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Laminate: State of the industry

Recovery mimicking economy: Slow, steady

By Matthew Spieler

Volume 26/Number 24; April 15/22, 2013

With authentic visuals and textures, such as those in Mannington’s Restoration Collection, coupled with great performance and ease of installation, manufacturers feel laminate is in position to gain share as the economy recovers.

Like many industries and flooring categories in particular, the laminate sector was hit hard by the recession. But executives are quick to note the category’s decline was really no worse than what others experienced. In fact, many will note laminate maintained its overall market share and as the economy slowly improves they see the category regaining traction, with overall growth ranging from a minimal 1% to a modest 5%

Bill Dearing, president of the North American Laminate Flooring Association (NALFA), pointed out, “There was only a decline in the sense the entire building material business was off. Yes, there is competitive pressure but certainly not a ‘decline.’ And as overall business improves, so will laminate.” 

Roger Farabee, senior vice president of marketing for Mohawk’s Unilin division, noted, “We believe the laminate industry maintained its market share during 2012 and it looks as if the industry will do the same in 2013. Overall, the first quarter continued along the same slightly upward trajectory in 2012 and so far this year looks like the industry will experience the same type of growth. This may be attributed to the entire hard surface category continuing to take share.”

Dan Natkin, Mannington’s director of wood and laminate, expressed a positive outlook. “We are firmly on the road to recovery. I wouldn’t say the recovery is like a hockey stick, and I don’t expect it to be, as laminate is now a mature category so the growth curve will be softer.”

Milton Goodwin, Armstrong’s vice president of wood and laminate products, believes, “We’ve seen the bottom and are in a slight improvement mode.  I don’t see it growing in the dramatic way like LVT is at the moment, but I do see modest growth in laminate for the rest of the year.”

And Kevin Thompson, category manager for Shaw laminate, thinks the segment has “one foot on the road to recovery and one still in the ditch, but we can see the path to the road. Recovery at retail will certainly get it back on the road, and the continued rising hardwood prices could possibly sway customers toward laminate.”

Goodwin added one reason many of the top quality companies are again seeing positive returns within laminate may be attributed to many of the companies that were flooding the market with low quality products have exited the market for various reasons. Some simply left because of the economy, but there has also been some consolidation and a number of Chinese companies shifted their focus to LVT.

Natkin feels part of the turnaround should also be credited to the specialty dealer “who just got tired of fighting the 49¢ and 69¢ products. Many came to the conclusion they can’t make any real money at that level and started to concentrate on the better-made products. That’s why Mannington feels that since 2010 we’ve been able to pick up market share at the specialty level as that is where our focus has always been.”

One of the main competitors to laminate has been the increasingly popular LVT, but Natkin feels the love affair will be like the one with laminate. “You will be seeing huge growth the first few years and more and more suppliers entering the fray. Eventually, there will be a shake out with the cheap stuff going to the boxes and the upper end goods being sold by specialty retailers.”

The one difference he believes is “it will happen much quicker with LVT than it did with laminate. Remember, it took a good 10 years before everyone started jumping into laminate, and that hasn’t been the case with LVT, so the fallout should happen quicker.”

Regarding the LVT competition, Thompson said, “Dollar for dollar, laminate is still one of the best values in the flooring industry. We are seeing excitement and growing demand for LVT, and while we do offer both categories, as stated before, with the performance and visual appeal of laminate, it is still a better value.”

As such, he added, “We are re-educating our sales force on that story to continue building excitement for the laminate category.”

Challenges

While LVT continues to be a challenge to laminate, manufacturers point to a number of areas that continue to plague the category. Two of the main issues are imports and rising raw material prices.

“Chinese imports created a more challenging environment for domestic manufacturers a couple of years ago and will most likely continue to do so in 2013,” Farabee explained. “How-ever, one very important point to consider is the Chinese presence will most likely continue to revolve predominately around price. This gives domestic manufacturers the opportunity to lead in the other product attributes important to consumers.”

He noted companies such as Unilin’s Quick•Step, for example, that don’t play to the low-end, “offer the consumer the industry’s best designs; a superior visual; texture; cutting-edge technology and innovation; consistent, certified quality; excellent service and availability, and substantial warranties, all at a price realistic in today’s economy. As the buying process continues normalizing through 2013 and beyond, these non-price features will continue weighing even more heavily during the consumer’s selection process.”

Natkin said not only imports from China pose a challenge, but those from Europe, as well. “As the Euro has gotten weaker, European companies are once again coming to the U.S. Their factories dwarf those here and they need to keep them running, and right now the U.S. is a more attractive market for them.”

On the raw materials side, Farabee noted, “We have seen increases in resin, paper, and HDF pricing due to supply constraints in North America and anticipate more in the future. Raw material costs are expected to continue to negatively affect the industry’s price points.”

Natkin agreed. “Raw materials are not getting any cheaper—similar to wood but not to the same scale, as laminate can use more variety.”

Moisture issues

While imports and rising prices continue to put pressure on the category, Armstrong’s Goodwin feels there is “only one real challenge” facing the category: Moisture. “And until we can figure out a way to make laminate more resistant, we’ll continue to take it on the chin from LVT. Laminate is great looking and more realistic than LVT, it is more structurally stable and easier to install, but LVT has the added appeal of being moisture resistant—whether it is real or imagined.”

He said when it comes to the moisture issue and laminate, “No one has been able to offer an efficient solution as of yet. Armstrong and the rest of the industry continue to work on a resolution but it has remained elusive. We’ve seen some interesting attempts to solve the problem at trade shows around the world but I haven’t seen anything immediate on the horizon.”

Despite this challenge, Goodwin said a solution “is coming; it will be figured out. It has been difficult for the industry to spend money over the last five years due to the unhealthy business climate. That’s not to say nothing has been done—the products of today are better looking and easier to install than the ones from a few years ago—but as things get better you’re going to see more research and development dollars going toward solving the moisture issue.”

Despite laminate’s challenges, he said, “laminate is still a great product, and there are plenty of people who love it and want to purchase it. It’s a product that’s here to stay—it’s part of the landscape.”

Shaw’s Thompson agreed, adding, “The bar is continuing to be raised on the overall look, style and design. Given our backwards integration into paper saturation and overlay production, we are always working on new structural attributes and innovations to improve performance. We are taking a non-traditional approach to style and design that is really paying off for us.”

Ultimately, he feels 2013 “will be a year of the beginning of recovery at retail which will certainly benefit the category.”

Laminate’s positive price/ value story will continue to make it a strong flooring option, Farabee added, “especially for today’s consumers who are seeking products that offer a good combination of style and value. Laminate is still one of the most affordable products on an in-stalled basis and has a strong green story that is impossible to beat at its price point. Coupling this with laminate’s desirable visuals, durability and virtually maintenance free status makes it a profitable part of any successful retailer’s hard surface offering.”

The laminate industry as a whole seems to have stabilized, he concluded, “and we expect to see the segment rise at a slow, steady pace in 2013 and over the next few years.”