Laminate Update 2010 - August/September 2010

By Jessica Chevalier

Despite the concern that the laminate industry would see significant loss in 2010, the year is bringing an uptick in marketshare for the category. In 2008, laminates accounted for slightly more than 5.5% of the flooring market and around 6% in 2009. In 2010, it is anticipated that laminate flooring will take over 6% of total flooring worth approximately $1.026 billion, according to Market Insights/Torcivia.

The mindset of the recession customer accounts for a part of laminate’s growth. While wood has an average mill price of $2.30 per square foot, laminate averages around $1.25. For builders, contractors and consumers who are seeking a beautiful look at a value price, durable, stylish laminate fits the bill.

TRENDS IN LAMINATE
Innovation on the style side of the laminate category continues to make strides. Nearly 80% of all laminate sold is wood-look, and laminate’s ability to emulate exotic wood visuals is a boon. Woods that would be unaffordable in natural product or those that are in short supply are as simple to create in laminate as a standard oak or pine. A number of manufacturers are capitalizing on this opportunity with exotic offerings such as Mannington’s Tasmanian Blackwood and Wilsonart’s Styles collection that offers the look of wood grains from Hawaiian, African and Honduran species.

Distressed and handscraped products remain the highest in demand for the laminate category, and the industry continues to make innovations toward greater realism in this arena. Mohawk introduced its GenuEdge technology, which allows the visual to roll over the side of the plank to produce a look more akin to authentic hardwood, while Faus debuted its convex texture—the graining visual remains raised while the surrounding area is pressed—that emulates an older, well-used wood floor.

Worldwide, there are approximately 100 firms that produce laminate flooring; nine of these manufacture or are building manufacturing facilities within the U.S. Some manufacturers have vertically integrated their production by incorporating the manufacture of coreboard into their process. Eighty-eight percent of the cost of manufacturing laminate flooring is material cost, so those manufacturers who make their own coreboard have a distinct advantage. Two of the top five U.S. manufacturers, Mohawk and Clarion, produce their own coreboard. Pergo sources its board from Uniboard, which is owned by Pergo’s parent company, Pleiderer. Shaw and Kronotex buy their coreboard from a manufacturer that is not under the umbrella of their organization.

LAMINATE PRICING
Currently, 46% of the laminates on the market retail for under $2.00 a square foot; this represents the largest portion of the market. The $4.00 to $4.99 range makes up only 2% of the total laminate market. Laminates that cost over $5.00 per square foot account for less than 1% of sales. While some within the industry believe that high end laminate is becoming more widely accepted as a sophisticated floorcovering choice, it remains to be seen whether the mass of consumers will choose wood look laminate over real wood if the two are offered at comparable price points.

Ultimately, much of the success of the laminate category depends on consumer education. As the price between hardwood and laminate tightens, it becomes more critical that consumers understand the performance advantages of the laminate category. While consumers are increasingly using the Internet to educate themselves before hitting the store, it is ever important that retailers have employees who are knowledgeable of the advantages of the category. Aaron Pirner of Cap Carpets in Wichita, Kansas notes that the majority of consumers enter the retail store knowing whether they want laminate or the authentic product. But it is still key for retailers and their sales teams to stress that the best option for a home is dependent upon the resident’s lifestyle. Laminate is a much more sensible choice than hardwood for the family with two little boys and a golden retriever, one manufacturer notes.

MANUFACTURER HIGHLIGHTS
Mohawk Industries sells laminate flooring in the U.S. under the Mohawk, Columbia and Quick-Step brand names, with Quick-Step serving as the most fashion-forward, European-inspired line. Over 90% of Mohawk’s U.S.-sold laminate products are manufactured at the Thomasville, North Carolina plant. The company’s coreboard is manufactured in Mount Gilead, North Carolina, only 30 minutes from Thomasville.

Mohawk Industries unveiled its new GenuEdge technology at February’s Surfaces show. GenuEdge, which is employed on both Mohawk and Quick-Step products, uses embossed in-register technology and rolls the paper design over the edge of the plank to create a more authentic hardwood visual. This process differs from that of other manufacturers who cut bevels to achieve a wood-look edge.

Mohawk believes that customers are less concerned with the sound of laminate than they were ten years ago, when the category was still relatively new to the U.S. market. The company attributes this to the fact that the hollow sound has been reduced by improved technology and better underlayments, along with a greater understanding of how to use combinations of laminate and underlayment together to produce the greatest acoustic effect. Additionally, as products like hardwood can now be floated rather than nailed or glued, people are simply more accustomed to flooring that produces a different sound.

Regarding style, Mohawk reports that recession customers are choosing safer, more conservative looks, especially those that offer a good price to value relationship. Ultimately, the company expects that customers will return to their standard tastes as the economy brightens. Currently, character looks, such as wirebrushed effects or scraped distressing, are selling best.

Mohawk is looking towards 2011 or 2012 for strong economic recovery within the laminate market. Overall, they expect that the industry may eke out a small amount of growth in 2010 but expect significant recovery will come with clear signs of job growth across the country.

Mannington rolled out its new Ultraflex display system for laminates this year and, thus far, has sold more Ultraflex units in 2010 than it had sold of the old displays in the last four years combined. The company’s Revolutions series is experiencing strong success with its Time Crafted and Diamond Bay collections as well. Mannington believes that styling and color are always the most significant considerations to the buyer. For that reason, they are continuing to innovate with embossed in-register technology to achieve more sophisticated and authentic visuals.

Since Mannington produces all hard surface products under the umbrella of its corporation, the laminate category works directly with hardwood and tile to stay on the cutting edge of style. For tile, this means emulating the narrow grout lines and rectified looks that are so popular at present. Mannington’s Sedona, an Arizona inspired line, and Portofino, a slate look, offer these styling features.

The bulk of Mannington’s business is to specialty retailers across the U.S. and Canada. The company uses distributors to get its products to market, where they retail for between $3.00 and $4.50 a square foot.

Unlike many laminate manufacturers, Mannington does 70% to 75% of its business at the high end of the laminate market. The company believes that, as a whole, the laminate category needs to play up its strengths, including its ease of installation, wear resistance and beauty, to compete most effectively in the market. In addition, the category needs to focus on meaningful, relevant, consumer-oriented innovation. Mannington is seeing recovery across all hard surface categories but characterizes the recovery as fragile and the growth as sporadic.

Tarkett introduced its Trends line to dealers at Surfaces 2010. The Trends collection, a wood-look line with beveled edges and narrow widths, offers facades that are in vogue in the current marketplace. The company plans to update the line annually and currently offers eight SKUs in two designs. Tarkett hopes this line will provide its independent retailers—the majority of the company’s business—with a stylish edge in a competitive market. The Trends line is offered at an economical price point.

Tarkett sees the current laminate customer moving toward looks that are earthy and natural, bamboo and seagrass visuals for instance. The company notes a move away from looks they characterize as a country feel.

In addition to independent retailers, Tarkett sells to Menards. It uses distributors to get products to independent retailers and sells directly to its big box accounts. Some of the company’s laminates carry an AC 4 commercial rated wearlayer, suitable for commercial applications with moderate traffic.

Clarion produces many of Tarkett’s laminate products. The company also sources flooring from its own facilities in Europe and Russia as well as from suppliers in China. Clarion reports that it is not seeing significant recovery in the market as of yet. The firm is hoping for substantial improvement in 2011, as those who are currently buying new homes begin renovations.

Armstrong has been focused on adding new premium products to its line. The company’s Rustics Premium New England Long Plank emulates the look of single-plank reclaimed hardwood. The product is handscraped with an oiled finish and features board lengths of over seven feet. The floor has Lock & Fold technology and carries a 30-year residential and five-year light commercial warranty.

Rustics Premium is representative of Armstrong’s approach in creating premium laminates that offer value, when compared to their hardwood counterparts. The company patterns its styling after popular hardwood looks. In its Bruce line, the company introduced Sapele Long Plank, another seven-foot handscraped, that emulates an exotic look with graining and texture that would be difficult and costly to achieve in real wood.

Armstrong also continues to see success with tile visuals. The new Weathered Way collection replicates the look of tumbled stone in a random block format. The line is available in four colors.

Armstrong sells its products through two-step distribution to specialty retailers and big boxes. In addition, the company offers a commercial laminate collection with an AC 5 wearlayer. The company believes that the market is shaky at present and notes that consumers are trending towards the lower end of the market in an effort to save money.

In late July, Shaw added the Left Bank style as a companion product to its Provincial collection, which was introduced in January. Left Bank, offered in three colors, is a 3” width that can be paired with the collection’s standard 5” pieces in a mixed installation or used alone. The company notes that narrowing and widening from standard widths is a popular trend at present.

Shaw notes a warming of the color palette in laminates. Though greys and beige tones are popular, golds are showing growth. In addition, beveled edge and base grade products are selling well. Shaw’s laminate products retail for between $1.00 and $4.00.

Shaw believes that the growth of the resilient category—which is especially good for wet areas—has put pressure on the laminate category. In addition, as the cost of hardwood has come down, especially in home centers, laminates have taken a bit of a hit. However, the company believes that the market has seen its bottom and expects a slow, gradual recovery.

Kronotex has seen success with its Quintessa collection. The product, six-foot planks in wood looks, was renewed from its first introduction. Launched in October 2009, the company’s Messina collection, with Vibrant Finish and a Välinge 5G locking system, is producing consistent sales as well. Messina is offered in eight wood looks.

Kronotex believes that the laminate market is slowly sloughing off its value brand image and becoming more widely accepted as a sophisticated product choice. The company sees the market trending upward, though spring sales were not as robust as was predicted. It anticipates full market recovery in mid to late 2011.

Kronotex notes that four-sided beveled edge products are developing interest at the retail level. The company sees its strongest sales in natural oak and traditional cherry designs in single, two and three plank formats.

The company’s business is a mix of branded product through distribution to specialty retail and private label programs. Kronotex products retail from $0.78 to $3.99 per square foot.

Faus recently completed a $30 million dollar expansion of its plant in Calhoun, Georgia. This expansion enables the firm to produce over 90% of its U.S.-sold product domestically. In addition, the company reworked its entire product line, consolidating from 83 to 49 SKUs, 17 of which are new decors. The newest of these products was introduced this spring. Faus plans to introduce an additional five to seven SKUs in September, including another color option for its Frame Floor, which features wood and concrete visuals on the same plank. The company will introduce unique wood visuals as well. Faus also rolled back pricing on its collections from 13% to 26%.

The company’s new display towers were put into use in late 2009. The four individual towers can be displayed side to side, back to back, or split up to accommodate a showroom’s needs. In addition, the towers have an abbreviated installation time, and updates are achieved quickly as well.

This year, Faus debuted its new patent-pending convex texture technology. Unlike embossed in-register technology, which aligns texture to wood grain visuals, convex texture presses the plank anywhere there is not a wood grain visual. The convex texture look mimics that of an older, well-used hardwood.

Ultimately, Faus believes that the key to growing the laminate category depends upon “selling” the consumer—specifically, showing them why laminate may be the best flooring option for their lifestyle. Often those in the laminate business mistakenly assume that customers are knowledgeable about the flooring type. That is not always the case, so increased education of retail store employees is key to growing the category.

EarthWerks reports seeing glimpses of economic recovery. The company says that demand is up, though it ebbs from week to week. EarthWerks notes that while industry professionals get excited about advances in locking systems and underlayments, for the consumer it’s all about styling. And for EarthWerks’s Oklahoma, Arkansas, Louisiana, and Texas customers, the style in demand is distressed. To answer that call and to compete with hardwood, EarthWerks seeks to make the most authentic product possible—in part by minimizing design repeats to every seven to 22 boards in most collections. This August, EarthWerks will introduce a new handscraped product as well as a product with more of an oiled-type finish. At present, EarthWerks offers approximately 50 SKUs that retail for between $1.39 and $2.99 per square foot.

EarthWerks notes that differentiation is still the most significant battle for laminate flooring. Many consumers reduce all laminate flooring to the lowest common denominator—the $0.79 per square foot unattractive and unsophisticated product. When laminate flooring was first introduced to the U.S. consumer, EarthWerks observed that the market was hourglass-shaped. Low-cost laminate sold well, as did high end product. Mid-range laminate flooring fared poorly. Currently, however, EarthWerks sees that market as pear shaped. Low-cost is thriving; mid-range is strong, but high-end laminate flooring is suffering. This is due, in part, to the decreased cost of hardwood, specifically engineered hardwood.

Though Tarkett sold its 50% share of Clarion Industries in April 2009, Clarion continues to manufacturer laminate flooring for its former shareholder as well as for a number of other industry players. Clarion sells no flooring under its own brand name. The bulk of the company’s product is in higher volume designs. Clarion produces its own coreboard at the Clarion, Pennsylvania site.

Clarion sells laminate flooring through three different channels: big boxes, distributors and private labeled to major flooring manufacturers. At present, the company sees the price-value relationship becoming more important to the consumer, noting that the upper price points are under pressure in the current economy. Clarion anticipates that the market will see solid recovery in late 2011 and early 2012.

At the time of last year’s laminate update, Alloc was in the process of implementing a new distribution model. The company now utilizes key regional distributors, who import product directly from the company’s Norwegian headquarters and other manufacturing locations. These key distributors then supply smaller distributors with Alloc’s laminate flooring products. In the first six months of 2010, Alloc saw 30% growth in sales and volume over last year’s numbers.

In early 2011, Alloc plans to introduce its new high-pressure Prestige line, which will feature a metal drop lock on the long sides and 5G-S locking systems on the end joints. Prestige will be offered in 5” hardwood looks and 12” tile looks, in addition to standard wood looks.

Style-wise, Alloc notes that there is a trend toward light, rustic grey tones that is trying to take hold within the U.S. market. Alloc predicts that the trend, which is already established in Europe, will do very well in the commercial market.

Alloc sells both high-pressure and direct-pressure laminates that retail for between $1.99 and $4.99 per square foot. The company’s Original line—a high pressure line with a metal locking system and attached pad—outsells all other products in both dollars and volume. Alloc serves both the residential and commercial markets and believes that those companies that continue to innovate and produce quality products will help the laminate category gain marketshare.

Home Legend recently introduced its Modern Retreat Collection, four SKUs with 5 ½” widths and attached 2 mm backing. The collection is AC 4 rated and features a Uniclic glueless system as well as recycled content. In addition, the company also enhanced its piano finish line to achieve AC 4 rating. Home Legend is working on long board formats at present and hopes to introduce these looks at Surfaces.

In June, Home Legend moved its corporate offices from Calhoun, Georgia to Adairsville, Georgia. The company sells direct to floorcovering dealers as well as to big boxes. Home Legend laminate flooring products retail for between $1.00 and $6.00 per square foot. The company sees future growth for laminates in the commercial sector, and with its AC 4 rated products, Home Legend is poised to make gains in this market.

Pergo is seeing activity in the premium and value-branded arms of its retail market. The company has products distributed across the value chain—a strategy Pergo feels is key in a difficult economy. Pergo believes that the recession has provided laminate manufacturers with opportunity on the commercial side of the market. To that end, in 2009 the company launched Pergo Commercial, which targets the specialty retail market, and Pergo Pro, which is for contractors.

On the premium retail end of its market, the company recently introduced three new refined rustic decors to its Elegant Expressions line: Reclaimed, Renaissance and Fleming Oak. The line offers a lifetime residential warranty and multi-layer embossed in-register texturing.

Pergo invented laminate flooring in 1977 and brought the product to the U.S. market in 1994. The company believes that the category will see modest growth in 2010 and notes that there is a tremendous amount of overcapacity in the market at present. However, as builders and architects are seeking economical solutions due to the downturn, Pergo believes there is significant opportunity for laminates to make in-roads in the commercial market.

Robina sells through traditional distribution channels to independent retailers across the United States. The company has formed new partnerships for distribution with The Master’s Craft and Wood Pro and plans to announce additional distribution partnerships shortly.

Robina is planning a launch this fall, which will include both products and green initiatives. Robina manufactures its own coreboard and notes that wood looks are its strongest sellers at present.

At press time, Wilsonart International announced that it will discontinue its Wilsonart Flooring product line and close its Temple, Texas manufacturing facility on October 29. A unit of Illinois Tool Works, Wilsonart has been producing high pressure laminate flooring, which caters to the high end of the market, for 14 years. The company’s products are the only high pressure laminate flooring still produced in the United States.

Ten years ago, Wilsonart’s annual profits were $130 million, and it was the second largest player in the laminate market, behind Pergo. The company has had a tough time over the last five years, however, as it has lost share to direct pressure products and the commodity side of the market.

In October 2009, the company restructured, cutting 10% of its staff. Wilsonart will cease all business operations on December 3. The shut-down will affect approximately 50 full-time employees around the country.

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