Brazil's high end eyes bigger slice of U.S. pie
By Gary Evans -- Furniture Today, March 13, 2005
Sao Paulo, Brazil — High-end Brazilian furniture manufacturers have given up on competing with China and are focusing on taking market share from other countries.
"In price, it is impossible to compete with China," said Daniel Bender, a spokesman for Moveis James, which has 10 years experience exporting to such U.S. accounts as Largo and Plow & Hearth.
But he and other manufacturers attending the ABIMAD furniture show here believe the weakening of the dollar against the euro will put Brazil in a favorable position to strengthen its exports to the United States, its largest foreign customer.
The dollar also has weakened against Brazil's currency, the real, but Brazilian manufacturers say their furniture is still a better deal compared with European prices.
Brazilians say they're competing with all of Europe but focus on Italy, whose contemporary styles are much like theirs. The similarity arose in part from the huge immigration of Italians to Brazil in the late 19th century, shaping a legacy of Italian style in wood furniture and upholstery.
ABIMAD, or the Brazilian High-End Furniture Manufacturers & Fine Decorative Accessories Assn., is a group of 150 midpriced to high-end producers that banded together two and a half years ago. It recently sponsored its second annual furniture show here at the Imigrantes Convention Center. Luiz Henrique Toniato, ABIMAD vice president, said the group represents 95% of high-end producers in Brazil.
Brazil's furniture industry hasn't been hurting for exports. Last year, it sent $1 billion in furniture abroad, plus another $2 billion in furniture raw materials — wood, leather and other goods. Exports were up 42.5% from the previous year, according to ABIMAD.
The association said the country exported $374.5 million in furniture to the United States in 2004, a 40% increase over the previous year's $267.5 million. While it ranks well below Mexico and is a fraction of China's volume, Brazil is among the fastest-growing U.S. furniture sources.
That growth came despite a shortage of shipping containers six months ago, which caused delays and drove transportation costs out of sight, countering two of the big advantages the country had over China.
The container shortage has stabilized, but now Brazil faces a weaker U.S. dollar. The current rate is 2.5 Brazilian reals to the dollar, down from 3.2 a year ago. (China's currency, in comparison, is benchmarked to the U.S. dollar, so that exchange rate has not fluctuated.) Brazilians believe the currency problem is a temporary glitch, which they feel sure the government will remedy.
Inroads now, the payoff later
Jackson Batista, a representative of Thork Trading in S. Bento do Sul and a former official of ABIMOVAL, another Brazilian furniture association, said that making inroads into the U.S. market now should pay off later.
"If we can sell furniture when the real is 2.5, we can really sell it when it's 3," he said.
Most Brazilian furniture exporters have targeted medium to lower U.S. price points, capitalizing on the abundance of a fast-growing species of pine found here. High-end producers think now is the time to increase their share, estimated at 15% to 20% of all exports.
Toniato, the ABIMAD vice president and president of Stone Design, a high-end upholstery, case goods and occasional company, said manufacturers can gain strength by putting extra value into their goods and giving them a distinctive Brazilian flavor.
"Some countries are identifying Brazilian design, the Brazilian taste, and I think that in a few years we can put in different countries very specific products with a Brazilian signature. In my opinion, that means more value," he said.
One American criticism of Brazilian furniture, however, has been that it's too Brazilian — which might sell in Europe, but would lack broad U.S. appeal.
Toniato agrees that furniture should be designed for its destination country, but he and many of his colleagues here said they are aiming for a particular style niche — contemporary with a Brazilian flair, much like the Italian look. He said stores in England and France already have created boutiques to merchandise Brazilian furniture.
Toniato is well aware that the bulk of the U.S. market favors traditional styles, not European contemporary with low-slung upholstery and stark, architectural case goods and occasional with lots of chrome and glass.
"But if you go to Los Angeles, Miami, New York, Dallas, Chicago, the big cities, so many young people are looking for different things, more design, cleaner and more relaxing ... not so much big, bulky, dark furniture," he said.
Toniato also said the association is working to convince Brazil's government "to create some taxes or limitations on companies that want to export the raw materials."
He added that any effort to impose such limits is long term, but believes "the government knows it has to create more jobs here, (and) when you export raw materials you don't create jobs."
Harald Unterleider Jr., export director for Herval, said the upholstery company changed its approach five years ago in response to Asian products.
"We're not interested in competing with China," he said. "Our focus is to sell unique Brazilian furniture products."
Half of Herval's exports are to the United States, sold through distributors in New York, Florida and Chicago, to customers such as Rooms To Go.
Unterleider said the company learned early on that it had to modify its Brazilian furniture to suit the destination country's tastes.
"Americans like their sofas and loveseats like a cloud," he said. "For Germans, it's like stone. But for them, that's comfortable."
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