In this exclusive Q & A with Draperies & Window Coverings, Hohler explains why current conditions spell opportunity for the industry and for the company he heads. He also updates us on the hard work that had to be done at Levolor Kirsch. "There is a much clearer vision of getting to that goal now than there was two years ago," he says. "The last time we had done this kind of interview we had identified all of the soft spots in this business and a lot of the things that needed to be fixed, but we hadn't actually done a lot of the heavy lifting at that point. Now, the good news is that a short time later a good majority of that heavy lifting has been done. That's not to say that there isn't more to do . . . there's no reason for a business to sit for any period of time on its laurels."
D&WC: In your opinion, what is the current state of the window coverings industry?
Jeff Hohler: In terms of the general health of the industry outside of Levolor Kirsch, the industry has seen low, single-digit growth. Levolor Kirsch's strategy has not been a pure growth strategy though . . . it's been more about positioning the business for profitable growth. The number that's being predicted as far as housing changing hands for 2004 is somewhere around 7.5 million homes, which spells nothing but opportunity for the window treatments industry. Combined with the amount of remodeling that's going on, that has done some pretty nice things for the industry.
When you add everything up—the nesting trend, low mortgage rates, refinancing, people moving—it spells a lot of opportunity. I think mortgage rates will inch up a little bit, but I don't see any huge swings conceivably for the next few years.
From the Levolor Kirsch perspective, our current state is getting healthier every day. One nice thing about this industry is that the product lifecycles are long. In addition to [that], the price point spectrums are deep. So you can bring a product out as a full-custom product at a relatively high price point and over the course of years you can evolve the product to more of a value positioning—bring it into a different channel of retail, do some things to it to get more life out of the product at a different price point or a different value level.
I think we've done a pretty decent job over the course of the last few years positioning a lot of our product lines at different value levels, under different brands, at different channels of distribution. That's one advantage you can gain in this industry, especially when you play at that very top level on the full-custom range, that gives you a good starting point to push off from. That, along with what we've done to differentiate the Kirsch brand from the Levolor brand and pull the positioning of those brands a little further apart than the way they were maybe a few years ago, has been a strategy that has worked well for us.
D&WC: What factors drive the industry? Price?
Hohler: Many factors influence the industry including home décor trends, the housing market and, of course, prices on raw materials and commodities. Our situation has been a little bit different than some of our competitors over the last few years. We've had to go through a major cleanup and restructuring. Predicting the outcome of your business sometimes, especially from a top-line standpoint, gets really tricky in that kind of an environment. We've exited some product categories, we've cleaned up a lot of SKUs and components in our manufacturing facilities, we've moved around a lot of manufacturing, so predicting where you're going to come out in top-line sales gets tricky.
One major driver is the increase in commodity prices that we're seeing. We started to see some pretty heavy pressure, especially in the steel market and certainly in the resin market, and it has only intensified—especially in the case of steel. The amount of price discounting we'll see in an ever-inflating raw material market will no doubt change.
D&WC: What role will imports play?
Hohler: Imports from the Far East have been a reality in the window coverings business for a number of years now. The biggest difference is, whereas in the past it was mostly finished stock product that was the major driver, now more and more you are going to see components coming from the Far East.
That doesn't mean the industry doesn't have a huge opportunity to add a lot of value to those components in the form of assembled product. And, of course, in the independent decorator/designer/dealer channel there's still tremendous opportunity to add value to the sale with decorating advice, measuring and installation, product design and the actual fabrication of the blinds. Where the components come from could definitely swing what kind of price points we can get to in the future, but the actual added value to the product at the end of the day isn't going to change that much.
D&WC: How is Levolor Kirsch perceived in the marketplace?
Hohler: You really have to break it into two parts. There's the role that we have in the trade—to the actual trade customer—and there's our image to the end user.
To the trade, [our role] has definitely evolved over the last few years. I think we probably had a reputation that we needed to be everything to everybody. The business has focused a considerable amount through our restructuring process and now we are a much leaner company that is only going to participate in categories and in channels where we feel we can run a profitable business. That wasn't the way this business went to market a few years ago. That doesn't mean the Levolor and Kirsch brands aren't as strong now as they've ever been amongst the trade.
When you talk about the end user, and our image and our role with the end user, that has evolved somewhat, too, but I think less so. I think that the strength of the brands has sustained pretty well. We've maintained our presence among end user segments at all different levels, whether that's the end user who's shopping for basic drapery hardware all the way up to the end user who's going to put $10,000 worth of custom blinds in the home. We've done a nice job sustaining the image of the brands and actually continuing to build some equity in the brands.
D&WC: Is the clean-up process completed?
Hohler: I would say we're 80 to 90 percent through it. For sure, 2003 was the brunt of the heavy lifting that had to be done in the cleanup. There are always some things that need to be tweaked and adjusted, but now we're into the next level of fixes. Thankfully, those are a level of fixes that have much, much less direct impact on the trade customer and ultimately the end users. It's things that are more driven around systems and fine-tuning processes.
D&WC: What do you see ahead for Levolor Kirsch?
Hohler: Everybody at Levolor Kirsch, all of the associates here, are delighted about two things: That we have completed the majority of our fix phase, and that we are actually seeing some nice up sides from a sales standpoint.
Our distribution and fabrication partners, and ultimately the end users, have stuck with us and hopefully they are going to be glad they did. Now, our partners are going to be working with a cleaner version of the Levolor Kirsch company that can provide stronger customer service, a stronger quality focus and compete much more competitively in the window industry.
D&WC: How has this affected product development?
Hohler: Admittedly, we've dropped back on the product development scale a little bit, especially in some of the fringe custom categories and concentrated on re-launching core categories. The interesting thing about that is if you look at the amount of relaunch activity that we've done in our custom ranges—things like wood, faux wood, metal blinds, vertical blinds and, certainly, cellular shades—what we've done is relaunched very cleaned up categories of core custom products. There's not a ton of new innovation in those categories, but now with those relaunched, cleaned up categories we feel that we can put product out there that's built off a stronger product development foundation. It's typical of the kind of product development that a reorganized company gets into.
On the other side of the equation, some of the true product development and innovative product that we've been able to come out with on the drapery hardware side is more traditional new product development. We've got our Estate Ultra in the Kirsch brand that's gotten a ton of good pick-up among our distributor partners. We have relaunched some product in the Levolor brand, especially in decorative drapery hardware, that we've gotten a lot of good pick-up with as well among our retail partners. In drapery hardware there was less of a fix phase and we've been able to grow that business through some nice, traditional new product innovation.
The new product development that has been done on the blinds and shades side has been more about fixing our platforms, which puts us in a nice position to pursue true new product innovation in the coming years.
I think it is also worth mentioning that we're not going to put product into the marketplace that we're not 100 percent sure is ready. Products get introduced in the custom area that maybe aren't ready for market and you end up having to fix them as they exist in the marketplace, which gives everybody a bad name.
When you're dealing with end users putting down anywhere from $500 to maybe $2,500 of their hard-earned money for a custom product that they're practically buying sight-unseen, then their expectation is that it's going to be perfect. You end up paying in the long run for product that's not ready for market, and that's something that we've gotten much more disciplined about. The things that you'll see from Levolor Kirsch in the custom ranges in the future will be ready for prime time.
D&WC: One criticism made about Levolor is that it is part of the huge NewellRubbermaid corporation. How do you respond to these comments?
Hohler: We could never have gone through the cleanup that we've gone through at the pace we have without the backing of NewellRubbermaid. It's an expensive process to get the foundation back and rebuilt the way it needs to be in the business. The corporation has been extremely supportive of our efforts in turning this business around and getting it cleaned up. It certainly would have been a much longer, drawn out process to get to the position we're at now.
The other thing is that the way we run the business is pretty autonomous. The advantage that the corporation gives us is a tremendous pool of talent to pull from. There's a lot of collaboration that goes on between NewellRubbermaid divisions when it comes to putting the right people in the right roles—whether that be sales, marketing, manufacturing, wherever it is—and we've benefited greatly.
Honestly, there's no downside to being a part of NewellRubbermaid.
D&WC: What accomplishments or programs are you most proud of?
Hohler: There are really two primary things that have sustained our business through the turnaround. One is the quality of people we've got here, the quality of the Levolor Kirsch associates, is tremendous. They are very dedicated and they're a pleasure to work around every day. The second one is the power of the brands. That has sustained this business through the turnaround.
There's example after example of the equity that we've got in the Levolor brand, and there's a lot of dealer, designer, decorator, trade equity in the Kirsch brand as well. Probably the accomplishment that the whole Levolor Kirsch organization is proudest of is that we've continued to drive even stronger equity in those brands.
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D&WC: What markets do you see as the most important for Levolor Kirsch?
Hohler: In terms of retail markets, the advantages we’ve got with the strategy we’ve put together with the Levolor and Kirsch brands gives us good equal-strength opportunity. We’ve seen a lot of growth in our business for what we’d classify as more traditional mass-market with the Levolor brand, but that doesn’t say we can’t be a force—especially with the Kirsch brand—in the fabricator market and in the independent dealer/designer/decorator market.
I would say our cleanup, our business turnaround, has been tougher on that market than the mass market. There are a lot of reasons for that. If you’re a fabricator and you’re buying Kirsch components from Levolor Kirsch and you’ve had to go through the amount of turnover of old programs to new programs that we’ve been through, it’s tough. We’re in the middle now of rebuilding relationships, rebuilding business, and it’s happening very quickly, which has been positive for the whole organization to see the amount of faith that the fabricator community has put back in us. That’s going to be a key channel for us moving forward and our intention is to grow pretty quickly there.
D&WC: What personal accomplishments are you proud of? Have there been any surprises?
Hohler: There are highs and lows as you’re working through this kind of turnaround. It has been a tremendous learning experience. It’s one of those situations where once you start to see the fruits of your efforts, you can look back on each clean-up situation and be pretty proud of what you’ve gone through.
It really forces you to get close to your customers, both your end user customer and your trade customer. We’ve had to have a lot of tough conversations with customers about what this business has to go through to get itself cleaned up and become sustainable. Our customer base, in large part, has been extremely supportive, and I think they’ll benefit in the future from a stronger Levolor Kirsch.
D&WC: Who are or have been some your greatest influences in business, or in the industry specifically?
Hohler: I’ve been very fortunate to work for and around leaders who are equally strong in operations, marketing and general business development—whom I would consider to be people who are true business managers and strategic thinkers. They are, generally speaking, people you just want to be around and work around.
At a more grassroots level, my parents have driven my respect for other people, which is something you need to have in this role; work ethic, a never-say-die attitude, which is something that is always a good thing to have in a turnaround situation; and I’ve been lucky in my career to be a part of great teams both personally and professionally.
D&WC: Does Levolor Kirsch occupy you 24/7?
Hohler: I’ve got a great family and when I’m not at work or thinking about work they occupy my time. I’ve got a passion for this place, a passion for this business and hopefully it shows through in my interactions with customers and with Levolor Kirsch associates. So I spent a good deal of my time getting this business back on the right footing; and when I haven’t, I have been with my wife and kids.