Winnipeg Free Press - PRINT EDITION

Palliser goes platinum

As it marks its 70th anniversary, family-owned furniture-maker moves up-market

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Unless you were really paying attention, you might have thought Palliser Furniture had packed up and left town.

But rumours of its demise are greatly exaggerated.

In fact, although it's undergone a dramatic reorganization -- at one time it was the largest private-sector employer in the city with more than 3,500 workers here -- it is still the largest furniture manufacturer in the country.

But changing economic dynamics, the rising Canadian dollar and global competition forced the company to reimagine itself.

Not surprisingly, it has kept a low profile for the past few years as the downsizing has occurred.

But on the occasion of the company's 70th (platinum) anniversary, it wants everyone to know it's not gone anywhere except, perhaps, a little up-market.

"The last few years, our story was about survival and repositioning," said Art DeFehr, the company owner, CEO and son of the founder.

Over the course of the last eight or nine years, the company has transferred more than 1,000 positions that once filled a couple of million square feet of industrial space in Winnipeg to Mexico, where Palliser now owns three factories.

It currently has about 1,100 workers in Mexico and about 600 in Winnipeg.

"It doesn't matter what the reasons were, that was not a good-news story," said DeFehr.

After the collapse of the U.S. housing market late last decade, the North American residential furniture market suffered mightily. Big-name manufacturers such as Shermag and Sklar went bankrupt.

But the Winnipeg-based family-owned business battened down the hatches.

Whereas it was once the go-to maker of commercial sofas, chairs and tables for the likes of the Brick and Leon's and a number of large U.S. retailers, Palliser -- and many of its North American competitors -- realized it could not compete with Chinese-made imports that were flooding the market.

Palliser is no longer in the plain-brown leather sofa market, and you won't find its product in the Brick or Leon's.

Now it is primarily a leather furniture company offering a growing number of mid-market niche retailers the heightened service of customized ordering and more up-market design.

DeFehr said sales are already 50 per cent better than at its lowest point, and this is the fifth consecutive year of sales growth in Canada, the U.S. and Mexico.

The higher service level, along with a made-in-North America value proposition, means a little higher price point.

"We did our thing quietly," said DeFehr. "We have worked our way through the recession... We used to do bulk product. Now we do custom product, mainly leather."

What that means is it can offer literally millions of customized combinations from about 2,000 different styles and frames, including the just-launched Pinnacle collection designed by Montreal's Norman Couture.

DeFehr, who never stopped engaging in international-development work on a scale likely unmatched by his CEO peers, realized he needed professional management to make the mass-customization plan work.

In January 2013, Houston-based industry veteran Cary Benson was named president of the company, the first non-DeFehr to run the company since Art's father, Abram, started the business in his East Kildonan home in the mid-1940s.

"Art is still very passionate about the furniture business, and because of his family heritage and legacy he cares a lot about the people, about our customers and suppliers," said Benson. "It's a good relationship for me."

At its peak, Palliser was doing close to $500 million in annual sales with 15 to 20 per cent annual growth in the 1980s and '90s. Its target is to hit about $150 million this year, which is up about eight per cent over last year compared with industry-wide growth of about 2.5 per cent.

"It's not double-digit like we all got used to in the '90s and early 2000s," Benson said. "But I will take two or three times faster than the market any day."

Benson said the furniture business declined by 25 per cent in the U.S between 2008 and 2009, and this year it is predicted to be back to 2008 levels.

Through the tough times, the company maintained its market-leading position in Canada. Some of its largest customers are Sears Canada and Winnipeg-based Dufresne group with its expanding retail network.

In the U.S., where Palliser's market share is in the lower half of the top 10, its product is sold at national chains such as JC Penney. But its sweet spot now is the boutique operators, and that is where the company's sights are set.

"The U.S. furniture market is about eight times larger than the Canadian furniture market, and we don't sell eight times as much," said Benson. "It is a lot easier for us to grow our business in the U.S. than in Canada."

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 22, 2014 B8

History

Updated on Friday, August 22, 2014 at 6:55 AM CDT: Replaces photo

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