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Hearth & Home May 2020

L to R (Top): Jøtul F 370; Jøtul GF 305.
L to R (Bottom): Jøtul GF 300 DV IPI ALLAGASH; Jøtul F 602 V2.

Nørwegian Røøts

By Bill Sendelback

Thanks to Eva Horton and Bret Watson, Jøtul North America is in its fifth decade in North America; it has 100 employees and 1,100 dealers (and, yes, wood is still important!)

Eva Horton.

The year was 1970, during the (very) early heyday of wood stoves. A young mother in Maine decided she wanted an airtight, cast-iron wood stove from her native Norway to replace her short-burning, sheet-metal wood stove, typical of wood stoves then being made in North America. A year after receiving her new stove, Eva Horton convinced Jøtul in Norway to allow her exclusive rights to import Jøtul wood stoves into the U.S. By 1980, Horton’s U.S. sales of Jøtul wood stoves topped 27,000 units and $15 million.

Also in 1980, in a move that proved to be well timed, Horton sold back to Jøtul AS her rights to import and sell Jøtul stoves in the U.S. By 1991, Jøtul’s U.S. sales had plummeted to 1,500 units as the company floundered trying to meet new U.S. emissions regulations, and struggled against a rapidly growing gas hearth products market.

With no clean-burn legislation, knowledge, or technology in Europe to fall back on, Jøtul USA had to play catch-up by hiring industry veterans from its competitors for clean-burn engineering. At the same time, the gas market took off, and Jøtul realized it also had no knowledge of gas hearth products.

In the mid 1990s, Jøtul met with its manufacturers’ representatives and asked them, “Is this market worth our efforts?” The reply from the reps was, “Yes, but we must get into gas products.” By 1998 the company contracted with Superior Fireplace for its B-vent and direct-vent gas engines, and with Monessen Hearth Systems for its vent-free gas engine.

The early results were Jøtul’s first gas stoves based on the #3 cast-iron wood stove, including two vented models and one vent-free model.

Move the calendar ahead to 2008, just before the hearth products industry cratered, and the now renamed Jøtul North America saw its sales rise dramatically, peaking that year at $30 million.

Today, with the year 2019 now in the rearview mirror, Jøtul has more than 100 employees headquartered in a 125,000 sq. ft. factory in Gorham, Maine, and it has just completed one of its best sales and profit years. Jøtul North America now accounts for approximately 20% of its Norwegian parent company Jøtul Group’s total revenues.

Bret Watson.
Photo: ©2020 Mark Rockwood Photography.

Looking back to 2017, wood-burners were 70% of Jøtul North America’s sales with gas totaling 30%. That mix recently has changed due to the EPA’s 2020 NSPS deadline, with wood-burners now accounting for 46% of the company’s sales, says Bret Watson, Jøtul North America president.

In 1998, Bret Watson was the 13th employee of Jøtul North America; then 32 years old, he was named Jøtul North America president after a five-year stint as National Sales manager of a competitive manufacturer of soapstone wood stoves.

“A big customer of mine, Roy L’Esperance, owner of The Chimney Sweep Fireplace Shop in Shelburne, Vermont, told me, ‘You have a great opportunity with Jøtul, so go for it.’ So I did. When I started at Jøtul in 1998, our sales were $8 million. Eighteen months later we were at $21 million. Much of the credit for this success goes to Norway for letting us hire some very capable industry R&D veterans, and Red House Design.

“My business plan for Jøtul was to put together a product development team and a game plan to address the North American market needs while still sourcing from our world-class foundry in Norway.” Watson knew that Jøtul could quickly get into gas products and avoid outsourcing, but this North American team also could train Jøtul engineers in Norway on U.S. clean-burn regulations for wood-burners, and on developing the larger fireboxes needed for the North American market rather than the much smaller, and typical, European fireboxes. “After hiring six key R&D people, by 1999 we had a crackerjack research and development team,” Watson says.

Along with the new R&D team, Jøtul North America hired Vance Smith and Al Wilker of Red House Design. “We worked our butts off to put together a package of new wood and gas models for the 1999 HPBExpo in Phoenix,” says Watson. “My earliest memory of coming to Jøtul was watching dealers’ jaws drop upon seeing the number of our new products at that show. We had changed the way Jøtul did business in the North American market.

“Then the wheels came off for us operationally. We were now very strong in product development, and good at developing dealer programs, but we didn’t know a lick about manufacturing. Sales had taken off, and now we had to quickly learn to be a manufacturer.”

Jøtul North America’s agreement with the Jøtul Group was that the division was free to manufacture gas stoves in Gorham, but wood stoves were to continue to be made in Norway. “In post Y2K, the freestanding gas stove market was huge,” according to Watson, “so we quickly ramped up our production of gas models and worked to gain control of our manufacturing costs and efficiencies.”

Watson and his core team in 2001 became students of lean manufacturing and the just-in-time systems that would result in more efficient and profitable manufacturing. As a member of the board of an advanced lean manufacturing consulting group, Greater Boston Manufacturing Partnership, Watson in 2016 was put in touch with Toyota, an international manufacturing giant long known for its ground-breaking manufacturing techniques and systems.

Photos: ©2020 Mark Rockwood Photography.

In 1995, Toyota created a not-for-profit division called Toyota Production System Support Center (TSSC) featuring some of Toyota’s best manufacturing minds in an effort to share its manufacturing prowess. “You don’t just join TSSC. You first must qualify,” says Watson. “We pay for the training and services, which includes having a Toyota manufacturing coach in our factory for three full days a month.

“To qualify, Toyota wants a company culture that seeks continual improvement, and a CEO who is very much hands-on involved, and is eager to learn and put the principles into practice rather than simply delegating the responsibilities. The number one factor of TSSC thinking is how good your organization is at problem solving, short-term and long-term, and being able to solve problems so you never have to revisit those issues.”

Jøtul North America today is a few months away from becoming a Toyota showcase company, “a prestigious distinction,” says Watson. The results have been impressive. In the past two years, Jøtul North America has increased by 20% the number of stoves it produces each day, while reducing injuries, lot sizes, and automatically improving on-time delivery to 96% plus. “Smaller batch sizes, smaller lot sizes, and reduced changeover times now allow us to build eight different models a day rather than four. These were much-needed improvements since our order flow and shipments have gone up almost 25%,” Watson adds.

He also is seeing improvements in the quality of the company’s products. “On an average production line, an operator may have 14 models to build, but that person may assemble certain models only once every three weeks, as an example. But now, with our smaller lot sizes, that same employee may see every model twice a week. As the employee’s familiarity increases with all models, his quality improves.”

Watson, however, does point out that with the current labor shortage in the U.S., all manufacturers are now facing the challenge of finding qualified entry-level people. “We have a great plan in place with a local training institute for entry-level manufacturing technicians who learn the basics of manufacturing.

“We’ve never built to a sales forecast,” Watson says. “We build to order 10 out of 12 months a year because we pre-book on early-buy orders 35% to 40% of our annual business. We build inventory only in July and August. Our supply chain is organized for ‘just-in-time’ deliveries based on a ‘min-max’ or ‘Kan Ban’ system. These all are principles and practices we began in 2001 and refined them as a result of our involvement with the TSSC.”  

The Jøtul Group has recognized the improvements and results in Jøtul North America’s operation, and finally, in 2016, it shifted its assembly of North American wood-burners to Gorham, Maine, doubling production at the division. In the spring of 2019, the Jøtul Group’s machining jobs were transferred to Jøtul North America. Currently, stove castings are flat-packed and shipped in containers to Jøtul North America via Norway.

“We annually bring in 125 containers of castings for which we do all the drilling, tapping, machining, and assembling,” Watson says. “Then 83% of our production goes to our U.S. dealers, 15% to Canada, and the remaining 2% goes to export customers.”

Jøtul North America uses four factory salespeople and one independent manufacturers’ representative to sell 65% of its products dealer-direct to approximately 1,100 specialty hearth dealers in the U.S. and Canada. For 30% of its sales, the company uses two-step distributors, and Jøtul maintains a bonded warehouse near Reno, Nevada.

Photo: ©2020 Mark Rockwood Photography.

“Jøtul has strong competitive advantages in part because it’s a very well-known brand,” maintains Watson. “It’s the oldest cast-iron brand in the U.S., beginning with Eva Horton even before Vermont Castings was born. We have been the dominant cast-iron wood and gas stove supplier in North America. We now have 65% to 70% of today’s modern-styled, cast-iron gas stove market.”

Currently, Jøtul has put emphasis on becoming EPA NSPS 2020 compliant, as well as expanding its gas stove and insert line; in the past two years the company has introduced two new modern-styled gas stoves and four new gas inserts with optional fronts in either cast iron or steel.

Wood-burners are still important, yet the company’s emphasis on the gas market raises questions for Watson. “There were roughly 145,000 wood stoves and inserts sold in the U.S. in 2018. I predict that, after 2020, that market could be down 25% to 33%, to 100,000 units or so. Wood is still important to Jøtul, yet it’s clear that gas is growing in the hearth product industry as the population ages and natural gas pipelines and distribution proliferate throughout North America.

“However, we’re committed to wood-burning. We are patenting our new Jøtul Fusion Technology, combining tube-type secondary burn technology with a downstream catalytic combustor to meet the 2020 standards. We’ll have about six new 2020 wood-burning fireboxes ready to go before May 15, 2020.”

Watson points out that manufacturers must make certain that their new 2020 models are “dealer friendly and user friendly, and that dealers can trust the performance of the stove in the field. We don’t want to make stoves that perform perfectly in the lab but don’t work in the field,” he says.

L to R: The Jøtul F 55 V2 Carrabassatt and Jøtul F 500 V3 Oslo.
Photo: ©2020 Mark Rockwood Photography.

Watson is concerned about increasing regulations putting a lot of pressure on smaller manufacturers that may have less capital. “I am proud of the sales, manufacturing efficiencies, and operating profits that Jøtul North America has enjoyed. We have plenty of capital to rebuild our range of wood-burners, and the Jøtul Fusion Technology is a game-changer in terms of the ever-important ‘first hour’ emissions profile during testing. That nuisance wood-stove smoke from your neighbor’s chimney on startup is no longer an issue. We’ve done something that has never been done before with our patent-pending wood-stove technology.”

The Jøtul Group, parent company of Jøtul North America, was acquired in March, 2018, by OpenGate Capital, a global private-equity firm headquartered in Los Angeles, California, with its European office in Paris, France.

“This has given us terrific new leadership in Norway with Nils Agnar Brunborg now as CEO of the Jøtul Group,” says Watson. “As a turnaround specialist, he has recognized and validated our best practices in operations and profits. He has dramatically downsized the organization in Norway, and has sent more jobs our way.”

In November, 2018, OpenGate acquired AICO, a large Italian manufacturer of hearth products including the Ravelli brand of pellet stoves being marketed in North America. AICO has been added to the Jøtul Group.

“The North American distribution of the Ravelli and Jøtul brands have very little overlap,” says Watson. “Ravelli will continue to be marketed separately from Jøtul through two-step distribution in the U.S. and Canada.”

OpenGate Capital and Jøtul are not through making acquisitions to expand the offerings of Jøtul. The Jøtul Group also is looking at North American fireplace manufacturers for possible acquisition. “With our aggressive new owner, I think this will open up new opportunities for Jøtul North America to make strategic new acquisitions in the coming year or two,” said Watson.

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