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Spontaneous Combustion

The decade-old revival of the wood-stove industry is cooling as quickly as it heated up. Upstart market leader Vermont Castings counts on the reputation it has for quality to warm the hearts of customers for new products.
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One weekend last August, some 10,000 people invaded the town of Randolph, Vt. They convened in a meadow on the outskirts of town and for two days drank beer, ate barbecued chicken and corn-on-the-cob, watched square dancing, heard country fiddlers, and talked about wood-burning stoves. The New York Times was there to cover the event, as was National Public Radio.

Now, wood-burning stoves aren't news; nor is the town of Randolph. What was extraordinary about the event, however, was that it was an "Owners' Outing," sponsored by a company named Vermont Castings Inc., and the 10,000 people who attended were a virtual army of satisfied customers whose regard for their Vermont Castings stoves borders on adoration. "It's almost become a status symbol to own a Vermont Castings stove," says Michael J. Herschel, president of U.S. Stove Co., in Chattanooga, founded in 1869. "Their product pushed the right buttons for the consumer."

Last year, Vermont Castings' wood- and coal-burning stoves pushed the right buttons for more than 50,000 consumers, generating revenues of close to $30 million. Founded eight years ago by Duncan Syme and Murray Howell, Vermont Castings has become the leading manufacturer of cast-iron wood stoves (ranging in price from $500 to $900) in the country, both in units shipped and in total revenues.

"To a couple of backyard hippies," says Syme, vice-president and secretary, "it's ironic as hell. Seven years ago we thought we'd have a couple of people -- like running a diner or something. At least, we hoped we'd get that far. If we tried to start the company all over again today, we couldn't do it. We had the right product at the right time -- and a lot of luck."

Syme's allusion to propitious timing is no mere entrepreneurial understatement. In 1973 only 1 million households in the United States still heated with wood, compared with 8 million as recently as 1940, which, in turn, was far below the level a century earlier when wood supplied an estimated 90% of the country's fuel. The Golden Age of the wood-stove industry, in the middle 1800s, climaxed with a flourish of Byzantine design: nickel-plated Grecian urns perched atop increasingly exotic shapes, themselves ensconced in excessively detailed cast-iron filigree. Hundreds of stove-plate foundries went the way of the buffalo as first coal then oil moved to household basements. Only a few companies, including U.S. Stove, Washington Stove Works, in Everett, Wash., and Martin Industries, in Florence, Ala., survived the onslaught of central heating.

But the wood-stove industry was rekindled when the Arab oil embargo struck in 1973. High-technology, twentieth century America quickly remembered the ways of its forefathers. More and more people began cutting, sawing, and splitting their way to a long winter's supply of assorted hardwood logs, which were then stuffed into that long-forgotten piece of Americana -- the wood stove.

All this was hard work, especially for novices whose previous commitment to energy conservation had typically ended at the thermostat setting. But it was also vaguely patriotic, tethered at some point to the American heritage of resourcefulness and self-sufficiency. And if that motivation was too obscure, there was the compelling fact that wood -- slipped discs notwithstanding -- was cheaper than oil. By 1979 the sale of wood- and coal-burning stoves and accessories had reached $1 billion. More than 2 million units were sold in that peak year.

The old-timers certainly got their share of the business, but more than anything else the wood-stove renaissance was a riot of entrepreneurial opportunity. The most unlikely sorts turned out to be wood-stove promoters. There was Eva B. Horton, a self-described "little girl who used to be a housewife," who imported Jotul stoves from Norway. There was Bob Fisher, who handcrafted the famous Fisher "Papa Bear" stove and soon had licensees across the country. And then there were Murray Howell and Duncan Syme.

"This company began," Howell says, "as the combination of two people who have distinctly different yet complementary abilities. I've often said that I'm as creative as the sole of my shoe and Duncan's as organized as a plate of spaghetti."

At work, they sit in the same room at opposite ends of a long, wooden trestle table. Although they are brothers-in-law, the strength of their interaction appears to rest on the steady, unquestioning confidence of two people who have spent a lot of time together and like it. Howell, who at 38 is chairman of the board, is well over six feet tall and rangy. He is a bit contemplative and answers questions quietly and slowly. His hands, long and graceful, are particularly expressive. Syme is shorter and stockier. He has dark eyes, round, gold-rimmed glasses, quick movements, and an after-thought hairstyle, which together project the distracted intensity of an artist or scholar. He is 45 and looks much younger. They are well educated -- Howell went to the University of Pennsylvania and Syme to Yale.

By inclination and previous experience, Howell is the acknowledged "businessman" in the relationship. Before launching Vermont Castings, he had owned and managed his own restaurant and bar in Crested Butte, Colo. -- it was there that he and Syme first met -- and later worked for a real estate investment trust at Lazard Freres & Co., the international investment banking firm, in New York City. At Vermont Castings, Howell is mostly concerned with cash-flow management, budgeting, and generally divining the company's future needs.

Syme, on the other hand, is the creative force behind the company. He graduated Yale with degrees in sculpture and fine arts and used this training in designing each of the company's four stove models: the Defiant, the Vigilant, the Resolute, and the Intrepid. He also created Owners'News, a quarterly newspaper sent to stove owners, and the popular Owners' Outing.

Howell and Syme have achieved unqualified success in a highly competitive industry, yet they still talk as if they have been on a schoolboy adventure together, laughing easily at the wonder of it all. "We always kept up with each other," Syme says, "no matter where we were, and talked about our ideas. We realized there was something very productive about our relationship."

In 1972, while Murray Howell was at Lazard Freres and Syme was working with friends in a small architectural venture in Warren, Vt., Eva Horton was in her living room on a farm near Portland, Maine, thinking about stoves. The 40-year-old housewife thought about her childhood in Norway and about the Jotul wood stove that had heated her parents' house. Her parents had even sent her one after she was married and she had been using it ever since. "All I ever wanted to do," Horton says, "was share this wonderful experience with my friends. As it turned out, I had 100,000 friends." Horton went to Oslo and persuaded the manufacturer of Jotul stoves to let her import them to the United States. In December 1973, a shipment of 150 Jotuls arrived in Portland addressed to Kristia Associates, Horton's newly formed company. The great wood-stove boom was under way, and for that Eva Horton deserves a lot of credit.

At about the same time, one of Howell's sisters called him in New York. She said she had been trying to buy an Ashley wood stove, but everyone always seemed to be sold out. Howell said he would try to locate one. He called dealer after dealer, with no better results. Finally, one dealer near Howell's sister told him when he expected his next shipment. She was waiting on the doorstep when the stove arrived.

"Murray called me," Syme says, "and told me about his sister's experience. He said somebody was asleep at the switch. I was beginning to think about wood stoves, too. You couldn't live in northern New England and not be aware of them."

Meanwhile, the demand for wood stoves was surging. "We really began to feel it in 1974," says Allen Tomlinson, of Martin Industries, one of the oldest stove manufacturers in the country. "That year we went to double shifts. Compared to what we were doing in the 1960s, our business nearly tripled by the late 1970s." But, says Tomlinson, the boom wasn't going unnoticed. "At one time," he recalls, "we counted over 300 competitors. It seemed like everyone with a garage and a welding torch was getting into the business."

In the spring of 1975, Duncan and his friends at the architectural firm in Warren held a contest among themselves to see who could design the most efficient and aesthetically pleasing wood stove. They had half-intended to start making stoves themselves. Syme had already converted a 1928 Montgomery Ward & Co. coal furnace into a wood stove to heat the loft where he was living. But he built on this practical knowledge by studying, among other sources, an accounting of combustion principles published by the Food and Agricultural section of the United Nations for use in Central Europe. Syme won the contest with a design for a cast-iron wood-burner he called the Defiant. He felt it would defy the winter winds.

The prototype was airtight and thermostatically controlled so that the heat output could be predetermined and maintained for hours. It had a baffled firebox that created a 60-inch, horizontal flame path, which extracted additional heat from the escaping gases. And it had an internal system of preheated primary and secondary air to help ignite these gases before they were lost up the flue. But Syme had also designed the stove to please the eye and the spirit. While many wood stoves were square, squat, and ugly, concerned with function alone, the Defiant featured a gracefully bowed front and, over the fireplace opening, an elliptical arch reminiscent of northern New England's early-nineteenth-century architecture. With the damper down and the double-arched doors open, owners could lose themselves in the traditional reveries of an open fire.

Howell and Syme needed an objective appraisal of the stove's merits from someone who knew the market. They took the design drawings to Burlington, Vt., where they visited the stove department at the Garden Way Living Center. Paul Bortz, who was manager of the store and has since gone on to found Vermont Stove Co., manufacturer of the Shelburne Fireplace Stove, remembers the day. "They were dressed very casually," he says, "like backwoods Vermont, and, almost shyly, they said they wanted to talk to me about an idea they had for a wood stove.

"They showed me some drawings and I was amazed. They revolutionized the whole industry, because their stove was both functional and attractive. Before them you got one or the other, but not both." Bortz made some suggestions, and Howell and Syme came back with revised drawings. "I gave them an order for 200 Defiants," Bortz says. "I think even then they realized they had a tiger by the tail." In July, Howell and Syme incorporated Vermont Castings.

In January 1981, Syme gave a speech at the Amos Tuck School of Business Administration at Dartmouth College, in Hanover, N.H., in which he described the company's meteoric rise. A student from the audience asked whether the company had ever made any mistakes. "No, we never made any mistakes," Syme replied, and was immediately cut off by cheering from the students. "Because," he continued, "the growth rate of the industry covered them up."

In their early days, for example, Howell and Syme had no specific plan for distribution. "At that point," Syme says, "we were so concerned about manufacturing, well, marketing, shmarketing, we didn't even think about it." Growing even faster than the number of new stove manufacturers was the number of new stove dealers. Drawn by easy profit and quick turnover, an assortment of retailers found space for stoves. Hardware stores did a brisk business, specialty stores featuring only stoves and accessories began to appear. And even furniture stores were getting in on the action.

Howell and Syme more or less decided to use dealers as well, but they signed up only two. They didn't sign up their third dealer, Tony Anthony, owner of Sandhill Inc., in Peterborough, N.H., until four years later. Anthony's case was unusual. For nearly a year and a half before he became a Vermont Castings dealer he had been buying stoves from the company at full retail price. "I didn't make any money on them," Anthony says, "but they were the best stoves around, and I wanted those stoves in my store."

In the fall of 1975, an article about the stoves appeared in the now-defunct New Times magazine, and Vermont Castings was soon flooded with postcards from people who wanted more information about the Defiant. According to Paul Bortz, Vermont Castings became the first stove manufacturer to use mail order in any meaningful way. "We never sat down and calculated some fancy mail-order strategy." Howell says. "We kind of backed into mail order. We put together a one-page flier and people started sending us $50 deposits -- actual money. The demand was so high, we could've set up a concession stand on the moon and sold them."

"Up until 1981," Syme says, "I don't think we ever had a stove lying around here that hadn't already been spoken for."

Demand took care of itself, but finding foundries that could meet Syme and Howell's quality standards and still keep pace with demand was another matter. By 1978, in fact, the company had already outgrown two domestic foundries and was dealing with two in Europe -- one in Germany and one in Holland.

Howell and Syme decided on a very direct, yet daring, solution to their foundry problem: In 1979, they built their own. Not only was the $5.5 million investment large for a company whose sales then were roughly $16 million, but it occurred when other U.S. companies were actually closing their foundry operations and importing stove plate from Taiwan. According to research by a member of Vermont Castings' staff, there hadn't been a foundry built for the casting of stove plate since almost the turn of the century. In addition, Vermont Castings' immediate needs called for only 25% of the new foundry's capacity. It was, if anything, an investment in the future.

No one could have predicted the future of the rekindled industry as Vermont Castings began its expansion. Since 1973, continued growth in industry revenues and profits had encouraged ever-greater numbers of manufacturers and dealers. In 1979, the year of the Iranian oil crisis, demand for stoves peaked as quickly and as unexpectedly as it had appeared earlier in the decade. As demand declined, it precipitated an industry shakeout that many feel is still going on. According to U.S. Stove's Herschel, from 1973 to 1979, the number of manufacturers rose from 8 or 10 to 500 or more. "Of those, probably 300 or so are still left," he says, "but I imagine that will decline to 100. The volume in the industry just isn't large enough to support 300 manufacturers. Many are small enough so they'll hang on for a while and then drop off one by one as they realize they can't recoup their initial investment."

Vermont Castings itself hasn't been spared the impact of the industry contraction. "We've reached the point," says Dwight S. Stimson, president and chief executive officer, "where we can no longer rely on the industry's underlying growth rate alone for our own growth. We've had to make a lot of changes in management, manufacturing, and marketing." Stimson himself is one of those changes. About six months ago, Howell, who until then had been president and CEO, asked Stimson to take on those titles and responsibilities. Howell wanted more time to devote to a variety of special projects, such as creating an outside board of directors to replace one composed largely of friends and relatives.

Stimson, 53, joined Vermont Castings as its financial vice-president almost four years ago. As a divisional senior vice-president at Itel Corp. in Dallas, he had managed data service computing centers throughout the country. Stimson, a native Vermonter, says that when he considered moving back home, he reviewed his talents and decided that he could be most effective as a "gray-haired adviser to a rapidly growing, profitable, small company with growing pains." Howell agrees and says that Stimson's maturity and his background in corporate planning and administration got him the job. "We felt vulnerable being a one-product company," Stimson says. "That's why we're taking our reputation for quality and service and applying it to new, nonstove products."

According to Neil Fox, vice-president for marketing, the company began restructuring its future in 1981, when it decided to increase its reliance on dealers. "It was a difficult idea, an emotional idea," he says, because in everything we've done, the company's had complete control." Fox sees the expanded system, with 120 dealers across the country, as a particularly valuable asset. Not only will they distribute stoves, but they can also support the company in other, related areas of manufacturing. "We're trying to develop a countercyclical business," Fox says, "that uses the foundry, our assembly, our new enameling plant, our customer file, our direct-marketing system, and our new-dealer system." But Fox is quick to add that the company also intends to strengthen its dominance in cast-iron stoves by introducing new models with even greater combustion efficiency.

Dealers are an important part of Vermont Castings' plan to reach people who, unlike the mainly rural, do-it-yourselfers of the company's older, primary market, live in suburban America, are generally unfamiliar with wood stoves, and consequently appreciate guidance from a local dealer. These customers also expect a wood stove to have some of the appeal of a well-designed piece of furniture. In 1982, Vermont Castings took the idea of stoves-as-furniture a step further by introducing models of the four stoves that are enameled in porcelain: "earth green, charcoal brown, warm gray, and deep blue."

Sometime soon, the dealer network will also receive the first product made by Vermont Castings that isn't related to stoves. The company donated 24 patio benches to the town of Randolph in 1980. They were designed by Syme in cast iron and wood and manufactured in the foundry. They got high praise from townspeople. The company borrowed the benches back from the town for last year's Owners' Outing to do some impromptu market research on them and again received favorable comments. One man wanted to buy 100 benches on the spot for his shopping mall. Vermont Castings then decided to make the benches available commercially. "We've got other products in mind," Stimson says, "but we're waiting to see how this one does." In general, he says, the bench has many of the qualities the company wants in new products: a consumer-durable item that is countercyclical to the company's on-going stove business, uses the foundry, and is related to the home. "People are spending more money on their homes," he says. "It's a pretty significant market to be in, and we've got the name and resources to serve it profitably."

Stimson agrees that the market for wood- and coal-burning stoves "has shrunk significantly," but he says it is a "more realistic market than all the panic buying that went on in 1979." Even though the company's sales in 1982 were flat with the roughly $29 million recorded in 1981, he says the company was able to increase its market share. He also says the company's sales suffered from two unexpected events. The introduction of the Intrepid, Vermont Castings' latest stove, was delayed because of tooling changes and late shipments of a special type of glass from Germany. And the demand for enameled stoves was so much greater than anticipated that capacity couldn't meet it. "We've been quoting 28-week lead times," he says. "Some people will wait, but others won't."

In less than a decade, the wood-stove industry has gone through a period of expansion and contraction that previously occurred over more than a century. It has been a case of deja vu. Even Syme gets a touch of it now and then. He tells time by a gold pocket watch that was originally given to his father, John Prescott Syme, to honor his career with Johns-Manville Corp. One day, after a long session spent reminiscing about Vermont Castings' past, Syme took it out, read the inscription, and said: "It's funny, isn't it? Here I am, a guy who once said he wouldn't have anything to do with business. Well, things have come full circle, haven't they."

Last updated: Apr 1, 1983




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