Volume 9, Issue 10 - November 2008

Getting the Industry Lowdown ...
from Charles Loewen

by Tara Taffera

Although the company is based in Steinbach, Manitoba, 75 percent of its business is in the United States, and it is currently taking advantage of the slower market to strengthen its business in areas such as the Southeast where the company doesn’t have as strong of as presence as areas such as the Southwest. In fact, when I interviewed Charles Loewen he was in Virginia visiting some dealers in the Southeast.

Charles Loewen is a humble, principled man who has great respect for the competition, and referred to Loewen a few times as “a small company.” But its presence in the market is anything but that.

Q: Tell me a little about your start at Loewen. Did you always want to join the family business?

A: No. I was a liberal arts major studying philosophy and history and had little intention of joining the business. I did work there summers and weekends when I was younger and enjoyed that, but it wasn’t until my early 20s that I became fascinated with the business for many reasons. I enjoy the fact that Loewen serves the community and creates jobs. We are a very large business in a very small town. I also realized that I could do more than just make money.

Q: Tell me about your father. Was he pleased that you ultimately joined the company?

A: He died at the young age of 59. We worked together for my first five years here. He was a good business strategist, while I grew up more on the production side, but I also had a strong interest in sales and marketing.

My older brother Paul joined at the same time I did and I think that was a relief for my Dad as far as now having a succession plan. His longevity was uncertain—he knew he had heart disease. So he started to execute a shareholder succession plan and he welcomed sharing that with us.

Q: It doesn’t sound like he pressured you and your brother to join ...

A: No, he was in a sense quite laissez-faire in his attitude. He never pressured us. But he did make us earn all of our promotions. He also wasn’t strong on praise but he was quick to give responsibility. At the time the companywas growing fast and we were thin in middle management.

Q: Is Paul still involved? What about your children?

A: Paul left eight to nine years ago to pursue other interests. I have three other brothers who are shareholders. Clyde is the only brother working in the company as vice president of product development. I have three sons—two are currently working at the company.

Q: How is it working with your sons?

A: It’s more fulfilling than I was prepared for. All three came back to the company at some point.

Q: It must be a great company if all have come back to it.

A: Yes, but we are very rigorous in our policies when it comes to family to prevent nepotism. They must have a post-secondary degree, and if they want to be in management they have to work outside the company for five years. But the family business isn’t for everyone. I have a sister who teaches music at a university and I think she’s probably happier doing that.

Q: Let’s talk about Loewen as company. We profiled your company in late 2005 (see DWM November 2005) and at that time you had an expansion planned. Can you give me an update on that?

A: That expansion didn’t happen. Instead we made some acquisitions and strategic partnerships. We acquired an interest Bella Vista out of Tucson, Ariz., as well as Sliding Visions in Oceanside, Calif.

Also, back at that time we had started implementing lean manufacturing principles and that allowed us to gain a lot of capacity making the expansion unnecessary.

Q: Tell me about how the current state of the housing market has affected Loewen. I’m interested to know if it has had much of an impact on you as it has other companies given the fact that you serve the high-end market, which is still relatively strong.

A: You’re right. It hasn’t affected us nearly as much as we serve the higher-end market. At the end of the first quarter we were down less than 10 percent but that is nowhere near the impact that some companies have had that serve other markets.

We are feeling more competitive pressure, though. Companies are bidding for projects that would not have earlier when we were in the boom. But  these companies have lower price points than our products and they don’t have the brand value.

Q: Since you also serve Canada, have you expanded in Canada to make up for the down U.S. market?

A: No. We have a strong share in Canada, and while there is opportunity to grow there it is nowhere near the potential in America.

But I will tell you that the value of the U.S. dollar [along with the state of the U.S. market] has affected the Canadian market in that we are seeing more U.S. manufacturers move into the Canadian market. Some of them know the market well but others are new and so they have a learning curve.

Q: Tell me about future expansion plans you may have.

A: We have clearly mapped ou
where our opportunities are— there are areas where we have no dealers. Our business model is strongly identified with independent dealers who have strong local reputations for service and strong relationships with architects.

In the boom years, we withheld taking on new dealers as growth is tough to manage. Now that the market is leveling off there are opportunities to move into new areas such as Florida. We’re looking for what we like to call A-dealers.

Our high-end customers are looking for distinction and a refined fit and finish. They want a unique buying experience and our dealers provide that best.

Q: As long as we’re talking about dealers let me ask you how you manage the installation process. Poor installations are such a big problem in the industry.

A:We have less of a problem with this as we work with very high-end builders and virtually every project has an architect who is rigorous in specifying the installation details. But that being said, even in our value chain, it is always a weak point.

Q: Your website says that one of your goals is to be the world’s leading supplier of luxury doors and windows. How are you faring in terms of reaching that goal?

A: I’ll just say this. Once a person was asked, “Are you a Christian?” and he said, “Ask my neighbor.”

Q: So I should ask your competition?

A: [Laughs] Without sounding arrogant, in our eyes we are the competition. We respect that there are others in the industry, but we don’t react to the competition—we react to our customers. It’s our competitors job to worry about us [laughs again].

It is critical that we have market awareness from the A-dealers of a given region. It is also critical that a person building his dream home is aware of Loewen and that the impression he has of us is compelling.

We don’t have the money to get to the awareness level of Pella, Andersen and Jeld-Wen. We’re a relatively small company. (The company produces approximately 1,000 units per day.)

Q: How has the Internet helped with this awareness issue and how has it changed the way you do business?

A: Luckily, we were on to the Internet early. We have a high closing ratio on web contacts.

Customers like the Internet as it is a non-threatening way to research companies without going to five or six dealers. A great thing about the Internet is that every company is the same size. A small company can create the appearance of a large company.

Also, with the Internet, customers are now more educated and that is good for everyone.

The key for us is that we create an experience that is consistent, starting with their first impression (whether that’s on the Internet or in the showroom) to installation and after-sales support.

Q: Is there anything that Canada does better than the U.S. market?

A: [Pauses]. Well, in Canada, air leakage is a big issue. Where we are in Manitoba it gets down to -40 degrees Fahrenheit so air leakage is very important. We look at that as an absolute requirement. But that doesn’t mean we design differently for both markets—preventing air leakage is always a priority. It’s not like we’ll say, “Well, this window is going to Florida so ...”

But for the first time on this trip I heard the word triple-glazing in the Southern United States [which we can offer].

But, getting back to your question, there really is a convergence between the U.S. and Canadian markets.

Q: You said people are talking more about triple-glazing. Do you think this is due to the ENERGY STAR® proposals?

A: It could be. The ENERGY STAR program is a good response to how to save more energy and be more environmentally sustainable. I believe we’re at the tail-end of a second green wave. The first was in the late 70s and early 80s. I don’t think people realize that the building industry is the greatest low hanging fruit. The building sector wastes more energy than even transportation and most people think it’s the latter but that’s not the case.

Q: Recently I interviewed an architect about a particular LEED home and he mentioned that when choosing windows he narrowed his options to two products— Loewen’s window and a fiberglass window. He said his options were severely limited because he wanted a triple-glazed glass package. Do you think the fact that you offer this is a big competitive advantage for Loewen as he ultimately chose your window?

A: With new programs, such as LEED, you always have your early adopters and this does help reinforce your position as a leading manufacturer. But a competitive advantage has a way of being replicated by the competition very fast. Next year there might be three options for that architect, and the next year, 20.

Q: Your website says that Loewen is the first major North American door and window manufacturer to receive Forest Stewardship Council (FSC) chain-of-custody certification for Douglas Fir wood used in your fenestration products. Why don’t more wood manufacturers pursue this?

A: There are lots of advantages of scale that we don’t have. But we find opportunities in lack of scale and this is one of them. It is very difficult for large manufacturers to pursue FSC certification but for a smaller manufacturer such as us it is less difficult. We are guided in everything we do by our mission statement, which is guided by our understanding of Christian principles. To go along with that, we also believe we are stewards of the environment. We are mindful of the full impact of the value chain.

I also want to point out that our behaviors are very in line with our target market—well-off people,who typically are sensitive to environmental issues. That’s why our family business is well matched to our target market.

Q: I know you are a member of the Canadian Forest Sector Advisory Council, whose mandate is to work toward reduced carbon dioxide emissions in the forest sector. Can you tell me more about this work and why you believe it is so important?

A: Yes, but I’m also a member of the International Institute for Sustainable Development, which has been taking even more of my time lately than the one you mentioned. I am very involved in work related to the environment, so let me say that whatever your view is of this issue it’s at least a political reality. It’s even a much bigger part of the political debate in Canada than it is in the United States.

Q: Since your company is so environmentally responsible, are you evaluating your relationships with your suppliers, i.e., doing business with those that share these core values?

A: [Pause.] That’s a great question, but essentially the answer is no. Though to some degree we do this with our timber suppliers as this is a key part of the supply chain. But we don’t ask our suppliers for their carbon footprint, for example.

Q: Why do you believe it is important to be a member of trade associations such as the Window and Door Manufacturers Association and the Canadian Window and Door Manufacturers Association?

A: It is important that our industry is ethical and part of our duty is to increase the share of fenestration products used. It is important to have forums available to discuss new technology and other issues affecting manufacturers. It is important to establish personal relationships so there is competitive respect and a high ethical code.

I think it’s important for players, large and small, to work cooperatively with associations. It’s perhaps even more important for the small- to middle- sized companies. I think there is a fear that the larger companies will dominate but this is not the case. The smaller companies can benefit from the resources of larger companies.

Q: Have you ever considered branching out into other materials such as fiberglass?

A: Yes. We are highly focused on wood due to its sustainable features, high-quality finishes, etc. But I’m not one to watch a business go down. So I pay attention to product technologies whatever they may be. I like to call it innovation as to me this means a new application of an established technology.


DWM

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