A Second Look

Wood & Wood Products revisits the 12th Annual WOOD 100 companies to learn how they have managed since September 11th.

By Bernadette Freund

September 11 is a date that has been burned into our collective memory. Each of us remembers where we were and what we were doing that morning as the full horror of the terrorist attacks unfolded.

On September 11th, the September issue of Wood & Wood Products, featuring the 12th Annual WOOD 100 Report, was at press. In sharp contrast to the dire economic news that flourished in the popular media, the WOOD 100 Report brimmed with optimism.

Fifty-seven of the WOOD 100 companies were expecting to post a double-digit growth in 2001. Eighty-two percent said they expected 2002 to be their “Best Ever” or at least a “Good” year.

Original WOOD 100 survey question from summer 2001: “What are your expectations for sales for 2002?”
Best Ever
24%
Good
56%
OK
20%
Poor
0%
Terrible
0%
Based on 55 responses.

What Impact?

A couple of months after the terrorist attacks and with America knee deep in war, we wondered what impact the events of 9-11 and the resulting blow to the already stumbling economy had had on the 12th Annual WOOD 100 companies. How had their business activity been affected; what were their current sales expectations for 2002; what had they done, if anything to counteract negatives created by the events of 9-11 and after?

Executives of 55 of the WOOD 100 companies responded to our fax survey. Despite the changes in the economy, 27 (49%) said that their business activity “Stayed the Same.” Twenty executives (36%) said they saw a decrease in activity and expected their 2002 sales to be less than originally predicted in the 12th Annual Report.

Follow-up WOOD 100 survey question from December 2001: “In light of the events of 9-11 and the economy, what are your expectations for sales for 2002?”
Best Ever
18%
Good
40%
OK
35%
Poor
5%
Terrible
2%
Based on 55 responses.

Surprisingly, eight respondents said that their business activity has increased since 9-11. Companies that predicted an increase were Lexington Manufacturing Inc., Nu-Trend Cabinet Co., Bluegrass Furniture Co. Inc., D & L Custom Interiors, Hoffco Inc. which predicted a 50% increase, SolidTops Inc., and Jasper Seating Co. which said its business is up 5%. (The eighth company asked to remain anonymous).

When asked if they were doing anything to counteract potential negatives created by 9-11, 28 said they were taking special action. Some of the most common remedies included beefing up marketing, laying off employees, decreasing spending, lowering prices, lowering inventories, adding new products and/or business opportunities. Some companies said they were doing a combination of these and other actions.

Increased Marketing

The most consistent answer to the question — What has your company done to counteract any negatives? — was to increase marketing or sales efforts. Twelve of the 28 companies that took action said that they had added some brochures or even more project pictures to each of their brochures, paid for more radio spots, held contests and promotions, stepped up the number of sales’ calls or added more sales staff.

“We have increased our print media, sponsored shows on NPR (National Public Radio) and did an insert in one of our largest market’s newspapers in Rochester, NY,” said Frank Carnovale, CEO of Exhibits and More, “We also placed more ads and issued more press releases on our high-profile projects and increased the number of trade shows we have attended on the East Coast.”

Immediate Impact of 9-11

Despite the downturn in the economy and the impacts of 9-11, nearly half of the respondents to the WOOD 100 follow-up survey said their business activity levels had “Stayed the Same,” while 36 percent said their business activity had been reduced.

Increase
15%
Stay the Same
49%
Decrease
36%
Based on 55 responses.

The Liverpool, NY-based Exhibits and More, an exhibit designer and fabricator, saw a decrease in business activity due to the trade show and travel industry slowdown.

“It took three weeks for the effects to hit us because of the work backlog,” said Carnovale. “We have decreased, but already we are starting to see an increase in our volume for orders and in quotations as a result of our increased advertising. I think staying visible to our prospects has shown that we are a strong, viable company.”

Another company that found marketing to be the key to making a turn around is Indian Country Inc., a component manufacturer in Deposit, NY. Indian Country increased its advertising budget, added two more sales people, including a new sales and marketing manager, and revamped its Web site.

“We have felt the opposite of most people who think cutting back is the answer,” explained Gerard Kamp, CEO of Indian Country. “We have done the opposite by actually adding certain things.

“The reason we have stayed successful and business has not decreased through this is because more advertising increased our business, calls for quotes and our customer base. The economic downturn and 9-11 just proved to us that we needed to be even more efficient than before.”

Lower Prices, Reduced Inventories

Several of the WOOD 100 companies mentioned that they were forced to reduce prices in order to generate business. Others said they were switching to just-in-time manufacturing to reduce inventories. Lexington Manufacturing Inc., an architectural millwork component and store fixture manufacturer in Coon Rapids, MN, has been doing both.

“We now offer a lot of different JIT shipment programs,” said Bob Dimke, president of Lexington Manufacturing Inc. “Companies we supplied to were scared to carry inventories so they ran them down; we reacted by keeping them supplied with parts JIT. Now we have a staff that works on Fridays as well whereas before we had a Monday through Thursday work week.

     
From Good to Bad

Twenty of the WOOD 100 companies have seen their sales expectations for 2002 decrease. Of those 20 companies, the three that stood out were EMI Construction, Hollywood Woodwork and Pearson Millwork because they said their business outlook for 2002 had dropped from “Good” in the 12th Annual WOOD 100 Report to “Poor,” in the December 2001 follow-up survey.

“We had great anticipations before 9-11 on a couple of projects we bid on. Had we received them, we literally wouldn’t have seen a shift in business,” said Kirsten Ingham, Pearson Millwork’s vice president of sales.

“Things were slowing down here so we knew there would be postponing and cancelling of projects, but people panicked after 9-11 and projects that we won bids on in September, October or November have been postponed or cancelled,” she added.

“Our decrease has been due not only to 9-11, but also the economy,” said Yves DesMarais, president and CEO of Hollywood Woodwork. “We’re mainly into architectural woodwork for the hospitality market and 9-11 created a significant reduction in travel. As a result, we have had projects put on the shelf for 2002.”

“We are located in New Jersey,” said Andrew Campbell, president of EMI Construction, “We did most of our business in New York City. People were very nervous and afraid in New York after 9-11 so there has been less office expansion and new office buildings for architectural woodworking to thrive.”

What They Are Doing About It

All three of these WOOD 100 companies have proven successful track records. Pearson Millwork, EMI Construction and Hollywood Woodwork replanned, revised and added different aspects to their businesses to span the gap created by the economy and 9-11.

“We are now not as concerned with what percentage of our gross sales each one of our customers makes up,” explained Ingham. “We also cut our prices somewhat but not so that we are below cost. Third, we decided to keep our inventories low in order to have on-time delivery.

“Our bids that were lost recently were not lost by as heavy of a percentage as in October or November. We will be happy with breaking even because considering the year breaking even is an accomplishment,“ she added.

DesMarais explained, “With the hospitality market down, tenant or office interiors became a more significant area for us as well as high-end residential here in Florida. We started to approach these markets carefully with a refined plan.

“First, we figured out how to market our services and product to these newer markets. Then we contacted estimators and researched our options. We will have less of a margin on bids from these areas so we planned for no margin of error. Our efforts have been working well because we are starting to make up for the loss of our business in the Caribbean,” DesMarais added.

“We have started concentrating on New Jersey,” said Campbell. “We have manipulated our pricing somewhat for the New Jersey market. We had to lay people off because the loss of projects was a large blow to recover from. The lay offs lightened the pay roll load and costs because we went from 75 employees to around 50. I believe these things are helping us get through all of this.”

-Bernadette Freund

 
   
     

“We have also seen price pressure because profits are harder to come by in our region,” said Dimke. “For instance, some store fixture manufacturers have been supplementing their business with architectural millwork components, which is what we mainly produce. This has meant more competition, which leads to price reductions.”

The company saw business decrease in October and November but is seeing a comeback.

“We have been experiencing a slower start to the year than originally expected, but before this year we had averaged 30% growth,” said Dimke. “We obviously do not anticipate 30% growth for 2002, but we will be growing because of new projects and our cost-effective attitude.”

Layoffs Become Necessary

For at least four of the responding companies a business curtailment made it necessary to lay off some employees.

Since making these cuts, EMI Construction, which laid off one-third of its 75-man workforce (see sidebar at left) Pearson Millwork, Cherry Valley Woods and Moralmar Kitchen Cabinents have looked for other ways to ensure they will not have to lay off more staff.

Even though Cherry Valley Woods , a contract furniture and custom millwork company in Palmer Lake, CO, laid off only one person out of its eight employees it was just as difficult for them as the other companies.

“Hospitality is one of our lines of business so with the decrease in travel, naturally, our business is less,” explained Danielle Grant, sales manager of Cherry Valley Woods. “We just do not have as much work lined up because some of our projects cancelled or are on hold, so there was not enough work for that eighth person.”

The company also changed its focus, much as it did when it switched from institutional furniture to the hospitality market in early 2001.

“We have been keeping our sales heavy on residential and commercial and then lastly hospitality,” says Grant. “This strategy will help keep us going because there are still plenty of office buildings and homes going up.”

New Products Equal Success

Five companies focused on replacing products that were not performing well or introducing new product offerings. They looked at new business opportunities by adding new products or asking accounts and customers what products they wanted to see their companies develop.

“We manufacture computer desks and activity tables for elementary schools,” says Funblock Inc. President Michael Crane, “but we also do home furniture for kids, which is the market for us that is suffering right now.

“We have contacted our dealers which has led to us producing a different line of modular coat lockers and other sizes of classroom storage and shelving units. We also do more work for other cabinet shops on our CNC equipment,” says Crane.

Like most of the 54 other respondents to our survey, Funblock remains optimistic for the company and for its future success.

“9-11 and the downturn in the economy has forced us, like any other company, to be more aggressive,” said Crane. “With the invention of our new products, some increased marketing and the latest CNC equipment, we will still be profitable for 2002.”

Other Steps

Another solution came from John Wiley, president of Elipticon Wood Products Inc. He said the company thoroughly reexamined its service and quality after the attacks.

“We met with our employees to evaluate the possible implications of 9-11,” said Wiley. “We pledged our best efforts to continuing good service and quality products and emphasized that their best efforts were also more critical now than ever before.”

American Regional Woodworks owner Michael Beasley said his company is simply trying to “sell more for less.” He also said, “We have prepared our employees to work longer hours in order to make more sales and get more projects completed.”

Kretz Lumber Co. of Antigo, WI, drew upon the strength of patriotism to forge ahead.

“We got ‘United We Stand’ stickers for all of our employees’ hard hats and other safety gear,” said Dan Kretz, president of Kretz Lumber. “We handed out the same stickers to the attendees at our annual ‘Forestry Field Day’ and collected Red Cross donations.

“We also held a company-wide meeting to improve our focus to a positive one and to talk about how to change things that we have control over.”

From Good to Better

Eight of the the WOOD 100 companies have seen their sales expectations for 2002 increase. Of those eight, the three that stood out were Bluegrass Furniture, Nu-Trend Cabinet and Hoffco Inc. Last summer, executives from each company projected business to be “Good.” Each upgraded their prediction to “Best Ever” in the December WOOD 100 follow-up survey.

“Doing whatever it takes,” was one of the reasons Kenneth Dietel, president of Bluegrass Furniture, cited for the company’s continuing increase in business despite 9-11 and the economic slowdown.

“Several factors helped us increase profits despite 9-11,” explained Dietel, “such as our ability to quickly design new products, our supportive retailers, our ability to quickly gain market and to do custom work.”

“We already saw a steady decrease in the economy before 9-11,” said Kevin Mack, president of Nu-Trend Cabinet. “I think our business has and will continue to increase despite the economic state because we really stepped up our marketing and bids.”

“I believe that people have been traveling less and staying at home more,” said Doug House, Hoffco Inc. vice president of sales and marketing. “Interest rates have been lower and remodeling has increased. We have been able to take advantage of the housing market, so we have been busy.”

How Did They Do It?

All three of these companies developed a well-thought-out plan of attack to keep their businesses thriving.

“We decided to do more direct calling on quotations rather than just sending a form letter,” said Mack. “We have established more contact with our new customers even meeting them face to face when possible. I used to do all of the calling for sales too, but I figured at the beginning of 2001 that it would be in the company’s best interests to hire a full-time sales person to keep our sales from slipping.

“So far, we have started working with three new customers as a result and have been getting customers to keep coming back,” he added.

House said, “We have just continued to step up our aggressive marketing track to make sure our customers and potential customers hear our name first.

“We thoroughly discussed the state of the economy and what impact 9-11 could have on our business. We have been so busy that we will be up 50% from last year.”

Dietel said, “The biggest changes we have made was adding entertainment centers designed for the newest sizes and styles of TVs, decorative bun feet, decorative arches and carved and rope mouldings to our offerings. I personally visited stores on the weekends to help sell product as well as having stores set up ‘Meet the Builder’ days. We also bought a digital camera and software so that we could make brochures.

“We really did not push as aggressively before 9-11,” added Dietel. “9-11 was a wake up call to our business. It made us realize that we could not wait any longer to come out with our new products, styles and brochures. We had to do it now.”

-Bernadette Freund

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