Hollander Home Fashions Corp.

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Hollander Home Fashions Corp.

6560 W. Rogers Circle, Suite 19
Boca Raton, Florida 33487
U.S.A.
Telephone: (561) 997-6900
Fax: (561) 997-8738
Web site: http://www.hollander.com

Private Company
Founded: 1953
Employees: 1,200
Sales: $211 million (2002 est.)
NAIC: 314129 Other Household Textile and Product Mills

Hollander Home Fashions Corp. is a privately owned major bedding manufacturer based in Boca Raton, Florida. Products are organized under three business groups: basic, fashion, and designer. Pillows are the most important product line in the basic bedding group, which specializes in white goods. Hollander sells more pillows, some 30 million across all groups, than any other company in the world. In addition, the basic bedding group offers mattress pads, down comforters, featherbeds, fiberbeds, throws, and blankets. The company also produces much of the group's raw materials by processing its own down, feathers, and polyester fiber fill. The fashion bedding group offers complete ensembles aimed at the juvenile, teen, and adult markets. Products include decorative pillows, pillow shams, comforters, duvet covers, sheets, bed skirts, and layered window treatments. Some of the juvenile lines are licensed with such designers as Hank Player USA, Todd Parr, and Libby & Friends. Hollander has stepped back from an earlier push to license well-known properties, due to mixed results. The designer bedding group offers basic bedding products through licensing agreements: Laura Ashley and Karen Neuburger for a more upscale market; and Countess York, JG Hook, and Beauty Rest for mid-market retailers. Traditionally involved in private-label manufacturing, Hollander also has taken steps in recent years to build its own brand: "Hollander Home Fashions: Live Comfortably." In addition to its corporate offices in Boca Raton, Hollander maintains a New York City showroom and nine manufacturing plants in the United States and Canada, factories in Germany to serve the European market, and five factories in China.

Founder's Emigration Following World War II

The company's founder, Bernard Hollander, emigrated from Uruguay to the United States in the late 1940s. Settling in New Jersey, he made his living peddling such everyday items as glasses and combs to retailers on a wholesale basis. He also began acting as a bed pillow jobber. One of his clients was Two Guys, the first discount store chain in the United States. The pillow maker that he represented decided to sell directly to the chain and cut him out. He vowed on a Friday that he would have a factory by Monday to start making bed pillows himself. He kept his word by converting his Irvington, New Jersey garage into a makeshift plant, relying on a single sewing machine and a homemade measuring board. Thus in 1953 he launched Hollander Home Fashions. It was a shoestring operation in the beginning: He sold his pillows by going door-to-door to home furnishings retailers, keeping track of orders on sheets of wrapping paper. A major turning point was a decision by the U.S. government, because of the Korean War, to commandeer all large supplies of feathers in order to make sleeping bags for the military. Because Hollander's operation was small and unnoticed, his supply of feathers was untouched and he was able to take advantage of the situation and establish himself as a pillow manufacturer. Soon he was able to move the operations out of his garage and into a true manufacturing plant.

In 1954 Bernard's 16-year-old son, Leo, began learning the business. After school, he worked in the factory, cutting fabric, and accompanied his father on visits to department stores on open buying days. He joined the company full-time in 1958. In 1964 Leo, still in his 20s, took over the business from his father and began to expand it. Factories in Los Angeles and Chicago were opened. A third generation, in the form of Leo's sons, were soon learning the business as well. The eldest, Jeff Hollander, began helping out on weekends when he was just six, counting the change in the soft drink machines and sorting canceled checks. After attending the University of Pennsylvania's Wharton School of Business, he worked briefly for a Washington, D.C., advertising agency. In 1981 he agreed to come to work for the family business at a salary less than half of what he made at the ad agency, but he correctly surmised that he had a greater chance for advancement working for his father.

The 1980s brought major changes to the bedding industry, in particular bed pillows, which for years had been dominated by a dozen strong regional companies. A wave of consolidation swept through the industry, led by Pillowtex Corp., which by the end of the decade had a 50 percent market share in pillows. When the shakeout was complete only four national manufacturers and a handful of weak regional companies remained. Hollander, by attending to its own business and choosing not to get caught up in the acquisition mania of this period, was one of the national survivors. But unlike some of its larger rivals it had not accumulated massive debt loads buying up the competition, a decision that over the course of the ensuing decade would lead to the demise of some.

One of the most important steps Hollander took in the 1980s was to start manufacturing offshore in Asia, years before it became a standard approach by U.S manufacturers. Because it was becoming increasingly difficult to find companies in the United States to do detail work such as hand sewing and double-needle sewing, Hollander turned to China, establishing an early presence in a country that would be destined to play a major role in the future of textiles.

Broader Product Lines in the 1980s

In 1989 and 1990 Hollander relocated its corporate headquarters from Newark, New Jersey, to Boca Raton, Florida, and later moved its product testing lab to the new location. At this stage, the company remained very much a private-label pillow company, well established with mass merchants such as Kmart, Wal-Mart, Sam's Wholesale, and Price Club. The company was dominant at the low price point, roughly $6, controlling about 40 percent of the synthetic pillow market, but with better stores Hollander's sterling reputation as a low-end supplier was not an advantage and the company did little business at higher-price point, higher-margin merchandise. Because there was less competition in the bedding industry in the wake of consolidation, both in terms of manufacturers and retailers, Hollander saw an opportunity to broaden its approach. No longer content to compete on price alone, the company now wanted to upgrade its styling and offer higher-end merchandise, thus becoming a total resource for its customers. A line of natural-fill comforters was introduced in 1989, followed by more expensive duvet covers. New synthetic fillings as well as feather and down were used in pillows to produce more upscale products to trade-up customers. Moreover, the company took advantage of its strong position in pillows to grow its mattress pad business. The company's decorative bedding products also were upgraded with the hiring of a print stylist. One of the results of this effort was new sheets added to an expanded line of decorative bedding ensembles, in order to provide low-price point ensembles with a fashion look. To support this aggressive approach to expanding its product lines, Hollander added its manufacturing capacity in down and feather processing by opening a California plant, and increased mattress pad quilting, and cutting and sewing operations.

By 1993 Hollander was generating around $140 million in annual sales, the result of five years of a 25 to 30 percent growth rate. Because the pillow business was mature, the company decided that rather than slug it out with the competition in taking away market share it would attempt to grow its fashion bedding business. To jumpstart this effort, Hollander acquired the assets of Countess York, a bed covering manufacturer that had been forced into Chapter 11 bankruptcy. Hollander's business was now restructured into two divisions: basic bedding and decorative bedding, which consisted of the Countess York line of comforters, bedspreads, comforter sets, window coverings, sheets and pillow cases, as well as the Cornucopia Cache line of decorative pillows. To keep pace with the demands of its expanded product offerings, Hollander also invested about $1 million to bolster quality control, including the purchase of inspection machines, computerized color matching, and a statistical record-keeping machine. A new director of quality assurance was brought in to implement a formal quality control program that was rolled out to all of Hollander's manufacturing operations.

The Countess York line failed to catch on with retailers, prompting Hollander to scrap the line and in February 1993 hire a respected designer, Terry Dikomeit, to start a line from scratch. In a matter of just two months, Dikomeit designed and unveiled to buyers a line of fully coordinated ensembles that received favorable reviews from retailers. Department stores continued to see Hollander as a mass-merchant vendor and shied away, but Dikomeit's reputation in the industry was strong enough to begin breaking down some resistance. Specialty stores, on the other hand, had no such reservations and embraced Hollander's new emphasis. But in keeping with its experience in mass merchandising, Hollander opted to hold the line on pricing, giving up the final markup points in favor of setting prices that would result in high volumes. The Countess York label would later be revived as a mass-market line.

Company Perspectives:

At Hollander the theme Live comfortably guides everything we do . . . down to the tiniest detail.

Stepped-Up Licensing in the Late 1990s

In July 1998 Hollander became involved with juvenile bedding licensing by acquiring the rights to Hank Player, a sports apparel maker. Several months later the company hired a new vice-president of sales for fashion bedding, Tom McCaffrey, who had successfully headed The Bibb Co.'s juvenile line. Later in 1999 Hollander added licenses for the classic patchwork dolls Raggedy Ann and Andy, and Rocky and Bullwinkle, the 1960s television cartoon characters that were about to be revived as a motion picture. In addition, Hollander signed a licensing agreement with major league baseball to produce juvenile bedding designs for the mass merchants, warehouse clubs, off-price retailers, toy chains, catalogs, and baseball team stores. Hollander added Todd Parr and its "Silly City" concept as a juvenile bedding license in 2000. Although Raggedy Ann and Andy, and to a lesser extent Todd Parr and Hanker, did well, the Rocky and Bullwinkle license proved disappointing, and the baseball design did not live up to expectations. Because the major licenses commanded high royalties and major guarantees by licensors, Hollander soured on the hit-or-miss nature of this segment. Furthermore, the company's non-licensed bedding generated about 80 percent of its juvenile business. As a result, McCaffrey was let go and Hollander scaled back its juvenile licensing efforts.

The basic bedding division also became involved in licensing. It signed a licensing agreement with the U.K.-based fashion and home furnishing company Laura Ashley and enjoyed good success. Then in 2000 Hollander signed an agreement with major mattress manufacturer Simmons Company to produce a collection of down pillows, comforters, and featherbeds under the well-known Beauty Rest label. In 2002 Hollander acquired the bedding license from designer Karen Neuburger.

While pursuing licensing opportunities, Hollander also bolstered its manufacturing capabilities overseas. It opened a factory in Auma, Germany, located in the former East Germany, to produce pillows and comforters for the European market. Hollander also began manufacturing in mainland China in 2001, opening five factories in Huangzou. The company added to its presence in China two years later with the opening of an office in Shanghai, a city that was emerging as a hub for business in China.

The bedding industry had seen a number of changes during the 1990s and early years of the new century. Pillowtex, once the industry leader, collapsed, its assets sold off in bankruptcy court, leaving just two 1950s-era pillow manufacturers left standing: Hollander, the market leader in terms of volume, and Pacific Coast Feather Company, the market leader in terms of revenues. While both companies were successful, Pacific Coast made the wise choice of building its own brand rather than relying on private branding and licensing. Hollander now played catch-up in this area. When Bed Bath & Beyond approached the company in October 2002 about producing a fiberbed product, Hollander took advantage of the opportunity by arranging to sell the product under a new Hollander label rather than as a Bed Bath & Beyond product.

For the first time in its history, Hollander hired a marketing firm and a public relations firm to represent it and help build its own brand. It spent more than $1 million advertising in trade publications and developing in-store displays, and also devoted time to renegotiating a number of private-label agreements in preparation for the 2004 launch of Hollander's own line of branded bedding products. The Hollander brand got off to a good start, but whether conflicts would develop with private-label or license customers, who now became competitors as well, remained to be seen.