Imports not a big issue for bedding producers
By Michael J. Knell -- Furniture Today, June 27, 2005
Ottawa — While bedding executives agree that imports from China may account for as much as a quarter of the market a decade from now, they don't foresee the same devastating impact as has occurred in other furniture categories.
Unlike the furniture industry, execs say bedding producers have worked hard over the past 15 years or so to create both consumer awareness and demand for their product using tools such as brand advertising and creating organizations such as the Better Sleep Council of Canada.
"One thing that's different about the furniture and bedding industries is that the mattress makers have created awareness of the product among consumers and made it easier for the retailer to make a profit selling it," said Bob Malin, vice president of licensing for Serta International and chairman of its Canadian Executive Committee.
This explains why the Canadian bedding industry has shown consistent year-over-year growth over the past decade, with the exception of a slight dip in 2003. According to preliminary data published by Statistics Canada, bedding shipments hit a new high of C$809 million in 2004, 3.5% more than the prior year's C$781.4 million.
The C$809 million includes the contract, hospitality and health care sectors, which represent about 15% of shipments. The figure also includes shipments by factory-direct and small regional producers as well as private-label products manufactured for retailers such as Sears.
The four producers ranked here continue to dominate the market with collective shipments of C$435.6 million in 2004, a 11.2% gain over the C$391.8 million recorded in 2003 — a growth rate almost triple that of the industry as a whole.
With sales now in excess of $100 million, each the three S's — Sealy Canada, Simmons Canada and Serta of Canada — remain firmly entrenched as the Canadian industry's Top 3 bedding sources.
Contributing to their dominant position is a deep commitment to advertising. All three producers not only run their own campaigns to create brand awareness, they also are regularly featured in the campaigns conducted by major bedding retailers such as Sears Canada, The Brick, Leon's, Brault & Martineau and Sleep Country Canada.
Sealy Canada remains this country's largest bedding producer, showing a robust 15.9% sales gain in 2004 to C$148.8 million.
Holding onto second place is Simmons Canada, the only publicly held bedding producer in the country. Its 2004 sales of C$128.8 million were essentially flat when compared to 2003. Simmons Canada is the only Canadian bedding producer with a chain of independently owned and operated dedicated stores across the country (19 in all), supported by a network of in-store galleries.
Serta of Canada is the bedding growth leader for 2004 as it saw its sales leap ahead 29.7% to C$103 million, breaking the C$100 million barrier for the first time. Malin attributes much of Serta's sales gain last year to the highly successful Counting Sheep campaign.
Bedford Furniture, the Toronto-based Canadian license for King Koil, had flat sales in 2004 with a volume of C$55 million. But the successful launch of three better-end branded lines — True-2-Form, Natural Response and Jaclyn Smith — holds out considerable potential for accelerated growth.
Executives noted that unlike furniture, Canadian bedding producers have been able to step up the consumer to better quality goods. Research conducted by Serta shows that the average ticket price paid by Canadian consumers for a queen-size mattress has risen from C$800 to C$1,000 over the past few years.
"We've done this by making the consumer more aware of mattresses," Malin said. "We've taken the attitude that our biggest competitor isn't another furniture manufacturer but any other durable that a consumer might buy, such as electronics or cars."
Solid marketing, better products and quick delivery add up to increased profits for retailers.
"The way mattresses are delivered today, the retailer can turn his inventory 13 times a year, and many do it 24 or 25 times a year," Malin said. "When you do that, you're making a lot of money."
This doesn't mean the industry isn't without its challenges.
"There was a large amount of price increases last year," said Gary Baskerville, vice president of sales and marketing for Bedford/King Koil. "There were significant increases in the price of steel, and we're starting to see increases in foam."
With retailers remaining resistant to price increases, the challenge for producers is to "become more efficient so we can absorb as much of these price increases as we can," Baskerville added.
The Canadian bedding industry saw its share of the apparent market drop to 93.8% from 96.2% in 2003 as a result of a 67.3% increase in imports last year, to C$49 million. And while still a small part of the Canadian market, bedding imported from China shot up 240.7% to C$5.4 million in '04.
Several of the larger imports — including Primo International, Hamilton & Spill and Eztia — have introduced China-made mattresses to their lines.
While bedding execs acknowledge China's share of the market will grow, they believe the Canadian market itself will grow just as rapidly because of the industry's willingness to take its message to the consumer. And due to the need to compress products for shipping, they also see China concentrating on specialty bedding products such as visco-elastic and similar constructions.
They also point out that the delivery cycle for Canadian product is measured in days — not the weeks that China to ship product across the Pacific.
"It's the rise of specialty bedding that will drive Chinese imports up," Baskerville said. "They don't represent a large threat to traditional innerspring producers."
| Canada's top bedding resources | ||||
|---|---|---|---|---|
| Bedding shipments in C$ millions | ||||
| Rank | Company name, home base, Web site, notes | 2004 | 2003 | Percent change 2003 to 2004 |
| All figures, with the exception of those supplied by publicly held companies that break out line-of-business sales for bedding, are Furniture/Today market research estimates. All data for calendar years ended Dec. 31, or the fiscal years closest to that date. Source: Furniture/Today market research |
||||
| 1 | SEALY CANADA | $148.8 | $128.4 | 15.9% |
| Toronto, www.sealy.com | ||||
| Owned by the U.S.-based Sealy Mattress Co. Factories Toronto, Edmonton, Alberta, and St. Narcisse, Quebec; a distribution center in Vancouver, British Columbia. Sales figures from data in parent's Form 10K filing with the U.S. Securities and Exchange Commission. Makes and markets all Sealy brands, including Posturepedic, Crown Jewel Posturepedic, Palatial Crest Posturepedic and Correct Comfort Pocket Coil. Key retailers include Sears Canada, The Brick, Leon's, The Bay, Sleep Country Canada and the buying groups. | ||||
| 2 | SIMMONS CANADA INC. | $128.8 | $129.0 | -0.2% |
| Mississauga, Ontario, www.simmonscanada.com | ||||
| Wholly owned subsidiary of SCI Income Trust; has a perpetual license agreement with Simmons U.S. Factories in Delta, British Columbia, Brampton, Ontario, and Kirkland, Quebec; a distribution center in Regina, Saskatchewan. Currently operates 15 freestanding stores and 55 in-store galleries. Makes Sears-O-Pedic and Ikea bedding, and other private-label lines. Also makes and distributes under license ObusForme bedding. | ||||
| 3 | SERTA OF CANADA | $103.0 | $79.4 | 29.7% |
| Itasca, Ill., www.serta.com | ||||
| Four Canadian licensees, in Toronto, Winnipeg, Manitoba, Vancouver, British Columbia, and Montreal. Each participates in joint marketing and sales activities, particularly for national accounts such as Sears Canada, Sleep Country Canada, The Brick, Cantrex, Dufresne Furniture & Appliances and Brault & Martineau. Added Leon's in 2004. Projected 2005 sales, $115 million. | ||||
| 4 | BEDFORD FURNITURE | $55.0 | $55.0 | 0.0% |
| Toronto, www.kingkoil.ca | ||||
| Privately held, family-managed producer of the King Koil brand in Canada; factories in Toronto and Calgary, Alberta. Figures do not include King Koil sales in Quebec, which is licensed to Mirabel Bedding of Lavel. Introduced True-2-Form, Natural Response and Jaclyn Smith lines in Canada last year. Key retailers include Sears Canada, The Bay, The Brick, Leon's, Bad Boy and Tepperman's. | ||||
| Totals | C$435.6 | C$391.8 | 11.2% | |
| Canadian apparent market for mattresses | |||||
|---|---|---|---|---|---|
| 2000–2004 | |||||
| In millions of current Canadian dollars | |||||
| 2000 | 2001 | 2002 | 2003 | 2004 | |
| Product categories: 337910 (mattresses) The apparent market is total shipments, less total exports, plus total imports, all measured in wholesale prices. Sources: Statistics Canada, Industry Canada, Windsor Bay Communications Inc. |
|||||
| Total Canadian factory shipments | $699.4 | $743.5 | $795.3 | $781.4 | $809.0 |
| % change | 6.3% | 7.0% | -1.7% | 3.5% | |
| Exports | 32.5 | 35.5 | 45.4 | 42.7 | 65.5 |
| % change | 9.5% | 27.7% | -6.0% | 53.6% | |
| Exports to the U.S. | 31.7 | 34.0 | 44.5 | 40.9 | 62.9 |
| % change | 7.3% | 30.9% | -8.1% | 53.8% | |
| Domestic shipments | 666.9 | 708.0 | 750.0 | 738.8 | 743.5 |
| % change | 6.1% | 5.9% | -1.5% | 0.6% | |
| Imports | 16.1 | 18.2 | 20.8 | 29.3 | 49.0 |
| % change | 12.8% | 14.2% | 40.8% | 67.3% | |
| Imports from China | 1.4 | 1.7 | 1.4 | 1.6 | 5.4 |
| % change | 24.0% | -21.9% | 16.9% | 240.7% | |
| Imports from U.S. | 13.5 | 15.9 | 19.1 | 26.9 | 37.7 |
| % change | 17.5% | 20.3% | 41.0% | 39.9% | |
| Apparent market | 683.1 | 726.2 | 770.8 | 768.1 | 792.5 |
| % change | 6.3% | 6.1% | -0.4% | 3.2% | |
| Canadian industry share of apparent market | 97.6% | 97.5% | 97.3% | 96.2% | 93.8% |
| China product share of apparent market | 0.2% | 0.2% | 0.2% | 0.2% | 0.7% |
| U.S. product share of apparent market | 2.0% | 2.2% | 2.5% | 3.5% | 4.8% |
| China product share of all imports | 8.6% | 9.5% | 6.5% | 5.4% | 11.0% |
| U.S. product share of all imports | 83.7% | 87.2% | 91.8% | 92.0% | 76.9% |
