Four months after HNI Corp. and its Hearth & Home Technologies (HHT) business acquired Vermont Castings Group (VCG), capital is flowing into VCG as its operations become more efficient. The efficiency is part of the HHT way, and Brad Determan, president of the HHT Group (Lakeville, Minnesota) and executive vice president of HNI (Muscatine, Iowa), believes that the culture change can help VCG realize its considerable potential.
By all accounts, the headline-making acquisition came at a crucial time for VCG, a company with annual revenue of approximately $100 million that was just emerging from several years of downward-trending numbers. Ricardo Leon, previous owner of VCG, now serves as president of the company. “VCG was in a steady decline from 2006 to 2013. In 2014, we saw that decline stop—and actually go up,” Leon says.The uptick caught the attention of Determan, who ultimately pulled the trigger on the acquisition. “The last years of VCG’s existence, prior to our acquisition, were pretty tumultuous,” he says. “We think it is now headed in the right direction. What Ricardo has been doing is correct and aligned with what we believe in doing. VCG is now a stand-alone company, and it will remain that way for the foreseeable future.”
No employees have lost jobs as a result of the deal, and while Leon and Determan hope to keep it that way, they are committed to streamlining operations, particularly when it comes to VCG’s two Vermont sites. VCG has three locations: a 300,000–square-foot facility in Paris, Kentucky; a foundry in Randolph, Vermont; and an assembly/enamel facility in Bethel, Vermont.
“The two Vermont facilities are 10 miles apart,” Leon explains. “The plan there has been to consolidate those facilities into the foundry in Randolph. Right now, however, the focus is on keeping the businesses running, making them more efficient, and (ultimately) consolidating that footprint. In the meantime, the course for 2015 and 2016 is to keep doing what we’re doing.”
As both parties attempt to keep what works and improve elsewhere, executives at HHT have taken a hard look at their new brands—and they love what they see. “It’s not so much that VCG’s Majestic and Monessen brands strengthen our core brands; it’s more that they complement our product suite very well,” Determan says. “The VCG brand has a deep heritage in wood stoves. Majestic still maintains the number-three position among builders, and that complements our Heatilator and Heat & Glo brands, which are number one and number two.”
The overall infusion of human resources and money into the VCG brand gives HHT the valuable opportunity to serve more customers with more brands. As HHT is a publicly traded company with a core growth strategy, the acquisition came at the right time for it (and for the market).
“HHT was also a customer of VCG, which provided for some of its cast-iron needs through our foundry in Randolph,” Leon says. “In 2013, HHT could see our focus. It saw the progress, the commitment, and the fact that we were rededicating ourselves. Meanwhile, the housing market is recovering, unemployment is dropping, and consumer confidence is increasing. These broader macroeconomic indicators are positive factors that we can capitalize on through HHT’s help in improving our manufacturing, supply chain, and overall execution.”He continues, “Maybe the best things have been the new leadership and our change of focus from cash, cost, and customer to quality, delivery, cost, and safety. We are also improving our safety procedures with more formality. Add to all that the capital investments in the foundry for new equipment and focusing on getting organized, sequenced, and scheduled. Ultimately, it’s great to have a partner like HHT.”
Marketing at HPBExpo
Specialty retailers and builders are still digesting the acquisition, but the initial reaction has been “better than expected,” Determan says. He attributes the feedback to HHT’s previous acquisitions, which have gone smoothly. “There is always nervousness and apprehension around these kinds of transactions,” he says. “One of the reasons it has been good is our track record. We say what we intend to do, and we do what we say. We are a collection of brands that has been built partially by acquisition and partially by organic growth. We take pride in being a successful family of brands with ex-owners running around, having fun.”
Leon adds, “We announced this to our customers by hosting a conference call. There was some apprehension: Are they going to dump brands? Now, there is an expectation that we are going to become stronger and better. We’re now playing in the big leagues, and we expect the game to get better. I’ll learn a lot more when I’m at HPBExpo in Nashville, Tennessee, because I’ll spend a lot of time talking with customers.”
Beyond the brands and their facilities, Determan is most excited about VCG’s capable employees, all of whom are now part of HHT and its HNI parent corporation. He says, “With a bit of support and some lean methodologies, I am excited to see the talent emerge and to watch them grow. These people are great. It’s true that there is a significant amount of change underway. Our business philosophy centers around lean principles; the VCG people are sort of drinking from a fire hose right now, but they are doing well and moving quickly in the right direction.”