BY GARY JAMES
The Flex Group first succeeded with midrange bedding but sees strong future in high-end brands
Rafael González sees big potential in the luxury segment of the U.S. market. That’s why his Madrid-based company, The Flex Group, chose to enter the United States with its British-made luxury Vispring mattress line in 2010 and why it followed up that move with the purchase of a majority stake and then complete ownership of Rancho Cucamonga, California-based, high-end bed maker E.S. Kluft & Co. a few years later.
Today, Flex is a major player in the premium U.S. bedding market, and its Vispring and Kluft lines are sold by top retailers throughout the country, including Macy’s, Bloomingdale’s, ABC Carpet & Home and Sit ‘n Sleep. Flex has been registering double-digit sales gains in the United States for the past few years, with sales up 30% in 2017. The U.S. market now accounts for 40% of its international business, or $108 million annually—and the company aims to double that figure in the next three years.
“The U.S. offers a tremendous opportunity,” says González, chief executive officer of Flex. “It’s a huge, diverse country and the largest market for luxury products in the world. If you deliver quality products and meet the very demanding requirements of your retailers and their consumers, the sky’s the limit.”
González has been thinking big since he joined Flex. A former marketing executive in the food industry and grandson of Flex founder Antonio Beteré Salvador, he was asked by his family to take the company’s helm in 1998.
Beteré Salvador entered the bedding industry in 1912 when, at the age of 15, he joined uncle Andres Lucia’s wool mattress workshop. Beteré Salvador’s entrepreneurial spirit drove him to open his first metal frame plant in the 1920s and, later, several more mattress-making factories. The metal bases were branded Numancia.
In 1956, the Somieres Numancia brand was renamed Flex, coinciding with the launch of the company’s first spring mattresses. That year also saw the creation of a slogan capturing the company’s philosophy—“Of the Good, the Best.” In the mid-1960s, Flex’s swan logo became its hallmark.
Antonio Beteré Cabeza, son of Beteré Salvador, took over Flex in 1975 as managing director. He ran the company until the late 1990s, at which time his nephew, Rafael González, joined the company as CEO.
A new chapter
At that time, Flex was doing only about $120 million a year in revenue, González says. “All of our business was domestic (in Spain and neighboring Portugal, considered part of the domestic market)—zero international,” he says. “We had a big, old-fashioned industrial structure with 16 factories. For a small country like ours, that made no sense. It was time for a change.”
When he became CEO, González made a series of bold moves. He streamlined plant operations, introduced new management structures and expanded the company’s focus to a variety of export markets. The first destination: South America.
“We invested in Brazil in 2001 and, once we were established, added Chile in 2004,” González says. “It was a natural growth path because of our shared culture, language and heritage.”
In Brazil and Chile, Flex offers a full range of midpriced innerspring, viscoelastic and latex bed models. Brands include the Flex, Simmons (in Brazil) and Epeda lines, produced at its own facilities in the two countries. The company targets these customers with the slogan of “La Noche Es Nuestra” or “The Night Is Ours.”
Earlier, in the late 1990s, Flex had begun to spread its wings in Europe. Recognizing that opportunities might be better for high-end goods, Flex opted to look for an established company it could acquire as a foothold into countries such as England, France and Germany.
“In markets like the U.K., it doesn’t make sense for us to battle with local producers in the low or medium end of the market,” González says. “Instead, we chose the luxury end, where we compete on value, not price.”
Flex’s research led it to Vispring, a producer of luxury bedding whose roots trace back to 1901, when the Marshall Sanitary Mattress Co. was incorporated in London. One of the first producers of the revolutionary pocketed coil mattress developed by James Marshall in 1899, the company changed its name to Vispring in 1911.
Throughout its history, Vispring has been known for the bespoke comfort of its handmade mattresses, which feature a pocketed coil innerspring system surrounded by luxurious layers of natural materials. The coils all have six turns, inspiring the name Vispring—the “Vi” comes from the Roman numerals for six. The company’s beds retail from $6,000 to $48,000 in the United States.
“Vispring was a hidden jewel,” González says. “It was owned by a bank (Bank of Scotland) and the management team (in a buyout financed by the bank) and was unable to grow because it was highly leveraged. All of its profits were going to pay off that debt. But it had a great product, a highly skilled workforce, and a creative and efficient management team.”
The Flex Group acquired Vispring in 2005. “That put us on the map,” González says. “Vispring was a highly respected mattress maker located in England, the birthplace of modern bedding. That acquisition made us much more visible and gave us an entry to a new group of better-end retailers.”
Soon after completing the acquisition, Flex began growing the export side of Vispring’s business. It started by lining up high-end retailers in the urban centers of Belgium, Holland and Germany, expanded progressively throughout Europe and then extended its reach in markets such as Australia, China, Korea, India, Taiwan, Saudi Arabia, Singapore, United Arab Emirates and the United States. Exports, with Europe leading the way, now account for half of Vispring’s business.
“We ship Vispring mattresses to retailers in more than 40 countries,” González says. “We focus on metropolitan markets with a high concentration of affluent individuals, from Sydney and Seoul to Los Angeles and Toronto. We have a truly global footprint that is constantly expanding.”
As Vispring’s presence in the United States deepened, González found that, to grow further, the company would need its own U.S. manufacturing capabilities.
“This is a large, complex country,” González says. “As we began to discover the potential in the U.S., we realized that we needed a local brand and manufacturing base. Otherwise, shipping products to all the key markets from east to west and north to south can be a nightmare. We needed to get closer to the key retailers doing business here to keep service at the highest level possible.”
Flex started in 2013 by buying a 51% share in E.S. Kluft, producer of the high-end Kluft and Aireloom bedding brands, which has manufacturing in Rancho Cucamonga. Soon after that, E.S. Kluft opened a second factory in Hazleton, Pennsylvania. Two years later, Flex bought the rest of the company.
“The acquisition of E.S. Kluft, along with Vispring, established Flex as the world leader in luxury sleep products,” González says. “The Kluft transaction was particularly important for us as the majority of the world’s high net worth consumers reside in North America, and we needed a stronger presence in the market.”
Kluft was founded by Earl Kluft in 2004 but traces its roots to the creation of the Aireloom brand by King Karpen in 1949. Aireloom, which Kluft acquired in 2004, has a storied history, being the mattress of choice for celebrities ranging from Frank Sinatra and Rita Hayworth to Ellen DeGeneres. In 1969, former Beatle John Lennon and wife Yoko Ono held one of their “Bed-in for Peace” events on an Aireloom mattress.
Aireloom offers artisanal quality and premium features, including eight-way hand-tied foundations, hand-stitched side walls and thick layers of cotton, Joma wool and latex. Retail prices for the Aireloom line start at $2,999 in queen size and top out with the Karpen Luxury Paseo model at $9,999.
The Kluft mattress line, which starts at $4,000, also features handcrafted construction and premium natural materials. The Kluft Signature line, sold exclusively at Bloomingdale’s, combines the natural cooling properties of horsetail hair with more than 5 pounds of cashmere and natural Talalay latex. A top-of-the-line king-size Palais Royal model, featuring cashmere, Joma wool, cotton and Talalay latex, retails for about $24,000 at Bloomingdale’s.
Evolving for growth
In the early stages of Flex’s investment, Earl Kluft continued to serve as CEO of E.S. Kluft. In 2015, after the entire company was acquired, Kluft transitioned to consultant, and David Binke, who had been president of sales for North America, was named CEO. Binke served in that capacity until he resigned last fall, and Alain Rauh, a longtime executive with Flex, became acting CEO. Rauh also heads Flex’s international division.
“We’re now heading into a new stage in our development,” González says. “We have begun a search for a new leader but, in the meantime, our senior leadership team is doing a great job of executing our business plan.”
Flex is looking for a classic “European-style manager” to head the U.S. operation, González says. “Earl launched and developed the company into a major player, and David, his successor, helped expand the business nationally,” he says. “Now we’re going to take more of a team approach and find someone who can help us manage the complexity of what we’ve built and execute our strategy.”
As is the case in England with Vispring, Flex seeks to recruit a U.S. executive to lead the U.S. team rather than a Spanish ex-pat. “We need someone who really understands this market and how to meet the needs of our customers here,” González says.
E.S. Kluft is blessed with a strong U.S. sales team led by Dominick Azevedo, executive vice president of sales, adds González, who visits the United States regularly to meet with key retailers, suppliers and the company’s local managers.
“Since the time of our original investment, the team has helped us grow Kluft and Aireloom from $25 million to $100 million annually,” González says. “We have one of the best sales teams in the country and they’ve brought us a lot of new customers, including Denver Mattress, Mathis Brothers and Restoration Hardware.”
The rapid growth has not been without its challenges. “Operations were designed for a certain volume and, when you pass that level, it creates new complexities—more customers to serve, longer distances to ship and more production to manage,” González says.
To ensure it delivers the high level of service major retailers such as Bloomingdale’s and Macy’s demand, Flex will invest more in information technology and other back-office systems in the coming year.
“We can leverage our scale in purchasing, accounting and other shared activities to reduce costs and improve efficiencies,” González says. “Our goal is to ensure that we are doing the best job possible. Otherwise, if we get an order and don’t deliver on time or with the quality our customer expects, our business will suffer.”
Going forward, Flex is adding more capacity at its California plant and is considering adding a third U.S. factory. Some of the additional capacity is needed to support exports, which is proving to be a growth area for both the Kluft and Aireloom brands.
Kluft now ships product to Harrods in London, and Aireloom beds are sold by the And So To Bed chain in England. Both companies are developing business in other countries in Europe, the Middle East and Asia, as well, building on relationships established by Vispring. Canada is another market where business is increasing, with Hudson’s Bay recently adding the Kluft bedding line.
“From the beginning, we thought international would be a good opportunity for Kluft and Aireloom,” González says. “It’s going to take time, because customers want to see that you’re committed to doing business in their markets, but we now have customers in Greece, France, the U.K., Spain, Panama, Dubai, Qatar and China. We’re finding that there’s a cache that ‘Made in America’ products have, especially in Asia. The American reputation for manufacturing and branding is strong all over the world.”
Flex has nine production facilities worldwide: three in Spain, two in the United States and one each in Brazil, Chile, Portugal and the United Kingdom. The company holds a 25% market share in Spain and is ranked among the world’s 10 largest bedding producers.
In 2017, Flex had total revenues of $420 million, with international sales representing 70% of the company’s overall revenues. The company sells its products in more than 70 countries.
A retail mindset
In addition to its broad manufacturing footprint, Flex owns two retail chains with 115 stores in seven countries: Noctalia is a midpriced bedding specialist that operates in Spain and Portugal; And So To Bed is a high-end bedding and bedroom furniture chain based in London with stores in the United Kingdom, Austria and the Middle East.
The company’s first move into retail occurred in the late 1940s, when González’s grandfather opened a Flex store. He decided he needed to expand into retail to reach consumers because many of his prospective furniture store customers were content to sell their own wool mattresses rather than his innerspring line, González says. A single Flex store soon grew into a chain as innerspring mattresses became more popular. The retail arm was updated and relaunched as Noctalia in 2000.
In 2005, Flex acquired the And So To Bed retail chain. González describes the purchase as a “defensive” move.
“We had purchased Vispring only a few years earlier and were still in the process of learning the U.K. market when we found out that And So To Bed, one of our biggest customers, was going to be sold,” González says. “To retain that business, we bought the company. The acquisition was mainly a way to protect our competitive position.”
Despite its retail operations, Flex defines itself as a manufacturer and doesn’t plan to expand the retail side of its business. “Retail is a completely different business,” González says. “Having our own stores has been useful since it has given us valuable insights into consumer behavior, but it’s not our core focus.”
What Flex does have plans for is continued double-digit growth for the Kluft and Aireloom lines. To achieve that lofty goal, it is expanding its messaging via digital marketing and trade advertising. The company also is working with key retailers to make sure its lines “have the best in-store presentations possible,” González says.
A good example of this is the new 2,000-square-foot Kluft gallery that opened this spring in Bloomingdale’s flagship store in Manhattan. Working with Bloomingdale’s visual display and home furnishings teams, Kluft designed the space as a comfortable retreat for experiencing its luxury mattresses, González says.
Flex also has started investing more in marketing and branding for each of its three lines in the United States, González says. The marketing team is led by David Long, vice president, with the assistance of outside social media, marketing and public relations agencies.
“For Kluft, we’re trying to position the line as a classic luxury American brand. For Aireloom, the theme is handmade California design and indulgent luxury. And Vispring’s global campaign is very aspirational, with an elegant woman in white and the tagline ‘Handmade Beds for a Perfect Night’s Sleep.’ ”
Over time, González sees all three brands establishing a strong global presence. Driving demand will be two key factors: the continued growth and resilience of the ultra-rich, who can afford to buy the best, no matter the price; and increased demand from middle-market customers who recognize the importance of a good night’s sleep and are willing to spend more to obtain it.
“We’re excited about our growth prospects,” González says. “We now offer three of the world’s most prestigious bedding brands in the U.S., and there are more and more consumers in other parts of the world who are in a position to buy our luxury bedding, as well.