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Tempur-Pedic: A game changer

David Perry -- Furniture Today, November 30, 2011

Tempur-Pedic at a glance

LEXINGTON, Ky. - Here's a quick look at some key facts about Tempur-Pedic:
Positioning: The company is the worldwide leader in the specialty sleep arena and in the premium mattress market. It defines the premium market as accounting for $5 billion of the $13 billion global mattress market.
Differentiation: Tempur-Pedic stands out with its consumer-preferred, branded product line, the company says. It notes that it offers the brand that is most highly recommended by bedding owners, and says that Tempur-Pedic is the most desired brand by non-owners.
The company says that it has spent more than a decade on brand advertising, and notes that it has a high level of owner referrals.
Profitability: Tempur-Pedic says it has industry-leading margins and cash flows. Its gross margin is at 50%-plus, and its operating margin is at 22%-plus. The company delivers high returns and has low cash needs.
Growing: Tempur-Pedic sees significant growth opportunities in revenues. It notes that it has a 3% U.S. mattress unit market share, up from 2% a year earlier. The company's intermediate market share goal is in the 7% range.
Analysts predict that publicly held Tempur-Pedic will finish 2011 with net sales of about $1.4 billion. The company has set a goal of hitting net sales of $2 billion in 2014.

DUFFIELD, Va. - Set amidst the Appalachian Mountains here, a huge Tempur-Pedic factory goes about its work three shifts a day, churning out mattresses and pillows made of Tempur material, the foam that changed the bedding industry.

The Tempur-Pedic plant hums with activity just as the Tempur-Pedic brand crackles with energy. The company emerged from modest U.S. roots just over a decade ago to reshape the mattress landscape and launch the specialty sleep segment as a major force on retail mattress floors.

Today Tempur-Pedic ranks as the fourth-largest mattress company in the United States and is on a torrid growth streak. In a lackluster bedding marketplace this year, its mattress sales are soaring, up 30% in the last quarter alone.

What is driving the Tempur-Pedic boom?
The company recently granted Furniture/Today unprecedented access to its half-million-square-foot plant here, one of two Tempur-Pedic factories meeting U.S. consumers' growing appetite for premium-priced Tempur sleep sets.

Top company executives also briefed Furniture/Today on key initiatives driving their brand.

Rick Anderson, a veteran consumer products marketer who joined Tempur-Pedic in 2006 and now is executive vice president of the company and president of Tempur-Pedic North America, said the company's "consumer centered" approach to the mattress business is helping it meet consumer wants and needs.

"We are helping more and more people get a better night of sleep each night," Anderson said. "I think everyone here believes that." And that belief, he added, is at "the heart and soul and passion of the brand."

Among the insights shared by Anderson and other executives:
* Consumer research shapes all of the company's actions. Tempur-Pedic spends more than $1 million annually on research, "testing our way to success," said Cathy Linder, director of marketing research.
* Some of that research is conducted at a consumer research center where showroom settings and focus groups are used to develop products.
* Heavy and consistent brand advertising - now more than $100 million a year - has rocketed Tempur-Pedic up the charts for future brand purchase interest into the No. 1 position for this key bedding metric.
* An expanded collection of Tempur mattresses now enables the company to better meet key consumer preferences, from beds with soft initial feels - a void in the line until a few years go - to firm initial feels.
* The company's "Ask Me" advertising campaign, based on high levels of owner satisfaction, is resonating with consumers and helping to drive demand.
* Tempur-Pedic's "retail activation" efforts include a road show that brings the brand in a "rock concert" type of setting to retailers in major markets. The shows, aimed at retail sales associates, have sparked immediate sales growth in the markets where they are held, said Wes Campbell, director of retail marketing and customer activation (a unique title in the industry). The road shows began this year and will continue next year.
* The addition of local advertising has helped Tempur-Pedic lift retail sales in several markets around the country. More local advertising is planned for next year. It will supplement the company's heavy national advertising program.

It all adds up to a bedding success story that has no equal. It is a story that has Scandinavian roots. Scientists in Sweden and Denmark developed proprietary Tempur material for mattress use after NASA released temperature-sensitive memory foam to the public in the 1980s, Tempur-Pedic says.

Holding pieces of chipped Tempur material that will be used in pillow fillings are Tempur-Pedic executives Wes Campbell, left, Cathy Linder, Rick Peak and Rick Anderson.Lexington, Ky., resident Bob Trussell met some of those scientists in Denmark and was inspired to bring Tempur-Pedic to America. And thus, the company notes, "a revolution in sleep was born." Tempur-Pedic is based in Lexington.

Tempur-Pedic entered the U.S. retail bedding market in 2000. Its first U.S.-made Tempur mattress was sold the following year.

The company quickly gained a foothold in the tough U.S. bedding market and relied on quality products, smart marketing and strong brand-building efforts to change the nature of the bedding game.

"We're not afraid to blaze a new trail," the company says. "We're passionate about doing things the right way, even if we upset the status quo. We completely did away with traditional springs in our mattresses in favor of a radical new material that was completely unknown at the time."

Now, thanks to Tempur-Pedic, memory foam is a key category in the mattress industry. And everyone knows Tempur-Pedic.

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