The purchasing power of Brazil’s growing middle class makes the South American country attractive to North Carolina manufacturers.
One of the first things Art Negrin noticed during his recent trip to Brazil was the lack of shoes.
Negrin, vice president of international sales for furniture maker Lexington Home Brands, didn’t mean this literally. He was referring to an often–told tale about two shoe salesmen who are sent to a remote island by their employer.
The first arrives and, after realizing nobody is wearing shoes, quickly declares it a lost cause and leaves. The second makes the same observation and declares it to be the opportunity of a lifetime.
“There’s nothing like what we do,” Negrin, 55, said, noting that the Brazilian showrooms he visited were filled with sleek European–style furniture. “All the customer is getting is this one style. There was very, very little choice.”
Negrin’s High Point–based company paid $3,000 – not including airfare and accommodations – to send him on the weeklong trade mission, which was sponsored by the North Carolina and U.S. commerce departments and open only to furniture companies.
The money covered the cost of hiring interpreters and the legwork involved in setting up meetings with a dozen furniture retailers in Sao Paulo and Rio de Janeiro.
Lexington, like many North Carolina companies, is looking to fast–growing emerging markets to help fuel its growth. Brazil has become an attractive opportunity for many North Carolina companies given the purchasing power of its growing middle class.
State and federal officials are eager to help facilitate these efforts as they try to meet President Barack Obama’s ambitious goal of doubling U.S. exports by 2015.
This was the first trip to Brazil organized by state officials since North Carolina hired a consultant in Sao Paulo to help connect companies with export opportunities.
Still, saying you want to boost exports and committing to it are two different things.
Lexington was the only North Carolina furniture company that signed up for the trade mission. When commerce officials announced the trip six months ago, a half dozen furniture companies expressed interest.
“As time got closer and people had to spend money and make plans, we just started having dropouts,” said Mike Padjen, who heads the state’s Furniture Export Office and led the trip. “I think the reality of it is in a lot of cases a lot of companies are worried about making payroll next week and not worried about expanding markets outside the United States.”
Padjen compares many U.S. companies’ current approach toward boosting exports to a very obese, unhealthy person. They know what they have to do to get healthy, but they’re not yet willing to put in the work.
“They know they have to increase their top line,” he said. “The market’s not growing in the United States.”
The state’s Commerce Department has an Asia trade mission planned for the fall, as well as a number of industry–focused trips. Environmental companies will go to Paris in late November for the Pollutec trade show that focuses on clean energy. And wood and furnishing firms will attend a furniture trade show in Shanghai in September.
The goal of these missions is to show hesitant companies that, while it will require them to get on a plane and make some investments, boosting exports isn’t as daunting as it may seem.
Interpreters are provided, and trade officials in Brazil vetted potential retailers ahead of time to increase the odds that the meetings will result in good leads for companies.
Brazil trade resurgence
After falling dramatically during the global recession, furniture exports to Brazil from North Carolina jumped 424 percent last year to $1.8 million. That made Brazil the 10th–largest market for the state’s furniture exports.
But much of recent growth has been in the area of bedding and hospitality furniture.
“In terms of sofas and beds and those types of things, Art’s correct, there’s no shoes down there,” Padjen said. “And somebody needs to go sell them some shoes.”
Founded in 1903, Lexington makes wood and upholstered furniture under brands like Tommy Bahama and Henry Link Trading Co.
The company now gets about 10 percent of its revenue from exports, up from 3 percent five years ago.
The increase reflects Lexington’s willingness to make exports a priority, as well as the dramatic rise in wealth of consumers outside the United States.
Mexico and Canada have traditionally been the company’s best markets, but China took the top spot last year for the first time.
It has been more than a decade since Lexington furniture was for sale in Brazil.
The country historically has been very protective of its own companies, levying hefty tariffs and taxes on goods, particularly those that might undermine homegrown competitors.
The fact that many American companies now consider it a viable market has much to do with the decline of the U.S. dollar in relation to the Brazilian real.
“That’s pretty much eaten into all that tax and tariff stuff,” Padjen said. “Companies are finding a little equal footing down there just because of the exchange rate.”
Unlike Chinese consumers, who typically want furniture with more flash, Brazilians are more inclined to pieces with clean lines and simple designs.
Negrin pitched several Lexington collections to Brazilian retailers, including a contemporary one called 11 South and the more classic looking St. Tropez.
Even with the weak dollar, a bedroom set from the 11 South collection that retails for $7,000 in the U.S. would cost triple that in Brazil once shipping costs, tariffs and taxes are factored in.
Still, those prices are competitive with Brazilian and European collections.
Can’t sit back and wait
Negrin’s meetings with retailers typically lasted about 90 minutes and covered everything from styling to delivery to pricing.
Encouraged by what he heard, he’s now preparing formal proposals to send to a half dozen retailers. Several are also considering coming to High Point in October for Market Week, a bi–annual furniture trade show that draws 80,000 attendees.
It will likely be six months or more before any Lexington furniture could appear in Brazilian showrooms.
“It’s not easy. It’s not cheap. But it doesn’t happen if you’re just sitting around waiting for it to happen,” Negrin said.
“I don’t know what will become of it even with the trip. I do know this. If we sat here waiting, little would happen.”