By Richard Wright
Long gone are the early days of the hearth rebirth in the mid-to-late ’70s, when a blowtorch and some steel was all that was needed to create a company. Today, life and work are far more complicated, and products being produced far more sophisticated.
Roughly two years ago, Nick Bauer (The Empire Group) purchased SBI, a strategic move that has already proven its worth; this year he purchased Primo Grills. In short order, Bauer has substantially grown his company.
About 13 years ago Vincent Boudreau noticed an advertisement for a fireplace in a foreign magazine. The company was Stûv, in Belgium, and it was love at first sight. Boudreau and his partner Nadia Gilbert flew to Belgium and returned with the North American rights to sell Stûv stoves, inserts, and fireplaces.
Today, Boudreau is half-owner of Stûv America, and products are rolling off the lines in a factory they built on the outskirts of Montreal. It required 13 years, and many miles opening up retail stores and building a brand. Boudreau would tell you it was well worth it.
Jonathan Burke became president and CEO of Montigo about three years ago – but it didn’t take him long to understand the company, and the swirl of regulations, and possible regulations, that are part of running a hearth company. Burke is a quick study, and a welcome addition to the industry.
|Nick Bauer||Jonathan Burke||Vincent Boudreau|
Nick Bauer with Arlo
The Empire Group
Twenty-seven months ago Empire Comfort Systems purchased Stove Builders International (SBI). Six months ago it purchased Primo Ceramic Grills. The synergies gained through these two acquisitions couldn’t be much better.
Hearth & Home: Today, I typed in Empire Comfort Systems and your site came up; right after that your page from our Buyers Guide came up. I was looking at all of the different brands you have and wondering how you keep all those balls in the air.
Nick Bauer: “What gives you the impression that we actually keep them all in the air? Honestly, it’s not that bad. We have a lot of different brands, and we sell a lot of different products, but whether it is SBI or Empire, it’s fundamentally the same. We buy steel, we cut it, we form it, we weld it, we paint it, we put a gas burner in ours, SBI doesn’t. Then we package it up, ship it out, and sell it to basically the same customer. So it really isn’t that complex but it is a lot of SKUs.”
Let’s start with Empire Comfort Systems. How were your sales in the U.S. and then in Canada.
Bauer: “We had another record year. More of our success in 2019 came from new products. We’re now selling wood products for the first time in 35 years, and our stainless steel grills are new. That’s just growth on top of zero sales. Eighteen percent of our sales have been from new products in these last three years; new products have always been a real strong driver of our growth.
“However, I was hoping for a stronger season. I keep hoping for three cold years in a row, but it just doesn’t happen. So I would probably give this year, just on the sales side, a six or a seven. We’re at the top of a cycle now. You’re not going to have these big growth years anymore if you’ve had big growth years the last six, seven years. Eventually the big growth years stop.
“We prepared for a stronger season than we had, and that really helped our on-time delivery. We had been struggling with demand for the past three years, and we’ve invested a lot with a new facility. Now we’re seeing delivery numbers we haven’t seen in the 12 years that I’ve been here. From the customer’s standpoint, we performed better than we have in a decade, which is awesome. That was our plan, and our plan worked.”
When you mentioned wood products, that has to be the SBI products, right?
Bauer: “Yes, SBI manufactures our Empire Stoves line of products; they are manufacturing a private label line for us that we sell to our customers. So they have their brand in the U.S. and we now have our brand in the U.S. If you’ve been an Empire guy for 50 years buying our gas products, and you buy 10 wood stoves from someone else, now you can buy those from us. You will have the same tech service guy you deal with on the phone, the same sales rep you deal with on the phone, the same customer service rep that you call if you have a problem. Now you only have one client contact if you buy our gas and wood products.”
That’s a compelling selling point, isn’t it?
Bauer: “That’s our plan. That’s also the reason why we bought Primo (Ceramic Grills) because 80% of their customers were current Empire customers, and a lot of their dealer customers were Empire customers. So instead of them having to deal with two vendors now they can deal with one as we roll Primo in.”
Where is Primo’s strength?
Bauer: “The South is strong; the upper Midwest is one of their largest customers, they’re probably a little weaker in the Midwest, which is our backyard, and then the Northeast. They only sell through wholesale, and they only have about eight to 10 customers. They also do about 30% international sales too, in Europe. I was surprised to see how much they do overseas.”
Where is Primo manufacturing?
Bauer: “Primo is currently manufactured right outside of Atlanta, Georgia, in a town called Tucker. George is the founder, and he and I have known each other for five years. He is actually going to handle all the European foreign sales for us because he’s their contact, he’s the person who set up all the licenses. He’s really good at the product side, the new product development, he has a bunch of ideas that he hasn’t brought to market, and we’re going to allow George to bring those ideas to market.”
Will the Primo product be at the HPBExpo?
Bauer: “The Primo will be at the HPBExpo, but they will be in our booth.”
Broilmaster, is that still doing well?
Bauer: “Yes. Last year was the first year where we introduced the stainless-steel version of our Broilmaster and, like I said to George, a lot of the outdoor kitchens have a gas model next to a kamado model, but there’s not another manufacturer out there that can say they sell both. We’re trying to be a single source for our customers.
“We introduced the grill and, three months later, we got a 25% tariff on it: we started at exactly the wrong time, so it didn’t take off as much as I had hoped. Not only was it a bad year for grills, but then we had the tariffs on top of that.”
Have you heard that the pellet grills are taking a bite out of kamado sales?
Bauer: “Yes, there’s no doubt that the pellet grill is what the kamado grill was three to five years ago. Pellets have taken 5% to 15% market share in two years, and that’s from the overall grill market, not just kamados. There’s no doubt that the pellets are the hot item right now.”
How is your relationship with SBI working? When we spoke last year you were very enamored with the fact that you will be selling SBI products in the states, and they’re selling Empire products in Canada. Is that continuing to be very healthy?
Bauer: “Yes, we did that deal 27 months ago, and if you asked me and my family on a 1 to 10 how happy we are, I would probably say a 12. Last year was their best year ever, and it has nothing to do with me. That is purely their success. As we get moving forward in 2020, they’re going to be introducing some of our gas products under their brand, Valcourt. Their 2020 stuff was all approved. I would argue that they were the most prepared out there of any manufacturer with all non-cat technology, and not adding too much cost to the product.
“Not only has it worked out well, but it’s been fun. We’re really good partners. The first year when an American company buys a French company in Quebec, the employees are scared that everyone’s going to lose their jobs, even though we said they would not. No one lost their job. In our first board meeting in October, some of the feedback we got from their employees is that now they actually want to be more part of the group.
“In fact, next week we’re having our next board meeting, and normally we do it in Quebec in January but instead we’re going down to the Keys where my mom lives and where I grew up. We’re going to have a meeting on Thursday and then spend the whole weekend together – fishing, diving, meeting families.”
You haven’t told me about Empire’s products. What do you have new for 2020?
Bauer: “We’re going to expand the Empire stove line with some high-efficiency wood units that they (SBI) are going to make for us. We always have two to four different gas units that are coming out. Probably the biggest thing is we partnered with Escea down in New Zealand and they’re making the glass-on-glass units for us; it’s called Plaza. We introduced it at the show last year, and we started selling it last fall. We’re going to continue to expand the Plaza line, so that’s a new category for us we haven’t been in before.
“The electric is a new category for us, the wood was a new category for us, ceramic grills was a new category for us, so all of these are just brand new categories that we’ve introduced the last 12 to 18 months, and we continue to do some more gas units and keep trying to maintain or grow our market share on the gas side.”
Now, are you one of the believers that gas is going by the wayside, wood will probably be discontinued, and the electric units are going to be the ones that remain?
Bauer: “Empire has been doing gas products now for 88 years; I like to think there’s a future, and I like to think that the government will allow choice. When the government has chosen for people, they haven’t necessarily always made the right decisions. I employ a lot of people and a lot of families are dependent on wood and gas. All I can do is control what I can control and that is creating more efficient products, whether it be wood or gas, getting into modern-style products. If everything goes electric, it’s not going to help the U.S., because all that comes from China.”
I know some manufacturers who are beginning to create electric fireplaces here in the states.
Bauer: “Yes, but I’m sure the components come from China, they just put them together. I like to think that the human spirit, the human mind, is the greatest thing this world has ever seen and, hopefully, someone a lot smarter than me comes up with many options so we’re not just stuck with solar and wind only.”
Yes, and I think a lot of people are working on that as we speak. Anything else you would like to get out?
Bauer: “I always say that I’m cautiously optimistic. I know we’re planning on a lighter year, just because of the election and the politics. All we can do is control the things we can control.”
President & CEO
Langley, British Columbia, Canada
Jonathan Burke is not one to pass the blame on to someone else. Regarding the declining incidence of fireplaces in newconstruction, he says, “That’s our fault (the hearth industry). We have not done our work to make sure that fireplaces remain a must-have item in a new home.”
Hearth & Home: The last time that we spoke was a year ago, and you had about 120 employees. I suspect that remains about the same?
Jonathan Burke: “Yes, we’re a little bit more, about 130 now and we’ve still got a plant in Ferndale, Washington, and another one in Aldergrove, British Columbia.”
How many dealers do you have now?
Burke: “U.S. and Canadian dealers combined, we’re at about 340 now.”
Your website is one of the better ones I’ve seen; it’s interesting, and most websites are just boring. What struck me is that you have a lot of traditional fireplaces.
Burke: “We do, both on the custom side, and on our residential lines, we do have a number of traditional offerings. We brought out some new products on the linear side last year and early this year, and along the same construction theme. In other words, shallow reframing depths, multiple options in a good, better, best format for log sets, lighting, things like that. We’re coming out with some new, traditional, square hearth designs.”
Have you been eyeing the electric fireplace market?
Burke: “We’re always looking at what’s going on in the electric space. It’s pretty crowded. Other than Modern Flames and maybe some unique products from Dimplex, everybody’s just ‘me too,’ get it from overseas, sell it for nothing, and keep low expectations on the part of the customers.
“If we’re going to make a move into electric, we’ll want to do something unique once again, because we just don’t want to do a ‘me too.’ I do think there is definitely a market in the multifamily space for electric units.”
For you, 2018 was basically a flat year. When we spoke a year ago, you said you were well positioned for 2019. How well did you do in 2019?
Burke: “In 2019 we grew our custom business in the United States. In Canada we went down a bit, so overall we had a little bit of growth but the main reason for Canada is that all of Eastern Canada is handled by two-step distribution, other than our custom products. We made a switch of distributors, and that’s always disruptive. But in the 50 States of the Union we grew last year – pretty good growth.”
Classify if you would, the economy in Canada for the past year.
Burke: “It was spotty. Alberta obviously is suffering quite a bit because of oil prices. Saskatchewan’s feeling a similar pressure. The Maritimes have not been overly good, although we did some big commercial projects out in the Maritimes. Ontario, they’ve got a new government in place, things are looking up there, but they’ve had a lot of pressure on housing prices.”
When it comes to product development, or product sales, the U.S. is a huge area, and somewhat untapped in some areas.
Burke: “One thing that we’re keeping a very close eye on, and with which we’ve been involved very closely with the HPBA, is states or municipalities trying to get rid of natural gas or propane. Some government people assume that a fireplace burns 24/7, 365 days a year, and therefore if it’s 30,000 Btus, how do we cut the Btu and energy footprint of a home.
“Especially with decorative fireplaces, people don’t turn them on, even in the winter, and run them 10 hours a day. They are for the purpose of providing ambiance, not for heating the home. So you can’t classify it like you would a forced-air furnace or a hot-water heater.”
If we lose natural gas, that would destroy 70% or 80% of the industry.
Burke: “Yes. As an industry, our responsibility is to make sure that people understand how our products work. But it’s also to start wading into the efficiency side of things, and looking at how we can improve the efficiency of our appliances, how we can use the energy that our appliances are consuming elsewhere in the home, and get more integrated with HVAC systems and other things.”
Net Zero (California) and Zero Net (Vancouver). Last year you explained both programs very well. Now that some people are thinking of dropping natural gas, how will that impact those two programs?
Burke: “Well, it’s incumbent upon the industry to make sure the politicians are well-educated about where the best effort can be put into improving the environmental efficiency of homes; going in and disconnecting natural gas is not the way. A number of different groups have done a tremendous amount of work to demonstrate that just disconnecting gas from a home is not an instantaneous solution.
“In a state where 75% of its electricity comes from coal or natural gas, if you switch out a home that is currently using natural gas for heating, for cooking, and perhaps for a decorative fireplace, then change that home to electric heating, with electric baseboards – which are the most common and are seven times less efficient than a natural gas-forced air furnace – you’re now consuming seven times more coal or natural gas to provide the equivalent amount of heating that individual is getting by having a natural gas pipeline to their home, with a high-efficiency furnace providing the heat.
“That’s the kind of stuff that we need, in collaboration with all of our industry partners, the gas suppliers, the utilities. We need to get that message out to these communities to make them understand that, be careful what you wish for because there’s unintended consequences.
“The challenge we’ve got in British Columbia is that, here in the lower mainland, the most populous part of the province where four million people live, almost 50% of its energy use is natural gas. If you can imagine taking 50% of a four million person population and switching them to electricity, how many more hydro dams do you think would have to be built?”
There’s been quite a bit of talk about the incidence of fireplaces in new homes plummeting.
Burke: “Yes, and that’s a bigger deal than the environmental issues. I think the industry can effectively manage and communicate and market the environmental story, both to government and to consumers. I think the bigger issue is that there are young people out there who are getting out of their condominium, or out of their first attached home where they may have had a less than compelling fireplace. So a fireplace may not be in the top five or 10 must-have items in their home purchase.
“That’s our fault. As an industry we have not done our work to make sure that fireplaces remain a desirable and, quite frankly, a must-have item in a new home. Where all of us, collectively, are at fault, is not doing what many other suppliers to home construction have done, which is keeping their products front and center in terms of desirability.”
How do you do that in an industry that has very limited funds?
Burke: “We’re talking about it; we’re working on it. We’re trying to do direct consumer-marketing efforts. But in total, this industry is not small. It’s pretty sizable. If some good efforts were put forward over the next 24 months to remind people, who may have grown up with a fireplace in their parent’s home, of the importance of it as a fixture in their home, I think we could make some headway. Of course, we need to do the research to find out where we need to do it, because the reality is, builders will build what consumers want to buy. Right now consumers aren’t asking for fireplaces as much as they need to.”
The Millennials, however, want a big backyard. They want room to entertain, for a pool (down the road), for cooking, eating, and relaxing. They also want a fire pit or fireplace.
If they want a fire outside, it shouldn’t be that hard to convince them that it works inside as well. But we’ve got to get to them. Everybody in this industry has to do a little bit of it.
Burke: “If we all do an equivalent amount, mark my words, over the next 24 months we can get a little bit of momentum back into the industry, because the momentum is going against us right now. I can’t tell you how many builders I’ve spoken to who said, ‘Yeah, (a fireplace) is nice to have, but not a must-have.’
“You know, these things are not difficult to sell. Gathering around a fire is an innately human activity. It’s in our DNA. Jack Goldman (president and CEO of the HPBA) got all the major players together last fall. We established a bit of an industry working group that is investing some meaningful time, with the goal to invest some meaningful dollars once we have an actual plan that everybody can endorse.”
What other issues do you see confronting the hearth industry?
Burke: “Labor. Getting good talented people to join the industry. We have experienced installers, salespeople, etc., and we need to make sure we know where the next crop of great people is coming from.”
Bromont, Quebec, Canada
Having set up its North American manufacturing operation in Bromont, Quebec, Stûv America discontinued its gas line, called TULP, in favor of consolidating its focus on wood and pellet products.
Hearth & Home: The big news at Stûv is that you have your new factory up and running. Which products are you producing now, and what quantity can you produce?
Vincent Boudreau: “We now have 20 employees here at the factory. We are producing all of the Stûv 16 line, which is stoves, inserts, and fireplaces – all are EPA 2020-Certified, and all are produced here in the Bromont factory. Our goal is to progressively switch the production from Europe to North America.”
How were your sales in 2019?
Boudreau: “Our best year ever in terms of growth was 2018. In 2019 we had growth in the low two digits; it was the lowest growth in the last four years, but still good growth. It was mainly due to the NSPS 2020 change-out. Dealers, distributors, and manufacturers were trying to liquidate what they had in stock and on their floor. That’s part of the reason why our growth was a little bit slower.”
How is the consumer learning about Stûv?
Boudreau: “We have been marketing our product toward architects, designers, and all the specifiers. Our clientele is mainly the Baby Boomers and they are older and have more time to conduct research on the Internet to find the kind of product they like. Also, they do travel, so they see other product from around the world.”
Are you using social media such as Facebook or Google?
Boudreau: “Yes, we are investing in marketing on the Web. So yes, that’s a new direction for us.”
What percent of your sales in 2019 were in Canada?
Boudreau: “In 2019 we had 70% of our sales in Canada and 30% in the U.S. The U.S. is still marginal for us. It represents the most potential for growth. We constantly receive requests from dealers from all around the U.S, but we don’t want to grow too fast. We still want to grow in a constant curve, but with solid growth.”
Explain your decision to drop gas and stay just with wood and pellets.
Boudreau: “The first principle of Stûv is to develop products that are unique, and missing from the market. We want to go to market with innovative products. That has always been our engine for growth, and it drives what we do every day.
“In North America, 70% of the market is gas. So we looked at the opportunity to acquire a company that was based in the Netherlands, and that would allow us to bring a gas line to North America. It took us two years to certify it and build a product line, and within those two years there were three other companies that came out with a similar look and function.
“The brand that we bought was TULP Fireplaces. It had very high quality, but was not that innovative. But from 2015 until today, major manufacturers in North America never stopped innovating. With TULP we had a very good, complementary line to our wood line, but we had to admit we were not innovating at the same speed as the major gas manufacturers.
“We decided to focus our time and money in continuing to innovate and invest all of our research and development time and money into what we have been strong at for more than 35 years, which is renewable energy. Renewable energy is wood and pellet. In Europe, five years ago, we developed a very innovative pellet stove, which is the Stûv P-10. That is an appliance that we want to bring to the North American market for 2021.”
How well is that product selling in Europe?
Boudreau: “In Europe, the pellet market isn’t comparable to the North American market. It remains marginal here in America, but in Europe it’s very strong. So our pellet stove has instantly been more popular than the gas series, even in Europe. From our perspective, we don’t see the Stûv P-10 reaching the same market as all other pellet stoves in the North American market, because it’s a higher-end product. In terms of finishing, it’s more like furniture, and it will be considered as furniture. It also will be the first pellet product in North America to be silent.
“There is no convection fan on the P-10 that makes noise, and also the way the unit feeds the pellets into the combustion chamber is from underneath. It pushes the pellets toward the pot that burns the pellets instead of dropping the pellets in. In terms of particulate matter, we have pre-tested it to the EPA standard and we have reached the second-best result in particulate matter compared to all other pellet products on the market today. It’s really impressive.”
Now that the Stûv products have been around for a number of years, where are they selling best?
Boudreau: “New England, Ontario, and Quebec are our main markets for now. Besides that, the West Coast, mainly in Canada, the western Canadian coast is very ready for our products, as well as the U.S. Midwest. States such as Ohio, Michigan, and all the states surrounding the Great Lakes are markets where we are seeing good growth.”
How many reps do you have on the road now in Canada and in the U.S.?
Boudreau: “Not enough, not enough. For now, we do have one agency that represents us in Ontario, which is Urban Hearth. They have three people traveling on the road. Beside that, we have two other people who mainly focus on the New England, Quebec, and the West Coast markets.
“We do need many more people. But this has always been difficult and challenging. As we have been dealer-direct until now, the dealer network appreciates the fact that they can reach us easily. We do have a dedicated phone number and dealers get priority when they phone through that number.”
As you said, you don’t want to grow too fast, right?
Boudreau: “Yes, we take our time. However, the beauty in this project for Stûv in North America is that now we do produce locally, so we have a capacity of production here in the Bromont factory. If we have faster growth at some point, we will always be able to get product from our factory in Belgium.”
Is everyone in Belgium pleased with how it’s going in the States?
Boudreau: “Absolutely. It’s a strong growth here, and it’s a constant growth. We want to build a strong relationship and a strong recognition of our brand; our goal is to become one of the major players in North America.”
Well, you might as well shoot for the sky, right?
Boudreau: “Yes, exactly, but we want to stay realistic. With the decision of stopping gas, we know we will lose a big market share opportunity. I think gas is here to stay. However, gas is being banned in towns and cities throughout North America. This is something that all of us have to watch.
“To be honest, part of our decision in stopping gas is that we would have had to invest massively in a fuel that we had less experience with. So our best bet was to focus on what we are strong in, which is renewable energy – wood and pellets. It deeply reaches our values.”
I’m sure you are very aware of all the different locales that have banned wood-burning through the years. Do you see that stopping?
Boudreau: “I don’t think so. When you look at it from an environmental perspective, it’s fossil fuel against renewable fuel. Today, renewable fuel is our better bet. I don’t take it for granted that wood will always be there as an option, but I think it is a good path to invest in, as a manufacturer in this industry.”
As long as the products burning the fuel are burning cleanly, such as yours.
What will you have for new products at the Expo?
Boudreau: “The new product for 2020 is the Stûv 6. Now we are into innovation. We are coming with a product that will be the easiest insert to install on the market. You’ll be amazed by the concept of its installation casing. The second innovation is the door design. The door has been designed where there’s a curve inside the combustion chamber that continues with the door frame, so it creates an impression of a big fire but into a small combustion chamber. This is totally innovative.
“The main clientele that we want to reach with this new product is people who want to stop their cold air infiltration, let’s say, from the hearth. So they are gaining efficiencies but don’t want to overheat their space. They want to keep a nice fire in their living room without overheating the space. So it’s a smaller insert. It’s, let’s say, in the 1 cu. ft. to 1.5 cu. ft. range.
“The P-10 pellet stoves will not be ready until the end of this year. ”
What have I not asked that I should? What else would you like to get out?
Boudreau: “I would like to invite everybody to look at our new website, which has been developed to help consumers with the experience of purchasing a stove or fireplace.”