In Canadian Furniture Shakeout, Some Firms Find Path to Success
Tip-toeing among US giants, company targets niche opportunity
ST. PIE, QUEBEC
OUT here amid the still-snowy stubble of farmers' fields an hour's drive east of Montreal can be found that rarest of species, a prosperous Canadian furniture manufacturer.
The clean blue-painted metal buildings squatting on the outskirts of tiny St. Pie, Quebec, are the home of Dutailier Inc., North America's dominant maker of gliders - the easy-flowing (almost floating) cousins of the rocking chair, with seats that swing smoothly back and forth on bearings attached to a stationary base.
This year privately held Dutailier will build more than 200,000 maple and oak gliders in 35 models at this and three other factories, including one in the US. Dollar sales are expected to be more than five times what they were in 1987. That year, the company dropped its home furnishings line (living room and bedroom sets, which were 40 percent of the company's business) to focus on building gliders.
Hard as it was for Dutailier, breaking the status quo to pursue a niche strategy has been the difference between good profits and possibly becoming a victim of Canada's three-year-long furniture industry shakeout, company officials say. Continous adaptation
"When you're in a business you have to constantly renew yourself," says Pierre Cloutier, the company's marketing manager. "You can't take anything for granted. A lot of other companies have not renewed themselves or what they are doing."
But renewal has been tough for Canadian furniture makers battered by recession, high valuations for the Canadian dollar that made products expensive in the US, and big US competitors eager to sell in Canada since the 1989 US-Canada Free Trade Agreement.
The FTA mandated a five-year phaseout of Canada's 15-percent tariff, the last of which disappeared in January.
In 1989 there were 1,845 Canadian furniture manufacturers employing 63,000 workers and shipping $4.9 billion (Canadian; US$4 billion) of merchandise, according to Aktrin Furniture Research, an industry research organization in Oakville, Ontario. Just last year, however, there were 25-percent fewer Canadian furniture makers, employing 35-percent fewer workers, and shipping 30-percent less than in 1989. Problems near end?
Some manufacturers think the industry may now be stabilizing since a helpful six-month uptick in sales that began last fall. But Stefan Wille, Aktrin's president, is far from sanguine.
"The industry is still shrinking," Dr. Wille says. "The economic recovery is not going to be the salvation of the Canadian industry."
Competition from US companies and a reversal of Canada's longstanding trade surplus in furniture with the US have amplified the failure of several big Canadian manufacturers, while others avoided disaster by seeing beyond the 1980s boom.
"We were planning to build another plant in 1987, but decided against it because we foresaw a recession," says C. Alex Geddes, president of Joyce Furniture Inc., Canada's third-largest office-furniture manufacturer, a subsidiary of a New York multinational since 1984.
"If we had built the plant we'd be bankrupt by now," he says.
As it is, Geddes and his managers have had to cut the work force and fine-tune operations at the company's Cole Business Furniture and Standard Desk factories. At the highly automated Standard Desk factory in Laval, Quebec, a work force of 140 in September 1990 was cut to 75 a year later. Since last fall's rebound, the number has risen to about 90. Even so, the plant is running at only about 60 percent of capacity with operations manager Guy Deziel keeping workers busy with jobs such as building 500 ster eo speaker cabinets.
Given the continuing pressure, Geddes says Joyce is concentrating on the US market. Prior to the FTA only about 5 percent of Joyce's sales were in the US, compared with 15 percent today. "We should be doing 50 percent" in the US, Geddes says. "What's holding us back is simply the work of getting the export markets developed. This is our problem, no one elses."
In Canada's $5 billion furniture market, about half of sales are for the home, Aktrin says. A few home furniture producers such as Palliser Furniture Ltd. in Winnipeg, Manitoba, and Dorel Industries Inc. in Montreal are doing well.
Tip-toeing among the giants, Dutailier competes with three big US furniture makers and 50 to 60 smaller ones by being fleet-footed. Far from being battered, Dutailier often eats its US competitors' lunch.
Setting sights on the US a year before the FTA took effect, Dutailier found a gold mine in America's baby specialty stores selling soothing gliders to America's expectant mothers, a market it now dominates from coast to coast. The US accounts for 75 percent of Dutailier's annual sales today, with the rest in Canada - the reverse of 1988 - Cloutier says. Now the company is sending gliders to Europe.