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Sunday, 19 March 2017 15:41

California Closets bets on West Michigan as long-term investment in talent

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As the popularity of small-footprint homes and urban living trends continues to rise, California Closets expects to capitalize on a growing market for its custom storage products, including closets, garages and other spaces. As the popularity of small-footprint homes and urban living trends continues to rise, California Closets expects to capitalize on a growing market for its custom storage products, including closets, garages and other spaces. Courtesy Photo

GRAND RAPIDS — While many companies decry the lack of available talent as a key challenge, one California-based manufacturer cited West Michigan’s workforce as the primary reason it’s moving into the region. 

Berkeley, Calif.-based California Closets, a maker of custom storage products, chose Grand Rapids as the site for its new manufacturing and distribution hub largely based on the pool of designers, skilled craftsmen and other talent in the area, even if those workers currently are in short supply. 

Eric Wolff, president of procurement at the company, frames the decision to move to West Michigan as a long-term bet on the company’s talent needs as it expands its product lines and enters new markets. 

“Grand Rapids really fits with and is in alignment with our strategy to continuing to evolve and improve our offerings to our customers,” Wolff said. “The West Michigan area has a long history of leadership in design and manufacturing, and I think that leadership is actually gaining momentum here. The key item was really the talent base for all types of positions that we need for our company. … We’re a full-service (company) from designing each individual solution to fabricating and manufacturing it, to delivering it and installing it. In each one of those areas, (talent is) a challenge for us.” 

All told, California Closets wants to hire about 61 workers in the next three years to accommodate production at its 130,000-square-foot facility at 4930 Kraft Ave. SE in Grand Rapids. So far, the company has hired five people. 

Wolff led the site selection for California Closets, a process that started about a year ago as part of a larger strategy to expand its in-house production capabilities. Traditionally, the company produced and sold its products via a network of 86 franchisees, each with their own manufacturing facilities, Wolff said.

In recent years, California Closets’ parent company, FirstService Corp. (Nasdaq: FSV), began buying out the brand’s franchisees in a bid to increase margins, according to the company’s latest annual report.

The Toronto-based public company, which includes a property management and products arm,  generated $1.4 billion in annual revenue in 2016 and employs 17,000 employees across its operations, according to filings. 

In 2015, California Closets opened a manufacturing facility in Phoenix, Ariz. as a major step in localizing production under its own operation. The company’s decision to open a manufacturing plant in Grand Rapids marks a continuation of that strategy, according to executives. The West Michigan operations primarily will serve customers in the eastern U.S. 

“We will certainly move production in some of our Midwest and eastern facilities starting with the end of the second quarter, and start to ramp that up,” said Scott Patterson, president and CEO of FirstService in a conference call with analysts. “I mean, we have the blueprint now. We have gone through the learning and we are very confident that we can get Grand Rapids up and purring quickly.”

SHIFTING LIFESTYLES

In addition to expanding its geographical footprint, California Closets’ move will also add the extra capacity and talent needed to boost its product offerings, a key portion of the company’s growth strategy. 

As modern living arrangements evolve, Wolff said he expects the company to offer new products within the residential furniture and storage industry.

While Wolff declined to provide specific examples of new products California Closets wants to launch, he did point to growth in the tiny house movement and the increased focus on small-footprint urban living as two driving factors that would increase the need for space-saving storage products.

“We’re on the cusp of a lot of changes. … All of those lifestyle changes are going to create needs in the marketplace that we will make sure we have the products to meet,” Wolff said.

Overall, the market for home-storage products is expected to reach $11.8 billion by 2021, a 34-percent increase from the $8.8 billion the industry generated in 2015, according to a report that year from Freedonia Group, an Ohio-based market research firm. 

The report notes that higher value, customizable products will lead growth in the industry, particularly as homeowners embark on expensive home remodeling projects.  

That trend has played in California Closets’ favor. FirstService does not disclose the financial performance of each individual business unit, but the company reported that “strong growth” from California Closets’ operations contributed to a 50-percent increase in revenue for its broader FirstService Brands business unit. 

FirstService Brands generated $370.1 million in revenue in 2016, according to the company’s  most recent earnings statement. 

Overall, Wolff expects the strength of the home-storage products industry will continue to help the company grow, especially as it expands into West Michigan. 

“This category is an exciting category, it’s a growing category and it’s fun,” he said. “We have a lot that’s going to be attractive for people who want to have a very great opportunity to influence the growth of a world-class brand.” 

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John Wiegand

Staff writer

[email protected]

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