Executive forecast: Things are looking up for laminate category

Home Inside FCNews Executive forecast: Things are looking up for laminate category

By Louis Iannaco 

Volume 27/number 15; December 3/10, 2012

After a rough few years, it looks as if the laminate segment may be on its way back to better, more profitable times. At least that’s the way industry executives believe, with one chief reason being the positive signs coming from builder business. Increases in the demand for higher end goods are also contributing to a more optimistic outlook for next year.

Roger Farabee

Vice president of marketing, Unilin

The industry could be up 2% to 3% for the year. We always expect to outpace it.

We believe we’re doing a better job with styling, with innovation and with quality. We hear consistent issues with quality—it’s not easy to make products that perform well.

When the boon was going on, people were concerned about appealing to another buyer, so they were buying more middle of the road product.

Now they are concerned with their own tastes. We have a number of character looks in our brands at premium price points. People are staying in their homes longer, so they’re remodeling.

We can see this trend in multi-family activity. LVT has been driving a lot of it, but properly maintained, laminate will hold up [longer]. It’s a better value because it will perform over time.

There is more value-oriented construction going on, so we’re also seeing more of the larger builders starting to experiment with laminate.

It’s about remodeling. There is plenty of pent-up demand, and if the economy is halfway decent, and there’s more security about jobs, more people will remodel and laminate will benefit.

We’re not expecting it to grow at the same rate as ceramic and wood, but laminate will get back on a growth pattern we haven’t seen in the last few years. The biggest concern is whether there is some kind of agreement allowing everyone to feel comfort- able so the economy can continue to grow versus going back into a recession. I believe this will happen.

With Mohawk, we’re introducing more flexible display systems that hold between seven to 15 large panels. So you can show a lot of one SKU or put multiple SKUs on a panel. It’s cost-effective, and allows you to mix products from multiple categories. It also has the ability to customize easily and cost effectively.

On the Quick•Step side, we continue our partnership with designer Erinn Valencich and have been doing big retail events around the country. We did one at Avalon (FCNews, Nov. 5/12) that was so successful they want her back this spring. People line up for hours to get a few minutes with her to get ideas.

We’re also doing big, high profile projects with her, such as a hotel casino in Las Vegas. She also has a retail store in West Hollywood, and Quick•Step is featured in it. She is becoming a wonderful ambassador for us.

George Kelley

President and CEO, Kronotex USA

2012 was a year of ups and downs: The first half saw business begin to improve and create optimism; however by summer raw material prices increased and order levels declined. The end result for Kronotex was a year where the top line met expectations but the overall mix and costs negatively impacted our bottom line.

Kronotex is forecasting an overall increase in demand in the laminate category. We expect to see consumers moving upstream from the low price points and seeking more choice in the mid to upper end of the product offerings. This may mean less overall square footage, but a more healthy mix of products that carry better margins.

Kronotex has been one of the few manufacturers that actually invested in new technology over the past few years. Our new press and flooring lines allow us to produce a full range of products from the basic 7mm to the full feature 12mm with the four-sided edge beveling and textures that will give consumers more choices as they look to tackle projects they have put off over the last few years. There is a pent-up demand for laminate and consumers are going to find affordable ways to improve their homes.

We don’t see the domestic producers investing in technology in 2013. Kronotex continues to invest in social media to create an awareness that Kronotex is a Made in America producer and to promote the Formica Flooring brand to the next generation of consumers.

We’re taking on projects to control our costs; however the biggest wildcard will be the continued pressure on raw material costs and our ability to reflect our true cost to produce in the price of the product. Laminate has suffered over the last five years of true deflation in that prices have declined while costs continue to rise.

Our biggest challenges will be returning pricing discipline to this category as raw material costs are expected to remain under pressure in 2013. The fact remains, a significant share of the overall laminate category is imported from China and Europe. They, too, have rising raw material, labor and shipping costs that will have to be reflected in their prices.

The domestic laminate industry must defend its Made in America pedigree. We have the service levels and full range of product offerings that will make us more attractive for all retailers to look domestic first.

The laminate industry has a lot to offer consumers—the product spectrum has improved and the quality and realism of decors has improved dramatically. The “death of laminate” is greatly exaggerated. We have an industry that has maintained share and volumes during the economic doldrums. We do have to do a better job of informing consumers this “isn’t your grandmother’s laminate” and that the category has a vibrant mix of products to offer them as they look at their flooring needs in 2013 and beyond.

Derek Welbourn

CEO, Inhaus Surfaces

2012 has been good for us and the industry, in general. Demand for laminate has clearly increased, especially for better goods.

We’re optimists, and expected a stronger 2012. We’re in the camp that believes in a long, slow, steady recovery. However, we didn’t see the increasing demand for mid- to high-end goods.

This trend should continue, but will require continued leading edge focus on design. We must create designs that offer something different and appealing. Competitors are quick to copy, so a continuous focus on design development is crucial.

There will be continued stability and slow economic growth. This can feel like rapid growth as many of our customers have survived while their competitors have not, meaning they are growing from increased consumer spending and taking market share. Some customers have experienced the best year in their history.

Laminate will increase in square footage but not as rapidly in dollars as there is price pressure with the continued surplus of capacity. Laminate’s growth continues at the low end. It’s one of the most competitive categories that offer good value. Where else can you get a $.68 square foot floor that looks good and performs for years?

Laminate also continues to push the limits of design. For example, reclaimed wood and hand-scraped looks are more authentic than ever and continue to offer excellent performance and easy installation—the corner- stones of the category. Laminate has limited exposure to commercial due to poor performance when exposed to heavy moisture.

Our strongest selling SKUs have been high-end hand-scraped and wire brushed looks. We started to see this in 2011 and it became a meaningful part of the business in 2012.

In 2013, we are targeting a reclaimed wood line in multiple widths and lengths. New designs, colors and embossed in register textures have been created to meet new trends. We’ve invested in new equipment to make these products. We’re continually investing in equipment and technology to help lower costs. If we lose focus on cost, we’ll be out of business. This cost- conscious philosophy has always been a key part of our success.

In general, the category continues to invest in technology. New pressing, printing and finishing technology happen annually and 2013 will be no exception. In 2013, we will complete our 14-month, $25 million investment in a proprietary finishing technology that will allow us to create some unique looks.

Advertising and marketing are important for companies with consumer focused brands. We invest in this as well, as Inhaus continues to become a staple laminate brand.

But our chief investments always lean toward production technology. It creates a product advantage and value for our customers.

Continued focus on cost will allow us to achieve profitability even with challenging prices. A challenge all leading producers face is keeping their plants full. A somewhat unfortunate side effect and necessary evil to achieve efficiency and cost effective production is to have facilities of an immense scale. It is a constant challenge to keep them operating at a high utilization rate.

Game changing technology that may affect a variety of industries is high-speed digital printing. It can potentially offer flexibility in design as well as cost effective production. All the leading laminate producers have looked at this and some have made investments. Although there doesn’t appear to be one obvious path for implementing it, most feel it could have a game changing aspect to it.

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