Looking back: Ralph Boe – Floor Covering News
The turnaround specialist looks back on the past 35 years in floors.
Describe the dynamics of the industry in 1986…
“The control was certainly with the fiber companies: DuPont, Allied and Monsanto. And they really drove the industry. None of the mills was big enough to drive at that time. Retailers were scattered everywhere 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 major dealers in the country. ColorTile was more into the tile business at the time; they were just getting started on carpet with Larry Nagle there. Then Carpet One started just before 1986. Abbey 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 with each other, allowing the US to maintain its position in the world as the cheapest manufacturer. Because once someone developed something at one company, the other companies picked it up pretty quickly.”
What was the first sea change after 1986?
At the time, it was probably Stainmaster. Suddenly they were putting the specs on the carpet. To make a Stainmaster carpet, you had to have a certain twist in the yarn, a certain weight, a certain construction and the use of stain blockers and dirt-repellent chemicals. I was with Horizon at the time. We didn’t get a Stainmaster because Tom McAndrews hated Horizon at the time. I told Peter it would change the industry. I said, “70% of our business is made up of multicolored loops. The reason people buy them is because they hide soil, especially in the Midwest. Now consumers don’t have to buy these multicolored carpets. If they have something that is stain resistant , they can choose a solid color.”
That is a disadvantage for our company. No. 2, whoever makes Stainmaster must make it to a specification; then the one who can make it cheapest is the one who is going to win. So the one that is most efficient will win in that process, and it will probably start the evolution of the consolidation and it certainly was a factor.
Stainmaster also had an impact on backward integration in fiber processing and ultimately fiber extrusion was the big dynamic.
How has Home Depot changed the landscape for the carpet industry?
One thing was their aggressive price specials. Their conventional retail prices were pretty much in line with what retailers are asking, but they would have these large quantities of items. We had one, I believe, a 90 ounce carpet that they retailed very aggressively. It only came in a dozen colors. We ran two spinning mills to support that one style for Home Depot. And it was so much volume that we couldn’t give it up. And then, six months later, they came in and put the screws on us to lower the price. Home Depot has helped the factories build the flywheel to build their business. It certainly wasn’t good at the time.
Talking about the impact of consolidation in the industry.
Consolidation brought costs down and eventually allowed the factories that were the consolidators to gain market share, either through acquisitions or by growing their business once they reached the lower cost levels. Consolidation allowed manufacturers to reduce costs, ultimately benefiting retailers and consumers.
What were the main consolidation events?
The first was probably Cabin Craft, mainly because it was a hefty mill that somewhat resembled Shaw. Shaw, E&B, Cabin Craft, World and Burlington were probably the four or five largest at the time. When Shaw bought Cabin Craft, it started the whole process. They went ahead and got Evans & Black. In 1991 we tried to buy Mohawk and they turned us down. We were both making $300 million back then. They came back in ’92 and bought us. That same year, Shaw bought Salem. Around the same time, Aladdin would go public, and David Kolb persuaded them to be bought and double the shares and they would effectively become 50% owner of Mohawk. And once Mohawk got to that level, suddenly things started to change in the hard surface market, especially the laminates.
What could the industry have done better in the past 35 years?
The factories might have been set up sooner if they’d done the marketing for carpet themselves rather than leaving it to a big company like DuPont. But today the factories have clearly accomplished what they had to do. Now it’s Mohawk, Shaw and Engineered Floors. They are the dominant forces in retail and their names are more important than the fibers they use or whatever they attach to their products. They might have gotten out sooner if it hadn’t been for Stainmaster. But then Stainmaster consolidated and the factories became more important in the eyes of consumers and retailers.
I also think that the factories could have come up with the softer products sooner, by moving to the finer deniers to make carpet more attractive to consumers.
Could the industry have done something better in terms of pricing?
In the construction segment, as we’ve always gone out with this 24-ounce carpet, and especially when it was spun, the fibers would pop open and not look good. After a short time, the basic carpet probably gave the consumer a bad taste. Instead, they put something else on their floor. When hard surfaces became available, they felt it was a more durable product than carpet based on the poor experience they had with basic quality. Better base quality or better build quality could have helped the carpet industry avoid losing the share they had.
The best decision you’ve made in the last 35 years.
Leaving DuPont. It was a great company and I had a lot of training there. I had many excellent mentors when I worked there. But it was definitely a change for me and my family to leave DuPont and go into the carpet business, especially with someone 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 achievement at Horizon?
Putting together a game plan that made us change because we lost a lot of money. Our stock price had risen 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 make us profitable again was probably the most important thing; That gave me some fame. When I went to Diamond, we did the same. We got 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 close Carpets International, but I turned it into profitability.
And eventually I came back to Beaulieu to do the same. I’ve run more or less four companies with a team of people.
If you could have done one thing differently in the past 35 years, what would it be?
I probably should have stayed in Mohawk. My ego got in the way. David Kolb asked me to stay, and I said, “Shall I report to you?” He said, “No, you will report to” [Don] Mercer.” So I left. That was probably a big mistake financially. I would have avoided going to Diamond and some of the hardships there. But then I would miss going to England. I had five great years there.
Now if I could put a few people at this table – living or dead – that you would like to chat with, who would they be?
I certainly miss Peter Spirer, personally and professionally.
Julian Saul. He was very hard to convince to do anything other than what he was doing. When I worked at DuPont, it was hard to get him to accept a new fiber. He was capable when we had the multicolor business, and Horizon and Queen competed on a lot of those things. We were working the case out of the fire, trying to get our share up. Julian wouldn’t ship until he had a large enough order backlog that he could run his paint line very efficiently. He had the ability to avoid having to operate the business the way we did and yet he grew his business tremendously.
If Marv Berlin were sitting here right now, I’d say, “Marv, you almost bankrupted us.” He was one of those guys anyone would claim. I swear that in the evening he went home with a suitcase 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 to Detroit and wanted me to work in his company. I asked if he ever thought about moving it to Atlanta because I didn’t want to live near Detroit. I also told him that I am not a retailer and that I did not think I would fit into this business.
What other retailers have you respected over the years?
Carpetland USA. Rick Meyer and Dave Cicchinnelli. Every time a New York Carpet World location opened, they opened a store across the street. They kind of lived off the crumbs of New York Carpet World, but they were able to run a pretty decent business. Rick was an easy man to do business with.
What story about your years in the industry tells you the most?
Peter [Spirer] was the guest speaker at one of the Abbey conventions in the mid-1980s. He started talking about DuPont and Stainmaster and what they were doing to the industry. He said, “Can you imagine US Steel going to General Motors and saying, ‘From now on you have to call your car US Steel because you use US Steel fiber?'” He pulled out a bag of fiber and said, ” This is what DuPont is offering the industry, not this,” holding up a piece of carpet. He said, “What Stainmaster has done is synonymous with US Steel trying to do that in the auto industry.”
We did the Diamonds and Pearls action, 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 dinner. We gave dealers points for luxury items such as furs, diamonds and pearls.
Who were your mentors?
I had a few at DuPont. Ed Foley, for example, when I was in Charlotte, he gave me some good basics of running an organization. Sure, Peter Spier. He always said, “How you start is how you finish.” He was someone who went after something and if it didn’t work, he was gone. He would never languish over the decision to drop anything. Indirectly I would say Bob [Shaw] even though I didn’t work for him long. He was my customer but also my competitor, my employer and then again my competitor. Just seeing how he operated definitely 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 motivation, making sure he’s done the right thing to cut costs.
My other great mentor is [my wife,] Nancy. I couldn’t wish for a better wife. She was willing to put up with all the moves I made, wherever I went. My success has depended heavily on her support and desire. She wanted to achieve greater things and that drove me to do greater things to support her.