Mexican mfrs. feel heat from Chinese
By Powell Slaughter -- Furniture Today, February 25, 2002
GUADALAJARA, Mexico — Latin America's largest furniture show, the winter edition of Expo Mueble Internacional held here this month, reflected more than ever the effects of globalization on Mexico's furniture industry.
In particular, Chinese case goods emerged in the exhibits of Mexican manufacturers, including furniture available through direct container shipments. Previously, most Chinese-made furniture had appeared in the show spaces of U.S. manufacturers, which have been blending imports into their lines for years.
Mexican producers now must contend with Asian sources at home as well as in export markets such as the United States. Not only that, Mexico's president, Vicente Fox, appears determined to wean the country from a monetary policy that has supported exports by Mexican industries.
"It used to be that the government could float the peso to increase Mexican competitiveness in export markets, but that's not happening now," said Ralph Sheppard, finish supplier Valspar's Mexico sales manager.
Sheppard has worked with Mexican manufacturers for several years developing finishes and styles targeted for the U.S. market. Now, Valspar also is pushing for more presence in the domestic Mexican market.
"With competition domestically from China, the manufacturers who don't update their plants and operations will be in trouble," Sheppard said. "We're looking for ones who want to make the necessary investments to keep going."
Many Mexican manufacturers are looking for new ways to use their capacity and maintain a competitive position.
In Guadalajara's state of Jalisco, an important furniture-making center, the industry lost 1,000 workers last year in the face of a 50% drop in exports — with U.S. sales down 70% — and a 30% decline in domestic sales.
"Our companies are operating at 72% capacity right now," said Rigoberto Chavez, president of the Jalisco Furniture Manufacturers Assn., or AFAMJAL, and president of case goods maker Muebles Liz. "Our expectations in 2002 are to reach 85% capacity. We're trying to simply make up for last year and get back to where we were before."
AFAMJAL is working to help its smaller member companies, in particular, work together in joint projects, perhaps producing one or two parts for use in a line of furniture. Companies might work with manufacturers from overseas, perhaps large companies that want to farm out labor-intensive aspects of production.
"We're talking about an integration of many companies' efforts to achieve one concept," Chavez said.
Guadalajara exhibitor Delsa, a case goods manufacturer, was using imports to expand at starting price points with high-gloss Italian bedroom, and to boost its top price points with bedroom and dining room from China. Delsa targeted the Mexican market with six bedrooms and nine dining rooms from China.
"We have the Central and South American rights for RiversEdge," said Carlos Amaya, operations director for Delsa. "It gets us into a new price level, two or three times over the standard line. The problem is that the product that's not selling as well is what's in our middle price range, which is what we make ourselves."
Imports account for 40% to 50% of Delsa's domestic sales, up from zero two years ago, he said.
More large furniture retailers in Mexico are receiving imports directly, said Blas Garza, chief executive officer of case goods manufacturer Galleria.
"A lot of retailers are buying products from China that's brought in by reps from U.S. companies," he said. "The problem is that imports here are coming down in price. They can go into any price-point furniture store now."
Galleria is examining the import of components and unfinished products, and will take a fact-finding tour of the Orient this year, he said.
"We're considering setting up a plant only for finishing," Garza said. "We've been developing a lot of product for finish appeal in the U.S. market, and we feel like we could do a lot in that area."
Asian manufacturers will have to make investments to meet the needs of smaller Mexican retailers, said Federico Cruz, key accounts representative for Mexican case goods manufacturer Gabite.
"For Chinese product to work here, if you don't handle key accounts, you'll have to have a warehouse in Mexico," he said. "Also, Chinese product is very Americanized. You need a different scale here."
Imports have particular potential at higher price points, said Domingo Aguilar, commercial director of Vizcaya, a case goods manufacturer that also owns three furniture stores in Durango.
"Imports cover some areas where we can't compete," he said. "And our vision is to grow that part of the business in our stores."
Mexican manufacturers doing a lot of business in the United States are acting to protect their customer base against incursion from other countries. Toro Furniture, a maker of entertainment centers, armoires and home office, is doing so by rounding out its line with correlating accent items.
"We're trying to show accent items that work throughout the home, but that go together well with the major pieces we sell," said Rafael Rosas, sales director. "Formerly, we might have an entertainment center, but not the accompanying accents."
Toro also is refining its service with a new less-than-truckload program and order consolidation at no extra cost.
"That will let us sell and distribute furniture to small dealers in the western United States who can't take whole truckloads," Rosas said.
Don Porfirio, meanwhile, makes 100% of its case goods for export and is looking to grow the 40% that goes to the United States.
"We invested three years ago in machinery for making solid- wood furniture, and invested heavily in new finishing equipment," said Miguel Nava, general manager. "We've developed new finishes specifically for the U.S. market."
Mexican manufacturers will have to keep improving if they are to compete in the global market, said Chavez of AFAMJAL.
"We already have been feeling the competition in the U.S. market from China," he said. "And now with the financial problems in Argentina, Brazil's most important trading partner, we will be getting pressured from the south as Brazilian manufacturers look to the U.S. market to make up for lost business in Argentina."
| Galleria is looking to build U.S. business with pieces like the Manchester bed, which combines castings and wood with a sophisticated finish. |
