Panels & Furniture Asia Jul/Aug 2020

July / August 2020, Issue 4 | Panels & Furniture Asia 40 | FURNITURE MANUFACTURING INCREASING CORPORATE SALES Alexander Shestakov (AS): In 2019, First Furniture Factory saw a 12% increase in revenue to 2.2 billion rubles (US$31.6 million). This growth was largely attributed to the development of corporate sales, which included an increase in the number of contracts for the supply of furniture to state and municipal customers, as well as expansion supplies to private companies. For example, at the Russia-Africa Summit held in October 2019, First Furniture Factory signed a series of large-scale contracts totalling 218 million rubles (US$3.1 million), one of which was with the Roscongress Foundation for the supply of chairs for the summit worth 109.5 million rubles (US$1.6 million). First Furniture Factory also made the furniture for the VIPs, as well as two 70-seater round tables, each about 12 metres in diameter, for the heads of state. Also contributing to the company’s growth was cooperation with construction companies on the supply of furniture to new apartments. In 2019, the company’s furniture sales to construction companies exceeded 500 million rubles (US$7.2 million). INVESTING IN NEW PRODUCT DEVELOPMENT AS: To produce products that correspond with the latest trends in furniture fashion, have an optimal price-quality ratio, and at the same time are functional, ergonomic and demanded by consumers, it is necessary to launch seven to 10 new collections annually and invest up to 10% of revenue on these projects. The experience of First Furniture Factory confirms the validity of this theory. We also came up with another theory: if 80% of new products are created by the company's in-house design bureau and 20% are made by invited designers, including recognised international entities, investments made in the development of new products are returned in the shortest possible time. TOP QUALITY EQUIPMENT AS: In 2017, First Furniture Factory completed its final large-scale modernisation project for its production equipment. At a cost of about 50 million euros (US$56.7 million), the capacities of the Swiss Piatti plant were transferred to St Petersburg. Currently, these capacities are sufficient and we are not massively updating the equipment park. Of course, there are expenses incurred for the maintenance and repair of the lines, but they fall within just 1% of the revenue. The project to transfer the capacity of the Piatti plant from Switzerland to Russia sought to increase sales of kitchen furniture in Russia by about two to three times. I believe that this project has been very successful. Due to the launch of the latest ultra-modern technological equipment, the First Furniture Factory almost doubled its revenue from 1.3 billion rubles (US$18.6 million) in 2016 to 2.2 billion rubles (US$31.5 million) in 2019 – most of which are sales of kitchen sets. Since then, we have fully appreciated the capabilities of the new lines through the diversification of our product range. First Furniture Factory began producing new types of products, such as cabinet, office and hotel furniture. The kitchen sets in the “medium” and “medium plus” segments range from 70 thousand to 120 thousand rubles (US$1003 to US$1720). The company's also has “economy” and “premium” segments – the latter of which includes designer furniture sets created by world-class craftsmen exclusively for First Furniture Factory. FURNITURE DEMAND WITHIN RUSSIA AS: In Russia, the demand for furniture is growing slightly. The greatest demand is for kitchen sets, and furniture for dining rooms and living rooms, and the office. An Insight into the Russian Furniture Market: Today and Beyond Russian furniture manufacturer First Furniture Factory has been specialising in the production of custom-made furniture for more than five decades before focusing on kitchen furniture production in early 2000s. In the past two years, the company saw its sales double within two years. According to Alexander Shestakov, chief executive officer of the company and president of the Association of Furniture and Woodworking Enterprises of Russia, it is necessary to invest up to 10%of annual revenue in development of new furniture collections to maintain growth. Shestakov shared some of the recent developments in his company and his insights on some of the current trends and challenges seen in the Russian furniture manufacturing industry. By Marina Khaibulina, Lesnaya Industriya Journal