No time for sitting around

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This article was published 20/04/2019 (2360 days ago), so information in it may no longer be current.

There’s nothing comfortable about running a Canadian furniture company in 2019.

At least, that’s how Peter Tielmann, the president and CEO of Palliser Furniture — one of the city’s most venerable businesses—puts it. Threats to profitability are everywhere: cheap, foreign manufacturers, industry disruption, and trade disputes with the neighbours to the south mean that Canadian businesses always have to be on their toes and looking for ways to stay relevant.

“We always have to adapt,” said Tielmann, a German ex-pat who first joined the company in 1999. “If you do it too late, it’s over.”

Now celebrating its 75th year, Palliser — the country’s largest residential furniture manufacturer — can’t afford to sit back and relax in its senior years. In many ways, it never could: the company’s survival can be chalked up to nothing more than a willingness to adapt.

When it began in 1944, under the name A.A. DeFehr Manufacturing, the company made its hay on step-stools and ladders, later transitioning to the seating market in the 1980s and ‘90s. As the years came and went, competitors disappeared, Tielmann says, and Palliser was forced to continually diversify its business.

The first, and most successful, example of that was the 2002 creation of EQ3, the now-standalone furniture giant that began as an internal project at Palliser — a start-up before ‘start-up’ entered the vernacular. EQ3 was established to appeal to new demographics of furniture shoppers, an urban set that Palliser needed to retain.

The results exceeded expectations, said Tielmann, 49, who served as the company’s CEO: 18 brick-and-mortar stores have opened in North America, and last year, the business expanded to the U.S., with stores in San Francisco, Chicago, and New York.

Around the same time the EQ3 experiment took off, the Canadian exchange rates made domestic manufacturing less and less appealing from a profitability perspective: Shermag Inc., a Quebec-based manufacturer, went bankrupt in 2009, and Tielmann saw the writing on the wall. “Manufacturing in Canada was a money-losing proposition,” says Tielmann, in Saskatoon looking into a potential start-up to invest in.

Soon, Palliser began outsourcing a significant portion of its manufacturing to Mexico, where nearly two-thirds of the company’s 3,000 employees now work. Four plants — two in Saltillo, and two in Torreón — now serve as the company’s main production hub, and the location, which Tielmann reminds is still in North America, helps deliveries stay on schedule and costs stay relatively lower than had production remained in Winnipeg.

Additionally, the company has begun manufacturing in Indonesia, where much of its wood furniture is produced.

Ideally, the company would have never had to make those moves, Tielmann said. But the changing times and economy made the moves necessary, he says. Since then, the company has continued to build and tackle new projects and niche markets, proving itself nimble players in an increasingly complex collection of industries.

Palliser has shrewdly added new tentacles to its corporate octopus. In the 2000s, it acquired Arconas, a well-established commercial producer in Mississauga, Ont., specializing in airport furniture: the company, which outsources its manufacturing and does all assembly on site, has a low-cost, high-volume model, and its work can be seen in most major Canadian airports: all the public furniture in the Richardson International Airport is Arconas-made, Tielmann says.

And while getting into the movie-theatre business might seem a poor idea, it’s been a rich one for Palliser.

Encore, a theatre-seating start-up, a la EQ3, has taken off since launching in 2016, he says. As tech disruptors like Netflix, Hulu, and the ultimate technocracy Amazon take strongholds on the feature-film market, the option of staying home to watch movies has become increasingly appealing, leaving theatre chains desperate to keep their doors open at any cost. “Nobody wants to sit in simple chairs anymore,” says Tielmann. “It’s all become luxury.”

You might have noticed the new motion seating at the Landmark Cinemas location at Grant Park, for example.

Last year, the company also acquired Casana Furniture, a case-goods company, to further expand its reach.

These ancillary businesses aside, the core of the company’s production, and the main thrust of its corporate identity, remains steeply planted in home furniture, which itself is an increasingly challenging field. Online options like Wayfair, Tielmann says, create significant challenges in offering low-cost alternatives, meaning the company has to do whatever it can to stay a step ahead.

In April, the company launched a full collection of furniture and furnishings designed by Sarah Richardson, an HGTV star and noted Canadian designer with a significant social media following. Richardson has hosted and produced eight shows for HGTV, including ‘Sarah Off the Grid,’ which is set to open its second season this weekend.

https://youtu.be/fGaYsfpwqK0

Richardson, a Toronto native, says she’s been approached by dozens of Canadian manufacturers to partner on a signature line, but chose Palliser due to its domestic feel and distribution networks.

“I’m too far into my career to take a flier on an unknown start-up,” she says. “Despite the fact that it’s a well-established company, it’s taking an exciting new direction.”

Indeed, Palliser has invested millions of dollars — Tielmann wouldn’t specify how much — into its technology department, and boasts a robust e-commerce platform. The hope, he says, is to usher the company forward and to ensure that the foundation doesn’t get left behind, either.

“The end goal, though there isn’t a clear one, is for the company to continue to grow,” he says.

business@freepress.mb.ca