The following remarks were delivered by Perstorp Flooring
CEO Lars von Kantzow at a seminar for retailers at the World Floor Covering
Associations annual trade show, Surfaces
LARS VAN KANTZOW
CEO, PERSTORP FLOORING
SURFACES 97 SEMINAR PROGRAM
Las Vegas, Nevada
February 22, 1997
Ladies and gentlemen, good morning.
Have you ever looked up the word "flooring" in the dictionary?
If you did, you would find the following definition: "1. a floor
or floors" ... well thats helpful, isnt it? ... and
"2. material for making a floor." How dull! No wonder some
people say "flooring is boring!"
But if you ask anyone at Perstorp Flooring to define flooring, the
answer youre likely to get is "an exciting, dynamic industry,
ripe for innovation and change."
This difference is what sets Perstorp Flooring apart, because we are
quite literally redefining the industry we all know as flooring.
Since this is a retailing seminar, you may be asking yourselves what
this has to do with retailing and how flooring will be sold in the future.
Well, I believe that the Perstorp Flooring definition of flooring has
everything to do with the future of this great industry.
Because, ladies and gentlemen, just when you thought you had this industry
all figured out ... just when you thought you knew the rules of the
game ... were changing them. And that will dramatically affect
the way you do business, as well.
The flooring industry today is in incredible turmoil. Were seeing
tremendous changes occur. Those who were once allies are now competitors
... manufacturers are also retailers ... suppliers are also customers
... and customers are also competitors.
Carpet is having a tough time in the U.S., and the carpet industry
is in free fall in Europe. Twenty years ago in Sweden, for example,
carpet accounted for 45 percent of the total flooring market. Today,
its about 5 percent.
There is a clear trend toward hard flooring, and were seeing
it all over the world.
Now I know that all this change is unsettling for some. After all,
most people dont like change. In fact, Ive heard it said
that the only people who do like change are wet babies.
But we at Perstorp Flooring thrive on change .. .and we are taking
every opportunity to change the way flooring is sold ... not only in
this country, but all over the world.
We are redefining every aspect of flooring: how to manufacture it ...
how to distribute it ... how to advertise it ... how to support it ...
and how to install it.
And as a result, nothing will ever be the same again.
Before I outline some of my thoughts for the future and explain how
I believe we will continue redefining the flooring industry, let me
take a few minutes to go back and tell you about some of the things
we have done to this point.
Im not really here to promote my company, but as the inventors
of laminate flooring, with nearly 20 years of experience in this segment,
weve gained valuable insights which we believe can be a springboard
for the future.
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Perstorp Flooring, as you may know, is a subsidiary of Perstorp Corporation,
based in Sweden. A $2 billion company with operations all over the world,
Perstorp Corporation is truly a global company, with 85 percent of its
revenues generated outside Sweden.
It was 20 years ago this year ... back in 1977 ... that one of my colleagues
first got the idea that the decorative laminates that our parent company
produced for a variety of uses ... from countertops to wall panels ...
could be put on the floor.
At first, people laughed at the idea, but through persistence and perseverance,
the early disciples of laminate flooring proved the value ... and the
marketability ... of laminate flooring.
And thus was created the first new product in the industry since cushioned
vinyl was introduced more than 25 years earlier.
Perstorp Floorings first laminate flooring product was launched
in Sweden in 1984, and a new manufacturing plant built in Trelleborg,
Sweden, in 1985.
The first laminate flooring was produced for the Swedish market only,
and it had a variety of names, including Perstorp Ombyggnadsgolv, Perstorp
Superlaminatgolv and Perstorp Golv. Catchy, eh?
As we expanded internationally, however, we realized we needed a name
that would be easy to export as well, and so we created the Pergo Original
brand in 1989.
The name Pergo originally came from a contraction of "Perstorp"
and "Golv," which means floor in Swedish.
After we chose the name, we also found that, in Latin, the word "Pergo"
means "to constantly advance ... continue in one direction ...
pave the way."
Once again ... redefining flooring.
Perstorp Flooring took a giant leap forward in 1994, when we introduced
Pergo to the U.S.
And just last fall, we opened our first flooring plant outside Sweden
in Garner, North Carolina ... a state of the art facility that will
allow us to speed distribution and provide even better service to our
customers in North America.
What were the key reasons for our success in the U.S. market and what
lessons do they provide for the retailer?
I do believe a key reason for our success was that we never took anything
at face value in this market.
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We were newcomers to the U.S., and we werent bound by some notion
of "the way things have always been done here."
We were clearly outsiders looking in, and we certainly werent
afraid to break with tradition and do things differently from the way
theyd been done in the past.
Our primary strategy for the U.S. launch was to create a success story
with one retailer, demonstrating to potential distributors, retailers,
and consumers alike, the viability of laminate flooring ... and, of
course, the Pergo brand.
When other manufacturers came to this country, the first thing they
did was open a sales office and begin selling as much product as they
could, as fast as they could.
Instead, we spent most of 1993 conducting extensive market research
that documented the size of the market and the receptivity to the product.
When I first came to the U.S. and began meeting with potential customers,
I told them, "Im not here to sell product. Im not here
to look for customers. Im here to introduce a concept, and Im
looking for a partner."
It was a completely new way of looking at the market.
As many of you know, we chose Color Tile for our launch in January
1994, and in retrospect, we could not have picked a better partner,
because it was the strong support from Color Tiles management
that really made the difference.
And when I stop to think about it, it has always been the commitment
of the retailer that makes the difference between success and failure.
And our success in the U.S. to date is really a reflection of our retailers
The success of the Color Tile launch spread like wildfire in the flooring
community, and over the next 18 months, our national roll out accelerated
with the addition of 17 distributors across the U.S. and Canada ...
all four major buying groups ... and 7,000 specialty retail stores.
And it was only after we created our success story with Color Tile
... after we had $30 million in sales ... taking a very retail oriented
approach ... that we opened our first office. Since the entire laminate
flooring category was new to the U.S., we knew we had to make a significant
investment in training.
We knew that consumers didnt know enough about Pergo to walk
in and just pick it up off the shelf. We knew it had to be sold ...
and we knew we had to teach people how to sell it, and make the retail
staff comfortable selling it.
So we spent a lot of time in the field ... and we hired 12 technical
support people in the first year to cover every market in the country.
Thats still more than anyone else in the entire flooring industry
employs today. And we did all of this, before we ever hired our first
Again, support for the retailer. Again, a very different approach.
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We also supported the U.S. launch with significant marketing firepower.
We didnt want to push product into retail stores, but rather pull
it through consumer advertising, with our unique "Q&A"
campaign, which has generated thousands of phone calls every week ...
driving customers into the store.
Our efforts did not go unnoticed. In 1995, Pergo received the Good
Housekeeping Seal ... the unquestioned rating of product quality in
Another great selling tool for the retailer ... to help convince consumers
of the quality of the product.
All of these things combined have helped make Perstorp Flooring the
success it is today ... one of the largest hard flooring companies in
the world ... generating worldwide sales of $400 million.
And then, in the spring of 1996, seeing the rapid success of Pergo
throughout the U.S., The Home Depot entered the picture.
Home Depot, as you all know, has made a significant commitment to the
flooring category, and has changed its strategy to fit our strategy.
It now sells flooring in a store within a store... and today
is committed to taking care of customers in the way we want them to.
With Home Depot now aligned with our strategy, we made the decision
to sell Pergo in Home Depot stores, starting with the West Coast last
It clearly was a controversial decision, and we did get quite a bit
of criticism. But I am absolutely convinced we made the right choice.
In Europe, we did not move early enough into home centers, and as a
result, we lost control of that segment. We left the playing field wide
open ... and we saw secondary brands of questionable quality, without
strong marketing support, rush in to fill the void.
The result in Europe has been rock bottom retail prices ... with no
margins for anybody, including the retailer.
We made that mistake once. We were not about to make it again ... for
ourselves, or our retailers.
The move into Home Depot has significantly expanded the market for
laminate flooring. It has allowed us to double our Pergo brand advertising
... building brand awareness and driving store traffic.
In addition, Home Depot is now spending substantial dollars on dedicated
Pergo advertising on network television, which is also helping to increase
brand awareness .. .and grow our business ... not only in Home Depot
stores, but also in traditional retail outlets ... because not everyone
wants to shop in Home Depot ... far from it.
I know many of you dont believe that, and I fully understand
the fear from some retailers.
I know many of you dont believe theres any way a traditional
retailer can compete successfully against Home Depot.
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All I can say, is that our experience proves differently. Our business
on the West Coast, where we began selling Pergo in Home Depot, is stronger
than the rest of the country as a whole today.
You cant escape Home Depot. Theyre here. Theyre growing.
And they are going to be a fact of life in this industry. It doesnt
help to be afraid.
You cant out run them. You cant hide from them. You can
move ... farther and farther away ... but if theres no Home Depot
there today, there will be one tomorrow.
And if you run so far away that theres no Home Depot ... then
there probably isnt much business there, either!
I believe that Home Depot stores and traditional retailers can successfully
co exist, especially in a growing category like laminate flooring. In
fact, I see Home Depot as a tremendous opportunity for you as well.
That may sound hard to believe. But just as we refused to be bound
by a traditional view when we entered this market, retailers have to
look at things differently now, too. You must take a step back ... as
an outsider looking in ... and consider different perspectives.
And so Id ask you to consider this perspective: it may sound
like a contradiction in terms to you, but Im beginning to think
that the best location for a traditional flooring retailer, may well
be, right next door to a Home Depot.
Think about it: Home Depot draws up to 50,000 customers a week. If
you only get 1 percent of that, thats upwards of 500 people a
week ... or three times the traffic the average retail store gets today.
And if you capitalize on the kind of personal, friendly service ...
in a clean, comfortable, attractive retail environment ... that only
a traditional retail store can offer ... you will be successful.
We are convinced there is room for everybody. With the kind of brand
building we are doing, I believe that traditional retailers and home
centers can quite literally operate side by side, with strong volume
and margin opportunities for all.
And that would truly be a redefinition of the flooring industry.
So what is the next frontier?
As a Swedish company, we are very concerned about the environment,
and believe that concerns will only increase over the next decade.
This will be an issue for manufacturers, certainly, but equally a concern
for retailers, because they will get a lot of questions from concerned
consumers in the years to come.
How does the flooring industry stack up?
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Laminate flooring in general, and Pergo in particular, is well positioned
as an environmentally friendly product, and Ill talk more about
that in a minute.
Carpet, as I mentioned, is losing share worldwide, in large part due
to environmental concerns ... whether it be an allergy scare in Sweden
a few years back ... maintenance issues ... or just an increasing sensitivity
to indoor air quality in general.
In addition, the only way to dispose of carpet today is to add it to
landfills ... which, as we all know, will be less and less of an option
in the future.
PVC, or poly vinyl chloride ... the main raw material in vinyl flooring
... is under considerable attack in several European countries, including
Sweden, Germany, Holland and Switzerland.
The environmental debate is going to heat up here, too. Im not
saying it will happen tomorrow ... and I cant tell you if it will
be in 6 months or three or four years ... but it will happen. And so
we must all be prepared.
Im proud to say that we at Perstorp Flooring have turned environmental
and resource issues into a natural part of our daily work.
We have analyzed all stages of the products life cycle ... from
raw materials ... through production ... through installation and usage
... right through to disposal and recycling.
Our factories and manufacturing processes have been recognized and
certified by the European environmental standard, and we are planning
to bring that same effort to our plant in North Carolina.
Already here in the U.S., Pergo has been chosen by the American Lung
Association for its Health House ... which is built entirely of environmentally
As a result, we are well positioned for the coming debate.
All this is very nice, of course, but once again I ask, "What
does this mean for retailers?"
It means that consumers will be asking more and more questions ...
looking at labeling ... and demanding more information.
This, in turn, means that retailers will need more information ...
new kinds of information ... to feel comfortable with whatever flooring
products they choose to sell.
The selling arguments will become different as well. Today, you sell
laminate flooring on the basis of beauty ... durability ... wear resistance
... and ease of care.
In the future, you will also want to point out that, because laminate
flooring does not collect dust, and is extremely easy to clean, it is
a logical choice for people who suffer from allergies or sensitivities
to indoor air quality.
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And because it has extremely low emissions of volatile organic compounds,
or VOCs, it is ideal for families concerned about a healthy home environment.
Soon, you will need to be able to answer questions on the content of
the product, whether it uses renewable raw materials, how it is made,
and whether it can be recycled.
Im not saying that we have all the answers, but to help you feel
comfortable with us and our products, we have produced this booklet
on environmental quality, with more details about our commitment.
As I talk about the environment, I realize that many of you may be
thinking, "Yeah, right, Lars, but Ive got a business to run,
and this sounds like a lot of puffery to me."
To you I say, this will be an important part of your business in the
not too distant future.
The environment is one clear area where we must all be prepared. How
else can we prepare for the changes that will inevitably occur?
Im reminded of something Bill Gates once said about success.
He said, "Believe me, staring out the window and saying, isnt
this great? is not the solution to pushing things forward. Youve
got to keep driving hard."
That advice holds equally true for retailers as for manufacturers.
How are we at Perstorp Flooring continuing to redefine the industry
to benefit the retailer? In several ways:
First and foremost, we are making a great product even better.
Just this week at Surfaces, we announced several major improvements
to Pergo Original. Pergo is already well known for its durability, ease
of cleaning, resistance to wear, fading and staining, and easy installation.
Well, were making Pergo even thicker, more dent-resistant, more
resistant to warping and bowing ... even easier to install ... and were
introducing seven new designs, as well.
We re engineered the tongue and groove system for a faster, easier
installation, a more exact fit, and stronger joints. This in turn gives
the floor superior moisture resistance and an even longer lifespan.
Weve developed a new core material, which were branding
PerCore ... and only Pergo will have it ... to improve stability and
resist dents even better.
To help generate incremental sales, we have revamped and updated our
merchandise displays to incorporate all of Pergos new features,
products and designs into to an easy to use modular system.
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I must say, we are very proud of this display, and we are very grateful
for the counsel of our retailers and distributors in helping to design
it. We sought their input, and they gave us feedback at every step along
the way ... and we are confident it will work well for you ... and work
well for us.
We are introducing a new range of accessories like patented snap in
moldings, and moving to American-sized wall bases.
Were also introducing a Main Street commercial line, Pergo Professional,
to open a whole new category to retailers, so you can go after businesses
like offices ... stores ... restaurants ... and shops ... well, in fact,
all of your neighbors! ... because this is now the most durable laminate
floor on the market today.
From the very beginning, we have understood the importance of building
the Pergo brand, and with no false modesty, I would argue that what
has been good for Pergo has been good for the entire industry as well.
But dont take my word for it. Listen to what Carl Bouckaert,
president and CEO of Beaulieu said in last weeks issue of Floor
Referring to the Carpet and Rug Institutes new advertising campaign,
he praised what we at Perstorp Flooring have done in this country.
[SLIDE COPY READS:
"They came over from Sweden and in a short amount of time, created
a certain image for their product. If we dont do the same, we
have only ourselves to blame."]
Well thank you, Carl. We did come in and create an image. We did come
in and create a brand. And you aint seen nothing yet.
The whole point of our advertising campaign ... and all of our marketing
efforts ... is to drive traffic to your stores. Every time we run an
ad, we generate thousands of calls to our 800 number.
We expect that in 1997, we will generate some 500,000 calls ... half
a million calls ... to our 800 number. Thats about 10,000 calls
And do you know what we do with these calls? We refer them to you.
To the retailers who are committed partners to Pergo.
We are also seeing more and more traffic on our home page on the Internet,
and referring those customers to local retailers as well.
And in the future, you can expect to see more technology initiatives
that will help drive even more customers to your stores.
As I travel around the country, Im often asked questions about
our advertising plans, and specifically, how long were going to
keep up this introductory advertising.
Well, let me tell you: This is not an introductory campaign. Our spending
will only increase as we continue to grow.
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We have already added television advertising to our print schedule
... and well keep adding media dollars to increase brand awareness
and drive even more customers to your stores ... which will actually
benefit the entire industry.
Third, our technical support ... already the most extensive in the
industry ... gets even better. We have already more than doubled the
number of our technical advisors ... from 12 to 25 ... all Perstorp
Flooring employees that we train and we oversee ... all to support local
We are also introducing a new Endorsed Installer Program, to take training
to the next level and increase the craftsmanship of an installed laminate
We will now offer more professional, hands-on education and give installers
the chance to learn as much as possible about installing Pergo.
Once certified, installations done by Endorsed Installers will be guaranteed
by Perstorp Flooring ... which means that if there is a call back, we
will supply all the materials needed for the new installation ... at
We want installers to know they are backed by the number one name in
laminate flooring ... and we want you to be able to sell installation
And finally, with our new factory up and running here in the U.S.,
our ability to supply product ... and serve our distributors and retailers
... will only get better.
What do all these things add up to?
Helping retailers to make money.
Going forward, we intend to help you make more ... and more ... money.
No look to the future is complete without a few predictions ... so
here are mine:
I see a huge flooring market, getting even bigger, with enormous potential
for manufacturers and retailers with the financial, technical and human
resources to take advantage of it.
I see a definite trend away from carpet and towards styled flooring
and wood designs ... in part for the environmental reasons I mentioned
... in part because of ease of care ... and in part because of shifting
I see environmental concerns continuing to grow in the U.S., and I
predict that those manufacturers ... and those retailers ... who demonstrate
a concern for the planet ... and communicate that concern ... will have
the definite advantage.
I also see a shakeout in the laminate flooring industry in the next
And when the dust settles, the only companies left standing will be
those that have extensive distribution ... provide the right marketing
and technical support ... and offer a superior quality product.
And, ladies and gentlemen, this I can promise you: Perstorp Flooring
will not only be left standing ... but will remain as the undisputed
leader in laminate flooring ... worldwide.
And we will continue to redefine the flooring industry. It is our heritage.
It is our future. And the future looks very bright indeed ... for all
Thank you very much.
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