has been a cause of concern for a good portion of the category’s major players who rely on importing either the finished product or components of the floor for final fabrication in their U.S. facilities. While the difference between the Euro and dollar has stabilized some in recent weeks, the fact remains that over the last six months the gap has widened significantly. At the start of the year, one Euro was approximately equal to US$1.05. At press time it was about 11 cents higher, or US$1.16. At one point it had surpassed US$1.20. Even companies that have not been adversely affected by this are feeling the pinch of extra costs due to energy and raw mater ials prices which, according to manufacturers in all segments, have skyrocketed.

So, whether it is the added cost of doing business with European partners or simply manufacturing the product, all companies have had to wrestle with higher prices in one form or another during a tough economic period. And, many say, though this has caused a great deal of headaches and ulcers in company board rooms, there may be a silver lining: prices will have to be raised. “In the next few weeks we’ll probably have some price adjustments,” said Ken Peden, executive vice president of sales and marketing for Quick-Step. “Everything is way up—energy, raw materials, the cost of doing business, you name it and it’s gone up in price.” Many believe the laminate segment needs to have its prices raised, not just because of the higher costs involved with getting a product to the marketplace but for the simple fact the goods being made and sold today are far superior in construction and design than those offered as little as five years ago.

Yet, these technically advanced floorings which offer consumers so many more benefits than their predecessors—moisture resistance, sound deadening properties, more realistic looks and finishes, etc.—are actually being sold for less. This has been seen, albeit very little, on the low-end of the price point scale as manufacturers have recognized they cannot make any money at that level. In fact, a great many mill executives spoken to by FCNews noted “no one can win at that price point. The category as a whole must move up.” And, while most admit that it is a good thing to raise prices given the abundance of extra features and benefits found in today’s products, they say it still has to be done with caution, especially at the mid to upper price points.

“Even though our costs have gone up,” explained Rob Tarver, Wilsonart Flooring’s national marketing manager, “it is difficult to raise the price of something that is already in dealers’ stores. It should only be done when bringing out new products and we have started to see higher prices in the marketplace with some of the newer products being introduced this year.” Dealers should not look too negatively at these increases, he said because this can give them an opportunity to make a better profit, especially if they concentrate on selling the better quality goods. “With less customers coming into stores, retailers are trying to get better margins and, to do that, they are selling better goods because they can make the same as before by selling less.

“Also,” he continued, “consumers are being more careful in how they spend their hard earned money so they want something that will last without giving them any trouble. They want to protect their investment, which means they are more apt to purchase a higher quality item.” But, when it comes to selling laminate floors, or any floor covering product for that matter, many will say price is not the only factor, nor is it at the top of the list in a consumer’s purchasing decision. “Price is not the only, or the main, differentiating factor in making a purchase,” said Angela Scenna, director of brand marketing for Pergo. “It’s important to give the dealer something to work with, something that is new and exciting but also practical with features and benefits understandable to the consumer.

“The consumer is making an investment in her home,” she added, “and she wants something that is durable; a quality product that will look good for a long time with little to no hassles.” Peden agreed. “Consumers are not really interested in low-end. They want something that will beautify their home. That‘s why she is purchasing more of the upper mid to higher priced products, because she wants to make her house beautiful and buying betters goods will do that.” The higher priced goods are not only more dur able and are easier to maintain over a longer period of time, they are also more stylish in their designs and realism. “And realism is important,” Scenna noted. Mimicking real wood, ceramic or any other natural material is something the industry as a whole has been working on since its inception and, in recent years, technological advancements have allowed the category to create laminate products that “look like the real thing.”

This is a trend not just in the United States but worldwide as noted by the European Producers of Laminate Flooring (EPLF). “Whether its color is dark or light; the look is wood or tile, or the inspiration oak, walnut, pine, maple or birch, natural authenticity is the latest trend in laminate flooring,” said Karin Dull-weber, the organization’s public relations director. She said the new decors that have been introduced this year “are strong and convince with a demanding true-to-nature look that turns a living room into a unique living experience. “The perfect reproduction of the wood grain is coming closer and closer to its natural inspiration,” Dullweber added. In addition to going more natural, ELPF stated when it comes to wood looks both dark and light colored options are popular. Even though the expressive, warm hues which veer toward a red-tinted brown are dominant in wood surfaces, the light woods, such as maple, pear and pine are just as trendy.

In the case of laminates imitating these lighter species, “their true-to-nature looks adds to the simple, subdued feel of a room that makes it the ideal backdrop for light, modern furniture.” Just as laminates have come a long way in re producing the look of hardwood, it has done the same with tile. “Are these tiles or laminate flooring?” Dullweber asked. “It is hard to distinguish when it comes to these new, modern tile decors. Laminate flooring convinces with its absolutely authentic tile structure, its warm feeling to the naked foot and the quietness to the step.” This is accomplished, she added, due to the technological advances at the manufacturing level in recent years. Such things as integrated sound reduction underlayment, simple click assembly and durable, easy-to-maintain surfaces “make laminate flooring the modern and innovative product that offers an ideal solution for any kind of floor.” (Editor’s note: In part two, we will discuss how a number of the major players fared in the first six months and what they foresee over the second half of the year for the category.)