Up the Chain
Vancouver Island company Sarita Furniture is going up the value chain with higher-end and eco-certified garden furniture.
By Paul MacDonald
Faced with intense competition from low-cost Asian manufacturers in the European market, a Vancouver Island added-value company has shifted gears and is now producing garden furniture-some made with eco-certified wood-primarily for the North American market and the upscale European market. "The western red cedar that we use and our products have a good reputation in European markets," says Keith Wyton, president of Sarita Furniture of Port Alberni, BC. "But it's come down to a price issue there."
While the company is still selling into the German market, for example, their volume is down substantially from a few years ago. Garden furniture producers from Malaysia, Indonesia and Vietnam started shipping teak product into Europe, and have the great advantage of both low raw wood costs and low labour costs-as in paying employees as little as $1 a day. Wyton believes the eco-certified part of their business has the potential to carve out a new niche in the market. They want to avoid the "commodity route" and not have to compete with teak, southern yellow pine or the New Zealand pine.
"There is a clear competitive advantage to some of the high quality wood that we have, such as western red cedar. We can use that to leverage into new markets and products. But we have to manage it properly. If we liquidate it all, we're not going to have wood left that anybody wants. We might still have second growth Douglas fir, but I talked to some sales people in Germany last week and they said they were awash in fir. They get it out of Poland, certified." But eco-certification goes beyond getting into new markets-Wyton wants to make the best end use of a high value resource.
"The main issue for us is we want to do justice to the material because cedar is a beautiful wood, but it's a limited resource." Certified wood is what the Europeans are looking for these days, Wyton says. And when they talk certification, it is Forest Stewardship Council (FSC) certification, not Canadian Standards Association (CSA) or ISO. "I can understand why these other systems developed, but they are looking for FSC in the European market. These other systems just cause confusion and don't have the same credibility as the FSC.
"The Europeans look at these other certification systems and they figure out pretty quickly that they are industry initiatives and they don't include everyone at the table when they are putting together the standards." The FSC includes a broader group of players, such as Non-Governmental Organizations (NGOs), that have given it more international legitimacy.
British Columbia, Wyton says, is "way behind" on the certification side. The controversy over logging in areas such as Clayoquot Sound and the Carmannah have polarized the issues and the parties and have made it difficult to develop a consensus approach to developing standards and resolving issues. There is an opportunity for the provincial government to take a leadership role and create pilot programs, such as having five per cent of small business timber sales FSC certified within five years, he says.
A major hurdle is that the FSC is still developing standards for British Columbia. But that has not stopped some companies from seeking preliminary approval. ABC logging contractor, Timfor Contractors (see December/January issue of Logging and Sawmilling Journal for a profile) has become the first FSC certified forest manager in BC working on Crown land. Becoming certified on the manufacturing side was a relatively straightforward process for Sarita Furniture. There is a "realistic and modest" application process, Wyton says, in which the company outlined its system and the FSC provided direction on what was required to achieve certification.
The cost of certification was about $4,500, and an annual audit costs an additional $1,500. Key to it all is having a record of "chain of custody" for the certified wood. The company has to have records-essentially a paper trail-showing they purchased their wood from a certified supplier and that the certified wood is stored separately from the regular western red cedar. "Really, all you need to do is want to do the certification," says Wyton. "There's no huge barrier to it as a manufacturer." The certification was done by SmartWood, a US-based FSC certified agency.
To achieve economies of scale, Sarita does production runs of certified product- which presently consists of a four-foot bench and an arm chair model. "It's a lot easier to do it that way," explains Wyton. "The certified wood is marked, but sometimes all of the surfaces of the wood are planed or cut or altered." Even so, the costs of manufacturing the certified products are higher because they are dealing with shorter production runs and the certified wood costs more. "And we're not at the point yet where we can charge a significant premium for this type of product." In addition, the company produces a fairly wide range of cedar garden furniture from non-certified wood, including chairs and tables.
"The simplest thing for a small manufacturer like ourselves would be if all the wood coming in were certified and all the product going out was certified. But it's going to be some time before we get there." Fortunately, FSC certification does not preclude a manufacturer working with noncertified wood. For Sarita, producing noncertified furniture also opens the door to dealing with a broader range of wood suppliers versus requiring all certified. The Sarita operation is definitely labour intensive. In addition to conventional woodworking equipment, the 7,000 square foot plant has three pieces of specialized equipment: a shaper, a machine for mortising and another machine for doing the tenon work on pieces, all of it from Italian company Ballestrini.
"It's not a big operation in terms of equipment. We have all that we need to take a stick of wood and turn it into furniture." They outsource the actual remanufacturing and the drying of the wood to companies on Vancouver Island and in the Vancouver area. The company essentially brings in the cut stock, machines it to their final requirements and does the assembly. As mentioned, the focus for the company now is on a high-end product line and custom work, rather than on commodity products. "If you compare it to clothing, you can get clothes that will keep you warm anywhere, at a Zeller's or a Wal-Mart," notes Wyton. But he says the market they are shooting for is higher up the value chain- in retail terms it might be a Bay, Eaton's or, for custom work, a Holt Renfrew.
"We are going the route of marketing to the independent dealers, rather than the big box stores. We are selling to the people who are looking for something a little different rather than going the commodity, big box route." This market would include designers, landscape architects and custom contract work. They are still involved in the European market. But while Germany, for example, represented the majority of sales six years ago, it now accounts for about 10 per cent of business. "What we have to do there is move into different segments of the market.
That might mean skipping some distribution levels, dealing directly with some high-end independents there, rather than the big box stores and getting a better margin on a high end product." In the meantime, their main markets these days are the United States, Canada and, to a smaller degree, Japan. In spite of the challenge of establishing new positions in the market, Sarita is committed to turning out eco-certified product for the long term.
It recently had its first annual audit, and passed without any difficulty. Wyton believes the certified market is worth developing, but more than that, he has a passion about making the best use of the wood in BC, even on a small scale, and sustainable forest management. He is not interested in running a high volume production plant that simply turns out commodity product. Going big is not the direction in which he wants to see the company proceed, nor does he feel that is a good business direction. "The higher the throughput, the bigger the company, the more committed you are to certain lines and the less flexibility you have."
Wyton says there have been positive steps made by the BC government towards better forest management, including provisions in the Forest Practices Code. "There's no doubt that there have been huge changes in the past few years. But the problem with the code is that the compliance structure is very expensive," he says, a view that would be seconded by anyone operating in BC forests these days. Certification offers the potential to take over some areas covered by the code and reduce the bureaucracy.
"The FSC system is performance-based," he says. "You're not sending in reports every week or having to go out and get permission to cut a block. It's a global plan that lays out what you are going to do." In the end, the area Wyton would most like to have an influence on is forest management. "We think working with certified wood is one way to ensure a lasting supply of high quality material and the integrity of the forest. We're not doing this because we thought we were going to get rich selling certified product. We want to have an impact and work with the forest."
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