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Hearth & Home May 2016

VP Berger.

Berger Steps Up

By Richard Wright

VP Berger’s task is to protect and grow a half-billion dollar hearth business while navigating through the vicissitudes of weather, the economy, fossil fuel prices, and the ever-changing tastes of consumers.

VP (Vincent Paul) Berger is well known within the Hearth & Home Technologies (HHT) companies, but perhaps not as well known throughout the greater hearth industry, although he’s now running what appears to be the largest hearth company on the planet.

His initial background was in accounting, but in 1997 he was hired by Thulman Eastern, which at the time was the largest fireplace installation company in the country. It was based in Maryland and Majestic was its main line. His timing was fortuitous, for at that time Thulman was on a growth path, acquiring other distributors on the East Coast.

Hearth & Home: With Thulman in such a growth mode, you must have learned much and fast about the hearth industry.

VP Berger: “From the time I joined Thulman, I spent the next three years in finance and operations acquiring a lot of other distribution on the East Coast and integrating it into Thulman Eastern. That was the late ’90s. Thulman actually grew to be greater than a $100 million business. We grew that small business into a 20-plus location distribution business before we sold it to HHT in 2000.”

What was your role during that period?

Berger: “Finance and Operations and Integration, with an emphasis on the business systems, because once you buy a company, then you put your business system in. That was my opportunity to learn how an installing distributor works, what are the things that builders value and what are the things that can get us in trouble.”

When you acquired distributors, in most cases did you keep the whole owners and managers on board, similar to what HHT has done with its acquisitions? 

Berger: “Absolutely. There was only one where the owner didn’t stay on, but his management team did. It was our plan to keep the culture in place and then bring out better cost platforming. Ironically, we were CFM’s largest customer at the time, and they cut us off one month after the acquisition. They literally turned 16 trucks around with a phone call. That became our first challenge after we were acquired by HNI. 

“Once we learned we were cut off, we converted 100 percent of that business to Heat & Glo and Heatilator within the next 30 days. It was very eye opening for me. What it taught me is how important that relationship is between the distributor and the builder.”  

The past year, 2015 was not an easy year in the hearth industry, yet HHT did pretty well. Is that the way you view 2015?  

Berger: “It is. We grew nine percent and also grew profits. Here’s how I look at these markets. It wasn’t a great year when you look at the slower economy and new construction. There was a really warm winter that put tremendous pressure on the retail side, and there was a biomass market that corrected back to below historic lows. 

“So 2015 was not great from a market standpoint, but we performed pretty well and we’ve come to understand that we are not going to be able to predict the markets. We’ve got to be nimble to provide product solutions based on consumer demand.” 

What is your forecast for 2016?

Berger: “I think the same thing. Let’s take it one market at a time. For the new construction market, there’s positive momentum. It’s just slower than we expected. For the retail business, ‘we will see.’ If winter comes we will have a very good stove, insert and fireplace year. If it doesn’t, it’s going to lag and be the same as last year. If we don’t get cold weather, even with high consumer confidence, the season doesn’t happen.”

Are there any specific paths down which you would like to take HHT?

Berger: “I truly believe this is a product and brand business, so we will continue to invest heavily – I mean heavily – in our products and brands for our customers. We did not take one dollar of new product development or R&D funds out during the downturn. We’re also going to continue fostering a resurgent energy in the Vermont Castings Group brands. We’ve hired directors of brands and product managers in all of those brands since we purchased them. 

“We will continue to take waste out, so we continue to be the preferred supplier of hearth products. Manufacturers are only one-third of the equation. The wholesaler, distributor and dealer handle the other two-thirds. To be a preferred supplier we need to be easy to do business with, and we need to be making them money. Those are really the two paths that we will continue to drive.”

Has the assimilation of the VC group gone well?  

Berger: “Well, obviously, we’ve announced the closure of the Paris (manufacturing) facility in Kentucky. The assimilation has gone very well. These are premium brands that have consumer pull. The actual front-wheel integration has taken longer than we planned, but we feel like we’ve got a good strategy to integrate those sales forces. That’s underway. 

“We have integrated the back-wheel supply chain into our distribution centers, so if you are a VCG customer you now have an integrated sales force and you will be pulling from our existing HHT RDC’s, which is a critical part of making our customers more successful.”

How do you bring Vermont Castings’ products back to the glory days?  

Berger:  “It starts with making sure we understand the heritage. The heritage of that brand is about craftsmanship, furniture-level quality. We’re protecting those brand differentiators. The second thing is we have to  deliver on time. Part of a customer buying into a product is making sure the value chain can support the consumer demand. Putting that through our value chain in our RDC and having the product closer to the customer is a big part of it.  

“Third, it’s just us being a better business partner. We’re not going to have one salesperson trying to call on 400 accounts. Integrating the front wheel will allow us to give our customers more of a business-partner experience and more frequent visits to make sure we can help them grow that brand.”  

Are there any roles that people such as Duncan Syme, or Vance Smith and Al Wilker at Red House Design could play? It might be a smart move on your part to bring them into the fold.

Berger:  “Yes. Ricardo (Leon) has already reached out to get some of the flavor of the heritage, to hear what the history is and the heritage behind the brand. We probably need to do more of that. I think we’re still in the transition period, but it makes a lot of sense to make sure we become as intimate with the characteristics of that brand as the prior owners, and I would expect us to do that not too far in the near future.”

How has the VC retail network reacted to this acquisition?

Berger: “I think we have a lot to prove. We’ve owned the company for the past 15 months, and the retailers are starting to see improved quality and improved delivery, but not to the level they want. They are not satisfied yet as far as our meeting their expectations. That’s my read. 

“That said, I’ve got great confidence that our integrated front-wheel and our value chain and our commitment to quality will spur that to go in the other direction. We are just entering the period of starting to bring them the advantages of HHT’s scale and capability, which can make them more money and be easier to do business with. The first 15 months we were trying to fix production and consolidate manufacturing. Now we need to become market focused.”

Are you comfortable with having vent-free products in your household?

Berger:  “Absolutely. When I was in distribution prior to the acquisition, we sold vent-free. That’s one of the things that is unique about our senior team, a lot of us were in Fireside Hearth and Home. A few things have given us confidence about vent-free. First, I would say that the industry has matured. If you think about how that product was specified, installed and used 15 years ago compared to today, there is a lot more rigor around it today. 

“The second thing is we learned a lot from our friends at Monessen. It did not take 90 days for us to see that this product has a very safe and proven track record as long as you put it in the right environment and you operate it properly. So we are fully committed and, as a sign of that, we’ve invested in a director of brand management, product management, as well as websites and new products. We’re going to come full force to show that we are committed to this product category.”

The incidence of fireplaces in new construction is quite low. It’s about 51 percent right now. What can be done to increase that percentage?

Berger: “It starts with the consumer. Nine out of 10 consumers want our product. We have to convince the building industry that consumers want it, that they can make money with it and, if they don’t do this they are not solving a consumer need. We have to educate the builders as to why our products are important.”

How do you view your skills? Where are your strengths or weaknesses? 

Berger: “What is unique about my experiences is I’ve been the customer, so I’ve been in distribution, manufacturing and corporate support roles. My greatest asset is that experience. As far as strengths, I think it is around leadership and team. If you talk to my team, you would find we like to set big goals. If we are not willing to change, especially in markets that are so volatile, then we’re going to be in trouble. 

“I think I’m pretty self-aware, which gets to your point on weaknesses. Taking over for Brad is really big shoes. When I look at the relationships he has with his customers, that would be my biggest weakness today. If I look back 15 years from now, I hope to have created loyalty that would stay through times of prosperity and peril. 

“Brad’s customers didn’t leave him when times were tough, and I am committed to making sure I’m working on that every day. I need to be a good listener and make sure my relationships with our customers are solid. Sure, I know many of them, but certainly not to the level that Brad does.”

Are your views going to be any different from Brad’s when it comes to attending the HPBExpo?

Berger: “No, not at all. As a group we’ve decided that a better use of shareholder money is holding an event with our customers. At a time when we were looking for distribution, it made a lot of sense to be there. Having our distribution in place, we just feel it’s a better use of our shareholder money doing our own events with our customers. I would never say never, though. But at least for the foreseeable future, that’s what we have communicated to Jack.

 “But I think it’s important that the industry knows we support HPBA in many ways. One of the untold stories is how much work and effort we do with Government Affairs. We have more employees, more money spent and more time spent than anyone else in the industry helping those initiatives.

“We are deeply involved in setting process, support and structure for Government Affairs, as well as leading safety commissions for HPBA as it relates to hot glass.” 

Is there anything I haven’t asked that you would like to say?

Berger:  “I would love to close with how Brad has been wonderful for this company. You can see that based on the culture, our connection with our customers, and our growth. Equally and just as important is the impact he has had on the industry. He is truly leaving a legacy of connectivity and lean manufacturing, and we thank him for that.”

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