Empire Ready For Aggressive Growth

December 13, 2004
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ZEELAND — The Empire Co. is looking to begin a second decade of aggressive growth with Tom Highley at the helm, but not the same Tom Highley that led the Zeeland-based distribution and marketing company from financial difficulty to industry leader.

Thomas B. Highley has taken over the responsibilities of day-to-day operations and management as president, a role recently vacated by his father, Thomas H. Highley.

The senior Highley will remain CEO of the company, but will now focus the majority of his time on strategic growth initiatives centered upon what the firm terms “an aggressive acquisition program.”

The elder Highley came to the Empire Co. as CEO and president in 1991 at the request of Westinghouse Credit Corp. on the condition that he would have the opportunity to buy the regional supplier of molding and specialty millwork if he could turn it around.

That chance came in 1993, and in the decade since, Empire has grown from a one-region, $40 million company with 85 employees to one of the largest companies of its kind in the country.

Now boasting more than 325 employees, a million square feet of warehouse space, and revenues in excess of $180 million, Empire serves most of the eastern United States from its distribution centers in Zeeland; Ocala, Fla.; Allentown, Pa.; and Chesapeake, Va.

Empire enjoyed that level of success despite the bankruptcy of eight of Empire’s 10 largest customers from 1994-98, with a ninth occurring just last month.

“We were able to distinguish ourselves in terms of service support,” the senior Highley explained.

“We deal in commodity products, and if you have nothing more than a commodity product, it’s very difficult to distinguish yourself on the basis of a product category.

“Where we differentiated and distinguished ourselves,” Highley said, “was on the basis of the service support required for those commodity products.”

One of the most significant ways Empire was able to excel was through the adoption of value-added technology support services, including electronic order processing, bar coding, inventory stock level monitoring, cycle counting and in-store packout services as part of its vendor-managed inventory program.

This approach has led Lowe’s Home Improvement Centers to give Empire the total responsibility of sourcing, distributing and managing specific product categories.  

According to Tom H., “the lion’s share” of Empire’s business had been found within the home improvement center segment.

But with nine of its top 10 customers folding in the past decade, a need arose to diversify its customer base with a concentrated expansion into the market’s lumberyard (pro dealer) segment.

“Our initial efforts to differentiate ourselves was based on the national home center market,” Tom H. said.

“Now we’ve balanced our energy and focus between that segment and the lumberyard segment,” he said. “We’d achieved a significant market share of what was left of the home center segment, and in the last 18 months we’ve achieved a more favorable balance on both sides of the fence.

“Now we’re looking to expand geographically through acquisition into markets west of the Mississippi within both customer segments.”

In the near future, Empire is looking to expand horizontally throughout the west as well as vertically into other parts of the supply chain.

“That’s the other major piece of the puzzle,” Tom B. added.

“We have a combined approach that will allow us to aggressively grow in both segments. Many of the targets we’re looking at will allow us to grow on both sides of the business.

“Our approach is to look at strategic partners that can allow us to diversify in both directions.”

He sees potential for growth on both sides of the business.

He said Empire has many more pro dealer customers than home center customers, but its main home center partner, Lowe’s, is large enough to take up a significant amount of internal resources.

“We’ll continue to aggressively grow the pro segment to obtain a more stable and diversified customer base,” Tom B. said. “We’ll become a more vertically integrated organization, and we’ll have a heavier part of our business involved in manufacturing as well as distribution.”

Through both strategic partnerships and acquisitions, the company is approaching possibilities within the domestic manufacturing of intricate and ornate products as well as synthetic materials, according to Tom B.

Assisting in the expansion westward is New Zealand-based Tenon Ltd.

Formerly Fletcher Challenge Forests Ltd., the publicly traded Tenon obtained a 67 percent stake in the Empire Co. last December after reaching an agreement to increase its shareholding in the company from one-third to two-thirds at a cost of roughly $10 million U.S.

Tom B. explained that Tenon will provide the financial backing necessary to complete Empire’s acquisition strategy.

Prior to his recent promotion to president, Highley was the vice president of sales and marketing for the pro dealer division.

Other changes included the transition of Dennis Berry from vice president of sales and marketing national home centers into vice president of sales and marketing.

Meanwhile, Empire promoted Chap Kester from former eastern regional manager to the newly created role of director of sales for the pro dealer division.    

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