Industry leaders, responding to Somnigroup International’s bold bid to acquire major supplier Leggett & Platt, say consolidation like that could be a negative in the marketplace.
Bedding News Now found significant concerns about the impact of the continuing consolidation that is occurring in the mattress arena.
“Consolidation usually helps the person doing the consolidating, but rarely the customers of those companies,” said Mark Quinn, senior vice president of sales and marketing at Shifman. “Most of the time, you hear about things like ‘synergy’ and ‘efficiency,’ which might be true and help whoever is consolidating their business, but I can’t recall a time where there has been a big rollup, and as a result, price decreases were issued because of all the savings that were realized.”
However, he continued, “We think some of this consolidation will help Shifman in the long run. We are hearing from retailers that they don’t want a single supplier to own too much of their floor, taking away their leverage and adding risk to their business.”
Asked if Shifman is a major buyer from L&P and would be worried about SGI owning this major industry supplier, Quinn responded: “Shifman has had a great relationship with Leggett & Platt for over 40 years, and I worked for Karl Glassman (L&P’s CEO) for almost a decade. There is no doubt that he will do whatever he can to look after the best interests of the shareholders, employees and current customers of Leggett & Platt. We will wait to see how it unfolds, if it unfolds, and do the same thing for Shifman.”
“It’s difficult at this early stage to determine the effect industry consolidation will have on consumers,” said Gerry Borreggine, CEO of Therapedic Worldwide. “Over a period of time, manufacturing efficiencies and free market competition, or lack thereof, will help consumers make that determination in the values they find, or don’t find, when shopping the marketplace. As for retailers, that is easier to determine. Retailers will have fewer choices to select from as the marketplace consolidates. It’s difficult to imagine that this will be good for anyone other than the consolidated entity.”
He said that Therapedic, which does business with L&P, “would have concerns if they were to be owned by one of our competitors.”
John Schulte, president of Symphony Sleep/Innovative Sleep Technologies, doesn’t welcome consolidation in the mattress industry.
“Consolidation in any industry typically restricts competition and, in our industry, with all the other economic restraints, I don’t think this consolidation is helpful,” he said.
“Consolidation mainly hurts retailers who are still dependent on legacy brands to drive traffic,” added Shaun Pennington, CEO of Diamond Mattress. “If your assortment and marketing rely on a handful of national brands, you’re more exposed to tighter terms, less flexibility and margin compression. The retailers in the strongest position are those building their own demand through alternative brands, private-label-style programs and partnerships with strong independents. That strategy allows retailers better differentiation and healthier margins.”
Looking at consolidation from the perspective of the consumer, Pennington said that it can “blur choice because what appear to be different brands are ultimately owned by the same few companies. Consumers often get better quality and value when retailers successfully educate them on credible alternatives. Many independents are producing excellent product with better materials and a cleaner value story.”
Addressing the SGI bid for L&P, Pennington said, “I think this would be bad for the industry and specifically mattress manufacturers. L&P touches a lot of critical infrastructure — components, foam and equipment platforms — so changes in priorities, access, pricing, lead times or support could ripple across manufacturers who’ve made significant investments in equipment and component branding. The issue isn’t assuming bad intent; it’s risk concentration. It’s easy for neutrality to slip and manufacturers will have to diversify supply and equipment strategies quickly. However, the equipment side is very expensive and difficult since those machines are designed to run for 20 years.”
Shana Rocheleau, Bedgear’s executive vice president for strategy, sees some positives in industry consolidation.
“Consolidation certainly has the potential for obvious benefits for some, as a result of vertical integration and supply chain transparency and control,” she said. “This can lower costs for some or all parties. Likewise, it further opens the door at specialty retailers for investing in innovation and unique product leadership, since, ultimately, diverse retailers want compelling brand offerings that reach a range of audiences, outside of the audiences that the L&P product serves. So, I see this as a positive for many, as well as Bedgear.”
Bedgear does not buy from L&P.
Piper Sandler analyst Peter Keith said that most retailers agree the surprise offer by SGI to buy L&P at $12 a share was “a savvy move” by SGI that should enhance its profit margins and vertical integration. “While the acquisition may face regulatory challenges, most retailers agree this can likely be navigated,” Keith wrote in an industry report.
He also said the deal could give SGI a broader reach across the industry than he had earlier contemplated. “Leggett & Platt’s adjustable base business (of which SGI is currently not a customer) could shift manufacturing to SGI for both Tempur and Sealy,” he noted. “Acquiring L&P could therefore provide vertical integration for SGI across springs, foam and adjustable bases.”
