1255 Greene Avenue, Suite 300
Company Perspectives:
Dorel is committed to continuous new product development and innovation, across a vertically integrated, low-cost manufacturing base. This is a key to our success and has been a major factor in placing us ahead of the competition.
Dorel Industries Inc. manufactures a broad range of juvenile furniture products, ready-to-assemble (RTA) furniture, and home furnishings, which it sells primarily through such mass merchants as Wal-Mart and Toys "R" Us, department stores, and specialty retailers. In addition to facilities in Canada and the United States, the company also has European operations. Dorel markets its ready-to-assemble furniture under the Ameriwood, Ridgewood, and Charleswood names; its juvenile products under the Cosco and Maxi-Miliaan names; and home furnishings under the Cosco and Sealy names.
The First 30 Years: A Family Business Growing Through Acquisitions
In 1962, Leo Schwartz founded Dorel Co. Ltd. in the basement of his home in Montreal, Quebec. Initially a small seller of crib mattresses, Schwartz by the 1970s had established a national sales network for his products. In 1987, Dorel merged with Ridgewood Industries Ltd., a wire-making company turned ready-to-assemble furniture maker, founded in 1969 by Schwartz's son, Martin, and his son-in-law. The merger completed, Dorel held its initial public offering, raising $9.4 million, which it put toward acquisitions, and changed its name to Dorel Industries Inc./Les Industries Dorel Inc.
Dorel made its first acquisition in 1988, purchasing Cosco, Inc., an American manufacturer of children's accessories and furniture. Cosco was three times the size of Dorel and had a distribution network that included clients such as Wal-Mart and Kmart. Despite the fact that Cosco was ailing, Dorel maintained production at Cosco's Columbus plant and raised its executives' salaries. Dorel also acquired Charleswood Corporation in 1990, another manufacturer of ready-to-assemble furniture and an apparently losing venture. Taking a different course than it had with Cosco, Dorel immediately cut Charleswood's staff in half and established new product lines for the company.
By 1990, Dorel's management consisted of Leo Schwartz, his three sons, Martin, Alan, and Jeffrey, and his son-in-law, Jeff Segal. Industry analysts considered the group a strong management team, capable of turning money-losing acquisitions into winners. Having weathered the Canada-U.S. Free Trade Agreement of 1989 and the devastating Canadian recession of 1990-91, which halved the ranks of Canada's furniture manufacturers, Dorel's management decided to become far more competitive and tackle the U.S. market. "Free trade made us realize that we couldn't hide behind borders," Jeffrey Schwartz, one of Dorel's vice-presidents, told Canadian Business in 1998. "In order to compete, we had to have world-class manufacturing facilities--and that's something we didn't have. ..." Management resolved to take a more active role in the operations of both its acquisitions, repositioning the top management at Charleswood and naming a new president for Cosco.
The company also engaged in several more acquisitions--companies that had overspent, were not efficient enough, and had the markets and relationships that Dorel did not have, according to Martin Schwartz, company president, in a 1992 Canadian Business article. In 1993, having purchased the assets of the Carol Anne furniture company, Dorel created Leadra Designs, a new Canadian division, to manufacture and distribute a line of mid-market bedroom sets, wall units, tables, and chairs. In 1994, it acquired Maxi-Miliaan and began to market the Maxi-Cosi brand of higher-end juvenile products.
These acquisitions provided Dorel not only with a broader line of products, but with a foothold in the United States and Europe; they transformed the company into an American corporation with a Canadian head office. Dorel also created Infantino Inc. in 1992, a California-based company that operated within its juvenile products division; it brought on line three new facilities as well: a new metal furniture manufacturing plant, a sewing facility, and a distribution center.
The Mid-1990s: Heavy Debt Load and Other Problems
Yet growth came at the expense of profits. Although sales quadrupled between 1988 and 1993 to reach $260 million, Dorel had accumulated an unhealthy amount of debt during its acquisition years. By 1994, the 2,500-employee company, ranked the 13th largest furniture manufacturer in North America by Furniture Today,carried a debt-load of $125 million. That same year it earned just $8 million in income on sales of $334 million.
The company faced another problem as well. Although Dorel exported to more than 40 countries by the early 1990s, 78 percent of its sales occurred in the United States in 1993, with only 17 percent in Canada and 5 percent internationally. More troublesome yet, Dorel was largely reliant on one client for distribution of its products; Wal-Mart booked 30 percent of its total sales.
To address this unhealthy balance, Dorel started shying away from acquisitions in 1995 to concentrate on building a more efficient and profitable set of consumer products businesses. It expanded its distribution through home centers, office superstores, and catalog merchants. In the second half of the 1990s, it began to produce futons for mass merchants, and in 1997, to manufacture and distribute futons under the Sealy brand name. The plan paid off, and Dorel doubled in size between 1995 and 1998. Its revenues in 1997 rose 25 percent to attain $532 million with earnings at $25 million. In 1998, sales increased another 44 percent to reach $767 million.
By 1998, the company was expanding rapidly in the ready-to-assemble furniture sector, growing both internally and by acquisition to become one of North America's top three or four RTA manufacturers in the lower end of the market. As a result, Dorel needed more production capacity. Once again turning to acquisition, it bought Okla Homer Smith, an American wood crib and dresser manufacturer, and Ameriwood Industries International Corp. in 1998. It also shut down its Leadra division,
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