Cabinetworks – Competitive Positioning Amid Potential
Buyout Deal – 6 May 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Brian Eckman (BE)
Former VP, Sales & Business Development at MasterBrand Cabinets Inc
Agenda:
1. Cabinetworks' portfolio growth through acquisitions
2. Competitive landscape – MasterBrands and American Woodmark (NASDAQ: AMWD)
3. Demand dynamics – R&R (remove and replace) and new construction customers
4. Material sourcing inflation pressure
Contents
Q: Could you give an overview of the commercial and residential cabinet manufacture industry? What are
the main categories, channels and drivers?
Q: When you say stock, are you referring to a lower-quality build?
Q: What is demand like for the custom business? You spoke about how stock is most dominant in terms of
market share. Is there opportunity in custom? What have been the trends there?
Q: Could you give an overview of Cabinetworks and its competitive strengths?
Q: How has Cabinetworks acquired multiple companies to drive its growth and enter channels it lacked a
significant presence in?
Q: How do manufacturers prioritise which channel to build a presence in while keeping lead times low and
managing costs?
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Q: You mentioned Cabinetworks focuses on home designers and its plants are specified for that end market.
If a competitor acquired Cabinetworks, would there be any potential synergies? Or would that acquisition
not make sense because they play in two different markets?
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Q: Which competitors could Cabinetworks integrate with, given the risks, if it wanted to expand into a
different end market?
Q: What is your outlook for Cabinetworks and the home designer end market as the economy starts to
reopen and we start to go back to traditional habits, ie, less investment in the home?
Q: What are the drivers of the home designer market? Does new home construction fall under this?
Q: What is key to preserving a brand? Is it entrenched relationships or product quality?
Q: There are confined requirements to building these cabinets. What does innovation involve in such a
constricted market, production-wise?
Q: What is your demand outlook across the different channels in H2 2021?
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Cabinetworks – Competitive Positioning Amid Potential
Buyout Deal
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview, entitled Cabinetworks – Competitive Positioning Amid
Potential Buyout Deal. I’m Nyree Hinton and I will be facilitating today’s Interview with Mr Brian Eckman,
former VP of Sales and Business Development at MasterBrand Cabinets Inc.
Brian, before we get started with today’s Interview, please state I agree or I disagree to the the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
BE: I agree.
NH: Thank you, Brian. Could you start by giving the audience a brief overview of your background and
various roles you’ve held in the industry?
BE: 27-year employee of MasterBrand Cabinets, 17 years of which I was a Vice President or higher. Most of
my experience was on the sales and marketing side. Also held several different general management-type roles
later in my career.
[00:01:13]
Q: Could you give an overview of the commercial and residential cabinet manufacture industry? What are the
main categories, channels and drivers?
BE: Channel-wise, cabinet industry has three primary channels. Approximately 55% of the business goes
through independents, whether you call them dealers, wholesalers, distributors, etc. Then you have probably
around 30% of the business that goes through the home centres, Home Depot, Lowe’s, Menards, probably
include Ikea in that group. Then you’ve got 10-15% of the business that goes direct, whether those are smaller
manufacturers that might mean local manufacturers that might sell direct to contractors, consumers, or some
of your largest manufacturers will sell directly to the nation’s largest homebuilders. That’s your channel
breakdown. Traditionally, you break down the product lines into stock, semi-custom and custom. You can
break each one of those down further. Your largest of those categories, in revenue-wise, would be your semi-
custom. The way that I personally always like to look at it, I like to split that out because they behave
differently. I like to look at the industry by stock, value semi-custom, semi-custom and either premium or
custom, whatever you want to call that high end. Unit-wise, your stock is definitely your largest volume. What
you were definitely seeing for several years, pre-COVID, was stock was the fastest-growing part of the market.
Main reason that was happening was consumers’ tastes favoured towards shaker-styling or pretty plain,
simple styling, and your lower-cost manufacturers, lower-priced manufacturers, could provide that look at a
lower price. Also, as you saw more and more Asian imports, first the majority were coming from China, they
were definitely targeted at that lower price point as well.
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[00:04:29]
Q: When you say stock, are you referring to a lower-quality build?
BE: A primary cost driver in the cabinet industry is the number of sizes of cabinets a brand or an offering
provides. When we say stock, it’s an old term that goes back decades, but really what it means within the
cabinet industry is, you can’t customise the size of individual cabinets. There’s a finite number of sizes within
an offering. My opinion is, where a lot of your cost lies, as a manufacturer, is in offering customised sizes.
There’s a lot more complexity in build and material management and there’s a lot more labour required to
provide that. Stock does not have to mean a lower-quality product. In fact, there are some stock manufacturers
that have a lot of nice features on their product, and they have a phenomenal finish on their product. What
they have is less sizes within their product offering. Less sizes, when it comes to designing the kitchen, creates
some limitations in what you can do from a designing standpoint. Some people will say custom. The way that
I’ve always thought of as custom, the way the majority of the industry thinks of as custom, is if you draw it, you
can build it. You can customise the product. It could be in the size of cabinet, could be in style of cabinet. Some
people call custom just because it’s a local shop that’s building it. That would be custom. Their product may be
a stock offering, it’s just done by a small, local manufacturer who calls themselves a custom shop. I hope that
clarifies what I meant by that.
[00:07:22]
Q: What is demand like for the custom business? You spoke about how stock is most dominant in terms of
market share. Is there opportunity in custom? What have been the trends there?
BE: Pre-COVID, that market was definitely declining. Then there has been so much demand in the entire
industry post-COVID as consumers have just shifted spending from things such as travel into their home. That
demand is up all over the place within the cabinet industry. You also have a lot of extended lead time that is
going on, especially on the custom side or the higher-end side, because pre-COVID, manufacturers took their
capacity down so much, especially on the custom side. It’s such a labour-intensive manufacturing process that
it’s not like you can flip a switch and run the machine harder to get more output. You need to hire people and
train people, and with a lot of the products you need craftsmen in order to do it. You can’t whip-saw your
capacity levels. Right now, today, as we sit, lead times are out significantly in many price points, including
custom, probably especially custom, but demand isn’t necessarily up more there than other areas, in my
opinion. It’s that capacity was taken down lower and it’s harder to rank capacity in that higher price point.
[00:09:43]
Q: Could you give an overview of Cabinetworks and its competitive strengths?
BE: Real quickly, there are three large manufacturers. MasterBrand Cabinets is the largest, then
Cabinetworks and American Woodmark are two and three. MasterBrand Cabinets has the broadest portfolio
of everyone, and they’re the only manufacturer that plays in all price points, product types and channels.
Cabinetworks and Woodmark both have broad offerings, and their offerings aren’t the same as each other.
Cabinetworks is on the higher two-thirds of the market, and Woodmark is on the lower two-thirds of the
market, is how they’re set up. Cabinetworks has real nice stable of brands and they’re selling a lot through
dealer, a lot builder-direct and a lot through the home centres. You can also break up the industry, I didn’t
mention this earlier, by made-to-order or stock. Your made-to-order captures your semi-custom and your
custom. Really, Cabinetworks is a real strong player on made-to-order and the stock business that goes after
builders. They have a very small business of stock that goes through the home centres. The home centres on
both the kitchen cabinet side and the vanity side still are category killers on, if you decide right now, for this
coming weekend, you want to install four cabinets in your laundry room, really, the only places you can go get
product are Depot, Lowe’s, Menards, Ikea. There may be a couple of regional people here and there, but
there’s nobody else on a broad scale that’s going to be able to get you product that’s in stock that quickly. If you
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want to do a bathroom remodel and you want to get a vanity, you’re going to go to one of those home centres.
Cabinetworks is a very small player in that space, where MasterBrand and Woodmark have very significant
presences in those spaces.
Prior to COVID, those were some of the fastest-growing parts of our industry. A little bit over a year ago, a
little bit before COVID really took affect and impacted the industry, you had anti-dumping rulings against
China, which hurt a lot of companies that were importing kits from China. Then you saw a lot of that demand
go over to the home centre in-stock space. Cabinetworks doesn’t play very much in that space. They’re a very
small player. They have a great stable of brands going after made-to-order dealer. They’re number two there
behind MasterBrand. They’re number two in builder-direct behind American Woodmark, and they’re, it’s
really close, they’re probably barely number one on the made-to-order home centre space. They’re a very, very
distant number three on the home centre in-stock space.
[00:15:11]
Q: How has Cabinetworks acquired multiple companies to drive its growth and enter channels it lacked a
significant presence in?
BE: It started with, I don’t know if they were American Industrial Partners at the time, what their name was,
I’ve always thought of them as ACPI, but when Armstrong, the flooring people, had a small cabinet division
that, for years, they could never turn into a real strong business, ACPI bought them and turned it into what I
was going to say is a decent business. Then they made a couple of smaller acquisitions, I think Master
WoodCraft was one of them. That Armstrong division, they changed the name to Echelon, and that was the
original ACPI. I think they did a frameless cabinet start-up in there, which is just a different way of
constructing cabinetry and the product is typically a little more contemporary product. They bought Master
WoodCraft, which was a private manufacturer in Texas, focusing a lot on multi-family. They may have bought
another small guy a long the way there. They made a sizeable play buying Elkay’s cabinet brands. Elkay is a
privately owned plumbing company and they were a decent manufacturer. Back five years ago, as you were
seeing growth in the Asian imports, you were seeing a lot of pressure on your semi-custom manufacturers, and
that’s where Elkay lived. That was their Medallion brand and their Yorktowne brand, those are the two main
brands there. They were feeling a lot of pressure. I think their profits went down. They sold to ACPI.
Then Masco, who for many years was the largest cabinet manufacturer, MasterBrand surpassed them about 10
years ago to become the largest manufacturer, but for probably two decades before that, Masco was the
largest. Masco decided they wanted to get out of more cyclical businesses like cabinets and windows, and they
wanted to get to, we’ll say, businesses that were a little more recession-proof, such as plumbing and paint.
They put their cabinet business up for sale. ACPI, and this was just a little bit over a year ago, won that, bought
the Masco business for about USD 1bn. That’s what my memory serves me. Then COVID hit. Then demand for
home products took off, and then, I’m assuming, this is my opinion and educated guess, is when ACPI bought
Masco, they didn’t think they would flip that quickly, but given what has happened to demand, they figured it
was probably timely to put them up for sale. Then the supposed acquisition with Platinum Equity came
together.
[00:19:52]
Q: How do manufacturers prioritise which channel to build a presence in while keeping lead times low and
managing costs?
BE: One brand, really, let’s not talk brand, let’s talk one plant and typically a product line, I correlate a
product line with a plant. What I always liked to do, was I liked to map a product line. Let me back up for you.
For six years I ran product management at MasterBrand, so I was responsible for this for a long time, for all of
MasterBrand. I liked to map a product line to an end market. When you think of traditional consumer
products marketing, Procter & Gamble is targeting a consumer segment. It’s my opinion, that doesn’t really
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work in the cabinet business because there are intermediaries that are heavily influencing the consumer in
their purchase decision. Whether it’s a kitchen designer, whether it’s a homebuilder, whether it’s a contractor,
there are these influencers involved. Rather than target consumer segments, we would target end markets. We
had the industry divided into seven end markets. A real good example of an end market is production
homebuilders, so your Pultes, your Lennars, your DR Hortons, those are production homebuilders. A
definition of a production homebuilder would be a homebuilder that is building off a pre-designed plan. When
it comes to cabinets, a kitchen designer is not meeting with the home owner or the home buyer. MasterBrand’s
Aristokraft brand was targeted at production homebuilders. For Cabinetworks, their Merillat brand and their
Echelon brand are targeted at production homebuilders. If you were to talk to their employees, they’re not
going to same language or the same lingo I’m using, but I promise you, their Merillat brand, their Echelon
brand really are catering to production homebuilders.
When you go through Cabinetworks’ portfolio, their Smart brand is going to be focused in on multi-family, a
different one of those seven end markets. You can often have a primary end market target and a back-up.
Aristokraft’s second target market would be small and medium custom homebuilders. Their first would be
production, their second would be that. That’s how we would target brands, capacity and investment, is that
you lay out that, and just so you get it on record here, your seven end markets are production homebuilder,
multi-family, new construction, small and medium custom builder. That takes care of your new construction
side of the business. New construction is about 30-35% of your cabinet industry. Very based upon the year,
obviously. Your remaining part of your industry is going to be in-stock consumer, in-stock contractor, and
when I say in-stock, that includes in-stock and quick-ship (audio distorts 25.18) business. Then you would
have designer-driven consumer, designer-driven contractor.
Your biggest segment of those seven, is your designer-driven consumer. What that means is, if my wife and I
decide that we want to remodel our kitchen, then we might go to a home centre and a dealer, looking for what
brand we’re going to choose, but we’re ultimately going to make a decision and work with a designer to design
our kitchen. That right there, that process I just outlined, makes up around 30% of the cabinet industry.
Cabinetworks’ KraftMaid brand, which is their largest and that brand has the most brand awareness in the
industry of any brand, is targeted at that segment. They’re very strong with designers and the home centres,
strong with designers and dealers. Their Yorktowne brand, their Medallion brand would all fall in that same
category. The way that I would go about it is, “Which parts of the business are growing?” Your plant can only
do so much. What your plant is not going to be able to do is, your plant manufacturing facility is not going to
be able to provide the level of customisation that you need for a designer-driven product, and it’s not going to
be able to have the low cost required for production homebuilders. The plant can’t do both effectively. That’s
actually what part of Elkay’s problem was. They were stretching their product lines too far, therefore
stretching their manufacturing capabilities, ie, cost or conversion cost capabilities within their plants.
[00:27:47]
Q: You mentioned Cabinetworks focuses on home designers and its plants are specified for that end market. If
a competitor acquired Cabinetworks, would there be any potential synergies? Or would that acquisition not
make sense because they play in two different markets?
BE: It’s very, very difficult, not impossible, but it’s difficult to acquire another manufacturer and quickly
integrate it in your manufacturing processes without creating a lot of disruption for your customers. I think
that’s what you’re asking, but yes. For instance, let’s just talk about what Cabinetworks has done or some of
the companies that previously owned Cabinetworks’ brands. Masco, who, again, was the cabinet leader for 20
years, they owned Merillat and KraftMaid. Then, in the ’90s, they bought another brand called Quality, out of
Texas. A lot of overlap between Quality and Merillat, both targeted at production homebuilders selling pretty
similar price points, etc. Masco went about trying to commonise the Merillat and the Quality products. It
created a ton of disruption with their customers as a result of doing that because, let’s say they were trying to
change a Quality product to be the same as a Merillat product. The heights of cabinet might be slightly
different. The way the construction happens on the cabinet might be a little bit different. The actually shade of
white finish or shade of brown finish that they’re using on the exterior of the product might be slightly
different.
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When they go to commonise that, standardise that so they can build it in the same plant efficiently, they’ve got
to make a change. As they made those changes, the ultimate buyer of that Quality cabinet was one of the
production homebuilders, let’s just say it was Pulte Homes. You’re disrupting Pulte’s business because they
have a model home they’re selling out of, and Masco went up to them and said, “We’re going to change the
shade of white or the shade of brown in your cabinet you have your model.” That’s disruptive to Pulte’s
business. They lost a lot of business over time by doing those changes. If you try to change it quickly and you
don’t communicate effectively and you don’t help your end market manage the process, a percentage of your
business will defect anytime you’re commonising like that. This is total opinion. I would be shocked if ACPI
only, with how shortly they owned Elkay and Masco, if they did much integration. If the Platinum Equity deal
goes through and then Platinum Equity looks to flip it to a more strategic buyer down the road, for them to
effectively integrate it, it’s possible, but to do it right takes a long time and it’s not easy. Did that answer your
question?
[00:33:23]
Q: Which competitors could Cabinetworks integrate with, given the risks, if it wanted to expand into a
different end market?
BE: Let’s say that Platinum Equity wants to own Cabinetworks for more than five years. I’ll answer what I
would do, maybe this will get it. If it would be a five-year hold and I have money to continue and grow the
business, I would look at commonising some of my products. Their Medallion product and their Yorktowne
product are very similar to each other, if not the exact same. I’m going to start commonising those brands
more with KraftMaid. I don’t need five different types of shaker door styles. I can consolidate that down to
two. I can aggregate my spend on those. I can simplify my operations. To implement that effectively I need
years. It’s not a months play, it’s years. I’m going to do that and I’m going to go through my portfolio and I’m
going to look at my product overlap between Smart and Master WoodCraft, or Smart and Merrilat, or Merrilat
and Echelon. I’m going to figure out what I can commonise, what I can standardise, what I can get more
volume in, whether it’s using the exact same finish formula for white, whether it’s having the same size
cabinets, same size doors. Whatever it is, I’m going to figure that out.
Then the end market they’re missing is your in-stock area. They may not even be the number three player in
in-stock. MasterBrand would be number one there. Woodmark would be a strong number two there. In-stock
is in-stock at the home centres, and then it’s quick-ship, which goes through your independent dealer channel.
Your first quick-ship guys were an importer in New Jersey named Fabuwood. Wolf Distributing, out of
Pennsylvania, is a major quick-ship player, etc. Public information, it’s in their releases, MasterBrand
Cabinets’ Mantra line goes after that quick-ship space. What I’m doing if I’m Platinum Equity is I’m maybe
knocking on Fabuwood’s door, I’m maybe knocking on Wolf’s door, to get into that quick-ship space. There are
a couple of USD 50m-100m players that are in the in-stock space, two different Canadian players that have
some presence with the home centres. Magick Woods, they’re headquartered in Canada, and then import a fair
amount from Asia. They also have assembly in the Chicago area. Fabritec is another one. I’m looking at doing
some bolt-ons like that to sure up my in-stock quick-ship space because it’s the one place where you can get
scale,
To get scale you need a lot of volume of same type of product. Platinum Equity, or Cabinetworks, is too
fragmented right now to get that scale. They’ve got to consolidate it, but it’s a multiyear play. You need some
real scale. The other place where you can do it, though, is on your going-to-market side. When your sales team
or your commercial team can sell a portfolio of products, then you can squeeze out the competition or you can
minimise the competition in the dealer area. You’re not going to totally squeeze them out of the home centres,
but you can squeeze your competition down in the home centres. The home centres like to have multiple
vendors for obvious reasons. They will, if you write a bigger cheque and you have the offering, they will focus
on your products and decrease the focus on your competition’s product. As you have a more robust portfolio,
you can play that game more effectively.
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[00:41:23]
Q: What is your outlook for Cabinetworks and the home designer end market as the economy starts to reopen
and we start to go back to traditional habits, ie, less investment in the home?
BE: I scratch my head on it. We have numbers that have been thrown around for what the spend on this
acquisition was. Then you go look at what the market cap is of American Woodmark and it just doesn’t add up
to me. Their sizes aren’t that different, and I believe, or my opinion is, the organic growth of the businesses
and the operating margins of the businesses aren’t that different. I just pulled it up right now. American
Woodmark’s market cap is USD 1.7bn. I just don’t get it. There’s going to be less spend in cabinets, there’s no
doubt about that. The one item that at some point will play to Cabinetwork’s advantage is when consumer
tastes go away from the current likes of simple styling or shaker styling and when it goes back to wanting more
ornate design. You can only achieve that ornate design with semi-customer higher-priced products. Back 15-
20 years ago, ornate design was very, very popular. That was one of the two reasons why semi-custom and
higher-priced products were doing very well back then. That will come back. Consumer tastes, they’re usually
10-year cycles, but it will come back to where that’s more popular, and then all of sudden there won’t be that.
It still doesn’t, in my head, in my opinion, justify some of the rumoured valuations for this business.
[00:44:43]
Q: What are the drivers of the home designer market? Does new home construction fall under this?
BE: It does. Independent distribution. There are overlaps here, but to start us off, let’s think of three different
types of business that are going through independent distribution. First and foremost, you have your designer-
driven business. This is my wife and I walking in, interacting with the designer, designer taking us around the
showroom, showing us products, then designing a kitchen for us, coming out to our house, maybe a field
manager meeting us in her home, selling it that way. Then in almost every single major metropolitan market
in the country, you’re going to have at least one, usually multiple, independent that is focused on the
production homebuilder. They will be buying the Aristokraft product, maybe the Merillat product, sometimes
the Timberlake product from American Woodmark, etc. Aristokraft would be the biggest player here,
definitely. Aristokraft is MasterBrand’s product. They’re targeting the production homebuilder and providing
the services that that production homebuilder needs. Typically, in those situations a designer or a sales person
for your dealer, distributor, wholesaler, whatever you want to call them, is not meeting with the homeowner.
That’s the second type of business going through the dealer channel.
Then the third, which has really emerged in the past five years, maybe 10 years, is your whole quick-ship
market. There’s not much brand loyalty at all in this quick-ship market. It’s a pretty well-developed market on
the East Coast, especially in the northeast. You would have Fabuwood and Wolf being number one and two,
not sure who is the biggest there between the two of them. Then I believe MasterBrand’s Mantra product
would be the number three. MasterBrand only launched Mantra two years ago, and it’s already the number
three player in that space. The point is there, you have a lead time that you’re trying to get the product out in a
week or less. That’s what is key there. Those three different players I talked about, MasterBrand, Fabuwood,
Wolf, all have different supply chains but their goal is, “You’ve got to get the product out quickly.” That is
competing with the home centres who have product in stock. You go to your local Home Depot store or Lowe’s
store, they have product on the shelves. That’s how the dealers compete with them. There’s a whole contractor
base out there who live on this in-stock or quick-ship-type product. That part of the market was growing
rapidly pre-COVID. It has continued to grow since COVID, but the entire market is up now since COVID, so
it’s hard to tell. There’s no doubt that was stealing business from your higher-priced semi-custom products.
There was significant trade down going on in the industry.
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[00:49:51]
Q: What is key to preserving a brand? Is it entrenched relationships or product quality?
BE: I believe there is no brand loyalty with consumers. When I’m talking brand loyalty I’m going to talk with
among channels and among the trades. When you take a designer-driven product, Cabinetwork’s KraftMaid
product, or MasterBrand’s Diamond product, you’re trying to get loyalty with the kitchen designer. The
kitchen designer has a significant influence on what brand the consumer decides. Where you’re fighting for
loyalty is with them. In order to maintain loyalty, first and foremost, you need to be a reliable supplier. You
need to ship on time, you need to ship complete, you need to ship correct, you need to ship damage-free. Those
are the fundamentals of this industry that you need to execute to build loyalty, maintain loyalty. Then it’s
going to go with a salesperson’s responsiveness for the manufacturer. It could go with marketing programmes.
Most manufacturers at various times will offer spiff. Basically, “You sell eight or more KraftMaid cabinets and
we’ll give you USD 10 per cabinet.” I sold 10 cabinets, I just made USD 100. That’s a payment that will go
directly from the manufacturer to the dealer’s designer. Home centres usually don’t allow the spiffs. That’s
how you build it in your designer-driven space.
Across all businesses, all cabinet businesses, those fundamentals, which are ship on time, ship complete, ship
correct, ship damage-free, are important. When you get into your production builder-focused products, like
Aristokraft or Merillat or Timberlake from American Woodmark, you need a faster lead time. These
production builders are trying to build homes on a faster time period, so lead time becomes more important
there. Also, you can build loyalty with the builder as well. You very, very rarely see large wholesalers be big
with two production builder brands. You’re either an Aristokraft house or a Merillat house or a Timberlake
house. You’re very rarely an Aristokraft house and a Merillat house. Then, on your quick-ship, it’s still what’s
important, of shipping on time, shipping complete, shipping correct, damage-free, but this is a one-time sale.
That contractor or consumer is just saying, “Give me a white shaker kitchen,” and maybe the last time, the last
three times, Fabuwood did a good job for me, so Fabuwood is my first place I want to order. I look up to order
from Fabuwood and they’ve got a couple of sizes I need on back order, so I instead look to Wolf. Wolf has got
extended lead times on that door style, so then I go to MasterBrand’s Mantra style or Mantra brand. Mantra
says they can get it to me in a week, I’m going to go with Mantra this time. The next time, Mantra took care of
me the last time, so I’m going to go to Mantra this time. Then you may become more Mantra-loyal, but Mantra
screws me over a time or two, I’m going back to Wolf or Fabuwood or trying a different guy. That’s how loyalty
works in that part of the business.
[00:55:26]
Q: There are confined requirements to building these cabinets. What does innovation involve in such a
constricted market, production-wise?
BE: Innovation is hard, first of all. Where you have seen effective innovation, it’s giving the appearance that
consumers want, whether it’s a new look. Maybe it’s brushed finishes, you see brushed finishes being popular
in furniture. I want my cabinets to be brushed as well. You’ve seen some success and innovation on new
materials being used on opaque looks. Painting a wooden cabinet can be very challenging, and especially
challenging if you’re not spending a lot of time sanding the product and putting on extra coats of finish on the
product. Sometimes, end markets don’t want to pay that much money for it. You’ve seen some innovation be
very effective of using non-wood doors that look like painted wood doors, that are at a lower cost and have a
better warranty history than what paint does. I am personally very sceptical on anything related to smart
cabinetry. We’re at a disadvantage vs appliances because appliances already have power going through them.
Cabinets don’t naturally have power going through them. It’s very costly, especially as a manufacturer, to run
power through them. You can usually get your local electrician to do it, if that’s something that is important to
you. In my belief, and any research I was exposed to, it’s not a high priority for consumers to develop smart
cabinetry.
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[00:58:53]
Q: What is your demand outlook across the different channels in H2 2021?
BE: I think H2 2021 is going to be strong, I just think there’s so much backlog. Go look at any of your publicly
traded homebuilders and look at what their backlogs are. That’s going to carry throughout. There was such a
rapid shift in demand in the home products, and people have projects that are partially started. I think you’re
going to see the completion of those projects throughout H2 2021. I think ’21 in most end markets, most
channels are going to continue to be strong. As the country opens up more and more, you’re going to see less
spending on home products and more back into travel. For instance, I’ve seen studies that say travel is not
going to get back to pre-COVID levels until 2024. It’s probably right, but you’ve got to break down those travel
numbers. Home products are competing with discretionary spend for my family. They’re not competing with
the spend of the amount of business travel that companies do. If people aren’t going to conferences as much, if
they’re not travelling to see their customers as much, etc, but I believe the average consumer wants to get back
to doing travelling as a family and for personal reasons, and that is going to take away demand from home
products like cabinets in 2022. H2 2021, I think is going to be strong.
[01:01:18]
NH: Let me close by saying thank you, Brian, for your input. Clients, if you would like to speak to Brian in a
private call or meeting, please let your relationship manager know. Thank you again for joining Third Bridge
Forum's Interview today, this now concludes our meeting. Goodbye.
BE: Thank you. Bye.
Transcription ends at 01:01:32 of the recorded material
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