Peru's resources make it a hidden gem
By Thomas Russell -- Furniture Today, March 10, 2008
High Point — For some furniture importers and manufacturers, Peru is a hidden gem thanks to its supply of native hardwoods and capability with hand-painted finishes.
Case goods importer Grass Roots Imports gets about 10% of its product mix from Peru, including dining tables and chairs, plus some occasional furniture, bookcases and entertainment centers.
President Peter Markwardt said likes the craftsmanship that's available in Peru, such as hard carving and hand painting on wood pieces and hand tooling of leather. "A lot of techniques native to those regions are still attractive to the marketplace," he said, adding that a dining table and eight chairs from Peru will retail from $4,000 to $5,000.
Case goods importer Peninsula Home Collection has been sourcing from Peru almost since the time of its formation 11 years ago. Today, it gets 100% of its upper middle- priced line of case goods from seven plants in Peru.
Founder and President Gonzalo Alonso, a native of Argentina, said he likes Peru largely because of the workers' ability to produce sophisticated hand-painted designs.
"You have very skilled people for what we do," Alonso said, noting that he traveled around the world looking for sources capable of the hand-painted looks he was seeking. "When we paint a sideboard, it is being hand painted as if it were a piece of artwork. There is a pattern to follow, but it is freehand."
He added that Peru is rich in indigenous species such as Peruvian oak and other varieties related to the mahogany family. It also has reclaimed varieties of hard pine found in old buildings.
Peninsula's finished product carries relatively high price points. A bed retails from $2,800 to $4,000, while a 72-inch rectangular table with turned legs retails for $1,600. Chairs retail at $650 each.
"It's not an inexpensive country when you compare it with traditional sources," Alonso said, noting that a skilled carpenter in Peru makes $1,500 a month. "In Indonesia, they make one-tenth of that."
One of the biggest challenges, however, has been the strengthening of the Peruvian nuevo sol against the U.S. dollar. Alonso estimated the dollar has been devalued by more than 15% over the past two years against the nuevo sol, a factor that has contributed to his own prices rising by an average of 5% to 6% each year.
He said the company is offsetting that price pressure by adding value to the product where possible.
"The factory does whatever they can do, but for the most part, we take the hit here," he said. "That is why we improve our products, so we can get more for it."
Alonso said his annual sales growth has averaged about 30% in recent years. Last year alone, Peninsula had 33% growth, and in 2008, he expects 25% growth, which should put the company over the $10 million mark.
Alonso admits that he is a little concerned about having all of his company's eggs in one sourcing basket. For that reason, he may start looking to Honduras, Ecuador and other neighboring countries.
But even if he moves product to those areas, he still expects Peru to remain his main source country.
Case goods producer South Cone produces three-quarters of its line in a 120,000-square-foot factory in Lima, Peru, that employs 280 workers.
The currency situation also has squeezed South Cone. In response, the company has added more value to its product to increase its appeal at the higher end of the spectrum.
That resulted in the company raising prices by about 30% since 2004, said founder Gerry Cooklin.
Cooklin said one-third of the increase resulted from the currency situation, while another two-thirds came from product improvements. He said that prices should have gone up another 10%, but that South Cone ate those costs through plant efficiencies and by cutting into its own profits.
Despite the challenges, Cooklin believes Peru still represents the best value for what he is trying to provide.
"In Peru, as I got into furniture, I realized the supply of exotic, high-end hardwoods is the best in the world," he said, noting that there are some 2,500 species in the Peruvian rainforests.
He added that Peru also has skilled labor force, particularly for the high-end finishing that his line requires.
