Spin-off Success for ‘Green’ Cabinets

Using wheatboard and certified woods, Neil Kelly Cabinets succeeds in the environmentally-conscious Portland area after separating from its well-known parent, Neil Kelly Company.

By Renee Stern

       
Neil Kelly Cabinets
Portland, OR
www.neilkelly.com

Year Founded: 2001
Production Employees: 14
Shop Size: 30,000 square feet

FYI #1: The company started as a “green” division of 54-year-old Neil Kelly Company and was so successful, it went solo.
FYI #2: Most people who inquire about Kelly’s cabinets either have allergies or sensitivities, or are “true believers” in green products.

 
   
       

Neil Kelly Cabinets wraps a new company and new focus in an old, respected name.

The Portland, OR, cabinet company spun off from a 54-year-old home remodeling and repair business, gaining independence in October 2001. The former parent, Neil Kelly Company, is now one of many customers for the custom cabinet manufacturer’s “green” products.

Certified wood is one option available for customers, but the company’s standard cabinet uses wheatboard for the case material. All feature a low-VOC, water-based finish. “Right off the bat, each product is green and healthy,” says Rick Fields, chief executive officer.

Oregon leads the country in environmental issues, Fields says. The state is a pioneer in recycling, for example, and interest is high in lumber certified as grown and harvested in responsible and sustainable ways.

In 1994, when the cabinet operation was a division of Neil Kelly, the company joined The Natural Step, a non-profit environmental education organization, and later gained certification from the Forest Stewardship Council. It became one of the first cabinet manufacturers to handle certified woods.

Fields joined Neil Kelly in 1998 to head up the cabinet division. That same year the company launched its Naturals Collection of cabinets with six door styles, using certified wood and water-based finishes. The collection was designed to offer a clean and versatile look inspired by styles of the Pacific Northwest, the Pacific Rim and what the company calls “Swedish Country,” a simple country style influenced by the Arts and Crafts movement. The new product gained widespread recognition, including a Product Innovator Award in the semi-custom cabinets category from Kitchen & Bath Business magazine in January 2000.

The cabinetry also has been successful in terms of sales figures. Fields says that division sales were $2 million in 2001 and he expects the new company to reach $2.5 million this year.

A ‘Perfect’ Sustainable Material
Among Fields’ first decisions for the cabinet division was the move to wheatboard as a substrate, which he describes as the perfect sustainable material. It is annually renewable, unlike trees, and it recycles some of the 60 million tons of straw left each year after wheat harvests. Aura, an Oregon-based distributor, supplies most of the company’s wheatboard, and two local laminators prepare the panels to Kelly’s specs.

The cost is now roughly equal to particleboard, down from the $4 to $5 premium for wheatboard when he first investigated the product, Fields says. Wheatboard runs through production in a similar fashion to particleboard, he adds. Cutting blades may dull a little faster on it, but wheatboard holds screws just as well. At the same time, it is 7 percent lighter than particleboard and 100 percent water-resistant. “It will float in water instead of turning to mush,” Fields says.

Achieving the quality he wants has taken a little time: to work out bugs with the new materials, both substrate and finish; and to train everyone from suppliers to production workers. The water-based finishes, for instance, must be applied “just so” to achieve an even flow, Fields says, and drying times are longer. Change is difficult, he adds. But now, production details are set and he is turning his attention to company growth.

Expansion into New Markets, New Territories
In its days as a branch of a larger company, the cabinet shop competed in-house with three other cabinet lines that its parent also handled. Neil Kelly also drew in business through dealership arrangements with about 20 high-end bath and kitchen shops in the Northwest.

Today, those dealerships and the former owner are part of Kelly Cabinets’ Northwest territory. The newly independent company has also expanded into a new sales territory throughout Colorado, Kansas, Nebraska and Texas.

Commercial contracts for condominiums and other high-end housing projects in the Portland area are another new venture, although Fields plans to stay local with those for now. “We don’t have the logistics to manage large projects elsewhere,” he says.

Current marketing is limited to brochures for dealerships because the low-margin industry keeps money tight, Fields says. He envisions future expansion coming through acquisitions to gain both production capacity and a customer base. But that’s further down the road on in his business plan.

“We have at least another year [before that happens] because the competition’s not there yet,” he says. But that, too, will come, he says, believing that other companies will either be attracted to new marketing opportunities or pushed by outside forces. (Fields predicts that legislation in five to 10 years will mandate sustainable forestry practices.)

For now, the bulk of the company’s sales come from the Northwest, spilling from Oregon and Washington into California. The rest is direct retail sales. Kelly Cabinets has three salespeople: one in Seattle, one in Colorado and one at the Portland office to handle commercial deals.

Inquiries come in from all over the country. The company is shipping cabinets to Boston and Washington, DC, for instance, without any local sales staff to pave the way.

The Neil Kelly name generates some local carryover for the spin-off. Fields estimates that about 40 percent of the parent company’s business comes from repeat customers. “That’s why I bought this name,” he says. “But at the same time I want to offer the country a green, sustainable, healthy product that’s not necessarily high-end.”

     
 
Standard Neil Kelly cabinets are made with a wheatboard substrate and a low-VOC finish. Customers can choose from several environmentally friendly upgrades, including a formaldehyde-free low-VOC finish and certified woods and veneers. Kelly uses certified wood from Endura Wood Products, a distributor that gets much of its wood from the Collins Cos. More recently Neil Kelly began offering juniper.
 
     

Broadening the High-End Niche
Fields says he wants to broaden the definition of high-end with more choices, opening up a spectrum of affordability within that niche. For example, choosing a simple door style and limiting modifications lowers the cost.

But quality doesn’t come cheaply. A Kelly cabinet uses a 32mm European box design, with 3/4-inch material and hardware mounted into the case. A set of cabinets with 14 boxes and flat panel doors runs as low as $6,000, Fields says, and stay very affordable. On the other hand, with upgrades, those same 14 boxes might ring up at $60,000.

“Our standard product is a Buick, but we can customize any job to a Cadillac,” Fields says.

Not that Kelly Cabinets produces a stock cabinet as such. “The folks we deal with want to make sure they have an exclusive,” he adds.

Fields divides the people who inquire about the company’s cabinets into two groups: those with allergies or sensitivities and “true believers” in green products.

“The folks who come to us because we’re green are hard-core environmentalists,” he says. “There are more who can’t afford us and that’s a damn shame. They’ve got Coca-Cola pocketbooks and champagne dreams.”

Neil Kelly customers also expect high standards. “Our scrap rate at the mill is extremely high,” Fields says. Yet, sometimes expectations soar beyond what’s possible with a natural product. “God is in charge of grain pattern and color,” he says. “There’s not much we can do about it.”

The company edgebands everything with its Holz-Her 1408 edgebander. Tolerances are less than 1mm. “We just don’t cut any corners,” Fields says.

At the same time, a custom product calls for flexibility to meet the buyer’s needs and wishes. The shop can handle any material and finish the customer asks for, says production manager Mark Smith. The company offers 136 veneer species and color options, and expands that list with custom mixes.

Based on previous sales, maple and cherry are the most popular woods. One of the more unusual projects included a sunflower seed composite inlay on certified cherry hardwood and wheatboard with certified cherry veneer. Another called for a granite-like textured finish achieved by spraying MDF, plastic and plastic foam.

Regional preferences add variety. Colorado buyers, for instance, prefer an Old World, distressed look, Smith says. ”It’s a moving target,” he says of market tastes. “That’s where flexibility is an asset for us.”

Some of the company’s projects incorporate stainless steel. Others call for round tops or round fronts. Smith recalls a freestanding kitchen island assembly with cabinets and furniture pieces using butcher block, and points out a prototype in the shop for a set of wine cabinets to hold a customer’s 2,000-bottle collection.

“If you’ve got a drawing, and I can build it, and we can agree on a price, we’ll do it,” he says. Sometimes those designs come in on napkins; Smith’s job is to translate them into reality.

Shop Equipment Provides Flexibility
In the shop, Smith heads a workforce of 14, using a small number of key machines that focus on flexibility. For now, a Viking spray booth is the shop’s most modern piece, but plans include acquiring a CNC machine to take pressure off the Striebig vertical panel saw and hand routers. The addition should double capacity and raise accuracy, but may require an adjustment, Smith says. “Automation requires a compromise in flexibility,” he says.

The shop also relies on a Rockwell shaper and a Busellato boring machine from Delmac Machinery Group, used for horizontal and vertical boring.

Finishes get lots of attention, so the spray booth is a key step in production. “A cabinet is something people put their hands on,” Smith says. “We work hard to get that hand feel and durability.”

At the same time, the shop narrows its focus on what’s done in-house and what’s subbed out to maximize efficiency. Two-thirds of the doors — the five-piece standard styles —- come from outside suppliers, as do common mouldings and dovetail drawers. A contractor with a press lays up laminates for box parts.

“Basically, we outsource the traditional things,” Smith says. “The weird things we make.”

That makes lead times more of a challenge. Customers want their projects in place without delay, but relying on outside suppliers to such an extent adds opportunities for glitches.

The key, Smith says, is communication: Present customers with options instead of obstacles on one end, and on the other end, impress vendors with the need for flexibility in order to reduce the potential for problems, he says.

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