About 20 years ago, Ricardo Moraes and Daniel Pagano noticed two trends in the U.S. floor covering market: the increasing popularity of hardwood flooring, and the lack of exotic species being sold in this country. The two Brazilians, who were living in Maryland at the time, had a relationship with a supplier from their homeland and decided to start importing exotic hardwood flooring. Hence, the creation of BR-111.
The company immediately sold the hardwood through distribution. It has grown progressively ever year, from a few hundred thousand dollars in 1989 to sales well north of $100 million in 2008. The company has evolved over those 20 years, sometimes being forced to change suppliers when they either “failed to provide a quality product or chose to attack the market directly in competition with us and our distributors.”
From time to time rumors have surfaced, most unsubstantiated. FCNews associate publisher and editorial director Steven Feldman recently sat down with Moraes, president, to separate fact from fiction.
So, exactly how bad was business in 2008?
We were profitable for the year, even though the last two months were tough. Like everyone else, business was off, so we constantly readjusted our overhead to get it in line with the reality of today’s sales.
What measures did you take as a company in 2008 to stem the tide?
We reduced inventory, changed our marketing focus, altered our pricing strategy and reduced our staff by 40 to name a few. At the beginning of the year, we were staffed to support 30% to 40% growth, so throughout the year we watched the economy change and adjusted the staff to the new reality. It’s very easy for us to make decisions to change things. It’s just a few of us. So when we see a trend of things changing, we can react quickly as opposed to bigger companies that can take three to six months to react.
Would passing on the Surfaces event, the famed Tao party, be included?
We do the party as a way of thanking the retailers for the great work they do with BR-111 throughout the year. Plus, it’s a great opportunity to mingle and meet with them. Last year we hosted 1,700 people. This year, we aren’t sure how many people are going to Surfaces, so it doesn’t pay to rent out a place if attendance is going to be down. Also, how does it look to splurge when so many people in the industry are losing their jobs and companies are hurting? This year we will skip the party in hopes of bringing it back next year. We are still attending Surfaces though, in the same booth we have been in the last several years.
There’s been a rumor circulating for some time that BR-111 is in trouble financially.
We are solid. We have made money every year since we started 20 years ago, including 2008. So why would we be going out of business? These rumors have been going around since we started the company. To be honest, we like that people talk about us. It means we must be significant enough in the industry for people to care.
What about spending? Are you making any cuts in 2009?
We are keeping our multi-million dollar consumer ad campaign budget the same as in 2008, but getting much more for our money. In the trade we will promote our Learn 2 Earn program, which we believe is a good way to show gratification to those supporting our product line.
What exactly is Learn 2 Earn?
It’s our comprehensive spiff program to the salesperson. They could get paid as quickly as three days within submission of the sale through a BR-111 American Express credit card. It’s fully online; no paperwork.
It has been said that BR-111 is simply a marketing company, or an importer selling to distributors, and the company owns nothing.
What does Nike do? It doesn’t own any manufacturing facilities. No one wants to know where it makes its shoes and whether it actually owns the manufacturing. We have been involved in a joint venture with our main suppliers in Brazil for years. The majority of our investment is in technology and equipment, which gives us an ownership stake automatically.
Can you talk about some of the issues you’ve had with previous suppliers?
Overall, we did streamline our brand to capitalize on the brand awareness we’ve created. We are now marketing only the BR-111 brand and not the individual product lines. We did make one change in manufacturing. Bringing it in house was done mainly to protect our customers and distributors and increase our service levels. This transition is nothing new for us, and it’s a long-term strategy that better positions our brand. We control the production, service, quality and all the costs associated with it.
What makes BR-111 special compared to some other companies importing from South America?
1. Consistency. You can compare product shipped a year ago with product shipped today and it will be identical in look and fit. That is one of the biggest keys to our success.
2. Inventory. We have more inventory stateside than anyone. Uninterrupted supply is critical.
3. Quality. We have the best manufacturing plants and have our own staff in Brazil overseeing quality control every day.
4. Experience. We have been doing this for 20 years. We have been the leader in exotics since day one. Daniel goes to Brazil 10 times a year to make sure things come to us the way we want it. This is what we do. We don’t do domestics; only exotics.
5. Marketing. With our FUF and Essentials (launching now) programs, we believe we have some of the best and most comprehensive marketing and merchandising in the industry. All our programs are supported with tools the dealers and distributors need. An example would be our new Learn 2 Earn spiff program.
What did you learn from your NFA program?
We learned we cannot do this thing direct. Distributors are the best way to go to market for our industry. The retailer is really their customer, not ours, and never will be. They have relationships, service, credit and the ability to bundle products. The overall cost of goods are actually lowered going through distribution. We are fortunate to have the best distributors in the country. We view them as partners and not just customers.
Who are your distributors?
Apollo, J.J. Haines, Bellknap White, Ohio Valley, All-Tile, Wheeler, Golden State, BPI, Readers and T&A.
Do you have any direct distribution right now?
Not at all. The only direct billing we have is Lowe’s, but distribution does the fulfillment.
Where are you in compliance with the Lacey Act? Will that help you against the Chinese importers?
For us, it’s business as usual. We have been Lacey Act compliant from day one. This is really going to help us. We see a lot of people dumping inventory because they can’t tell where this stuff is coming from. It will help regulate the crazy prices of the last four years and weed out the unfair competitors. There is a cost associated with doing everything right, so some of that competition was unfair. We have been doing things correctly since day one.
Distributors and retailers make money on BR-111’s products. Competing manufacturers wonder how.
We have a premium brand and all the things that go with it. It has a much higher cache than a generic. Consumers believe in brands because they know that they know that there is a cost to doing things the right way. Cutting costs usually means cutting corners. That is how they are able to make margin. It’s the same as how Pfizer makes money on Viagara.
Talk a little about 2009. Will we see new products at Surfaces?
From a business standpoint we are prepared for a tough year. But we are expecting it to be better than 2008. Looking at product, we are introducing the Designer and Architectural Series, an upper high-end residential/commercial product that is made from pre-consumer waste. The 20-SKU collection is unique in every way. Many of the products in the series are suitable for ceilings and walls, which is very popular right now. We always offered a portfolio that was like a BMW offering from the 1 Series to 7 Series. Now we have the Bentley. We are also showcasing the Essentials Display, which contains a similar offering to Fashion Underfoot but in a smaller footprint, with smaller samples and a smaller investment for the dealer. The market has been asking for this type of display for a year, and now they are shipping out. We have 1,500 already sold and the goal is about 2,000. We already have 4,000 Fashion Underfoot displays in the marketplace, so 6,000 are a lot of dealers.
Because of the economy, will there be fewer introductions than years past?
We did not cut back on product launches. Why would you cut back on product promotion? There are people who are still buying flooring, and we want them to be buying ours. Also, we want to be in the driver’s seat when the economy does turn around. We still have to respond to changing trends and tastes.
Anything else going on?
We launched a new Web site the first of the year. It’s nothing like anyone in this industry has seen before. We are employing technology used by Fortune 500 companies. Right now we get 150,000 unique visitors each month on our site and we expect to triple that. We will be sending leads to dealers directly. And consumers who request samples will be sent as leads to dealers in their area.
A few years ago you started the BR-111 Foundation. What is it exactly, and what’s the latest?
We started the foundation about six years ago to help build schools and provide education to impoverished children in Brazil. We donate a percentage of every sale we make to the foundation, and we have many of our distributor partners helping us with the cause every month. There are about 100 kids involved in the school. It provides education, both scholastic and life teaching (hygiene), medical and dental support, and we feed them. We invite more people to contribute. I believe it’s everyone’s dream to help each other, especially the ones in desperate need; thanks to our sales every month we are able help a little. Learn more and contribute through our Web site at www.br111.com.
The company immediately sold the hardwood through distribution. It has grown progressively ever year, from a few hundred thousand dollars in 1989 to sales well north of $100 million in 2008. The company has evolved over those 20 years, sometimes being forced to change suppliers when they either “failed to provide a quality product or chose to attack the market directly in competition with us and our distributors.”
From time to time rumors have surfaced, most unsubstantiated. FCNews associate publisher and editorial director Steven Feldman recently sat down with Moraes, president, to separate fact from fiction.
So, exactly how bad was business in 2008?
We were profitable for the year, even though the last two months were tough. Like everyone else, business was off, so we constantly readjusted our overhead to get it in line with the reality of today’s sales.
What measures did you take as a company in 2008 to stem the tide?
We reduced inventory, changed our marketing focus, altered our pricing strategy and reduced our staff by 40 to name a few. At the beginning of the year, we were staffed to support 30% to 40% growth, so throughout the year we watched the economy change and adjusted the staff to the new reality. It’s very easy for us to make decisions to change things. It’s just a few of us. So when we see a trend of things changing, we can react quickly as opposed to bigger companies that can take three to six months to react.
Would passing on the Surfaces event, the famed Tao party, be included?
We do the party as a way of thanking the retailers for the great work they do with BR-111 throughout the year. Plus, it’s a great opportunity to mingle and meet with them. Last year we hosted 1,700 people. This year, we aren’t sure how many people are going to Surfaces, so it doesn’t pay to rent out a place if attendance is going to be down. Also, how does it look to splurge when so many people in the industry are losing their jobs and companies are hurting? This year we will skip the party in hopes of bringing it back next year. We are still attending Surfaces though, in the same booth we have been in the last several years.
There’s been a rumor circulating for some time that BR-111 is in trouble financially.
We are solid. We have made money every year since we started 20 years ago, including 2008. So why would we be going out of business? These rumors have been going around since we started the company. To be honest, we like that people talk about us. It means we must be significant enough in the industry for people to care.
What about spending? Are you making any cuts in 2009?
We are keeping our multi-million dollar consumer ad campaign budget the same as in 2008, but getting much more for our money. In the trade we will promote our Learn 2 Earn program, which we believe is a good way to show gratification to those supporting our product line.
What exactly is Learn 2 Earn?
It’s our comprehensive spiff program to the salesperson. They could get paid as quickly as three days within submission of the sale through a BR-111 American Express credit card. It’s fully online; no paperwork.
It has been said that BR-111 is simply a marketing company, or an importer selling to distributors, and the company owns nothing.
What does Nike do? It doesn’t own any manufacturing facilities. No one wants to know where it makes its shoes and whether it actually owns the manufacturing. We have been involved in a joint venture with our main suppliers in Brazil for years. The majority of our investment is in technology and equipment, which gives us an ownership stake automatically.
Can you talk about some of the issues you’ve had with previous suppliers?
Overall, we did streamline our brand to capitalize on the brand awareness we’ve created. We are now marketing only the BR-111 brand and not the individual product lines. We did make one change in manufacturing. Bringing it in house was done mainly to protect our customers and distributors and increase our service levels. This transition is nothing new for us, and it’s a long-term strategy that better positions our brand. We control the production, service, quality and all the costs associated with it.
What makes BR-111 special compared to some other companies importing from South America?
1. Consistency. You can compare product shipped a year ago with product shipped today and it will be identical in look and fit. That is one of the biggest keys to our success.
2. Inventory. We have more inventory stateside than anyone. Uninterrupted supply is critical.
3. Quality. We have the best manufacturing plants and have our own staff in Brazil overseeing quality control every day.
4. Experience. We have been doing this for 20 years. We have been the leader in exotics since day one. Daniel goes to Brazil 10 times a year to make sure things come to us the way we want it. This is what we do. We don’t do domestics; only exotics.
5. Marketing. With our FUF and Essentials (launching now) programs, we believe we have some of the best and most comprehensive marketing and merchandising in the industry. All our programs are supported with tools the dealers and distributors need. An example would be our new Learn 2 Earn spiff program.
What did you learn from your NFA program?
We learned we cannot do this thing direct. Distributors are the best way to go to market for our industry. The retailer is really their customer, not ours, and never will be. They have relationships, service, credit and the ability to bundle products. The overall cost of goods are actually lowered going through distribution. We are fortunate to have the best distributors in the country. We view them as partners and not just customers.
Who are your distributors?
Apollo, J.J. Haines, Bellknap White, Ohio Valley, All-Tile, Wheeler, Golden State, BPI, Readers and T&A.
Do you have any direct distribution right now?
Not at all. The only direct billing we have is Lowe’s, but distribution does the fulfillment.
Where are you in compliance with the Lacey Act? Will that help you against the Chinese importers?
For us, it’s business as usual. We have been Lacey Act compliant from day one. This is really going to help us. We see a lot of people dumping inventory because they can’t tell where this stuff is coming from. It will help regulate the crazy prices of the last four years and weed out the unfair competitors. There is a cost associated with doing everything right, so some of that competition was unfair. We have been doing things correctly since day one.
Distributors and retailers make money on BR-111’s products. Competing manufacturers wonder how.
We have a premium brand and all the things that go with it. It has a much higher cache than a generic. Consumers believe in brands because they know that they know that there is a cost to doing things the right way. Cutting costs usually means cutting corners. That is how they are able to make margin. It’s the same as how Pfizer makes money on Viagara.
Talk a little about 2009. Will we see new products at Surfaces?
From a business standpoint we are prepared for a tough year. But we are expecting it to be better than 2008. Looking at product, we are introducing the Designer and Architectural Series, an upper high-end residential/commercial product that is made from pre-consumer waste. The 20-SKU collection is unique in every way. Many of the products in the series are suitable for ceilings and walls, which is very popular right now. We always offered a portfolio that was like a BMW offering from the 1 Series to 7 Series. Now we have the Bentley. We are also showcasing the Essentials Display, which contains a similar offering to Fashion Underfoot but in a smaller footprint, with smaller samples and a smaller investment for the dealer. The market has been asking for this type of display for a year, and now they are shipping out. We have 1,500 already sold and the goal is about 2,000. We already have 4,000 Fashion Underfoot displays in the marketplace, so 6,000 are a lot of dealers.
Because of the economy, will there be fewer introductions than years past?
We did not cut back on product launches. Why would you cut back on product promotion? There are people who are still buying flooring, and we want them to be buying ours. Also, we want to be in the driver’s seat when the economy does turn around. We still have to respond to changing trends and tastes.
Anything else going on?
We launched a new Web site the first of the year. It’s nothing like anyone in this industry has seen before. We are employing technology used by Fortune 500 companies. Right now we get 150,000 unique visitors each month on our site and we expect to triple that. We will be sending leads to dealers directly. And consumers who request samples will be sent as leads to dealers in their area.
A few years ago you started the BR-111 Foundation. What is it exactly, and what’s the latest?
We started the foundation about six years ago to help build schools and provide education to impoverished children in Brazil. We donate a percentage of every sale we make to the foundation, and we have many of our distributor partners helping us with the cause every month. There are about 100 kids involved in the school. It provides education, both scholastic and life teaching (hygiene), medical and dental support, and we feed them. We invite more people to contribute. I believe it’s everyone’s dream to help each other, especially the ones in desperate need; thanks to our sales every month we are able help a little. Learn more and contribute through our Web site at www.br111.com.
 |