By Richard Wright
When Lehman Brothers declared bankruptcy on Sept. 15, 2008, the firm’s stock plummeted a final 93% from its standing just three days prior, and fear spread rapidly through multitudes of companies and industries. The hearth, patio, and barbecue industries were not exempt from the resulting shock waves.
Hearth & Home Technologies (HHT), the largest company in the hearth industry, was forced to downsize – rapidly – in order to protect its stockholders. Those were perilous and difficult times to navigate, and many employees were laid off.
Ross Morrison was one of them, and so was Rob Sloan. They soon paired with Gary Butler and Rick Berg, and Stellar Hearth was formed. Little did they know that, approximately nine years later, when Stellar Hearth was well established, their previous employer, HHT, would purchase their company and keep the operation intact.
Hearth & Home: In what year were you let go from Hearth & Home Technologies?
Ross Morrison: “It was 2009.”
Did you immediately set up a new business?
Morrison: “Yes. We could see the recession looming, and more people were getting laid off. Rob (Sloan) and I started talking about what we would do if we were laid off. We had an idea for an old Heat & Glo product called a Grate Heater. It was just a small wood-burning insert, basically a grate made of hollow tubing and a fan. Rob had an idea for making it more efficient. But in early April of 2009 we were both laid off on the same day. He called me and said, ‘All right. Do you want to try this?’ I said, ‘Why not.’
“We recruited engineers Rick Berg and Gary Butler to see if they could help us with the mechanical drawings and whatever testing we needed. They were going to help on a contractual basis.”
Were those two already laid off from HHT?
Morrison: “No. Rick had left the company a year or two previously; Gary stayed there. He was doing some engineering work and overseeing trade shows. Rick was doing custom fireplaces after he left Heat & Glo. He had a shop at his house. We took him out to lunch to ask about our grate heater idea. He said, ‘I love to build them, design them. That’s all fun. I don’t love the meetings so much, and trying to find the clients.’ Rob and I were thinking, ‘Well, we can do meetings and clients. That’s what we do.’
“As you know, there is more money in custom fireplaces than other segments. We first started with our hearth warmer and, a few months later, the four of us got together and eventually became Stellar Hearth.
Morrison and Sloan in the factory.
It must have been nip and tuck for a while?
Morrison: “Quite a while, yes. It was all outflow for a while and, obviously, we were building up a product line. We did some design work for other companies to help pay the bills, and it really took about four years to get our feet underneath us and start to get over the hills financially.”
At one point, you were winning Vesta Awards left and right and my sense was that you were on a roll. At that point you were profitable. You were at the trade show; you had a good presence there. You were getting a lot of praise for what you were doing. You were putting out great products. So why did you move back to HHT?
Morrison: “Well, we were happy with where we were at, and we were attracting investors. About once a year somebody would call us and want to talk about having this capability as part of their repertoire. HHT had talked to us a couple of different times, but nothing really serious. As we were growing, we needed more money. We needed major equipment such as a laser and major press brakes. We needed more people and a painting facility, and just a larger building to house all of us.
“At that point, we had been profitable enough that we no longer were using bank money. Now, we were looking at going back and having to start over again with a major loan to take the next step in our business. We looked around and asked, ‘OK. Do we want to do this again?’ At that time there were a couple of different companies that came calling, and HHT was one of them. It seemed like the right time.
“We could get a big engine behind us and let us work on the things we like to do, which is the creative side and the Sales and Marketing part, and use the other side for a much better distribution network, and salespeople, and then all the back engines, production kind of things. It was hard to pass up, especially as I’m 56. I’m not a spring chicken anymore, so I didn’t want to go back into that.”
Interior of factory.
Has that decision worked out well for you?
Morrison: “Yes. It has been great. We are very comfortable with them, obviously having grown up there. I started at Heat & Glo in the 1990s so I’ve been with the company a long time and knew a lot of the people and processes, and so did my partners. It was very comfortable going back with most of the same people and the same atmosphere.
“It has been a year now, and walking through all the changes, going from being small to being part of big, it has kept us filling in blanks in a good way. They are letting us be us, and then just trying to help on the back side and not try to institute a lot of their processes or procedures, but let us do what we do best.”
Well, that’s wonderful. But you probably heard a lot of moans and groans from those who know you.
Morrison: (Laughing). “I think you were one of them!”
Please describe the present structure of Stellar Hearth Products. How many people do you have and are you still in your same quarters?
Morrison: “We are. We are about 20 minutes from the home ship, but it’s in our own building. There are 12 of us here, so we still do what we were doing before the acquisition. We all do a lot of everything because we are so small. I’m kind of the general manager and always have been when we were Stellar on our own. But Rob and I put up the Sales effort, and Rob, Lori and I work together on the Marketing side. Then Rick and Gary oversee all the Production and Engineering. Then, of course, we have a small group of employees in the drafting world, and then in the Production portion of our business.”
Butler adjusting the flame.
I believe Galaxy is the brand you’re flying under for your regular line, right?
Morrison: “Yes. That is the vast majority of our sales. It’s kind of the mainstream. When we were doing customs, we ended up finding that most of the ones that we were bidding and landing were somewhere between 4 and 8 ft. wide and then 2 or 3 ft. tall. So the Galaxy was a subset of the universe of everything we could do, and that is why we named it that. It occurred to me as I was on a run one day. So that’s where the name came from. Probably 80% of our sales are in that arena.”
How many dealers do you have selling your product?
Morrison: “When it was just Stellar we only had maybe 50 or 60 altogether. Now, with the big guys on board, we have access to quite a bit more. I don’t know that we are necessarily in that many places yet.
“I can’t see us being everywhere, but it’s hard to grow a brand with only 40 or 50 shops in 50 states and Canada. It’s much too sparse when we get customers, homeowners, or architects calling and wanting to see a product locally. It wasn’t easy to direct them there, so we missed a lot of opportunities that the competition had. I think we have a better shot of getting people in to see what we do.”
The Single-Sided Galaxy Series fireplace, shown with the unique Envision panel option, that allows you to take any high-definition picture and have it printed on glass to line the inside.
What percent of your business is custom?
Morrison: “It makes up about 20% or 25%.”
But custom is very profitable, isn’t it?
Morrison: “Yes. Of course, there’s a lot more work involved, so we charge more because we have to draw them mostly from scratch, from the ground up. There’s a lot of unique parts, some overlapping parts. There is definitely a customer base out there (for custom work). We have bid projects where they didn’t ask how much. They just want to know, can we do this and, if so, how fast can I get it?”
But that has got to be the fun end of your business, right?
Morrison: “Oh, yeah. It can be very frustrating because sometimes (the customers) just really don’t know what they want, or they want to defy the laws of physics. It’s fun as a group to get a little bit creative. It’s fun for the engineers to solve the riddle of how do we get the exhaust out there, how do we throw the flames in this direction. The challenge is fun, versus the day-to-day doing the same thing and making it 2 ft. longer.”
Like Kurt Rumens; he ended up with a 66 footer.
Morrison: “Yes. I think we might have bid against him. I know we bid on one in California. We just finished a 30-ft. outdoor fireplace in Edmonton, and it was a very different animal from anything we have done before. It’s kind of rewarding and frustrating all at once.”
It’s no secret that various areas continue to ban wood-burning, but now gas is under fire as well. They’re even banning gas lines in new construction in developments in Canada as well as on the West Coast of the U.S. Right now, it seems the hearth industry is on the wrong side of history. I don’t see that slowing down in terms of the gas and the wood being banned; I think it will pick up the pace very rapidly. But what’s your take? Does that concern you greatly?
Morrison: “Overall, yes. There is still a lot of business for us in California. Obviously, there’s a number of well-to-do people and corporations that like to invest in this sort of thing. We don’t look at it as a fireplace. We look at it as fire art. In my estimation it’s a different category altogether. But it still is a concern. What happens in California tends to want to move up the coastline and then start heading east.”
Exactly. Somehow, whatever California does other states take it very seriously. They start looking at it and pretty soon they’re doing the same thing. California does the heavy lifting, I guess.
Morrison: “Absolutely. John Crouch and the folks at the HPBA have their hands full trying to stay ahead of it, and working behind the scenes or in front of the scenes in Washington and other places to try to be on top of it, trying to keep it in an ordered form. But I’m not sure how far we can go. We’re fighting a pretty big machine there.”
As Jack Goldman (president and CEO of the HPBA) was saying recently, “We just don’t have enough boots on the ground to be stamping out fires everywhere.” I believe the banning of gas in North America will begin going faster. The future of the hearth industry will be up in the air.
Morrison: “It may be all electric, or all electric with solar panels attached.”
The custom Pier design fireplace has Safe-T-Touch glass, a 9-ft. x 2-ft. viewing area, and a dual-ribbon burner in an oval shape.
That was another one of the questions I was going to ask. I hear from some manufacturers, hearth guys, that they think electric fireplaces will be the future of the industry. I have trouble digesting that. It’s not a real fire, not even close. Do you feel the same way, or is it something you want to get into?
Morrison: “I do feel the same way, and I’m not looking to do electric fireplaces. Sometimes I’ll see one in the lobby of a hotel when I’m traveling. No offense to the electric fireplace manufacturers of the world, but it doesn’t look like a fireplace to me. In my estimation they should just have a TV monitor on with a blazing log in it. They can go that route if they want, but to have that sort of weird flicker effect on a back panel just doesn’t hit the spot for me. The technology that exists right now is pretty limited.”
But more and more manufacturers are getting into it.
Morrison: “Yes. Well, for the last 20 or 30 years we have been competing with the TV for placement in the house.”
From a high of 73% in 1992, the incidents of fireplaces in new-home construction have steadily declined. In 2017, it was down to 46%. That’s not just a minor drop; that’s the bottom falling out. Any idea why? There are people in your company, Roger Oxford and others, who have been trying to figure that out. Comments?
Morrison: “It’s scary. I don’t know if wages have kept up over the last 30 or 40 years, or not. I believe they have been flat instead of growing, whereas the cost of a home has continued to climb. I can understand why people are concerned about putting more into their mortgage. But, living here in Minnesota, I can’t imagine not having a fireplace in my family room when I come home on a cold December evening.
“At Stellar, we are building a lot more outdoor fireplaces and fire pits, so some of that is consumers putting the money outside versus putting it inside. I hope that is a growing market for us. Otherwise, you’re right. I think Roger and his team are trying to figure out how we get builders to spec more fireplaces into their plans. Why isn’t it part and parcel of the home and, if it is, a lot of times they’re offering a base model that doesn’t match the size and scope on the home.”
Model 4-ST-GL-R. The taller-than-wide design is currently a popular request for a custom see-through.
Exactly. No longer are fireplaces in the top five items that new homebuyers covet. Those days have gone by the wayside. It’s way down on the list. For the Millennial homebuyers, only 16% are interested in a fireplace.
I’ve often felt that the hearth industry has been consistently shooting itself in the foot for all of these 40 or so years by selling its cheapest products to builders of tract homes. That’s where all the major numbers are.
Let’s throw out a number here: say one million Builder Boxes are sold each year. From 1980 until 2020, that’s 40 million of the hearth industry’s lowest quality fireplaces that are in homes for all to see. So all the family members, friends, relatives, etc., have been exposed to a fireplace that really is not representative of what the industry has to offer.
That’s why I say the industry has shot itself in the foot, over and over again, and it continues to this day. Does that ring any bells with you?
Morrison: “Yes, I think so. I grew up in a house where we had a basement fireplace; it was beautiful and the focal point of the family room. The first house that I purchased after I got married had just a simple Builder Box with a sliding mesh front, and that was it. It just wasn’t pretty. It wasn’t much of a heater. Back in the day when I first started with Heat & Glo, we were selling fireplaces like most companies, you can sell the box for less than cost and make it up in the sale of the pipes, which I always thought was pretty perverse, but I get it.
“The tract home builders were putting in anything they could call a fireplace, and they would charge the homeowner $2,000 at that time. If you grew up in a home where the fireplace looked like that, or it was a nice masonry, or the gas fireplaces of today, the nicer ones, have just beautiful log sets. They glow. They have rolling flames. They produce great heat. Nothing like that was going on in the ’80s. So the Millennials or the generation just ahead of them, are facing all of these things and thinking, ‘There is nothing here that I need to have.’”
The custom 3-ft. diameter vertical round VRD-GL-R fireplace, shown with optional LED media lights.
Right. I think the entire industry is paying a price for giving the builders the very cheap products that they wanted. Some companies should have just drawn the line and said, “We’re not doing that.” A lot of hearth manufacturers didn’t go after the tract housing, probably for the exact reasons we’re talking about.
I remember years ago going to a builders’ show, in Houston, Texas, and there was an $8 million show home they had put up. There were three fireplaces. Each one was a cheap Builder Box, and the screens on a couple of them were falling off already, just because people would move it a little bit to look inside. So in an $8 million house they were still putting a piece of junk in.”
Morrison: “Exactly. We see that a lot in the show homes here in the Minneapolis market. It will be an $800,000 to $1 million home and they would have a very baseline gas fireplace, not even a large one. There would be a huge Great Room with a 32-inch firebox. It’s not just disappointing. It’s maddening that they were giving such disservice and discredit to the homeowner.”
Is there anything you want to bring up?
Morrison: “Well, you covered a wide amount of material. My normal commercial pitch for Stellar is that we have the skill to fulfill the dreams of architects and designers. Yet, they think that all they can do is a 5-ft. linear fireplace.
“But this is a fun industry. There’s the romance and everything else. People never seem to leave the industry, in my opinion. They might recycle from different companies, or maybe bounce out and bounce back, but I think once you’re in, you’re in. There is that mystique about the fireplace that probably does that.”