Following on the heels of its purchase by Pfleiderer, the Pergo brand has risen to the No. 1 position in flooring sales in the United States.

A DL press and manufacturing line added at the Garner, NC, facility in 2005 increased capacity and facilitated the manufacture of value-added products.

Bringing laminate flooring makers Pergo and Uniboard together under the Pergo banner has generated cost savings, led to a broadened product range and landed the combined operation in a top spot among U.S. players, company officials say.

German engineered wood and laminates company Pfleiderer AG, which had earlier bought Canadian panel board and laminates maker Uniboard, bought Swedish Pergo in early 2007 for $386 million. “The North American Flooring Division, which consists of Pergo and Uniboard surfaces, will be consolidated and go to market under the Pergo brand and under the name Pergo LLC,” says George R. Kelley, division president.

The flagship brand will still be Pergo, “our top of the line product,” he says. But the Uniboard products, including those for the private label market, will offer entrée into the entry-level price range that Pergo never targeted before.

“Pergo’s only had one brand,” Kelley says. “You didn’t want to compromise the brand with these segments, where price point is a factor.” Consolidation, he says, “has allowed us to aggressively pursue more segments.”

In addition, consolidation gives Pergo access to Uniboard’s coreboard manufacturing. “While we still buy some of our HDF on the open market, we buy the majority from our sister company, Uniboard Panel in Canada,” Kelley says.

Pergo is headquartered in Raleigh, NC, with flooring manufacturing plants in Laval, Canada, and Garner, NC, and a plant making laminate and wood mouldings in Garner.

Atop the Heap

The merged company commands 20 percent of the U.S. laminate flooring market, says Pfleiderer CEO Hans Overdiek, which Pergo Director of Marketing David Small says puts it atop the sales heap in the United States.

The company as a whole does not release sales figures. In 2006, when the companies were still separate, Floor Focus magazine’s May 2007 Annual Report estimated Pergo’s annual U.S. sales at $221 million and Uniboard’s at $110 million. It gave Mohawk, which acquired Unilin and its Quick-Step flooring in 2005, sales of $285 million, and Shaw, $229 million. (These figures included private label sales, where Pergo had a very limited presence.)

Currently, market analyst Keith Hughes of SunTrust Robinson Humphrey ranks Pergo No. 1, Mohawk No. 2 and Shaw No. 3 in a U.S. industry that he says was once highly fragmented, but now increasingly dominated by the big three

“I think we’ve still got the No. 1 position,” Kelley says in agreement with part of Hughes’ assessment. But, he adds, “I think the field is a bit larger than just the three of us. Some competition from Europe. Some new companies started production in the U.S., and certainly we’ve got to be very conscious of the Asian and Chinese companies putting product in the U.S.”

Last year, he says, the consolidated Pergo managed to wring some growth out of the flooring market, which slipped overall as the housing market plummeted. “We gained volume in the actual square footage shipped [over the 2006 combined total for Pergo and Uniboard]. We are very pleased that this was accomplished in a very soft flooring and housing market,” he says.

Pfleiderer CEO Overdiek says he expects the company to grow more market share this year. He is looking for the 20 percent share to rise to 22 or 23 percent. “That’s our challenge,” agrees Kelley.

Analyst Hughes thinks the “big three” are where they are partly because their parent companies have the ability to buy other companies, they can achieve vertical integration, Pergo has such name recognition and Mohawk and Shaw have long experience selling directly to retailers.

“I think those three are going to continue to lengthen their lead over the smaller players,” he says.

Pergo’s laminate flooring lines are available in a wide range of color tones and patterns, to suit any room in the house.

Market Challenges

The present market presents a major challenge, Kelley says. “Obviously, everybody knows the situation in the housing market. I keep calling it the perfect storm. A slump in housing; consumer confidence is down; the cost of materials is up. The price of gas and energy has gone up dramatically.”

Because they are mainly used in renovation and repair, the laminate flooring market has not been as affected as carpet and hardwood. Even so, says Hughes, “it still stinks. There’s been a lot of pressure.”

Floor Focus estimated that laminate flooring’s market share held steady in 2006 at 5.6 percent, while carpet and hardwoods slipped as the housing slump began.

Pergo is responding to the challenge with two new product lines, a streamlining of sales and other operations resulting from the merger, and last fall’s introduction of a new marketing campaign.

In sounding an encouraging note in late January, Pfleiderer CEO Overdiek announced $50 million in orders that he said exceeded orders at that time in 2007. Home Depot was responsible for most of that, Kelley says.

Home improvement centers and other “big boxes” like wholesale clubs make up some 56 percent of industry-wide laminate sales, says Marketing Director Small. At Pergo, he says, “the majority of our sales come from the big boxes.”

Remaining sales for the laminates industry are through specialty retailers, an avenue that Hughes thinks is growing because the retailer, “who was initially afraid of all their products, has now warmed up to it.”

There’s been a slow progression towards high-end products, he explains. “The products they put out now are light years ahead of what you would have got five years ago.”

In May, Pergo will introduce its Elegant Expressions, selling retail at $3.99 and up per square foot, to the specialty retailer market. The high-end product “more closely emulates a piece of hardwood” than any other laminates, Small says. Planks come in standard 8-inch widths, but also 5 inch and 3 inch. The register embossed products, including those with a hand-scraped appearance, mimic woods like Brazilian cherry, mahogany, and bamboo.

The look and feel of oak are replicated here in Pergo’s Brockton Oak design, part of the high-end Elegant Expressions Collection.

At 10mm thickness, the product is “thicker, more stable,” he says, and an improved aluminum oxide layer gives it increased scratch resistance. A lifetime warranty will be offered to the original purchaser.

At Home Depot, Presto Prestige debuted this spring, aimed at the do-it-yourselfer. An attached underlayment guards against noise and provides walking and standing comfort, Small says. “Pergo Prestige offers value-added features at a premium price point,” he says.

Pergo also is repositioning its heretofore-residential Pergo Select for the commercial market. Its high-pressure laminate surface “gives it superior wearability,” Small says. “As commercial becomes more important to the category, we’ll pursue it.”

Pergo, like other laminate flooring manufacturers, will continue to have “a bit of a struggle” before economic conditions start to return to normal, Kelley feels. “We’re probably in about the 18th month, in this industry, of a recession. Certainly the market is going to remain pretty flat through 2008.”

But Asian governments’ subsidies to laminate flooring manufacturers have been reduced dramatically, so some of the competing products coming from there “have a different cost structure than from several years ago,” Kelley says. And among U.S. consumers, he adds,”There’s still a very good pent-up demand out there.”

There is light ahead, he says, just not immediately. “We are hoping that the recent moves by the Federal Reserve and the upcoming election will help stimulate the economy by the fourth quarter, but realistically we don’t expect real improvement until early 2009."