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from Patio and Hearth Products Report

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Economic Realities and Opportunities: A Chat with V.P. Berger, President of Hearth & Home Technologies

head_shotClosing a manufacturing facility is never an easy process, but officials at Hearth & Home Technologies (HHT) recently made the difficult decision with a keen eye toward the long-term health of the company. As a hearth manufacturer and maker of several iconic brands, the Lakeville, Minnesota-based HHT decided to close its manufacturing facility in Paris, Kentucky.

Reasons are numerous, but V.P. Berger (pictured), president of HHT, cites the recent economic slow down, in addition to warmer weather and low oil prices—all of which challenged HHT’s revenue assumptions. Patio & Hearth Products Report (P&HPR) sat down with Berger to get additional insight on the closing, how it will affect employees, and how it will ultimately improve operations.

Majestic_LogoP&HPR: What factors brought about plans to close the manufacturing facility in Paris, Kentucky.
V.P. Berger, president, Hearth & Home Technologies, Lakeville, Minn: The recent slow down in the economy, warmer weather, and recent low oil prices are all challenging our revenue assumptions. We are expecting slower new construction recovery, modest retail gas, and a continued contraction in the pellet business. With all these changes, we feel we owe it to both our shareholders and our customers to protect our best cost position. When we have redundant manufacturing, it makes sense to take structural cost out to protect our position.

P&HPR: What is the time frame for closing?
Berger: Phasing out all the manufacturing will take about 12 months. The plan is to move the production to Lake City, Minnesota, and the Mount Pleasant, Iowa plant beginning in late May 2016.

Monessen_LogoP&HPR: What elements will be left at the Paris facility?
Berger: It’s important to note that we are just talking about the manufacturing in Paris. The new product engineering teams, the research and development teams, customer service, technical service, and warranty will all remain in Paris—both during and post transition. These teams are not impacted by the decision to consolidate manufacturing operations. There still will be a large call center and engineering department in Paris, Kentucky.

P&HPR: How many HHT team members will be affected by the closing?
Berger: First of all, the decision to close a manufacturing facility is a difficult one. In no way does it reflect the quality, hard work, and dedication of the Paris members. That said, there are approximately 210 members who will be affected. Certainly we appreciate them, and thank them for all their efforts. We are working with them to transition them to their new assignments.

Vermont_CastingsP&HPR: Will HHT be helping out those who are affected?
Berger: Absolutely, we will help all of our members transition to a new assignment. I think it’s important to understand how we will do that. We have a very strong culture and philosophy and we want to assist every member with their new opportunities. That’s why we call it transition pay, because we are transitioning them to a new opportunity versus traditional severance. We will spend millions of dollars on our members to help them do this.

P&HPR: How will you do this?
Berger: First, our philosophy is transparency. More than one month prior to this announcement, we were in front of the member base in Paris telling them that we were going to look at this as a possible situation. So, by no means was this going to be a surprise to them. We spent the next five weeks analyzing different opportunities, and when we actually came to a decision in early March, we were able to not only tell the members, we were able to give them dates of when it would impact them.

When you look at transparency, and then we get to the point to where we do make a decision—a difficult one—every member was given a timeline from either 60 days notice to up to 9 months. This too is key to help them from a transition standpoint. Then, while they are here and working toward their end date, they are provided weekly incentive production bonuses. Upon completion of their assignment, they are provided additional transition pay based on their years of service. It’s transparency, it’s clear timelines, and it’s more than dollars. We will reward every member above their hourly pay with transition incentives as well as production bonuses.

Dutch_West_LogoP&HPR: How are you able to go this route when so many other companies get it so wrong?
Berger:  We have a parental advantage being owned by HNI Corporation, a large and well known publicly traded company. With their parental advantage, they give us great guidance. You hug your members on the way out the same way you do on the way in. I know that sounds simple, but it is that simple. If you look at it that way, it really provides a perspective of the culture. It is about transition. It is not about severance.

P&HPR: What economies will be achieved with consolidation?
Berger: This is another example of our ongoing effort to continue to simplify and streamline our business model. By doing this, it allows us to take full advantage of our linked and lean value chain.

P&HPR: What benefits/advantages will you be able to pass on to the dealer network?
Berger: The change really advances our ability to deliver high quality products with the best cost performance. It’s back to our original point. If the markets are going to be soft, we have to be aggressive and proactive to remove structural costs and redundancies to protect that best cost position. That’s the best thing we can do, not only for our shareholders, but for our customers.

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Highlighting Contemporary Furniture is Boosting Sales for Retailers Across the Country

As more specialty retailers strive to set themselves apart from the competition, they are increasingly looking at contemporary designs to boost sales. Officials at Pride Family Brands, Hollywood, Fla, have keyed into this trend with heavy investments in time, money, and design expertise.

Photo_1Rory Rehmert, senior vice president of Sales, Pride Family Brands, says the effort has been worth it. “A very high percentage of our customers added at least one slot of the new contemporary products,” reports Rehmert. “In markets with Fall selling seasons, the retail activity on the contemporary collections was outstanding, and we are looking forward to an amazing Spring 2016.”

Many outdoor retailers are flooring a contemporary collection (such as the Park Place Collection [top left] featuring a Contemporary Coffee Table in Platinum- DeVries Casual Furniture, North Brunswick, NJ) from Pride Family Brands for the first time and experiencing success from the start. In fact, Rehmert reports that two of the company’s new contemporary collections are now in Pride’s top 10 collections.

Photo_2Carrying a bold contemporary collection (Park Place Sling Dining and Contemporary Table on right – DeVries Casual Furniture, North Brunswick, NJ) is a great way to stand apart from the competition, but Rehmert points out that merely buying the collection and hoping for the best is not enough.

“Providing inviting product presentations, featuring superior products sold by well-educated and professional sales personnel is essential,” he says. “Our message is to seek out brands that are innovative and responsive to retail and higher-end consumer trends and demands. Seek out quality products that maintain a favorable margin that ultimately benefits you, the retailer, and your sales team. High-end, customizable outdoor furniture is in high demand, and is here to stay.”

Rehmert has specific ideas about the best ways to show these new contemporary products, and Patio & Hearth Products Report (P&HPR) recently got a chance to chat with him about the showroom floor, current challenges for retailers, and how to appeal to all market demographics.

Photo_3P&HPR: What is the best way to balance contemporary and traditional collections on the showroom floor?

Rory Rehmert, senior vice president of Sales, Pride Family Brands: With the popularity of contemporary styling in outdoor furnishings (Park Place Horizon Sectional and Icon Table pictured on left- Today’s Patio, Scottsdale, AZ), the proper display and merchandising of modern designs is important to the success of the collections. For casual retailers who have done well with traditional designs, there is a need to carve out a specific space and create a distinct section with a more contemporary feeling within the showroom, while also maintaining a separate traditional section.

The balance should be determined by the market demographics; however, if equally presented, there are distinct elements that need to be taken into consideration with regard to the style and the applicable customers. The set-up of the specific sections, along with the transition between each, can be best accomplished by doing merchandising research or by consulting a design firm. For the modern design trend, one must take note that it is driven by the high end consumer, including boomer or gen X age groups—or even wealthy millennials. For this group, styling, lighting, and accessorizing should present a high-end appeal as well. Done correctly, it should earn a great return on investment.

P&HPR: What is the greatest challenge for retailers today?

Rehmert: The single biggest factor and challenge affecting businesses in the outdoor segment is weather. From a late spring to record breaking rainfall, weather is a constant of which retailers have no control. They are challenged daily to manage expectations and outcomes as best they can.

Photo_42016 is a new year, and everything is lined up for the industry to have a good season. It then falls upon each business to maintain a high energy level within retail sales personnel. This in part is created by selecting manufacturers that deliver fresh, eye-opening designs (see Eclipse Sling Dining with Live Edge/Altra Dining Table on leftMcGannon Showrooms, Dallas TX), and stress the benefits of selling better goods. Improving product flow with new, exciting, customizable products that are higher quality and built for longevity is key.

P&HPR: What is the best way to appeal to all market demographics when featuring contemporary collections?

Rehmert: For the proper showcasing of contemporary seating, modern buyers tend toward clean lines, less clutter, and a cohesive streamlined look. The amount of separation allowed between contemporary vignettes and traditional product also will enable lighting to be style specific.

A brighter and more cheerful setup captures the contemporary feel with a well-lit space, in conjunction with neutral background coloration including floor coverings. If applicable, positioning nearer to front windows will place a focus on the furnishings in relation to the clean lines of glass and the bright open lighting. Positioning a representative selection of throw pillows near to a contemporary set allows sales personnel to change throw pillows from more traditional and classy to colorful and youthful. Within the proper showroom display, asking open-ended questions to determine color preferences will direct pillow selection as well as other product decisions.

P&HPR: What is the biggest mistake that retailers make when displaying products on the showroom floor?

Rehmert: Placing sets too close together is a big mistake and does not allow for the product to be properly viewed or experienced. Mix and mismatch is a definite mistake. The contemporary buyer is not the same buyer as the traditional buyer. In traditional furniture stores, catering to contemporary and traditional is found; but still is segmented.

Modern buyers, in general, do not like clutter. However, one does not want the display to lack a lifestyle look. Keeping displays relatively clean, well-lit, and accessorized with coordinating contemporary items is encouraged.