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Executive forecast: Laminate officials remain optimistic

By Matthew Spieler

 

With the massive slide laminate had been on continuing to level off in 2011, officials remain upbeat the category will soon see better days—albeit not to the degree they once were, but compared to where they have been recently, any improvement is a welcome sight.

Executives admit there are still tremendous challenges even beyond the economy but feel laminate’s realism, performance and overall value will win back the post-recession consumer.

 

Kevin Biedermann, senior vice president, Armstrong

The laminate business is likely to be flat-to-down in 2011, but Armstrong believes there is money to be made. Laminate is still a smart flooring solution for many applications and consumers will choose it based on quality and value. Keep in mind, someone is selling laminate and doing it quite successfully.

One of the ways we believe retailers can sell laminates is to use the power of brands to distinguish quality products to support a trade-up story. A meaningful brand says, “Here is a product in which you can have confidence.”

Armstrong more than anybody has taken the high road, creating opportunities for profitable sales. Everyone else is price-driven. Sales of high-gloss laminate and long plank Armstrong products are encouraging. Beyond our brands, the category is being highly commoditized. Our commercial laminates also are improving year-over-year; there has been keen growth in light commercial applications since we launched this line.

The biggest challenge and opportunity for the U.S. laminate floor market in 2012 is helping retail salespeople remember that, despite the overall challenge of low store traffic, the money in flooring is in repeat business and referrals, and as such, selling on price alone is a dead-end street.

As a retailer, you need to have the price points that matter, but you also need to have a staff that can talk about the features at every price point so the consumer knows what she is buying. If you can’t articulate features and benefits the only thing people will hold on to is price.

Even if they don’t have the budget, they will understand what the differences are. At the end of the day, they will be thankful and thrilled they did not buy the cheaper one but got a better value and a better quality product at the right price. Retailers should have a very focused offering—you don’t need four brands of the same 8mm product. You have one brand at 8mm at an opening price point and then you need a great trade up story—beauty, performance, price points.

As the most trusted brand in hard surface flooring, our reputation and the success of laminate sales depend on providing great looks, price, performance and value.

As an industry, we need to focus on design trends. Armstrong’s approach is to get as sharp as possible on the cost of the product, but we will never compromise on quality and performance. We feel low-end products that don’t live up to customer expectations is not good business and is not good for the category. Other products attempt to make money by selling below those standards, which is not where we want to be or where we believe the industry wants to be. We deliver a comprehensive portfolio from high-end to base grade value products that still deliver a level of performance retailers can feel comfortable selling and in which consumers have confidence. We offer products that provide a great value without compromising on quality and we always back it up with world-class customer service after the sale.

We are preparing for 2012 not expecting any tail wind from general market conditions—high unemployment and little help from home values. We will focus on value-oriented aspects of the business. Here’s where the Armstrong story gets even stronger. We have a clear strategy of focusing on helping our retailers succeed, from products to programs to training. Retailers want customers. Armstrong does a better and better job of bringing customers to retail.

 

Travis Bass, executive vice president of sales and marketing, Kronotex USA/Formica

Total dollar sales were about what we expected in 2011. There were, however, more extremes. The retail price war, which rippled through almost every market segment, produced stronger volumes at lower unit prices. High-end products began to see an increase in activity during the second half.

We expect 2012 to start slowly and gain momentum through the year as we experience a gradual economic recovery. The events in Europe as well as raw material cost increases promise to keep things interesting.

In laminate, the biggest challenge will be competitive price issues. The opportunity will be creating a draw for your products that have consumers seeking them out.

In our camp, Kronotex and Formica are positioning for ongoing product introductions from a proprietary design team along with a consistent emphasis on quality assurance. Pursuit of these attributes along with scale will allow style and efficiencies, which in turn deliver more value to our customers.

With the recent completion of our $45 million investment in plant and equipment [in Barnwell, S.C.], we are able to produce virtually every product in the spectrum of laminate flooring. I think you will see continued improvements in clarity and surface textures. We will continue to roll out new products to refresh our existing lines as well as gain market share.

It is not time to sit still, though expenditures will be carefully directed. Cost concerns will continue to drive investment in product technology, and the flow of new products to refresh our existing lines as well as gain market share will be an ongoing program for Kronotex/Formica.

 

Kim Holm, president of Mannington Residential

We came into 2011 anticipating a 5% growth but looks like it will be closer to 2%. The category has really become bipolar—either low or upper end products. So we improved our product mix and put our attention on the upper end. As such, we’ve even seen some average price improvement.

In 2012, we feel the category will be up 6% due mostly to a stronger remodeling market since new home sales remain weak.

The challenge is laminate is going up against a lot of competing categories and products. There is an awful lot of stuff on the market, specifically LVT, as well as wood which has come down dramatically in price. People feel they can buy the real thing at the same price as a good laminate. As a result of this competition, profits are challenged. If wood prices go up it should help and they have really compressed laminate prices.

There is not a great deal in technology and investments as there is an abundance of global capacity. Some like Kronotex and Clarion continue to improve to catch up but other than that not much investing is taking place.

Product trends are all about realism. Laminate products, especially from Mannington, continue to get more realistic—from bevels to textures to the overall printing process.

We plan on the staying the course in 2012, starting at Surfaces, with new products and displays. We saw great success with the introduction of Restorations in 2011 and will have additions to that. We also continue to do well with tile looks. Laminate was the second category we introduced the Ultraflex display and had great success so we will continue to push it.

 

Roger Farabee, senior vice president of marketing for Mohawk’s Unlin division

The laminate industry as a whole seems to have touched bottom already and we expect to see the segment rise at a slow, steady pace in 2012 and over the next few years. Although growth is only expected to rise a couple percentage points each year in the near future, projections indicate the increase will be consistent.

Over the past few years, consumers were predominately fixated on price to the exclusion of the many other important considerations that should always appropriately be part of the selection process.

During 2011, confidence began to rise and the buying process started to normalize. Consumers once again began considering more factors than just price. However, as the shopping process normalized, a “new normal” emerged; a strong price/value relationship is now of paramount importance. As the buying process started to normalize, domestic brands such as Mohawk and Quick•Step continued to be a distributor’s/retailer’s best way to meet consumers’ expectations.

To be successful in 2012, retailers need to continue focusing on products that offer a strong value proposition to capture consumer sales. Laminate’s positive price/value story will continue to make it a strong flooring option, especially for the new smarter shopper. Laminate has the lowest installed cost of any hard surface flooring. Coupling this attractive price tag with desirable visuals, durability and virtually maintenance free status makes laminate a profitable part of any successful retailer’s hard surface offering.

The successful laminate brands will definitely need to continue taking a dual-approach during 2012: producing a winning product line and then wrapping it in a comprehensive merchandising program.

Realism will continue to be an important component of the positive value proposition that is now a standard demand made by most consumers. Manufacturers who continue to invest in technology will be in the strongest position to offer this competitive advantage.

Despite the recent economic turbulence, the financial strength of our brands has enabled Mohawk and Quick•Step to continue innovating and launching revolutionary new products and features while still keeping the price within the consumers’ budgets. We plan to continue with this strategy during 2012.

Social media is here to stay and savvy brands will continue to capitalize on this opportunity to reach their consumers in a new way. Brand promotion through social media is not only effective, but in most cases is an economical marketing tool. Successful brands will need to include social media as an important part of their 2012 comprehensive merchandising program and is something we will continue to do.

Mohawk and Quick•Step social media programs help support our retailers most fundamentally by creating buzz on Facebook, Twitter and various blog sites to increase overall brand awareness. Additional plans for 2012 include using social media in creative ways such as by conducting contests, promoting and driving traffic to retail events, or providing professional design instruction.

We have plans for the continued visibility of our designer partners via various social media to further support our retailers’ sales efforts as many consumers are highly influenced by the endorsement of an expert when considering the purchase of a product or service.

As the buying process normalizes even further during 2012, the non-price features will weigh even more heavily during a consumer’s selection process than they did in 2011. Products from Mohawk and Quick•Step which offer such a strong price value proposition, and are wrapped in effective merchandising program, will continue to equip retailers for success in 2012.

 

Randy Merritt, president, and Steve Sieracki, vice president of marketing for Shaw

Merritt: The economic climate continued to create challenges to the industry in 2011. While we were disappointed to realize that the upswing in the market demand was not going to happen this year, we made the necessary adjustments to right-size our business to meet these market conditions.

Sieracki: The hard surface business also continues to be affected by the lack of residential new construction. Laminate, similar to the ceramic market, continues to be challenged by low cost and poor quality imports, which put added pressure on a market that sees the average price per foot continuing to drop.

Merritt: Because of the capital investments, flexibility and responsiveness Shaw has demonstrated in 2011, we will be even more able to react to 2012’s opportunities and challenges with our lean, right-sized structure in all of our areas.

Sieracki: Like all our categories, we continue to invest heavily in [laminate] technology to ensure we are both an innovative and low cost producer with the highest quality products available.

We will continue to focus on building our brand with all audiences, focusing on the consumer, dealer and retail sales associate.

Social media is a new communication outlet that is growing quickly. In the past year alone, Shaw has grown its Facebook audience to more than 70,000 fans. We’re very proud of this accomplishment, and the creative ways we’re incorporating social media into our promotions, such as the “30 Days of HGTV HOME” promotion and our fall “Dream It DO IT promotion.” People receive information quicker, more efficiently and more abundantly than ever before. In 2012, we expect that we’ll continue to see our industry adapt to these new tools by creating more concise messaging and delivering it through the newest and most affective user-friendly digital and print outlets available.

Throughout 2012 you will see a variety of traditional, interactive and social media marketing and public relations strategies created to build the reliable Shaw brand.

Merritt: Our greatest challenge is always creating and implementing the best strategies to reach our customer base. At Shaw, the customer is always our first priority, and our business and marketing approach is designed to insure that we are providing the kind of services, products, value and consistency that our customers, regardless of the channel, have come to expect from us.

 

David Hartman, vice president of sales and marketing, Pergo North America

While 2011 has been a challenging year, Pergo has achieved stronger than anticipated sales. This performance has been driven by the strength of the Pergo brand and through the introduction of innovative, new designs and products.

We successfully introduced Pergo Max at Lowe’s and Pergo Extreme Performance at Home Depot in 2011. Both feature superior wear resistance and lifetime warranties. We anticipate both of these programs to continue to gain traction in 2012. We also plan to refresh our sub-brands and reintroduce our commercial program with new décors.

We will continue to see a challenging economic environment throughout 2012. High unemployment, declining home values and uncertainty about the future of the U.S. and world economies will continue to impact consumer confidence and spending.

Nonetheless, Pergo is anticipating increased sales in 2012. This is driven by the successful product introductions in 2011, planned new programs in 2012 and continued strong consumer demand for the Pergo brand.

In 2011, we advertised in print and interactive websites and plan to do even more advertising in these mediums in 2012. Our branding will continue to be a key differentiator for Pergo. We plan to aggressively market through increased spending, new products and new categories in 2012.

Our biggest challenge continues to be building outstanding value into our products while remaining competitive with many low price and low quality suppliers.

We expect to see continued investments in new designs and technologies. We expect to see more refined rustics, handscraped decors, realistic oaks, cherry and maple decors as well as more tiles.

Pergo will continue to strongly invest into it brand and relevant new product innovations, by offering the leading brand, relevant messaging and features and superior design at a great value to our customers and consumers.