By Richard Wright
Recently, a number of significant European hearth products manufacturers have launched efforts to break into the North American market. Unlike many past European companies whose efforts were short-lived, this new crop of entrepreneurs is well-funded, come with sophisticated products and, most importantly, have an understanding of what it takes to be successful in such a large, and diverse, country.
One of the latest is Spartherm, a German company first established in 1986 by G.M. Rokossa as a two-man business. Today, with owner Rokossa still in charge, it has over 1,000 employees, and distribution in over 50 countries.
The responsibility for penetration of the Spartherm product line into the North American market is on the shoulders of Timo Steinhauer and his colleague Markus Aumann.
Aumann is on the road, calling on dealers and also overseeing testing of the product line. Steinhauer is in charge of marketing, company representation and organizational matters such as preparations for trade shows.
Both men report to Cosimon Serata, head of export for the company; they also report directly to the owner and to management.
The fourth person directly involved in the move into North America is Dr. Volker Schmatloch, head of Research & Development and responsible for all product testing.
Preceding the company’s entry into the North American market is, of course, the high regard with which German engineering is held in this country. The reputations of company’s such as Mercedes and BMW set the bar high, as do the German-made medical instruments that are coveted by most hospitals. German tools are also in demand by many manufacturers for their precision and reliability.
|L to R: Markus Aumann and Timo Steinhauer.|
Hearth & Home: How did the name Spartherm originate?
Timo Steinhauer: “About 32 years ago, when the company was being formed, a friend of the owner came up with the name Spartherm. Spar is energy, and therm is for thermal.”
What are the gross revenues of Spartherm?
Steinhauer: “It’s $65 million Euros, and right now the dollar is pretty much equal to the Euro, so it’s about $67 million U.S.”
Being in so many countries must present a challenge for testing and regulations, where each country is slightly different.
Steinhauer: “In Europe, of course, the regulations are like those in North America, but it’s our home and we have worked with those countries for the last couple of decades and are all set here. The challenges regarding testing are basically in Australia, New Zealand, Asia and North America. In other countries it is easier. If you sell to Greece you don’t really have to worry about regulations and testing.”
Recently, the Swedish company NIBE bought controlling interest in the Canadian company Regency. Why did you make the decision to come in with your own brand rather than purchasing a North American company?
Steinhauer: “We wanted to come in with our own brand name; we don’t want to purchase other companies in the U.S. Our goal is to achieve a long-lasting, proper network ourselves; we want to work with distributors and get our own product into the market.
“Also, we just merged with a company from the Netherlands; we purchased a company called Dru. We are pretty much focusing on internal stuff right now, getting everything focused with that company. But it has never been a plan of ours to acquire or purchase a local company. We would rather deal with our own brands and do it ourselves.”
|The Spartherm facility in Germany. A: Spartherm refractory brick production. B: Offices and large storage area. C: Offices and main production area.|
Will you be using the Dru gas appliances as part of your offering here in North America?
Steinhauer: “It is not on the agenda. Right now we are just focusing on our wood appliances. Of course, gas is a huge thing in the U.S. We will have gas knockouts in our units and that makes it possible to retrofit the gas burner afterwards. We figured that was the best solution for our units right now.
“Our next step will be inserts. We have a very nice range of inserts – high-quality, contemporary inserts – and the next step will be that we are going to have these for North America.”
What are your main selling points that will convince a dealer to carry your product?
Steinhauer: “Our selling propositions are quality, reliability, design and, of course, the sophisticated technique that we use with our lift door, with the opening, with the levers on top and bottom, and there is the German manufacturing. These products in comparison to others are high end and unique, almost like a custom product. It’s a long-lasting, reliable, high-end, quality product.”
Did you find it difficult to meet the EPA regulations on wood-burning appliances?
Steinhauer: “Yes. In total, it took us almost four years to get everything ready and approved for North America, and it’s still ongoing. It is a very difficult process. It is very costly and very difficult.”
How many of your units do you have EPA-certified at this point?
Steinhauer: “Fourteen. We have a range of 14 units.”
Well, that’s a substantial number. But you’re right about getting so many products certified. It requires a lot of time, and effort, and money.
Steinhauer: “But if we do it, we want to do it right. We don’t believe in shortcuts. We only use the best labs, such as Polytech, CSA. We want to be able to bring a product to the market that is perfect, and that is 100% secure and safe. Safety is a very important thing for us.”
What are the price ranges of your fireplaces?
Steinhauer: “From $6,000 to $12,000 in U.S. dollars.”
That puts you at the high end of the market, doesn’t it?
Steinhauer: “Exactly. We are positioning ourselves as a manufacturer of high-quality, high-end product aiming for customers that are design oriented, and looking for markets with high-end products.”
|Varia model M-100h.|
The good news for you is that, over the past year or two, the hearth industry has been coming out with very high-end products, at least some of them.
Steinhauer: “Like the da Vinci, and all these other manufacturers that have come out with high-quality, high-end, custom products. We figured there is a demand for appliances like that, and it’s growing. The distributors can make a good margin with high-end product, so it’s a very good thing.”
The sweet spot for some of these products is from $30,000 to $80,000, and that is changing the hearth industry. Our retailers are learning how to sell expensive products, and that bodes well for you. Your price looks pretty low compared to some of prices out there.
Steinhauer: “Yes. Absolutely. What we are offering could be considered custom because it’s something so new to the market, and price-wise it is a very good value for the product that you get. Once the dealers have seen the product, and then sell the product, they are 100% convinced. The feedback that we are getting is amazing.”
Are you setting up a North American headquarters?
Steinhauer: “That is not on the agenda right now. But in the long run we would consider it. Right now our headquarters and warehouse are with Powermatic in Canada.”
Does Powermatic already have some of your product that they are moving out to dealers?
Steinhauer: “Yes, absolutely, and they are very, very successful.”
When did they start moving product?
Steinhauer: “Eight months ago.”
And the sell-through at retail is good?
Steinhauer: “Yes. They are building a network and the feedback they get and the success they’re having is very good.”
Is it premature, or can you describe the demographic that will be your target customers in North America? Who will be spending this amount of money; who will you be going after? What amount of household income will they have?
Steinhauer: “We are targeting the design-oriented customer. We’re looking for high-end markets, and that’s on a national basis. Absolutely. It could be someone living in the south of Texas or up in the Maine area. Geography is completely irrelevant for us. We’re targeting the customer who has money, definitely, because we’re not selling an inexpensive product. It is someone who has the resources to purchase a product in that price range, and someone who is specifically looking for good design and a proper, well-manufactured product.”
So throughout both Canada and the U.S., your plan is to set up distributors, correct?
And if you can get big players, such as Powermatic, so much the better.
Steinhauer: “Absolutely. That’s the plan. We would like to have a decent structure network where distributors, dealers and consumers can benefit and get a high-end, reliable product that boosts our name and the reputation we already have in Europe. We want to create that reputation in North America.”
Who do you see as your main competition in selling wood-burning fireplaces?
Steinhauer: “When it comes to contemporary, we are always looking at Stûv, but they only have straight bases and we’re coming in with a range of angles – peninsulas and corners. At this stage I would not consider Stûv a real competitor. Right now, the products that we have in the wood-burning section are pretty much unique.”
Well, that’s a nice position to have, isn’t it?
Steinhauer: “Yes, we’re happy with that. We are actually the first European company coming in with a three-sided wood-burning appliance to North America. It’s kind of a pioneering position when it comes to angled wood fireplaces. Straight bases are something different. We have some straight bases, but basically what we are focusing on, and what our strength is, are the corners, the angles, big based peninsulas, like our Big Bay. That is the best of the line.”
|Spartherm produces its own refractory bricks.|
Do you have a specific plan as to what you hope Spartherm North America to look like, say three or five years out, in terms of how many units you may be selling?
Steinhauer: “We can’t really tell how many units we will be selling. It’s too early at this stage. Right now, we want to set up a very structured and respected network with great distributors, such as Powermatic. That is our goal. That is what we want to achieve. At the same time we want to spread the name in North America and establish ourselves and the name like we did over the past decade in Europe. That is the plan that we are working on.”
In Europe, do you have a similar going-to-market strategy where you have the equivalent of distributors handling your products?
Steinhauer: “In export, yes. In Germany we are working with dealers, but when it comes to export in Europe it is the same.”
Do you have anything that I did not ask that you would like to get out?
Steinhauer: “The inserts that we will be testing, they will be certified at EPA 1 gram per hour.”
Terrific! Did you get a lot of good contacts from the HPBExpo?
Steinhauer: “Absolutely. It was a great success, a really great success. On top of that we won a Vesta Award for Wood Products, which was major for us, really, really nice. We are already looking forward to the next one in Nashville. The show in Atlanta was the second show at which we exhibited. We started with New Orleans, that was the first one, and I think it just gets better and better with each show.
“Atlanta was a great show, with many great people. We made many good contacts, and we met so many nice people. This is a great market to be in and a very nice challenge that we have. My colleagues and I are very happy that we are now penetrating this new market. It’s a great fit.”
|Varia model 2L-80h.|