The turnaround specialist reflects on the past 35 years in flooring.
Describe the industry dynamics back in 1986…
“The control was definitely with the fiber companies: DuPont, Allied and Monsanto. And they really drove the industry. None of the mills were big enough to drive it at that point in time. Retailers were spread all over the place and very small; there was no one who really had the dominance from a sales standpoint. There was New York Carpet World, Carpetland USA and Carpeteria. Those were the three big dealers in the country. ColorTile, at the time, was more in the tile business; they were just getting going with carpet with Larry Nagle there. Then, Carpet One started just prior to 1986. Abbey had preceded Carpet One but didn’t do things with the same dynamism as Carpet One.
The fact that we were all in the same part of northwest Georgia made us very, very competitive against one another, which allowed the U.S. to maintain its position in the world as the lowest-cost manufacturer. Because once somebody developed something at one company, the other companies picked up on it pretty quickly.”
What was the first sea change post-1986?
At that point in time probably it was Stainmaster. All of a sudden, they were setting the specifications on the carpet. Whoever made a Stainmaster carpet had to have a certain amount of twist in the yarn, certain weight, construction and application of stain blockers and soil- resistant chemicals. I was at Horizon at the time. We weren’t given Stainmaster because Tom McAndrews had some aversion to Horizon at the time. I told Peter it would change the industry. I said, “70% of our business is multicolor cut loops. The reason people buy them is because they hide soil, particularly out in the Midwest. Now, the consumer is not going to have to buy these multi-color carpets. If they’ve got something that’s stain resistant, they can go with solid color.”
That’s a detriment to our business. No. 2, whoever makes Stainmaster has to make it according to a specification; then, whoever can make it the cheapest is the one who’s going to win. So, the one who’s most efficient will win out in that process, and it’s probably going to start the evolution of the consolidation and it certainly was a factor.
Stainmaster also had an impact on the backward integration into fiber processing and then, ultimately, fiber extrusion was the big dynamic.
How did Home Depot change the landscape for the carpet industry?
One thing was their aggressive pricing specials. Their conventional retail prices were pretty much in line with what retailers charge but they would have these big volume items. We had one, I believe, it was a 90- ounce carpet that they priced very aggressively to retail. It was only in a dozen colors. We were running two spinning mills just to support that one style for Home Depot. And it was so much volume we couldn’t give it up. And then, six months later, they’d come in and they put the screws on us to dial the price down. Home Depot has given the mills help to build the fly- wheel to build their business. Certainly it wasn’t good at the time on margin.
Talk about the impact of industry consolidation.
Consolidation brought the cost down and eventually either let those mills that were the consolidators gain market share either through acquisition or by growing their business once they had gotten the lower cost levels. Consolidation allowed the manufacturers to reduce costs, which ultimately benefited the retailer and the consumer.
What were the most significant consolidation events?
The first was probably Cabin Craft, mainly because it was a good-sized mill somewhat similar to Shaw. Shaw, E&B, Cabin Craft, World and Burlington were probably the four or five biggest at the time. When Shaw bought Cabin Craft it triggered the whole process. They went on and got Evans & Black. In 1991, we tried to buy Mohawk and they turned us down. We were both doing $300 million at the time. They came back in ’92 and bought us. That same year, Shaw bought Salem. Around the same time, Aladdin was going to go public, and David Kolb talked them into being bought and double the shares and they would become basically 50% owners of Mohawk. And once Mohawk got to that level then all of sudden things started changing in the marketplace with hard surface, with the laminates coming on in particular.
What could the industry have done better over the last 35 years?
The mills may have been established quicker if they did the marketing for carpet themselves rather than leave it to a large company like DuPont. But today, clearly, the mills have accomplished what they needed to. Now, it’s Mohawk, Shaw and Engineered Floors. They’re the dominant forces at retail and their names are more important than any fiber they use or anything they might attach to their products. They may have gotten out there sooner if it hadn’t been for Stainmaster. But then Stainmaster prompted consolidation and made the mills more important in the eyes of consumers and retailers.
I also think the mills could have come out with the softer products sooner, going to the finer deniers to make carpet more appealing to the consumer.
Could the industry have done anything better as far as pricing?
In the builder segment, because we’ve always gone out with this 24-ounce carpet, and when it was spun in particular, the fibers would splay open and wouldn’t look good. After a short period of time, the base-grade carpet probably gave the consumer a bad taste. In place of that, they put something else on their floor. When hard surface became available, they felt it was a more durable product than carpet based on the bad experience they had with base grade. A better base grade, or a better builder grade, could have helped the carpet business avoid losing the share it did.
Best decision you’ve made in the last 35 years.
Leaving DuPont. It was a great company and I got a lot of training there. I had a lot of excellent mentors while I worked there. But it was certainly a game changer for me and my family to leave DuPont and get into the car- pet business, especially with somebody like Peter Spirer. Peter was a dynamic marketer and gave me the opportunity to run something, which is what I wanted to do.
What was your greatest accomplishment at Horizon?
Putting together a game plan that got us turned around because we were losing a lot of money. Our stock price had gone from $14 or $15 when it first came out in 1983 to $2.50 by the time I walked in the door. Getting the team on a plan that would get us back to profitability was probably the biggest single thing; I gained some notoriety from that. When I went to Diamond, we did the same thing. We were getting it turned around when both lawsuits started. We had the storm, then the fire and we lost all our inventory. I also went to the UK with Bob [Shaw] and he wanted me to shut down Carpets International, but I got it turned around to profitability.
And eventually I came back to Beaulieu to do the same thing. I more or less turned around four companies with a team of people.
If you could have done one thing differently over the last 35 years, what would it have been?
I probably should have stayed at Mohawk. My ego got in the way. David Kolb asked me to stay, and I said, “Will I report to you?” He said, “No, you will report to [Don] Mercer.” So I left. That was probably a big mis- take, financially speaking. I would have avoided going to Diamond and some of the hardships there. But then I would have missed going to England. I had five great years over there.
If I could put a few people at this table right now—alive or dead—that you just want to have a chat with who would they be?
Certainly I miss Peter Spirer, personally and from a business standpoint.
Julian Saul. He was very hard to convince to do something different than what he was doing. When I was at DuPont, it was hard to get him to accept a new fiber. He was able to when we had the multicolored business, and Horizon and Queen competed on many of those things. We were servicing the heck out of the business, trying to get our share up. Julian wouldn’t ship until he had a big enough backlog of orders so that he could run his dye line very efficiently. He had the ability to avoid having to service the business like we did and still grew his company tremendously.
If Marv Berlin was sitting right here, right now, I’d say, “Marv, you almost put us out of business.” He was one of those guys who would claim everybody. I swear he went home at night with a briefcase full of forms, filled them out and sent all these claims in to get his 7% to 8%. He was certainly a master at it. After Horizon, he asked me to come up to Detroit and want- ed me to work in his company. I asked if he ever thought about moving it to Atlanta because the Detroit area was not somewhere I wanted to live. I also told him I’m not a retailer and I didn’t think I fit in this business.
Who are some other retailers you’ve respected over the years?
Carpetland USA. Rick Meyer and Dave Cicchinnelli. Every time a New York Carpet World location opened they would open a store across the street. They kind of lived off the crumbs of New York Carpet World but they were able to have a pretty decent business doing it. Rick was an easy guy to do business with.
What story about your years in the industry do you tell the most?
Peter [Spirer] was the guest speaker at one of the Abbey conventions back in the mid-’80s. He started talking about DuPont and Stainmaster, and what they were doing to the industry. He said, “Can you imagine if U.S. Steel went to General Motors and said, ‘From now on, you need to call your car U.S. Steel because you’re using U.S. Steel fiber?’” He took out a bag of fiber and said, “This is what DuPont offers to the industry, not this,” and holds up a piece of carpet. He said, “What Stainmaster has done is synonymous with U.S. Steel trying to do that in the automobile industry.”
We did the Diamonds and Pearls promotion, where we rented a restaurant in Buckhead. It was in support of our Carrington House carpet line. We had “Dynasty’s” Catherine Oxenberg and Michael Nader, who were two of the stars [who promoted the product], come to the dinner. We gave dealers points for luxury items like furs, diamonds and pearls.
Who were your mentors?
I had a couple at DuPont. Ed Foley, for example, When I was in Charlotte he gave me some good fundamentals of running an organization. Certainly, Peter Spirer. He always said, “How you start is how you finish.” He was one to go after something and if it didn’t work, he was out of it. He would never languish over deciding to drop something. Indirectly, I would say Bob [Shaw] even though I didn’t work for him for very long. He was my customer but also my competitor, my employer and then my competitor again. Just seeing how he operated certainly instilled in me the need to make sure you do what it takes to get low cost to compete in the industry. That’s his whole driving force, making sure he has done the right thing to get cost down.
My other great mentor is [my wife,] Nancy. I couldn’t ask for a better wife. She was willing to put up with all the moves I’ve made, no matter where I went. My success has been very much dependent on her support and desire. She wanted to achieve greater things and that drove me to do greater things to be able to support her.