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Mills debate whether there is still life in the middle-Part I

If there is one thing just about everyone can agree upon when it comes to the recession that has gripped the U.S. for more than three years now is consumers have changed—in attitude, in how they shop and in what they purchase. Gone are the days of carefree spending and simply looking for the most expensive item to buy. Today’s consumer is more price conscious. And, she wants products offering greater value for her hard earned money, thus, turning more and more to mid-level, “better” goods.

Prior to the recession, the laminate category was experiencing what many called an hourglass effect. Meaning consumers were more apt to purchase either a high-end product featuring the latest technology and designs or a low-end floor that gives a quick, easy updated look to their home. As such, sales of products in the mid price point were get- ting squeezed out of existence.

So, has this new consumer mindset affected sales of the laminate floors like it has other industries? Is there once again life in the middle?

FCNews posed these and other related questions to a variety of the category’s players— large and small. While all agreed consumer attitudes in general have shifted, the debate as to whether the segment’s hourglass has changed brought different responses depending on how a particular company approaches the market. Some feel it still exists, but has been reshaped into more of a genie bottle, meaning there is more going on at the bottom level, forcing prices at the upper tier to be lowered.

Others feel the hourglass has turned into a pyramid, meaning the fewest sales are at the upper price points, the mid level has grown and the bottom level has the greatest amount of purchases. Though, this, too, is being debated as some mills say when it comes to their sales the pyramid is inverted.

What follows are some of the responses along with what each company as well as the category is doing with regard to the mid price point level.

Perry Coker, president of Lamett USA, feels the hourglass model was “pre-crisis. We now have the major home center channel dropping all retail price points and promoting low-end laminate aggressively, when in the past it focused on mid- and high-end [goods] with only a touch of entry-level. Moreover, in the past two years we have seen entry-level wood products drop to historic lows, which has directly impacted high-end laminates. The net effect is the mid- price laminate offerings now must have all the bells and whistles of what was formerly the top of the hour- glass.”

He added the 17-year- old category is not only maturing, it is experiencing “the same curve sheet vinyl experienced in the 90s. The best features, designs and new technologies are still being desired, but the max price you can realize for these attributes must be at a better value proposition.”

Fred Giuggio, vice president of the Formica Flooring brand, said the company is “very aware” of the hourglass shape the category has turned into.” As a result, the company has launched products such as Messina, “which is made in the USA and designed with the American consumer in mind. We added bells and whistles such as 5G installation, our Vibrant Finish technology, longer boards and a 30-year warranty. We deliver all this to the consumer at a very reasonable price.”

Why? “Formica is aware the consumer will not pay-up for a brand, but if she trusts the brand to be of high quality and fairly priced, she will buy.”

Eric Erickson, Shaw’s hard surface category manager for laminate, feels while the hour- glass still exists, it is now “just a shorter glass. The middle price point has really been squeezed as base grade continues to be strong and pricing on higher end products has come down so much. There just isn’t as big of a price spread in laminate like in years past and the visuals have gotten so much better in the higher end products that it has really hurt the middle price points.”

Like many of the executives, he said technology and the ability to apply it less expensively has played a role in why laminate sales are the way they are. “With all the advancements we are able to bring much better visuals at more competitive price points. For example, bevels, which provide a much better visual and value, have become much more cost competitive in recent years.”

Erickson added the goal is to get the consumer to understand these products can offer her many more years of enjoyment and less hassle than low end goods. “We are continuing to try to offer more value in [the mid level] to help get consumers to up- grade. No one wins living in base grade and this strategy hurts the overall category.”

David Sheehan, vice president of Mannington’s resilient and laminate business, said while the shape of the way sales are going has been altered in general, it is not the case on a macro level. “For most of the North American market, this transition from hourglass to genie bottle may be true. But for Mannington, neither has ever truly been the case. Mannington’s laminate shape, as it were, is an inverted triangle, with the majority of sales in the best collection. We believe feeding this structure provides the retailer more opportunities to successfully trade the consumer up, thus realizing higher margins.”

An inverted pyramid does mean the middle tier is relevant and Sheehan said Mannington has been investing in the better price point over the last three years with “positive results. Mannington has introduced more patterns and colors, added hand scraping and a variety of proprietary technological advancements that help make our products look and perform even better. We plan to continue to invest in the better category in 2011.”

As part of this strategy, he said, “Mid-range products need technological advancements as well as some of the bells-and-whistles that are part of the best category. We believe this helps to provide a logical trade-up story for the retail salesperson.” Roger Farabee, senior vice president of marketing for Unilin, which oversees the Mohawk and Quick•Step laminate brands, feels the recession transformed the hourglass into a traditional pyramid. “The initially stable sales in the top tier products diminished, and pur- chases once made in the premium level shifted down to the middle price point in the laminate category.”

This shift, he added, was driven in large part by the migration of the collective consumer mindset to put much greater focus on products with a strong price/value relationship. “This was a departure from their past attitude. The new collective consumer mindset is predominately focused on getting a good, quality product at an affordable price. The features and benefits of mid-range laminate give consumers just that.”

Farabee cautioned even though products may be priced the same, “it is very important to note there are still very distinct differences in the capabilities of the brands represented. We know that consumers’ flooring needs and their appetite for the highest levels of design, style and performance have not diminished. But, in the current more challenging economic environment the number of discretionary dollars available to Americans has. Sensitive to this reality, our Mohawk and Quick•Step brands are offering some of today’s hottest looks on an 8mm platform.”

He noted the price/value characteristic resulting from this “positions these premium visuals in a mid-range price point that is attractive to a large portion of a retailer’s customers.”

-Matthew Spieler