How much furniture capacity is left South of the border?

HIGH POINT — Mexico’s historic rise in the world of furniture manufacturing is no longer a secret.

Here are some numbers to put the country’s ascent into perspective. According to Furniture Today research, Mexico’s furniture exports to the U.S. rose 61% in 2021 over 2020, eclipsing $1.9 billion in market share. With the exceptions of India and Thailand, which saw significant increases of 58% and 55% respectively, Mexico’s rise far outstrips every other country, even surpassing leaders China and Vietnam by more than 35%.

Mexico is still significantly behind Vietnam and China, whose furniture exports hit $9.1 billion for the year. But its rapid rise to the third-place spot is certainly remarkable.

Many vendors have recently set up operations there, including A-America, Legends Furniture, New Classic Home and American Woodcrafters, to name a few. Others, such as Marge Carson, Martin Furniture and Whom Home, have taken steps to boost their output in the region.

But how much capacity is left in the country for furniture manufacturing? And what other challenges are giving furniture makers issue?

New Classic is one company that’s new to Mexico, introducing its first products from the country earlier this year.

“Capacity is definitely a challenge for companies wanting to come down here and start new, as there are very few companies with large enough capacity to take on bigger vendors or customers,” said Scott Hill, the company’s president of sales and marketing. “So, you have to position yourself with the right factories.”

Legends Furniture is even newer to the region, having unveiled its first bedroom collection out of the country at the recent High Point Market. The company runs a facility in Arizona, as well as sourcing from Vietnam.

“Mexico is already maxed out with capacity,” said Tim Donk, vice president of sales at Legends Furniture. “People are talking about ability to muster up secondary factories.

“We’re lucky because we’ve been tinkering around there for the past 10 years. We expect a big push to Mexico, but it’s going to be hard for new companies. Quite frankly, we’re already late to the game.”

A-America introduced its first Mexican collections in January at the Las Vegas Market.

“We’re already seeing capacity being hit,” said Christian Rohrbach, company president. “A lot of factories are completely full. With only 130 million people in the country, it doesn’t have that ability to hit China’s levels. But with that said, the quality of Mexico better than I thought.”

When it comes to capacity, region is also playing a role.

“There’s a lot of inquiries along the border and in the interior of Mexico, areas such as Monterey, Guadalajara and Mexico City,” said Gil Martin, founder of Martin Furniture.

Martin has been making furniture in Mexico for the past 20 years, when it moved its manufacturing plant from San Diego to Tijuana.

“There may be more opportunities in the interior of Mexico than along the border, but the freight to bring goods up to the U.S. border is steep from further South,” he said.

Jim LaBarge, CEO of the high-end Marge Carson, is a veteran in Mexico, having been manufacturing in the Tijuana region for the past 25 years. LaBarge is less worried about capacity, but he does think newcomers will have a harder time than they would have in earlier decades.

“Capacity I don’t think is an issue in Tijuana,” said LaBarge. “But maybe it is for companies moving in different directions.

“I will say, though, that in Tijuana, the cost of building is very high now,” said LaBarge. “You used to always be able to negotiate lease rates. We have a long-term lease so we’re fine. By the end of the year, we’re probably going to have to look for a new facility.”

LaBarge is much more bullish on upholstery than case goods, as most factories he says lack the technical sophistication required by Marge Carson. His primary goal now is finding factories capable of producing case goods at a high enough level.

“I have a solution that I’m not ready to announce,” he said. “But it’s still going to take more work.”

Freight issues mount

Freight prices are rising, and transportation trouble is becoming more common.

“Trucking is harder when you’re coming from the South,” said Jonathan Bass, CEO of Whom Home and Innova. Bass has been producing furniture in Mexico since 2011.

“From Tijuana to our town, there are five checkpoints. Trucks can be pulled over at any time, and you have to pay for the unload. They’re looking for stolen trucks and drugs,” he said. “Guadalajara to Tijuana is $8,000 in freight. It’s expensive. And the further away from the border you are, the more complicated it is. Border proximity is key. Guadalajara is better if you’re shipping south,” he said.

Hill at New Classic cited rising fuel prices and a lack of drivers as reasons for why the situation seems to be worsening.

“Freight is becoming more of a challenge for people who don’t have their resources in line,” he said.

Rohrbach also cited a lack of drivers and trucks.

“While Mexico’s quality is better than I thought, trucking has been underwhelming,” he said, saying that while transport certainly beats China and other countries overseas, it doesn’t beat them by much.

LaBarge agrees that transport is hard but with a different take.

“Getting things picked up is hard,” said LaBarge. “We had a situation where a truck was supposed to come but never showed up. Later they said they had a problem. Who knows what the truth was? Now, that could be just due to unreliable people. I’m not sure.

“If California would allow Mexican trucking companies to operate more freely, it would help. They only allow one stop for maquiladoras,” LaBarge continued. A maquiladora is a company that brings raw material from the U.S. down to Mexico and has Mexican labor produce the added value. The finished product is then returned to the U.S.

Labor issues

Labor is also an issue in Mexico, in some ways mirroring those currently seen here in the U.S.

“Retention of our workforce is a constant challenge,” said Martin. “Since we’re close to the border in Tijuana, there’s so much competition for the labor that’s available. The government also raised minimum wage in all of Mexico by 21% on the first day of 2022. This added to our operating costs.”

“Workers will switch over for a small amount of pay increase from another factory,” said Pat Hayes, Martin’s vice president of product development and design. “You really need to pay more than the going rate and provide better benefits to keep the good workers; otherwise, it becomes a revolving door of training and finding new workers.”

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