Interface 2004 The magazine for wooden floor manufacturers worldwide no. 3 December

COMMODITIZATION, AND HOW TO AVOID IT!

Keeping on the right side of the law in Brazil 3 The enduring success of an Austrian family firm 6 Your chance to win a great Bona gift 7 What do hang gliding and quality management have in common? 12 Editorial

An issue to be Correct environme discussed practices in Brazil

In the last issue of Interface I raised the question of what we could do as an industry to avoid a steady descent into wars and commoditiza- tion. From your feedback, I understood that Bona is not alone in its concern. Many of you agreed that in order to afford to maintain current levels of innovation and quality in parquet flooring, we must provide end consumers with more informa- tion about the products they are buying. At the moment, the end consumer has so little informa- tion that it’s not surprising his or her decisions are steered predominantly by price. I recently discussed the matter with an Austrian colleague, Karl Scheucher (see feature, page 6) and he agreed. Scheucher is in the process of building a new office space with special facilities for training retailers, distributors and professional installers about their pre-finished parquet range. It is encouraging to hear that one of our key Our newly appointed Bona representative in Brazil, customers is investing in customer education, Tony Borek, gives advice about doing business in since it will ultimately benefit the whole industry. I believe that, as end consumers become more South America, and explains how to avoid the risks knowledgeable, and can make better informed purchasing decisions, they will also become more of dealing in illegally taken timber. demanding – of both information and quality. And this is positive for any company that wishes to position its products on the market, and not just have them fall into the generic (i.e. commoditized) category of ‘wood parquet’. To further stimulate thoughts on this subject, in this issue of Interface we include an article exa- mining commoditisation as a general challenge facing manufacturers around the world. I hope you’ll find it enlightening and inspiring to read GLUEBOEN ARTICLE PARKETT – SUGGESTTRAVELS ITFIRST IS SEPARATE CLASS about the strategies pursued by other companies in other sectors, and that you'll take something useful away with you. Over the last few years, Bona’s Norwegian customer, BOEN (previously BOEN and Höhns) has become a major international player in the parquet floo- ring business. Here you see their engineered Merbau Plank flooring (600 square Paul Spångberg metres of 15 mm Merbau Plank) instal- Director Division Industrial Coating led in Eurostar’s First Class lounge at London’s Waterloo Station, UK. The Boen Parkett was specified by Haskoll Architects and installed by contract flooring specialists, Loughton dimensional stability and tough, high Contracts of Loughton, Essex. quality finish. Merbau was the prefer- Usually designed as a floating floor, red choice of species due to its ability the Boen Parkett 15 mm range is also to withstand heavy pedestrian traffic as suitable for fully bonding to the sub- well as for its aesthetic appeal. floor, as was required in this particular You can find out more about BOEN installation. Boen Parkett was selected on www.boen.com for this installation due to its excellent

2 Interface Environment

What kind of environmental prison sentences, or a penalty restric- certification exists for wood ting entitlements. In some cases, the ntal from managed, sustainable company or individual is required to forests in South America? reforest the deforested area with native FSC Certification (Forest Stewardship tree species. Council). The aim of the FSC council is to ensure that the consumer gets wood Acquisition of illegal wood products from forests that are properly In Brazil, a consumer receiving or acqu- managed, environmentally sustainable, iring illegal wood products from native socially beneficial and economically trees, which are in their raw state or viable. However, the certificate is not a ”in natura”, for commercial or indu- guarantee of final product quality. strial purposes such as, cut timber, wood pieces, firewood, charcoal and What are the advantages other forest products must ask for an for companies of using ATFP (Authorization to Transport Forest FSC certified wood? Products) from the vendor. Failure to do The advantages are numerous! Here so would result in a fine and/or impri- are some typical examples: better rela- sonment. The ATFP proves the origin tionships with consumers, meeting of the wood and the issue of this docu- of market requirements, product dif- ment is the responsibility of the IBAMA ferentiation, access to new markets, (a national institute in Brazil). improved public image of the company, reduction in the number of work acci- What should Bona’s customers dents, contribution to the preservation look out for when dealing with of nature, protection of endangered suppliers in your region? species. When buying raw forest products from native trees in Brazil, customers What are the penalties should demand an ATPF from the ven- for illegal deforestation? dor together with the invoice for the The penalty for deforesting is imposed sale, to prove the origin of the product by the IBAMA and the relevant institu- to the IBAMA. If the forest product is tions in each state. Anyone committing not accompanied by an ATPF then the such a crime can be subject to fines, wood is most certainly illegal.

COST-EFFECTIVE FINISHES, WITH VACUUM COATING

Vacuum Coating machines are increasingly used in the wood finishing industry in North America, for treating pre-finished floors with either stain or UV-coating. This technology is very much in demand since it gives an even finish - even when used on the distressed floors that are so popu- lar among American consumers. The Larry Subervi investment required for a vacuum coa- ting machine is relatively low ($100,000- $200,000 in US dollars) so it appeals especially to smaller wood manufacturers. Bona’s UV finishes on vacuum coaters can produce about 25 grams per square feet per pass. Giving the final product about 50 grams per m2. Sheens can vary from 10 -80 on a gloss meter. The real beauty of this technology is that Bona’s vacuum finishes are equally durable as those produced on a regular roll coat line.

Interface 3 Wherever you want to be we'll help you get there Where would you like to see your wooden floors? Bona has UV coatings that have been specially Maybe the Taj Mahal gardens aren’t on your new developed for damage resistance, making your wood- business list just yet, but why not exercise a little en floors suitable even for heavy traffic areas. Start by imagination? You might be surprised by how easily figuring out where you want to be…then contact Bona dreams translate into reality. to find out how we can help you get there. Customer case From pumpkin seed oil to pre-finished parquet

Besides being the place that Governor of California Arnold Schwarzenegger calls home, this part of Austria has plenty of other surprises in store. You find lush valleys planted with corn as far as the eye can see, picturesque villages where farmhouse kitchens serve Buschenschank buffet, and men who still wear Austria’s traditional Lederhosen on a regular basis. And perhaps less surprisingly, this is where you find the office and production plant of highly successful wood parquet flooring manufacturer, Scheucher Holzindustrie GmbH. Interface magazine interviewed the company’s present owner, Karl Scheucher, and asked him to talk us through the last 84 years of nimble entrepreneurial maneuvering that has brought enduring success to his family firm.

Founded in 1920, at first, the Scheucher ship was to start producing three layer the flourmill and pumpkin seed oil press enterprise included an impressive panels for the then highly fashionable are long forgotten, as parquet flooring array of different activities – farming, 'solid wood' kitchen furniture. It wasn’t now constitute’s Scheucher’s single a sawmill, a flourmill and a press for long, however, before the devaluation of most important activity. the region’s famous pumpkin seed oil. the Italian lire in 1995 caused Austrian So where does Scheucher intend to Then in 1936, Karl Scheucher’s father producers to lose market share, and a take the company next? entered the business. His activities new strategy was required. Karl explains, “Contrary to the cur- were sharply interrupted by WWII, but Karl’s answer was to start making rent trends of moving production to on his return in 1945, he focused his three layer parquet flooring. A research lower cost countries, we are actually efforts on developing that part of the trip to Scandinavia convinced him opening up a new production line in business which most appealed to him that this was the right course to fol- Austria. As a way of broadening our – the sawmill. Thanks to his interest low. Production began in 1996 with product range and meeting a greater and attention, the sawmill thrived, and the focus on the Austrian and German proportion of the market’s needs, we in the early 70s, Scheucher began to markets, and since then demand has have decided to start producing two produce readymade spruce and pine steadily increased. So much so in fact, layer parquet as of December 2005. wood products for the house buil- that in 1999 the plant’s capacity had to Two layer parquet appeals especi- ding industry. Most of the output was be doubled. Today Scheucher makes ally to professional floor installers, exported to Yugoslavia, the border of 1.5 million square metres of pre-finis- as it is thinner (space is sometimes which lies a mere 15 kilometres from hed floors every year and exports to a problem) and can be used to make the Scheucher plant. thirty different countries. The days of interesting and original designs. In 1985 Karl Scheucher entered the business, his first major initiative was Scheucher - facts to shift the focus from using pine and 145 employees spruce to using the hard woods which 23,6 million Euros turnover are indigenous to this region of Austria. Exports 80% of production Oak, ash, beech, maple and cherry Production capacity 1.5 million m3 were all used to make furniture, doors layerparquet and wall panels. In 1992, the second (2005 increasing production capacity important initiative under Karl’s leader- to include 500.000m2 layer parquet)

6 Interface Lifetime support

direction quickly if necessary, and secondly keeping a competitive edge through e.g. -adding finishes like the ones we buy from Bona. “Since labour costs are high in Austria, our product is relatively expen- sive, so we have to differentiate it. To this end, we use 22 different wood spe- cies, including lots of varieties of fruit trees. dictates that one year light woods such as beech or maple may be popular and the next, it’s swit- ched to darker woods such as walnut, Ceremony held to officially begin building Scheucher’s new offices and showroom. merbau or smoked oak. So we conti- "The goal is to get production of what’s going to happen, so you just nually need to find new sources of raw two layer parquet up to 500,000 have to listen to the market and try materials and new stains to appeal to square meters over the next two to to understand which way it’s turning. the consumers’changing tastes. Bona three years. However, I have learnt to pay atten- helped us prepare ten different varnish “Speaking more generally about tion to two things in particular: having colours in order to widen the range of future prospects, you never know flexible production so we can change choices we can offer.“

Bona’s new office in Brazil

Bona Brazil was officially opened on the 15th of May 2004. The decision was taken in order for Bona to be closer to, and therefore better serve our South American customers. Many are actually based in Brazil, and the others (in e.g. Argentina, Chile, Colombia etc) can be easily reached from the Brazilian base. Tony Borek - Forest engineer

The new office is placed in the city of pre-finish their solid parquet, and many supplying them just the UV-coatings”. Curitiba in the state of Paraná and is are investing tremendous amounts of Bona currently supplies two facto- led by Tony Borek, a forest engineer, money in setting up plants for engine- ries and tests are underway with many specialized in tropical or exotic woods. ered wooden flooring. It has become more. South American manufacturers Tony is responsible for technical & sales clear that if we want to be successful export the majority of their product to support and is working hard to build here, we must have a local presence, the US. For them, cooperation with up good relations with the producers with people who speak the same langu- Bona gives a number of extra benefits: in the region. age and work in the same time-zone. they win credibility from using ”Bona Life ”Production in this region is expan- I am sure we will be able to increase our Time Support”, trust from our recogni- ding rapidly,” says Tony. ”Until a few business with both smaller and bigger zed brand-name, and of course all the years ago, most producers only made producers in this region, as we have a benefits of our experience, technical solid, unfinished, parquet. Now they unique offer that goes much further than service and maintenance products.

Win a gift with the Bona logo!

We know from all the positive feedback to our editorial team that you’ve appreciated receiving your own copy of Bona’s Interface magazine. Now’s your chance to tell us who else might enjoy it. In return for your help improving our distribution list, we’ll send you a gift item emblazoned with the Bona Logo. Just fill in the form below and mail to Elisabeth Mårtensson, BonaKemi AB, P.O Box 21074, SE-200 21 Malmö, Sweden, or send an e-mail with your colleague's details to: [email protected]

Name ...... Company ...... Position ...... Address ...... Telephone ...... E-mail ......

Interface 7 Wherever you want to be we'll help you get there Where would you like to see your wooden floors? Bona has UV coatings that have been specially Maybe the local football pitch isn’t on your new developed for damage resistance, making your wood- business list just yet, but why not exercise a little en floors suitable even for heavy impact areas. Start imagination? You might be surprised by how easily by figuring out where you want to be…then contact dreams translate into reality. Bona to find out how we can help you get there. Commoditization Commoditization, and how to avoid it!

DuPont’s Teflon® is an example of co-branding or “ingredient branding” being used to combat commoditization.

In his book, The End Of Marketing As We Know It, Sergio Zyman warns us, “Don’t let price be the tie- breaker”. He’s actually talking about commoditization. The history of industry is full of examples of great products that started life as unique, clever solutions to life’s many problems – but went the way of commoditization and now compete on price alone against similar products, with equally thin profit margins. Gigantic volumes and high market shares become the target in commoditized markets, and the competition is relentless. There is a risk of this happening in the wood parquet business, though the major players are trying to prevent it. Here are some examples from outside our industry showing how commoditization has either been skillfully avoided or deliberately pursued as a strategy.

Take cigarette lighters. Once upon a watch the pricey, premium competitors to pay a lot for what Montblanc com- time, a lighter was a high-tech expres- drown and get swept away. municates through its products: taste, sion of a smoker’s personality, and came At the other end of the market, elegance and style. Montblanc has for in all sorts of sophisticated shapes and Montblanc still does business around decades swum against the downward- sizes. You can still buy lighters like that, the world selling $800 pens, which sucking current of commoditization in but in the 1970s French innovator BIC hardly makes sense when you can get its markets. Decisive, aggressive dif- came out with its brightly coloured, a pack of a dozen BIC Round Stic® ferentiation has been the key, built on disposable, lighters (remember “Flick ballpoints for 89 cents. Montblanc’s excellent product design, advertising, my BIC”?) and the race towards the secret is all about exclusive brand and merchandizing strategies. lowest price had begun. BIC did the image. Montblanc pens certainly cost As Michael Porter started saying same thing with disposable ballpoint more to manufacture than a BIC pen, more than 25 years ago, a business pens and razors, revolutionising those but the much higher retail price is 99+% has to choose between three gene- industries. This was their business a function of product brand differen- ric market strategies – price leader- model: cheap, plentiful, simple. Flood tiation. After all, the pens do exactly ship, differentiation, and niche-focus the world with a new and the same thing. People are prepared – and any one of them is fine as

10 Interface Problem solving

Some products just are (e.g. ) some become commodities by deliberate low pricing strategy (e.g. BIC lighters) and others avoid commoditiza- tion by branding, technological edge or other forms of added-value (e.g. exclusive pens and watches).

long as you do what’s necessary to lots of profits. Now, many consumers There are even practically invisible beat the competition in that chosen pay next to nothing for a new mobile components of products that do well in game. Scotland’s Linn (sound sys- phone and the manufacturing game is fighting off commoditization. DuPont’s tems), Steinway (pianos), Cartier (wat- all about volumes, reducing produc- Teflon® is a case in point. Teflon® is ches and jewelry), Apple Computer, tion costs and global distribution. Like a non-stick chemical coating applied Lexus, Billabong Surfboards, and the pen busi- to a large range Gucci clothing and accessories do ness, mobile “This sort of co-branding of products sold what’s necessary. Through a brilliant phones might by manufacturers redefinition of its business, Interface support a few or ’ingredient branding’ is under their own Corporation moved its commercial Montblancs, brand names. carpet brands away from the price but the main one strategy for fighting the There are other pit and saved its margins, as cheap game from pull of commoditization.” similar coatings, commodity carpeting spread through now on will be but DuPont mana- the interior decorating markets. low-cost, low-price and large-scale. ged to establish Teflon® as a household Some things just are commodities. Other examples of commoditized brand name alongside the brands of the Water, electricity, concrete, basic buil- products include many household app- products it coats. Consumers see the ding hardware, plastic injection-molding liances, power tools, clothes, sneakers, Teflon® logo on the packaging of their pellets, petrol, whole milk, and refined consumer electronics, and even open- new frying pan along with the product sugar are examples. There might be source software. Visit any Wal-Mart, brand logo. some differentiation going on – spe- Carrefour, IKEA, Seiyu, Staples, or Gore-Tex® breathable water barrier ciality concrete, organic milk produced Best Buy, and you’ll see aisle after aisle coatings do the same thing for high- without hormones, and fancy mineral stocked with them. Yet, like Montblanc performance clothing manufacturers. water – but the vast bulk of product on and the others above, there are many The “Intel Inside” brand logo helps Intel these markets is indistinguishable from interesting cases of consumer and indu- Corporation prevent its microproces- its competitors. That means custo- strial product manufacturers who suc- sors from going the anonymous way mers look at price and only price when cessfully executed a strategy to avoid of commodity silicon chips. Diet drinks deciding what to buy. The lowest-cost being drawn into commoditization. This indicate that they contain Nutrasweet®. producers own the categories, all other has allowed them to keep above This sort of co-branding or “ingredient things being equal. the low-cost options, and use the resul- branding” is one strategy for fighting the However, you’ll find many examp- ting profits to innovate and brand build. pull of commoditization. les of commodity markets today which Customer education is key – through It requires nerve, resolve, and invest- used to be premium until a few years advertising, user training, customer ment, but experience shows that a back, e.g. mobile phones. In the early service, and other channels. If the dif- strong brand or pair of co-brands built 1990s, before digital radio and multi- ferentiation is based on genuine added on a unique edge – be it technology, operator competition, mobile phones value, customers need to understand design, historical image, quality, lifestyle, were high-tech, high-margin products. and appreciate that is why they are service, or something else – is the best Small, innovative producers made being asked to pay more for it. way to avoid competing on price alone.

Interface 11 A day in the life

Profile: Heinz Kiefel – a high flyer

Since 2000 Heinz Kiefel has been What does a typical working just been installed in a local fire station. day look like for Heinz? quality manager at the parquet Expensive tests regarding environme- For a start, no ! Heinz switches ntal compatibility, soundproofing, fire flooring producer, Tilo, near on his computer and answers his protection etc, are allocated to recog- Salzburg in Austria. He has also e-mails. When ready, he spends one nized institutes.” or two hours checking all the relevant been an enthusiastic hang glider production points and supervises the Why is your role so central? pilot for over twenty years. test protocols. ”It’s obvious! If a customer is disappoin- ted, their confidence in our product will Tilo operates according to the motto: Why the continual inspections? be damaged. It can take years to rebuild ”Only if we would buy our product ”Staying permanently on target is what this. As a quality manufacturer, we can- ourselves, is it also good enough for to consistent quality, yet eve- not afford mistakes. Of course quality our customers. If not, then it’s not!” In rything is in movement and therefore also costs money, but a high quality other words, consistently high product changing. The surrounding conditions, standard is absolutely essential for a las- quality is what gives Tilo’s products machines, the wear and tear on tools all ting business relationship these days.” the edge. That’s why Heinz’s job is cause gradual changes - the produc- so important. He and his quality team tion lines have almost a life of their own! You mentioned earlier that you check the suppliers’ raw materials con- So we apply test protocols which make are an enthusiastic hang glider tinuously, carry out daily inspections at sure that the machines are checked at pilot in your free time. Are there the production lines, and ensure their least every fifteen minutes.” any commonalities between compliance with Tilo’s own product If nothing special comes up, Heinz your profession and this sport? standards. “Not only are the visual then has time to work on improving ”Yes, several actually! Both activities are characteristics e.g. a smooth surface and updating Tilo’s technical informa- technical. Hang-gliding is a highly tech- and a perfectly edged profile exami- tion system – a database of information nical sport, and the production of par- ned, but we also check that the wood about Tilo’s products that is used by quet flooring requires highly technical is well-conditioned and professionally dealers and end consumers. Product equipment. One needs experience and processed,” he explains. development is also a continual pro- knowledge for secure flying. Similarly, When specifying internal standards, cess, and one to which Heinz also successful manufacturing of parquet Heinz and his team consult the official devotes a large proportion of his time. flooring depends on experience and international standards. If these are knowledge. Faults and carelessness considered insufficient, they refer to gui- How does this product can have serious consequences. delines from leading institutes. So, for development process work? “Nature is another common point. example, the strict requirements of the ”We get input from different sources: Whilst hang-gliding, the pilot is at one IHD (Institut für Holztechnik Dresden) from our customers via Tilo’s sales with nature, cannot force anything but are applied to the pre-finish ed parquet representatives, from market observa- can use nature’s possibilities optimally surface. Heinz points out, ”Our stan- tion and not least, from the product (i.e. to circle in a thermal). It is the same dards are orientated towards the inte- and company management. The usual when you work with wood. Being an rests of the customers and the product development steps are carried out on absolutely natural material, one must requirements in practice. This means all new products. Small-scale produc- understand the wood and learn to work we often go beyond the official product tion is tested intensively to see how it with its unique properties. I should standards. ISO 9000 provides the fram- performs in practice. We have a test add that I have fun both in my job and ework, but in the implementation you room with sub-floor heating for this. with the hang-gliding. It’s just that one notice the real difference. We make the We use also ‘real’ conditions at our takes place on the ground, the other same demands on our suppliers”. employees’ homes. A test floor has in the air!” Contact us today

Asia Pacific Central Europe North Europe North America BonaKemi Asia Pacific Ptc Ltd BonaKemi GesmbH BonaKemi AB BonaKemi USA, Inc. For other markets, please 390 Havelock Road Mayrwiesstrasse 21 Murmansgatan 130 14805 E. Moncrieff Place contact our head office. #07-03 King’s Centre A-5300 Hallwang bei Salzburg SE-200 21 Malmö Aurora, CO 80011-1207 Singapore 169662 Austria Sweden Tel +303 371 1411 Visit us at our website www. Tel +65 6738 55 80 Tel +43 662 66 19 43-0 Tel +46 40 38 55 00 Toll free 800 872 5515 bona.com under the Fax +65 6738 11 58 Fax +43 662 66 02 05 Fax +46 40 18 25 05 Fax +303 470 1288 section Parquett Producers Eugene Goh +65 9786 8005 Georg Laimer +43 664 31 22 382 Larry Subervi +1 303 478 0209

China South Europe Latin America Head office BonaKemi Asia Pacific Pte Ltd Bona Ibérica Bona Brazil BonaKemi AB Representative office (Shanghai) Paloma, 1, Pol. Ind. Los Gallegos Rua Sete de Setembro P.O. Box 210 74 Room 10A66, Shanghai Mart E-28946 Fuenlabrada – numero 4214 - Conj 704 SE-200 21 Malmö 2299, Yanan Road (West) Spain Bairro: Centro CEP 80060-070 Sweden Shanghai, 200336 P.R. China Tel +34 91 642 01 88 Edificio: Cond Business Offices Tel +46 40 38 55 00 Tel +86 21 62361350 Fax +34 91 642 06 90 Tel +55 47 9931 9525 Fax +86 21 62360388 Marcus Björck +34 670 91 79 40 Tony Borek +55 479 141 5255