Springs Global Transforms, Focuses

Brent Felgner, Don Hogsett, August 21, 2006

Six months after the marriage of Springs Industries and Coteminas, its Brazilian terry supplier, and the creation of a new company, Springs Global, work goes on to knit the two companies and their far-flung operations together. It will likely be another 24 months before the job is complete, said Springs executive vp, sales and marketing Tom O'Connor in a wide-roaming discussion on the eve of the New York home fashions market.

“Anything less than 24 months would certainly be a great accomplishment. You just can't believe how things never stop changing, and the speed at which they change. The minute you think one thing is accomplished, you may have to go back and rethink it.”

And when the job of integration is complete, “or as near complete as it ever will be,” said O'Connor, the new Springs Global will be a radically transformed company, much different from what it is now, or what Springs or Coteminas had ever been before.

What will it look like, this new Springs Global? “Take a look at the name. That tells you a lot about where we're going, and it all revolves around going global. We'll be both manufacturing and marketing product in different parts of the world, and not just where we are now,” said O'Connor.

“Stop to think: It's always easier to market a product where you have a manufacturing footprint. We manufacture here and in Latin America, and we also have a very large Asia office, and that can be used to market product as well as source product. The opportunity there is tremendous.”

“That Asian market is going to grow tremendously, and there's a tremendous appetite for Western products. Clearly, you can't ignore the rest of the world as a market, and we're not going to.”

How's the merger going? Like any new marriage, it has its tricky moments, O'Connor acknowledged. “But don't believe everything that you hear. The reality is that we're still in a kind of honeymoon phase. Let me tell you something, the market out there has been challenging, and the market conditions and the retailers challenge us more than the merger. Our merger, in many ways, is nothing more than the continuation of a five-year relationship in which we both got to know each other very well. So well, in fact, that there really haven't been many surprises.

“Fortunately, the relationship we've had with Josue [Gomes da Silva, co-ceo of Springs Global and Coteminas ceo] and his senior staff has given them an understanding of this business, and we've had years to understand what made Coteminas work.”

O'Connor brushes aside marketplace chatter about “cultural differences” that divide the two companies. “I don't think there is much of a cultural issue. In many ways, we share a culture that's very important to each of us. We actually have a whole lot more in common than people think. We both have a history of family ownership or family management, and that family thing is very important to each of us; it gives a company a very special character that can't be duplicated. We both have deep roots in our respective communities, and feel a real commitment to our communities. And we each have a strong aversion to debt, and we're very, very careful about how we spend money.”

What has made Coteminas so successful and such a good partner? “What's driven their success has been to be out front in technology and scale, in a part of the world where cotton is a very important locally produced raw material, and energy is readily available.”

The particular strengths of Coteminas? “Its focus and its passion,” said an unhesitating O'Connor. “They bring a singular focus to whatever they do, and a very real passion. No business has a singular dimension, and that's true of Coteminas. So they're focused, very tightly focused, on manufacturing, products, costs and service. Neither do they want to be a boutique, or an all-things-to-all-people type of company, which is much the same way Springs has defined itself since 2001.”

If there's been any one surprise since the two companies went to the altar, said O'Connor, “It's been the market. It's been far more challenging than either of us expected.”

Has that put a strain on the relationship? “Not as much as people believe. They've gone through all of it with us for the past five years. Springs Global may be new, but the relationship isn't.”

O'Connor defined two major benefits of the new relationship. “First, they have a much better view of the global landscape in retailing. American suppliers have been very myopic in terms of developing this market. Coteminas sees the market in a global sense, and the American market as part of an even larger marketplace.”

Balancing that, he added, “Springs brings a highly developed understanding of this market, and this is still about a third of the global marketplace for the products we make.”

The second big plus, said O'Connor: “Look at the kind of machine you're building when you take the best manufacturing, their international perspective, low labor costs, energy, and raw materials and combine them with our assets, the best go-to-market front-end distribution in the world, our distribution, design, logistics and customer service, and the two biggest home fashions brands in the world, Springmaid and Wamsutta.”

Leaning across the table to make his point, O'Connor added, “You really want to know what difference this merger has made? A few years ago all we could talk about was our 30% share of the marketplace and how to defend it. Now we talk about our 7% to 8% of the global marketplace and how we're going to grow it.”

“Let me tell you, that really gets your juices flowing, that really energizes you, when you realize you're at the very beginning of something and not just treading water.”

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