Mohawk Industries Inc
With a rich, colorful past, Mohawk looks to the future with excitement.
Peggy Whaley, Carpet Editor
"In just the past five years alone, the firm has grown its sales by 15 percent compounded through acquisitions and internal growth," said Jeffrey S. Lorberbaum, president and CEO. Today, Mohawk employs about 32,000 people and has almost 100 plants, as well as more than 250 distribution points across the country to move product to its customers.
Mohawk Industries designs, manufactures and markets carpet, including the Mohawk, Aladdin, Durkan and Karastan brands.
The Early Days
Mohawk's first incarnation as The Shuttleworth Brothers Co., makers of Karnak carpet, began in the early days of the 20th century in New York City. Neighboring carpet manufacturer McCleary, William and Crouse also came into its own at this time. The producer of Smyrna rugs merged with Shuttleworth to form Mohawk Carpet Mills Inc. in 1920.
Armed with the distinction of being the only mill in the United States to produce all domestic weaves of carpet - Wilton, Axminster, velvet and chenille - Mohawk set about introducing new products and colors, including lines of "washed" Axminster carpets that resembled costly, handmade orientals.
The firm introduced the first high- and low-loop textured design, Shuttlepoint; and the first sculptured effect in carpet, Raleigh, around this time. By mid-century, Grosvenor had become Mohawk's best-selling carpet since its Shuttleworth days. Woven interlock was introduced in 1951, and was the first successful application of the knitting principle to carpet manufacturing.
During the 1950s, the company expanded, building manufacturing plants in Mississippi and South Carolina. Mohawk merged with Alexander Smith Inc. in 1956, and the largest carpet manufacturer in the world at that time was formed under the Mohasco Industries banner. Mohasco became a leading producer of interior furnishings over the next 15 years, with 81 locations in the United States, including 26 plant locations in 12 states.
Mohasco's Color Center dealer program, a map for successful retailer/manufacturer relationships, began in 1974 and is still used by Mohawk today. A decade later, stain-resistant technology became prominent, prompting Mohawk, in partnership with DuPont, to produce some of the first Stainmaster carpets. In 1988, Mohawk decided to focus solely on the floor covering industry, and separated itself from Mohasco, establishing headquarters in Kennesaw, Ga., in 1989.
The acquisitions of American Weavers and Crown Crafts added rugs and throw pillows to Mohawk’s line of home products.
Mohawk was taken public in 1992, with about $300 million in annual sales, and about a 3-percent market share in the carpet business - and was considered a mid- to high-end niche player in this arena. Mohawk integrated both backward and forward and became a fiber producer, which gave it cost and supply flexibility. Today, the company manufactures nylon, polyester and polypropylene fiber. Mohawk is also one of the largest soda bottle recyclers, turning about 2 billion soda bottles annually into fiber for its different product categories. In addition, it has built a trucking and distribution system to move product to market and has created a differentiated service level.
Mohawk's presence in Calhoun resulted from its acquisition of Horizon Industries in 1992. It moved its headquarters there in 1994, when it acquired Aladdin Mills.
Lorberbaum explained, "Since going public in 1992, Mohawk has purchased about 13 companies. All 13 of the acquisitions contributed to earnings in the first year. Over the past five years, the combination of these initiatives has allowed us to grow our top line about 16 percent compounded per year and earnings per share at about 29 percent. At present, market share is a little less than 30 percent."
In the fall of 2000, the firm decided to dramatically expand its presence in hard surfaces. To accomplish this, it needed a broad product offering and a separate sales force focused on hard surfaces to support the venture. "We hired more than 200 representatives and rolled out an offering in laminate, wood, ceramic and vinyl," said Lorberbaum. "We became a national distributor of Congoleum vinyl. It was fortunate for us that Congoleum was looking for a partner at the same time we were planning our hard surfaces expansion."
Mohawk has implemented a marketing and distribution strategy to provide a foundation to improve customer loyalty. In addition, the firm has developed information systems that improve stock positions and lower costs. These systems are available through the Internet to both customers and sales and management teams.
"We can't control the economic environment, but we can continue to bring value to our customers. We are focusing on our merchandising, marketing and brand value in the marketplace. These assist our customers in selling more of our merchandise at higher margins. Local inventories and our trucks allow us to get to customers in a timely fashion," Lorberbaum said.
In order to provide the highest service level in the industry, Mohawk opened regional warehouses and offered local delivery. By maintaining local inventory and utilizing the firm's own truck fleet, it was able to provide quick service to customers. The plan initially started with carpet and padding and expanded from there. It was a natural extension to leverage this investment into other product categories.
In recent years, Mohawk has added vinyl and wood flooring, as well as ceramic tile and stone, to its product offerings.
Mohawk operates four divisions, each having its own products, features and brand names. The company designs, manufactures and markets premier carpet brands including Mohawk, Aladdin, Bigelow, Custom Weave, Durkan, Galaxy, Helios, Horizon, Karastan, Mohawk Commercial, World and WundaWeve. In addition, the firm offers a broad line of home products including rugs, throws, pillows and bedspreads under the Aladdin, Goodwin Weavers, Karastan, Mohawk Home and Newmark brands. Mohawk also manufactures and distributes ceramic tile and natural stone products under the Dal-Tile, Mohawk and American Olean brands. Other products include laminate, wood and vinyl flooring, and carpet padding under the Mohawk brand.
Residential, the largest division, includes non-specified mainstream commercial and hard-surface flooring. Broadloom continues to be an excellent market, even though hard surface is growing faster than carpet.
"As the industry becomes more sophisticated in merchandising products at the retail level, retailers will see improved margins. We offer total store concepts, boutiques and individual product collections to meet the needs of different retailers," Lorberbaum said.
He continued, "These offerings also include store design, coordinated merchandising, comprehensive selling systems, consumer benefits, geographic exclusivity, unique products, retail and sales training, co-branding, promotion and advertising, to name a few."
Mohawk's Commercial Division offers specified performance carpet for heavy industrial use. Lorberbaum said each business focuses on meeting the needs of its distribution channel and maximizing the value of products to customers through merchandising, marketing, products and services.
In the home products area, Mohawk manufactured rugs and mats until it acquired American Weavers. That acquisition added a flat woven business that today produces throws, pillows and table top products. Those categories, sold through the same distribution channels as rugs and mats, continue to show substantial growth. The acquisition of Crown Crafts' woven business made Mohawk the largest manufacturer of throws. Lorberbaum feels there is still tremendous growth potential left in the hard-surface and home products business.
Building consumer confidence will separate one company from another, said Lorberbaum. "Mohawk has the best and most widely recognized brands in every business segment. Karastan is the premium flooring brand and is the product of choice among higher-income consumers. And, we are achieving great success with Ralph Lauren, the premier designer brand in the United States."
Lorberbaum continued, "Today, the Mohawk brand is the most recognized in the entire market. It focuses on all price points to the mass market. We use sub-brands to differentiate various retail channels in the market to maximize our distribution and reduce retail conflicts."
Each of these brands has its own advertising, marketing and product strategy. "We continue to expand print and television advertising aimed at consumers to enhance our position," Lorberbaum said. "It is our intent to make the Mohawk brand the consumer's first choice and our retail partners' most profitable opportunity."
"Our distribution system has provided Mohawk customers with a higher service level than our competitors can provide. This has allowed us to continue improving customer loyalty for our products," he continued. "In addition, it has created the foundation for moving from a carpet supplier to a total flooring company. As others in our industry retracted to centralized warehousing, we offered higher service levels, which reduce our customers' inventories and improve their sales."
In March 2002, Mohawk merged with Dal-Tile - the largest US ceramic manufacturer with more than $1 billion in sales - and gave Mohawk the ability to offer all hard-surface flooring types including ceramic, laminate, wood and vinyl.
"Other fairly recent milestones include the expansion of branded hard-surface products; investment in sales, marketing and distribution infrastructure; customer support for product categories of ceramic, wood, laminate and vinyl, which is gaining momentum; and the expanding of product offerings to satisfy consumers," Lorberbaum said.
Consumer tastes and lifestyles are changing. Consumers are putting more hard surfaces in their homes and businesses than they have historically. Homes built today are larger, and more second homes are being built, creating greater opportunities for flooring suppliers. Because of this, Lorberbaum expects future growth to continue in all areas of flooring.
Mohawk's line of attack has been to grow internally, to be a low-cost producer and to take advantage of acquisition opportunities. Product and marketing leadership, quick service and brand value have created internal growth for the company, but tactics have been used as well to leverage manufacturing, distribution and sales channels to increase various product categories.
"There is still room to expand in the carpet business in niche markets, as well as in existing ones," Lorberbaum said. "The hard-surface flooring industry is about half as large as the carpet industry, and other than ceramic, we have a limited share. Our home products are still an expanding category, and we would consider adding additional products. Plus, there are many opportunities in importing products from around the world."
Lorberbaum added that Mohawk's position as an industry consolidator has allowed it to grow from $300 million in sales in 1992 to almost $5 billion today. "We continue to look for strategic acquisitions that offer synergies in manufacturing, distribution and customers. To do this will allow us to add value by reducing costs, leveraging assets across different end-uses and expanding our customer base. We're thrilled about the prospects in the marketplace, and we're excited about the opportunities for Mohawk's future growth," Lorberbaum said.