Watch ‘em bro’; I’ve got your back
Component producer finds a market against heavy competition
Accuwrap did not enter the market in the best of times. The company incorporated in 1988, just in time for the recession of the early ‘90s, as a project of three brothers. The oldest, Lorenzo, left the company in 1992, although he now has his own closet business and buys components from Accuwrap. This left brothers Enzo and Fabio D’Alessandro, looking at a bleak economic landscape.
In the early ‘90s, Europe had gone into supplying residential panels, and Concord, Ont.-based Accuwrap was experimenting with that product in North America. However, according to Enzo, “It was not the right time in Canada.” The faltering company had to get into supplying furniture components in order to keep its machines running, and Enzo put in his sweat equity running a profile wrapper.
Both brothers looking back are amazed they made it, and are not confused why they did. It was just plain hard work. “We could devote our time to work,” Fabio says. “We had a company with a lot of debt, a group of non-paying customers, it was in the middle of a recession and we had a lot of equipment. There was a period when we took no draw for two years.”
Both brothers knew they would need more than luck to pull their fledgling operation out of the fire, and they spent a lot of time discussing options. “The first wise decision in our business,” says Fabio, “was to chop off 80 percent of our customers.”
Enzo concurs: “We had to concentrate,” he says. We had to partner with our good customers. Perhaps we did not grow as fast as we should have. We were not a marketing company. But we are still doing business today with that same group of customers that we concentrated on 20 years ago as a core for our business as it has expanded.”
In the early ‘90s, RTA furniture was strong in Canada, and Accuwrap was able to keep itself afloat. Also, the brothers say, they did a little bit of case goods and other stuff.
In their quest to diversify their product lines, the brothers ran across picture frames in the ‘90s and found a market to make their company well. Accuwrap rode the wave of the framing business in the ‘90s, only to watch its rapid demise under attack from Asian competitors.
According to Enzo, “99 percent of the picture-frame business has been killed by China and Korea.”
The brothers relate the story of one large trade show in New York where they and a number of other providers all had 20-by-20 booths, all tricked up with the latest in wood mouldings. Asians were standing by the booth to have their photos taken, but Enzo says he could see they were instead zooming in on the mouldings beside the ostensible subject’s head. On the last day of the show, Accuwrap also found a number of its display samples had been ripped from the display overnight.
The next show, says Enzo, saw all their mouldings on display in Asian booths, moulded in plastic for 20 percent of the price Accuwrap was charging.
“People would come over to us,” Enzo says, and explain the price difference and ask us to work with them. We were making a living, but the margins were not there.”
One weak spot in the Asian marketing scheme was in its volume requirements. While Enzo and Fabio were charging $.60 a foot, they only required a minimum order of 20,000 feet, and you could mix colours. The Asians, although they were selling the same moulding for $.11, required an order of 300,000 feet.
That was not the total end of the story. Some customers tried to buy the larger lots, hoping to be able to sell the overstock, but they found the colours went stale or dead, and they came back to Accuwrap. But for the most part, mouldings for picture frames moved offshore.
Because of the speed of the Asian takeover on picture mouldings, Accuwrap was faced with a huge disaster. Once again the brothers put their heads together, and decided this time to look for markets that are “China-proof.”
“To be China-proof,” they reasoned, “you need to have demonstrable quality, you need to give an enforceable warranty, you need to show commitment and you need to have your customer’s confidence.”
This realization came on a road trip to customers in the central U.S. When the brothers visited a long-time customer and toured the plant, they noticed that the normally clean shipping docks were cluttered with standing merchandise. Enzo asked why there was a change, and the manager said it was only temporary — that their main client, a well-known big-box store — was experimenting with outsourcing some of its goods to Accuwrap’s now-long-time nemesis: China.
“That was it,” Enzo says. “I turned to Fabio and said they were done. That business was not coming back. Their production had gone from 35 trucks a day to 35 trucks a week. Four fifths of their production was gone.
“At that time,” Enzo says, “85 percent of our work was in the U.S. Now we had to start looking for different markets because of the loss of RTA.”
At the time, some of the RTA manufacturers on the high-volume side needed support on an outsourcing basis, so Accuwrap, already equipped to support RTA, increased its productivity and started offering cut-to-size, a kitchen program and a closet program, in addition to its stock-in-trade of profile wrapping. This led to the launch of a new company, Accucutt.
“We had already doubled up on our critical equipment,” Enzo says. “We could not afford to have a mandatory device be out of commission, so we had purchased backups. By the time we made the move to change, we had duplicate capacities in cutting, edging, drilling and routing, and had three CNC machines in operation. The only thing that had to happen, then, was for us to ask, ‘why not add cutting jobs to our marketing material.’
“The really interesting thing that happened, though,” says Enzo, “is that our quest to find niche markets for cut-to-size and profile wrapping led us back into Canada.”
Therefore, while Accuwrap/Accucutt used to do 85 percent of its work in the U.S., by the time the loonie started its steep rise against the U.S. dollar, the companies were doing 80 to 85 percent of their business in Canada.
No longer can Fabio and Enzo afford long hours with no breaks or long weeks away from home. Both now have young families, and family life takes precedence. The brothers see their workers as an extension of the family, and take pains to be sure wages are higher than the going rate, that people’s family lives are supported and that work conditions are the best they can be.
It may be a small thing, but one example is the firm’s coffee. It’s the smoothest espresso you are likely to find outside Italy, and it’s a blend of three beans delivered by Mom daily.
The firm prides itself on the productive longevity of its workers, gives out 10-year-service watches (“Accutron,” says Enzo.) every year, and this year will be giving out a 20-year-service watch.
The company has refined its business model to match the old mantra: “I have three options available; you can have two of the three. They are low cost, high quality and speed.”
That means you can have low cost and good quality, but you may have to wait; you can have low cost quickly, but you have to be happy with a lower quality; you can have high quality quickly, but you will have to pay; etc.
The brothers do not think off-shore competitors can offer two of three. They can offer low cost, but you will wait and you will take what you get.
The brothers believe we all need to learn how to work with off-shore production, because it is not going away anytime soon. However, according to Fabio, “In order to work with Asians, we need to have products that exploit what we do best in North America and exploit the weaknesses of our competition. That means good products on time.”
Enzo echoes his brother’s sentiments: “I would not have guessed 10 years ago that we would be knocking together cabinets on top of everything else, but you need to understand your customer’s needs, and then find a way to be there to support him.”
Editor’s note: Wood Industry’s long-standing policy of separating advertising and editorial has not changed. Accuwrap has held the outside back cover of Wood Industry for two years. However, Accuwrap is also a wood-products producer, and refusing them a profile simply because they advertise would be as unfair as doing a profile for any advertiser because they advertise. There was no trade-off, and Accuwrap did not know it was under consideration until the day before the interview. — ed.