W&WP April 2003

One on One:

MasterBrand Cabinets CEO Discusses Growth Plans

Following its acquisition of The Omega Group, Richard Forbes expects MasterBrand Cabinets to continue to invest and grow in all sales channels, including the home center market.

By Chad Sypkens

MasterBrand Cabinets Inc. of Jasper, IN, solidified its position as North America's second largest manufacturer of kitchen cabinets and bathroom vanities through last year's acquisition of the Omega Group.

The Omega Group includes the Omega, Kitchen Craft and HomeCrest brands. These lines were added to MBCI's stable that already included its flagship, Aristokraft, plus Schrock, Decora', Diamond, Kemper and Kitchen Classics. Combined sales of MBCI's lines were $1.2 billion in 2002, second only to Masco Corp.

MBCI was established in 1998 with the merger of Aristokraft and Schrock Cabinet Co. MBCI is a subsidiary of Fortune Brands, a leading consumer products company. Fortune Brands owns many recognized brands including Titleist, Jim Beam, Moen, Master Lock, Foot Joy and Waterloo. Currently, MCBI represents about 25% of Fortune Brands' annual sales.

Wood & Wood Products recently contacted Richard E. Forbes, president and CEO of MCBI, to learn more about the impact of the Omega Group buyout. We also took advantage of the opportunity to question Forbes on the progress of the licensing agreement through which MCBI manufactures Thomasville Cabinetry for Home Depot.

 

In April 2002, Fortune Brands completed a major acquisition of kitchen and bath cabinet manufacturer, The Omega Group. What was it that attracted your company to Omega?

One obvious attraction was Omega's rich tradition and strong industry presence. But more importantly, the acquisition gave us the opportunity to complement our existing product lines with Omega's core competencies in

custom and semi-custom frameless cabinetry. The addition of The Omega Group has put us in position to offer customers the full array of cabinetry, including custom, semi-custom, frameless, stock and RTA lines. Today we sell RTA cabinetry to several national home centers in the United States and Canada. Our RTA brands include Georgetown, Kitchen Classics and Maple Creek.

 

How does Omega's manufacturing capabilities, product offerings and distribution network dovetail with MasterBrand's other cabinet lines, including Aristokraft, Schrock, Diamond, Decora' and Kitchen Classics?

Omega's manufacturing capabilities and product lines really completed our offerings in regards to construction and product types. The inclusion of the Omega Group expanded our capabilities in two key product categories -custom cabinetry and semi-custom frameless cabinetry. The Omega line is truly a full-custom cabinet offering, while Kitchen Craft is our first semi-custom frameless line.

As for distribution, Omega's established position among top-tier customers in the dealer channel and in upscale design centers, really enhanced our presence in these very important channels. The Omega Group increased our presence in the dealer channel by approximately 50 percent. Today we service nearly 5,000 dealer accounts.

 

Were any changes required to make Omega fit into the MasterBrand family? If so, what were they and have they been completed?

The addition of The Omega Group has enabled us to experience synergies across the business. Our increased volume provides added opportunities to consolidate purchases of raw materials while our sales forces are very complementary. We have benefited from savings in different cost centers, such as sourcing and logistics, and we are currently exploring ways to leverage our logistic capabilities. We've also instituted "best practices" in many areas of our operation.

 

How do you view the results thus far of the Omega merger?

I'm glad to say the addition of Omega, Kitchen Craft and HomeCrest has exceeded our expectations. We've not simply added to our stable of great brands, we've been able to grow those brands as well.

 

In February 2002, MasterBrand entered into a business agreement with Furniture Brands International and Home Depot to manufacture the Thomasville cabinet line exclusively for Home Depot. How successful has the program been thus far? How many stores currently sell Thomasville Cabinetry?

The manufacture of Thomasville Cabinetry is a fantastic opportunity for our company. We will have a national presence in The Home Depot, premium display space, and we offer a great brand that a majority of consumers already know and trust. Presently we supply Thomasville Cabinetry to more than 500 Home Depot stores. Within the next year, we are scheduled to supply Thomasville to all 1,600-plus Home Depot locations.

This opportunity reflects MasterBrand Cabinets' strength in semi-custom cabinetry, and our reputation for excellent customer service. The roll-out has been very successful in the stores reset thus far, and we look forward to more growth in the future.

 

Aside from the name and the relationship with Home Depot, how is the Thomasville cabinet line different from other MasterBrand offerings?

Thomasville Cabinetry has its own unique set of door styles, crafted exclusively to suit the needs of Home Depot and Thomasville consumers.

 

What have been the most recent additions or enhancements to the Thomasville line? What is being planned for this year?

Recent enhancements have centered on the overall product offering. In the fall, we introduced two new maple door styles, four oak, and a hickory style. We also introduced a Cranberry finish for cherry styles. This spring, we plan to introduce a variety of new mouldings and embellishment pieces, as well as the Brierwood and Toasted Almond finishes for our maple door styles.

 

The housing market was one of the few bright spots of last year's economy and really helped the cabinet industry. Approximately what portion of MasterBrand's sales have gone into new homes as opposed to remodeling?

We've always been strong in new construction, but recent additions to our product mix have tilted MasterBrand Cabinets' total business more toward remodeling. Today, we are approximately 60 percent remodeling and 40 percent new construction.

 

Where do you see MasterBrand's greatest growth coming from in the next five to 10 years?

We will continue to invest and expect to grow all sales channels, but the greatest immediate prospects are in the home center and builder-direct channels.

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