Family flooring business set for a solid future | Fin24

Family flooring business set for a solid future

Mar 09 2016 15:00
Lameez Omarjee
CEO of Van Dyck Carpets, Dr Mehran Zarrebini. (Pic

CEO of Van Dyck Carpets, Dr Mehran Zarrebini. (Picture supplied).

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Consumer confidence may be at its lowest level in 14 years due to a tough economic climate, but flooring company Van Dyck Carpets is full of plans to grow its market share locally and build its international footprint.

Bought by PFE International, Van Dyck has seen its market share grow from 20% in 2004 to about 33% for all flooring products.

Van Dyck, a family-owned business with decades of experience in the carpeting business, and also South Africa’s oldest carpeting brand, grew revenue 20% between 2013 and 2015.

This success can mainly be attributed to the strength of the family business, which values long-term resilience over short-term performance in its decision-making, says CEO Dr Mehran Zarrebini.

He joined the family business after graduating with a PhD in chemical engineering from the University of Cambridge in 2001, at the age of 26.

Zarrebini’s grandfather and other family members were always involved in the sale and distribution of handmade Persian carpets in Iran.

His father obtained his PhD in textile engineering in the 1970s and proceeded to start the family’s first carpet factory in 1975 in Iran. This operation is still running today, as a family-owned business, Zarrebini says.

Today, PFE International manufactures raw materials for the flooring industry across the world. The group also includes PFE Extrusion and tyre recyclers, Mathe Group.

PFE International’s first investment in SA was in a joint venture with textile group Ninian & Lester in 1995, at the “dawn of democracy”, as Zarrebini describes it.?

In 2004, PFE International acquired Van Dyck from its Belgian parent company Domo Carpets. Van Dyck, which was established in 1948, was the “perfect fit” for PFE International, says Zarrebini.

“We realised there was an opportunity for us to secure our stake as raw material manufacturers in SA,” Zarrebini tells finweek. Besides carpeting, the group manufactures a variety of flooring products, including textiles, for commercial and residential purposes.

The move to SA was part of a strategy to relocate its manufacturing operation from the UK to Hammarsdale in KwaZulu-Natal.

One of the principle attractions at the time was the relatively inexpensive cost of utilities and labour. Compared to other developing countries, SA’s infrastructure has always been highly developed, especially the financial and logistical industries, says Zarrebini.

Managing a family business

The ownership structure of a family business gives it a long-term orientation for success, which other companies often lack, says Zarrebini. “We tend to look at a longer horizon to ensure our future generations can sustain our business.”

This means being frugal, in good times and in bad. When it comes to expanding, it’s important to be judicious with capital.

For this reason, “strong” projects with high potential returns on investment are favoured. “This may be a good thing or a bad thing and may result in missing out on some opportunities in the short term,” he says. Overall, it minimises risk exposure over the long-term.

PFE International also favours joint ventures and strategic alliances with flooring experts in their respective countries, says Zarrebini.

This is beneficial in leveraging off the skills of others, while focusing on the group’s core strength, which is manufacturing. A recent example is its venture with Belgium-based group Pergo, which specialises in laminate and hardwood flooring, which was announced in September 2015.

The deal makes Van Dyck the sole distributor of Pergo flooring products in the Southern African Development Community (SADC) region. 

Employee retention is also a priority, not only for retaining skills and knowledge, but also because it helps to develop a strong culture within the organisation, says Zarrebini. The group has close to 700 employees in SA.

Having worked in diverse environments and being exposed to different cultures in countries like Iran, England, Portugal and Brazil (where his wife is from) Zarrebini says his experiences have helped him adapt to doing business in SA.

Zarrebini has also had a hand at a number of start-ups, which has made him “comfortable” with switching roles in different circumstances and tackling challenges. “Being involved in a number of start-ups requires a sort of ‘roll-up-your-sleeves’ mentality,” he says.

His skills and knowledge as a chemical engineer have also been beneficial in the manufacturing industry.

“I think the background also helped me gain quick enough understanding of the types of processes that are involved in manufacturing flooring,” he says.

Investing in sustainability

One of PFE International’s recent investments has been in Mathe Group, an environmentally sustainable company that manufactures rubber crumb from used tyres.

The operation is in association with tyre-recycling organisation, Redisa. These products are used by Van Dyck in manufacturing acoustic underlays and cradles and there is also a market for rubber crumb as infill in the sports industry (e.g. in athletic tracks). The largest export market for recycled rubber products is the USA and UK.

“Recycling waste tyres will create the opportunity to innovate further and develop more downstream opportunities which may or may not have been untouched especially in SA,” adds Zarrebini.

Zarrebini believes sustainability and maintaining green standards should be central to business.

Although there are a number of challenges for companies to comply with these demands, there is also an opportunity to turn them into a competitive advantage. There is a misconception that expanding or developing products that incorporate green attributes is more expensive, he says.

“I find our environmental initiatives have actually lowered costs in the long term. I see them as an investment opportunity rather than a threat,” Zarrebini says. Investment in sustainability has been accompanied with greater efficiency and productivity, he says.

In May 2015, Van Dyck was awarded the Carbon Trust Standard certification, which recognises organisations that take a best practice approach to measuring and managing their greenhouse gas emissions and achieve real reductions in these on a year-on-year basis.

Van Dyck, which has reduced emissions by 28% over a two-year period, is the first organisation in Africa to achieve this standard. A further reduction of 10% is expected within the next year, Zarrebini says.

The group will continue to invest in its existing companies, and prioritise upstream raw material production to reduce its dependency on imports, he says.

Growing market share

Van Dyck currently sells to 20 countries, with exports making up about 15% of total sales. Its main market is Australia, but it also ships to the USA, Germany, UK, South Korea, the United Arab Emirates and countries in Southern Africa.

Growing market share requires having a good understanding of customers and researching how they define value, says Zarrebini. “We’ve increased market share simultaneously through differentiation and low costs,” he says. 

PFE International will approach 2016 cautiously, but has opted to invest in a number of different projects to differentiate products and develop new market opportunities.

“We’re expecting a decline in some areas but also growth in new areas. It’s going to be a mixture of both,” says Zarrebini.

The group will focus on expanding and building its international presence. This will be achievable through the development and reinforcement of some existing and many new partnerships, explains Zarrebini.

The group will also commit to continued development of sustainable products manufactured, which will contain a high percentage of recycled content.

“We’d like to consider design for an environment with minimisation of resources. Environmental initiatives are certainly a force,” he says.

This article originally appeared in the 18 February 2016 edition of finweek. Buy and download the magazine here.

recycling  |  sustainable  |  business  |  carbon tax  |  green  |  entrepreneurs

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