Cavalier gears up for 'aggressive' push into Australian carpet market

Friday, 9 April 2021

Cavalier is gearing up its factories to cope with increased demand from an aggressive marketing push for woollen carpets.

Cavalier Corporation is gearing up for an aggressive push into Australia where it will take on its much bigger rival Godfrey Hirst as it comes to the end of its flirtation with synthetic carpets and focuses on wool and natural fibres.

The NZX-listed company has sold its Auckland property, paid off its debt, and at its December 31 balance date had $26.3 million of cash on hand to invest in its new strategy.

Cavalier announced in July last year that it was exiting the synthetic carpet market as it bets on increased demand for more sustainable products. It was forced to move into synthetic carpet in 2013 to remain viable as consumers switched away from wool and towards synthetics.

“The world is now a different place” as people become more aware of plastics and their impact on the environment, said chief executive Paul Alston.

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The company has another month or two to go before it ends production of synthetic carpet, and will then focus solely on natural fibres where it sees demand growing in the future.

“That is essentially halving our volumes, which is exciting but also scary at the same time,” Alston said.

The change saw Cavalier drop a shift at its Auckland factory at the end of last year, resulting in the loss of about 30 staff. Alston said the company asked for voluntary redundancies, which suited many staff who were coming to the end of their careers.

Cavalier expects the switch out of synthetics will result in reduced revenue this year. However, increased wool carpet sales are expected to lift revenues from its 2023 and 2024 financial years with the full benefits of the transformation expected from 2025 onwards.

The company is preparing for an “aggressive” wool marketing campaign that will run mid-year, Alston said.

“There are a number of pros of wool over synthetics, or plastic, which people don’t necessarily realise or have forgotten, so we are going to be pointing those out. We are gearing up for quite a large promotion,” he said.

Cavalier is preparing its factories to cope with any increase in demand.

“We have been adding more capacity, particularly to our yarn mills, to increase our volumes so when we do launch, if there’s any jump in demand we can cope with it,” Alston said.

Farmers are facing low wool prices as demand for carpet wool has waned following increased competition from synthetics.

The company is targeting Australia, a market six times bigger than New Zealand, and where it is a much smaller player than Godfrey Hirst, owned by the New York Stock Exchange-listed firm Mohawk Industries.

While Cavalier is also seeking to grow in New Zealand, there are more opportunities for growth in Australia, Alston said.

The company’s marketing will target women aged 30 to 60 online and through magazines, using influencers, and across various media including Facebook and Instagram.

Cavalier plans to sell its more affordable carpet range through an additional 300 retail outlets in Australia, adding to its 700 to 800 existing retailers there.

The company plans to offer training and incentives such as rebates to retailers to help them promote woollen carpets, he said.

Cavalier’s biggest challenge will be convincing consumers that wool is a better product to buy when there’s a lot of misinformation about synthetics, he said.

“Plastics are bad for the environment, it is entering the food chain and it’s not natural,” he said, noting one house-lot of nylon synthetic carpet was the equivalent of 22,000 plastic bags.

“People are going to the supermarket and not taking the plastic bag, but then you can lay a house-lot of carpet and it’s the same as going to the supermarket for the rest of your life.”

Sales of wool carpet in New Zealand have fallen to about 15 per cent of the market, from about 80-to-90 per cent 25 years ago, he said.

“New Zealanders and Australians need to understand that we have got the best products in the world sitting on our back doorstep and we’re not using them,” Alston said.

Farmers facing low wool prices were considering whether to keep their flocks and people could support them by choosing wool carpet over synthetic, he said.