Tier two producers looking for opportunities
David Perry -- Furniture Today, December 20, 2013
High Point - Big bedding producers are getting even bigger, but Tier Two mattress makers see opportunities for growth in the new year.
Some expect very strong growth but others are more cautious, seeing a year of flat performance or only slight gains.
The producers see growth opportunities with innovative products, including specialty sleep beds, and with lines that offer strong values and high margins to retailers.
As part of its annual bedding outlook, Furniture/Today asked more than a dozen Tier Two producers this question: "What is your overall outlook for bedding business next year?" Here's how they responded to that question:
Diane Adams, chief marketing officer, FXI: "The outlook for the industry is very strong. It will be better than this year and a real opportunity to capture more of the middle market as we see more action at the $1,000 to $1,500 price points in 2014."
Mark Akerman, vice president of sales and merchandising, Enso Sleep Systems: "Cautiously optimistic. We expect Q1 to be impacted greatly by what does or does not get done in Washington in regards to a budget deal.
Consumers will be adjusting to the realities of the Affordable Care Act and that could have an impact on disposable income. Continued strengthening within the housing industry will create opportunities for growth in both units and dollars. The consumer is focusing more and more on real value - high quality at obtainable price points. Manufacturers who can deliver that, as well as high margin opportunities to retailers, will find 2014 to be a very good year."
Sarah Appleton, vice president of sales and marketing, Spring Time Bedding: "Our overall outlook for the year is very favorable. While the economy is still struggling, we see some positive signs, mainly an increase in demand for luxury bedding, especially feature-packed sleep systems with gel and memory foam mattresses. We are also seeing retailers move beyond the simple good, better, best model, and actually adding SKUs in between those price points. This is significant because it is adding slots to the floor and offering the consumer more choice in price and features. By and large, these new slots are going to hybrids and particularly those with gel and memory foam."
Walt Bader, president, Organic Mattresses Inc.: "The industry as a whole will be flat in both units and dollars next year. I think what you will see, however, are niche manufacturers continuing to take market share from the ‘S' brands because these smaller companies are really fueling the innovation in the category that helps retailers make higher margins. If most of a typical retailer's floor is an ‘S' brand, that means that retailers need a diverse product mix on their floor with higher margins to attract new customers and improve profits. We are seeing more and more of these retailers turning to authentic certified organic mattresses and accessories as a product category to accomplish this."
Alvise Bertoncello, vice president of sales and marketing, Technogel: "It will be a fairly good year for the industry in 2014. If you look at the trend lines, consumers want value, although they are afraid to spend money. An interesting thing is happening: When they buy, the pricing over the past few years has really started to creep up. It has led in large part to a change in high-available-income-consumer interest in ‘quality sleep,' but also to several medium to high-end manufacturers advertising, which has had a significant impact on the industry. That consumer, already inclined to spend $3,000 plus, when they now look around the showroom floor, is not dropping down to cheap product, but rather to comparable price points and this helps companies like ours. I also think you are seeing the formation of strong specialty brands that have cemented their roles in the industry. I believe we are starting to own that space in gel technology. Market leaders, particularly when ‘purists' of a technology, will continue to grow stronger, as the consumer appreciates that."
Denny Boyd, president, Boyd Specialty Sleep: "With the introduction of our Thomasville and Broyhill sleep products, we believe our business will be up significantly in 2014. As for the industry, I think business will be up only slightly next year as the economy continues its slow, uneven recovery. Housing starts will keep improving but unemployment will remain high, mitigating gains in the real estate sector. The foundation of the U.S. economy has been fine but consumer sentiment is easily impacted these days by developments such as the recent shutdown of the federal government."
Richard Fleck, president, Paramount Sleep: "We are cautiously optimistic for 2014. We believe the business environment will remain challenging for the first half of 2014 for several reasons: 1, Economic growth is forecasted in the sub 2% range; 2, housing is making a tepid recovery and will vary by region and market; 3, fiscal policy is still a mess with a 2014 ‘fiscal cliff' looming, and 4, overall households remain reluctant to spend. We anticipate that the economy will start picking up momentum in the second half of 2014. Since bedding is a consumer durable that is a deferrable purchase, we see overall modest increases in 2014. Fortunately, our organization is an 80-year-old startup. The transition from our old business model in 2010 to our new business model will allow us to gain national and regional momentum. Our focus will be on our customers, products, people and processes."
Bill Hammer, president, Shifman: "I believe the industry has the potential to increase sales next year. Consumers are looking for a better night's sleep and will continue to search for products to satisfy this need. Shifman will continue to grow its sales with existing and prospective dealers in North America with superior products and marketing that drives traffic, increased sales and profitability, a higher average unit sale, and unmatched customer satisfaction."
Ken Hinman, senior vice president, sales and marketing, Jamison Bedding: "I think the industry will still be dealing with the fact that deep discounts will be required to generate sales. As much as 70% of bedding sales in 2014 will remain in the promotional price range of from $499 to $999 at retail. Jamison's business next year will continue to buck trends because of the nature of our distribution. The majority of retailers we do business with sell higher-end goods."
Kurt Ling, president, Pure Latex Bliss: "The temperature of the bedding market today is really dictated by the overall economy. That trend started with the recession and we have really not migrated from 2008. Before that, housing sales was the key driver, and while that is still somewhat the case, the fact is that consumer is much more closely drawn to economic indicators like jobs, unemployment, consumer confidence and the stock market. A retailer need not look beyond CNN in the morning to know what kind of day they are going to have. If Ben Bernanke or now Janet Yellen sneeze, the mattress industry will catch cold. That said, I believe the indicators are more positive than negative, so barring any major hiccup, we will see modest gains in the coming year."
Bob Naboicheck, president, Gold Bond Mattress: "The fundamentals of the economy are good, but the consumer is terrified by the shenanigans in Washington. I think 2014 could be one of the best years for our industry in a long time. Housing sales, our industry's leading indicator, are strong, employment has stabilized and the stock market has recovered. If the politicians stop taking us to the brink on economic news, we will have a great year."
Robert O'Connell, executive vice president of sales and marketing, Sensorpedic, a unit of Soft-Tex: "For specialty manufacturers, and in particular foam producers like our company, there is tremendous growth taking place, with some interesting twists that skew the numbers. First, unit gains will be higher because growth is coming from nontraditional retail sources like big box, e-commerce and TV retailers who are getting into the mattress business. Also, in these channels, it is not uncommon that 50% or more of the product mix is specialty, so as a subcategory of the industry, we are distributing more than ever. This is also true with traditional retailers, as they grow their assortment of specialty sleep slots on their floors. Additionally, specialty sleep products may experience reduced AUSP as more and more imported products and alternative channels take more aggressive positions in the marketing of this category."
Tony Pearce, president, ZZZest: "Continued strong growth."
Martin Rawls-Meehan, CEO, Reverie: "Our overall outlook for the year is very favorable. The economy is doing reasonably well, and the demand for adjustable foundations, or ‘power bases' as they are also called, under mattresses is growing as more retailers appreciate the value of showing all, or nearly all, of their mattresses on an adjustable foundation. Retailers are now not only carrying ‘good, better, best' for the adjustable foundation category, but also slotting product in between those categories to fill price point gaps that traditionally existed in the good, better, best model. This should help improve attach rates and raise general awareness for adjustable foundations as more floor models show up on retail floors."
Jon Stowe, CEO, Dormeo North America: "Specialty products, particularly foam, will continue to drive sales next year for retailers. The consumer is excited about the comfort, performance and durability of foam and has essentially cast innerspring aside. The other driver for the success of foam is the profit margin for dealers. They just can't make a living on a $399 or even $599 innerspring. They will continue to direct traffic ... to foam because that is where the profit lies."
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