Mexico slips to No. 4 but still a key source
By Thomas Russell -- Furniture Today, March 10, 2008
High Point — When it comes to sourcing product around the world, most industry executives remain fixated on growth markets like China and Vietnam.
But Mexico remains a key source for the U.S. furniture industry and the most important player in Latin America.
Despite a 2007 sales decline that caused Mexico to lose its No. 3 spot to Vietnam on the list of top furniture source countries for the U.S., Mexico ranks fourth with a still-healthy $1.14 billion in exports to its northern neighbor.
Last year, its upholstery shipments to the U.S. market totaled $342 million, down 12% from 2006. Wood shipments totaled $207.1 million, down 14%.
Still, the country remains important to a variety of U.S. importers and manufacturers such as Martin Furniture, which has operated a plant there for the past five years.
Located near Tijuana, the 150,000-square-foot leased facility produces home office and home entertainment products in cherry and oak veneers and oak and hardwood solids.
At full capacity, the plant can produce as much as $30 million in goods a year, said Karl Eulberg, vice president of sales. The plant replaces a facility damaged in a fire last July.
The new plant has one finishing line and another is set to come on line in mid-April. At full capacity, the plant will be able to produce at least 10 different finishes, including some that involve eight to 10 steps.
At about $2 an hour, the 380 plant workers earn far more than their Chinese counterparts, but far less than the workers in Martin's former plant in California, who made $8 to $10 per hour.
"It's a 75% savings in the labor rate, which is huge," Eulberg said. He added that the Mexico operation also saved $1 million a year in workman's compensation costs.
The facility ships goods to a 235,000-square-foot warehouse in nearby San Diego, which then sends goods to U.S. retailers in a matter of days.
For Martin, the proximity of the plant to the U.S. market is a key advantage. In a year's time, the company hopes to have all its Mexican-made products in stock and be able to ship in five to 10 days.
The quick availability and other factors are causing more customers to show interest in the Mexican product mix, Eulberg said. He said Martin is planning to add another shift at the plant, which would double production.
"It gives us more flexibility in scheduling our production," he said. "As freight from China goes up (in cost) and inflation soars in China, Mexican products are becoming more attractive."
Mexican case goods producer Toro Furniture also takes advantage of its proximity to the U.S. market. Its 270,000 square feet of production facilities in Ocotlan, Mexico, are 14 hours from the border. The company ships product to U.S. retailers in four to six weeks from the time of order, or within 24 hours for in-stock goods.
Toro started about 38 years ago selling bedroom and dining room to the domestic Mexican market. It began to export rustic-style case goods and occasional in 1980.
The United States initially represented 100% of its export business. Today, it represents 70%, with Canada representing the other 30%.
Toro's line also has expanded to include lower-middle-priced wall units, home office and contract furniture made with oak, cedar, pine, mahogany, mesquite and cherry veneers and medium-density fiberboard. Its styles have diversified to include contemporary looks as well as mixed-media designs that incorporate wood and metal.
Export sales for the company amount to $20 million to $25 million, although the company has experienced some slowdown in the past four years. Head of export sales Rafael Rosas attributed that to a weaker U.S. economy and to competition from China.
As a result of that competition, Toro has dropped about half the items in its export line to focus on areas where it still can compete, Rosas said. He added that growth in domestic sales have helped offset losses on the export side.
But he said the company is looking to grow its U.S. business once again.
"We have quality designs and can compete against China," Rosas said. "What we sell is unique. It's part of the Mexican design that makes it feel like it is something that is made by hand and like you have an original piece of our culture."
Bill Kemp, a principal in case goods importer B.K. Home Furniture, said he brings in 40% of his bedroom line from Mexico and the remaining 60% from Indonesia. Overall, Mexico represents 20% of his volume.
Kemp sources from four factories in north and central Mexico that he has worked with for 20 years. He said he remains pleased with the quality of the groups, which retail between $999 and $1,199.
He also likes the proximity to the U.S. market — lead times from Mexico are about four weeks compared with 10 to 12 weeks from Asia.
U.S. raw materials like poplar and oak also can be shipped to Mexico more quickly than to Asia, Kemp noted.
"Mexico brings us close proximity and the ability to get product quickly," he said. The short travel time also helps in correcting any errors in production, he added. "With Mexico, it is easier to get down there if you have an issue and the fact that they are in the same basic time zone that we are makes it easier to communicate."
Mexico also has been a good alternative for case goods manufacturer Sunny Designs. The company has plants in China, but can't make bedroom furniture for the U.S. market there because of the high U.S. antidumping duties it would face.
So it sought out factories in Mexico to do the job. At first, it wasn't pleased with the quality and service. After about four years of struggling to get consistent quality and delivery, it found a plant in Tijuana that now produces its Santa Fe line and will also make its Sedona bedroom. Both sets have an estimated retail of $3,000 for a five-piece group.
"We are very happy," said Hokeun Lee, Sunny Designs' marketing director. "The owner is very hands-on — he does mostly custom work and he knows how to make sure there is quality. He also puts a lot of attention and detail into the finishing."
Higher-end companies also are looking at Mexico as a potential resource. They include Ferguson Copeland, which sells a high-end line of imported occasional, dining room and bedroom.
"We are exploring Mexico to bring a new array and collection of materials and looks into the marketplace that is indigenous to Mexico," said President and CEO Darrell Ferguson.
He said he looking at various stones, leather treatments and naturally oxidized metals.
"I don't see anybody as capable of producing as high a quality metal product as Mexico," he added.
