Hot Seat: Charlie Eitel

May 31, 2008  by in UnCategorized   

By Home Furnishings Business in Bedding on June 2008 If anyone deserves to be called an “industry leader” in bedding, it’s Charlie Eitel. The longtime chairman and CEO of Simmons Bedding Co., Eitel also assumed the duties of company president last year following Gary Matthews’ resignation. In addition to his multiple roles at Simmons, he’s the chairman of bedding trade organization the International Sleep Products Association (ISPA).

Like other industry leaders, Eitel faces tough times ahead. While the bedding industry is expected to weather the storm of a down economy better than other sectors in the home furnishings business, Simmons still faces the same challenges every category currently does—consumers’ limited budgets, price cutting all around, and a wide variety of products competing for shoppers’ dollars.

Eitel spoke with Home Furnishings Business about his plans to grow Simmons’ business in such a climate, the company’s efforts to go green, and his vision for ISPA’s role in the industry’s future.

While furniture stores and furniture manufacturers currently report steep drops in sales, mattress sales have continued to grow. What can mattress manufacturers teach other furniture segments about creating demand?

One thing we did that’s very different: We have a just-in-time model and so you really don’t have to wait for mattresses. If you buy a product today, it will more than likely be delivered today or tomorrow, so the majority of domestic manufacturers have the ability to make the the order very quickly and get the product to the furniture dealer. Obviously, they get it straight to the consumer, so speed is one of the key items. The other factor is mattresses inherently are really a little bit more important, I think, to the consumer than furniture, because sleep’s more important than sitting. So I think it’s a production model and marketing model, and also we do a really good job at educating retail sales associates on the importance of a good night’s sleep.

It’s hard not to notice makers of foam and other bedding working to create a negative perception of inner-spring beds with phrases like “pressure points” or “an old bed with steel coils.” Has that created challenges for Simmons?

We acquired ComforPedic® last summer, which is the next generation of memory foam product. We also have a wonderful latex line called Natural Care™, so we want to make what our dealers, retailers and consumers want to buy. If it’s a wire bed, if it’s a latex bed, if it’s memory foam—we make it. If it’s a combination, a hybrid, which is really one of the hot new selling categories for us, we call it Beautyrest® Next Generation—and that product is flying off the floors. It’s a combination of the legacy of Simmons Pocketed Coil® with the next generation of memory foam. So Simmons doesn’t have any sort of campaign to protect steel. We’re on a campaign to provide retailers and consumers with what they want. I think we’re doing that better than anyone, in that we have everything, whatever they want, from an open-coil traditional inexpensive product all the way up to $7,000 beds in both memory foams and Beautyrest Black™ and combinations thereof.

Are people shifting to more reasonable bedding due to today’s economy?

Not necessarily. People who have money are spending it, and when they’re spending, they’re going to buy the best. So we’re faring very well in our premium segments. It’s actually the fastest-growing segment in our company, but there’s no question it’s kind of a high/low. I think you’re going to see a lot of people go low because of price, and you’ll see people who have money go high. It may be here in the middle that ends up a little bit more under pressure.

There’s a lot of talk lately about “green” furniture and bedding. What’s Simmons doing to be a part of this movement?

We’re rolling out our Natural Care™ line in coordination with Danny Seo, the environmentalist. I’d say it’s very important to not greenwash—that nobody claim they’re doing something they’re not. I’m personally very sensitive to that—to be sure whatever we say is completely true and it’s also not misleading. From there, it’s a marketing story, and it’s interesting, but that’s not the solution to green. Green is all about product design using all components from either recycled or upcycled products. The industry’s already doing a pretty good job with 100-percent recycled or upcycled steel, as well as with wood harvested from sustainable forests. Even the foam manufacturers, Future Foam being one, are doing some nice things with more environmentally responsible processes, so I think the industry is doing a pretty good job at the manufacturing level and now you’re going to see some of that flow through at retail—hopefully with nobody misleading the consumer.

Are you using your role as ISPA chairman to encourage bedding manufacturers to be more environmentally responsible?

Yes, I am. In fact, that’s really one of the three or four things that I’m really focused on—to help lead the industry to be more sustainable, and clearly the biggest problem is the back-end, where products are being taken out of people’s homes and sold to renovators who are illegally operating to sell bedding to the underground. So to me, worst-case, we’ve got to figure out a way to keep these products from being improperly sold downstream, and probably the easiest way to do it, even though it’s not the best way, is to pulverize them and then take that pulverized feedstock and try to do something with it—either use it for energy or some sort of a recycled product.

We’ve heard about the campaign ISPA is starting up along the lines of the “Got milk?” program. What can we expect from this project?

We’re in the early stages, and the problem is, where do you get the money? We held a summit in Florida in February this year, and we had nine major retailers attend, and every one of them thought it was a great idea and totally support trying to grow the industry, and to me that’s one of ISPA’s No. 1 roles. One of the ways you do that is to eliminate the obstacles, and toward that end, they all said “Yes, let’s go for a campaign,” but they don’t want to pay for it. So Simmons stepped up and said, “Look, here’s the deal: If 75 percent of the industry will follow us beginning next January, contributing $2 apiece for every foundation we sell into a fund, we’ll begin to build that fund for the campaign. The key is, you have to eliminate the majority of the free riders. No manufacturer can do this by themselves; it’s going to take at least 75 percent of the industry to fund it. If we can get the funding—and I’m optimistic that we will over time—then you’re correct, it would be a campaign much like “Got milk?” and we’ve actually retained the exact same person, Tom Nagle, to run the campaign. But we’re not developing it yet because we don’t have the commitment from the industry to do it, and it probably will take the balance of this year, if not longer, to get that commitment. But when we do, assuming we do the theme clearly, it will be a health and wellness campaign focused on the importance of a good night’s sleep, and I have tons of pieces of data that are just alarming about the number of automobile accidents caused by sleep deprivation, the health issues that are results of people not getting eight hours of sleep. So the campaign clearly will focus on the health and wellness benefits, much like “Got milk?” did. That’s the plan. It’s kind of slow-moving, but I’m going to stay in there and keep swinging and hopefully we can get it done.

Are you a sound sleeper?

Yes I am. I’m kind of obsessed with it. I sleep eight hours every night. I just go to bed early—that’s the key to it. If you don’t go to bed on time, you’re going to have a problem.

Do you constantly change mattresses at home to test out new models?

I do. Three to four times a year, I’m testing something new. A lot of our executives do that. It’s part of our own research—to be able to know what’s working.

If I need a mattress right now, there’s a mattress store on the corner, I could go to Costco or I could call an 800 number to have one delivered within a few hours. How does the Simmons brand fit within all of that? Could I or should I be able to buy a full range of Simmons products at any of those outlets?

No. First of all, a mattress is not a product that you buy over the phone, and it’s not a product that you take off the shelf. If you go to the grocery store and you want a particular product, you already know what it is—you’ve used it before. You’re just repeating a purchase that’s familiar to you. Unfortunately, with a mattress, for the average consumer it’s been over 10 years since they bought the last product, and the entire industry has changed, so you really need to be sold the product, And if you go to Costco, there’s nobody there to sell it. What are you going to do? It’s on its side and it’s a practical matter—it’s just a commodity. So if all you want is a mattress, you don’t care what it feels like, yeah, go to Costco. It’s fine, or if you want to buy something over the telephone, fine. But at the end of the day, our products need to be sold, and the three best ways to buy our product are through a department store, furniture store or speciality sleep shop. We spend millions and millions of dollars training people on how to sell our products, and not only to sell our products, but to sell period. And we believe we have the best stuff and that if we allocate our dollars to educate that person, they’re going to properly fit a consumer to what they really need.

I expect I’ll see an ad this weekend offering a Beautyrest® queen mattress for $399. Does that pose a problem from a consumer education standpoint for Simmons or the industry?

I hope not. I think selling mattresses on price is a bad idea. That’s part of what we’re trying to do with this ISPA campaign—move away from price. There’s a segment of the population that has a very limited budget and they’re probably sleeping on a very old bed, and almost for sure a new bed—regardless of whose product it is—will help them sleep better, because over time mattresses do impress and there are all sorts of issues that occur because it’s a textile product that’s going to wear out over time. So a new mattress at any price is a good idea, but selling on price, and advertising on price, to me, is a bad idea and it’s a terrible habit this industry has gotten into. Frankly, I think we need to get out of it, and it’s just the way it is. But that $399 bed, you’d be surprised how seldom it’s sold, because once the consumer comes in, they’re really not going to buy a lot of product for $399. To get a really great product, you need to get up to close to a thousand dollars.

What can we expect to see in the future from Simmons?

So much of that’s dictated by us listening to our retailers and consumer focus groups. But for sure, everyone would tell you, I think, who knows anything about this business, that we have been innovators, whether you go back 100 years or eight years when I joined the company, or even right now with the Next Generation hybrid, we’ve been the innovator, and I think people look to us to be the innovator. But we don’t always innovate just to innovate. If you’re making a change to your product, you want to make sure it’s really improving people’s sleep and it’s not some gimmick. We’re not in the gimmick business. We don’t believe in inserting features into beds just for the heck of it. So I would say our product lines right now clearly are the most sound that they’ve ever been, and we are the fastest-growing bedding manufacturer in the country for sure. We gained the most share last year and we believe we gained the most share first quarter (of 2008). We think our product lines are sound, and that’s the reason we’re continuing to grow. We’ll keep tweaking it and keep listening and trying to find the next best right answer.

Besides trying out beds, how do you enjoy your spare time?

I like to be outdoors—golfing, boating, scuba diving, some fishing. I have a home in Florida. Being outside and being with my family—that’s about it.

(Thanks to Jo Fleischer for his contributions to this story.)