F/T looks at Latin American sources
Thomas Russell -- Furniture Today, March 6, 2005
HIGH POINT -- Mexico and Brazil by far are the largest exporters of furniture to the United States from Latin America.
More often than not, they are the source locations of choice for importers helping to design and bring product into the U.S. market.
Still, an informal survey of importers by Furniture/Today found a small, but growing percentage is coming in from countries such as Honduras, Chile, Peru, Bolivia and Argentina. Here is a look at some of the activity in these five countries.
Argentina
Argentina is the third-largest Latin American furniture exporter to the United States, with an estimated $85.9 million in exports during the first six months of 2004. That compares to $75.7 million for the first half of 2003 and $146.6 million for the full year 2003. Still growth has waned since 1999, when overall exports totaled $293.7 million.
One of the largest importers from Argentina is South Cone Trading, which owns a plant there. Its line includes high-end, mostly solid-wood products ranging from case goods and youth furniture to home accents, occasional and home office.
Sourcing from both Argentina and Peru, South Cone’s overall volume has increased from 200 containers in 2003 to 230 in 2004. In addition to quality labor, South Cone also has benefited from an ample selection of sustainable hardwoods.
The company also has been able to develop new wood species, a process that will important to its future product strategy.
Illinois-based Ethnicities imports 90% of its dining, occasional and office furniture from Argentina. Most of its goods come out of small, workshop-type settings where local artisans incorporate handcrafted designs that are indigenous to their culture. Some of these designs have a distinct European flavor.
“There is a design element in South America that is available,” said Ben Sandzer-Bell, president. “It may not be a mainstream market, but a fringe market is responding to the different colors and different materials…it is very modern, yet unmistakably very South American.”
Like other executives, he said logistics can be a challenge, particularly from a cost standpoint.
“The cost advantage is essentially erased by the cost of shipping,” said Sandzer-Bell, who is scaling back on the furniture line to focus more on home accents.“The cost of logistics is disproportionately high.”
Bolivia
Furniture exports to the United States from Brazil totaled $2.3 million for the first six months of 2004, up from $1.3 million in the same period in 2003. That compares to $1.2 million for the entire year in 1999.
Case goods, youth furniture and occasional importer Pan-American Furniture & Design brings in 30% of its product mix from this country.
What makes Bolivia a growing source? For one, it has extremely low labor rates -- about $1 an hour. That’s similar to Peru, Ecuador and Chile, but less than the $2 to $4 average hourly production wage in Brazil, said Pan-American President Chris Anderson.
Bolivia also has an extremely talented work force with the ability to produce more traditional styled, carved product than Brazil or Chile. It also has a high supply of Forest Stewardship Council-certified and sustainable timbers.
That’s a niche that is appealing to big-box retailers such as Costco and Home Depot, Anderson said.
“It’s a niche that China and Asia cannot compete in because there is no certified timber coming out of there,” he said. “Asia can import it, but that’s where they lose their price advantage.”
Chile
During the first six months of 2004, Chile exported $22.1 million in furniture to the United States, compared to $16.2 million for the same period in 2003. For the full year of 1999, it exported $28.4 million.
Case goods and occasional importer Andes International does 100% of its business out of Chile, importing a combination of master bedroom, casual dining and occasional tables. In 2004, it shipped about 195 containers from there with a wholesale value between $6.8 million and $7.8 million.
The number of containers had dropped slightly from 2003, but it expects a 10% increase in business in 2005.
Another company doing business in Chile is American Woodcrafters, an importer of bedroom and youth bedroom products. It does 65% of its business there through a joint venture with Coupihue, a Chilean-based manufacturer.
Accoding to President Lao Labra, the advantage that Chile and South America have over China is geographic proximity to the U.S. marketplace and key resources. Coupihue, for example, is a vertically integrated operation with its own extensive timber supply.
The Latin culture, he said, also is more similar to the United States than that ofAsia, another reason business officials find South America a good place to source.
But both Labra and John Foster, chair of sister company Rockford Furniture, said there are some disadvantages, including lack of infrastructure and the lack of ability to work with mixed media elements such as glass and stone. Carving is another area where places like Chile offer less than, say, China.
Labra, however, believes that over time, the infrastructure issues and ability to work with mixed media will improve.
Chris Anderson, of case goods importer Pan-American Furniture & Design, said that like Brazil, Chile remains strong for promotional and middle-end product. Having a large supply of natural resources in its backyard helps provide the necessary materials for those goods.
But he believes Chile remains challenged because its labor rates are higher than those of Brazil and other parts of Latin America. At the same time, he said, Chile doesn’t have the furniture manufacturing history that Brazil has -- a factor that limits Chilean-made furniture to about 10% of the company’s imports.
“It has just stagnated when it comes to furniture,” Anderson said. “I just don’t see that there will be a lot of growth out of Chile.”
Still, he believes the country remains strong as an exporter of raw materials such as wood pulp, wood chips and copper.
Honduras
During the first six months of 2004, Honduras exported $1.3 million in furniture to the United States. That number was down slightly from the first six months of 2003, but well above the $785,000 it exported during the full year of 1999.
Today one of the best advocates for Honduras as a source country is occasional and casual dining importer Trade Winds Furniture. The company sources 20% of its product from this Central American nation. The rest comes from Indonesia.
Vice President John Locklear said Honduras has several strengths over Indonesia, including the quality of its finishing and availability of materials such as pine solids and prima vera solids and veneers.
Locklear said Honduran furniture factory workers make more than the $100 a month rate that is typical in Indonesia. However, the company is pleased with the quality of those workers.
Transit times also are easier to deal with from Honduras, Locklear said. For instance, it takes 10 days for product to be shipped from Honduras to Miami, the main U.S. port of entry for that area. By comparison, it takes 40 to 45 days for the products to get from Indonesia to a port in Wilmington, N.C.
One main disadvantage Locklear identified with Honduras is that some supplies have to be imported from other areas. That often adds logistical challenges to the equation.
“Our biggest issue is hardware,” he said. “We have to manage that from a stocking standpoint and do the logistics on our own and make sure they have what they need and that there is consistency. We have not been able to source any hardware there. We’d love to.”
Case goods and upholstery importer Drakeford Furniture has gotten one full collection out of Honduras and been pleased with the quality. However, President Billy Curtright plans to move some product from Central America to Asia, where he can get similar quality at a lower price. Drakeford still plans to do some sourcing from Honduras, but Brazil will represent the bulk of his Latin American production.
Peru
Export figures were not available from Peru. But all indications are that some countries are doing good business from there. South Cone does 70% of its business with Peruvian-made goods.
Other companies doing business out of Peru include case goods and upholstery importer Patagonia and case goods and home office importer Grass Roots Imports.
Patagonia owns a 25,000-square-foot plant in Lima, and does 100% of its business from there. A key plus for President Edward Guerrero is the quality of the raw materials, including Peruvian leather and mahogany.
He also applauded his 26-member work force, particularly for its ability to produce middle to high-end, handmade product with a combination of contemporary and Old World styles.
“They are all artisans and take a lot of pride in what they do, which is refreshing,” he said. “They are willing to work overtime, (and do) whatever it takes to produce the goods.”
Logistics, however, are a challenge, particularly getting wood from the rain forests. Rainy seasons in the Amazon region, and a lack of dry kiln facilities in the region also pose a challenge in terms of scheduling.
Grass Roots Imports sources from a plant in Peru that produces about 5% of its volume. CEO Peter Markwardt praised local workers for their artistic ability in producing specialty dining room and occasional furniture and accessories with designs that reflect the Peruvian culture.
“It is the appeal of that look,” he said, noting the source plant has good finishing capabilities and an ability to work with leather. “We are not recreating anything.”
Low labor costs also are a benefit. However, Markwardt estimates it is still two to three times more expensive to source product from Peru than from China, where the labor rate is estimated at 64 cents an hour, or just a little more than $5 a day.
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