Chris Gigley -- Casual Living, July 2, 2011
Three Birds Casual may be one of the most prominent suppliers of teak casual furniture in the U.S., but its owners don't like to run it that way. Tad Varga, president of the Columbia City, Ind.-based company, said he prefers to act like a small business.
"When the economy took a nosedive a couple years ago, we were so small and flexible that we were able to move and change directions on a dime," he said. "I always tell our customers if they have an issue, here's my cell phone and e-mail. That eliminates a lot of the ‘he said, she said.' They know if I say we're doing something, we're going to do it."
The approach not only helped Three Birds weather the last few years of economic malaise, Varga said the company is on track for its best year ever in 2011. Regardless how fast the company grows, it will always have the soul of a small business.
Three Birds Casual is a classic tale of great American entrepreneurship. The company was launched out of a garage based on the whim of three global travelers. When Tad and Kim Varga and Kim's brother Victor Lewis couldn't find a type of furniture they saw on a trip to Asia, they decided to import it themselves.
"It started as a hobby, really," Varga said. "We just really liked this furniture and brought it over to try it. Twelve years later, here we are."
Varga admits they made mistakes early on, and they learned from those mistakes. But they also kept things simple, adhering to core business principles Varga said apply to any kind of business, whether advertising or importing.
"We were both familiar with how those principles work and how to market and brand," Varga said. "We knew we had to create a positive market perception, and contribute a significant amount of money to the local economies. Varga and Lewis searched for factories in Indonesia, and the culture shock was immediate.
"Learning the mannerisms and way they communicate over there was a huge learning curve for us," Varga said. "It was difficult. We had to find people there we could trust and develop."
In 2003, Lewis packed his suitcase and flew to Indonesia for what he thought would be a couple of weeks.
"Two weeks turned into eight years now as I quickly found there was nothing easy about doing business in Indonesia," Lewis said. "In order to meet our high quality standards I knew I was going to have to actually move there to personally oversee the production process."
Lewis now lives in Indonesia full time. As soon as he got there, Lewis and Varga were determined to demand the level of quality they would want for furniture in their own homes. That meant a painstaking line review, after which 70% of the products they sold at the time was either eliminated or redesigned.
"That's when we noticed the perceived value and the actual value improve immensely," Varga said. "It set us on the course to where we are now, perceived by consumers and retailers as a high-quality product in the marketplace."
Working in Indonesia still has its challenges. The government, for instance, has a tendency to arbitrarily change raw material costs, which has been particularly vexing in the last couple of years.
"We'll usually have some advance warning there will be a price increase and we take that into consideration when doing our pricing," Varga said. "But there are times you can't raise your prices in proportion with the cost of raw materials. It doesn't make sense, and we just have to do the best we can with the cards we're dealt."
It's anyone's guess what those cards may be. Varga said some years the Indonesian government doesn't raise costs at all, other years it boosts costs 15% across the board.
"Sometimes you just scratch your head wondering why they raised the prices," Varga said. "It's like dealing with OPEC."
Luckily, those costs haven't increased to the point where Three Birds has had to increase its pricing, Varga said. And there's no doubt the company's deft cost management in Indonesia has a lot to do with Lewis being on the ground there to respond as quickly as possible.
During the financial crisis, for instance, Lewis said he decided to analyze every piece of furniture in the product line to identify opportunities to improve the wood efficiency in Three Birds' products.
"Teak raw material can account for 70% or more of the total cost of the furniture, so even a small improvement could help off set the increases in raw material costs," he said. "Fortunately, we found some significant opportunities to improve efficiency, which has allowed us to keep prices stable the past couple of years."
Back home in the United States, Varga spends as much as two weeks a month on the road, either visiting or training retailers or supervising commercial projects.
"We want to ensure the products are there and there are no problems, which is why I handle it myself," Varga said. "If the customer has problem, they want to run it up the flagpole as high as possible."
On the retail front, Varga said the company has benefited from its launch of the Ciera line of all-weather wicker in 2008 and the expansion of the line last year. Although Varga said the company didn't get into wicker to diversify the business, that is exactly what has happened.
"We probably will diversify more," Varga said. "We have many designs on the drawing table, but we don't want to diversify too quickly with the way the economy is. We want to focus on what we do well. As we see demand for new types of products, we'll bring them out."
Running a company with a small-business sensibility gives Varga the flexibility to take a wait-and-see approach. As the market goes, so goes Three Birds Casual.
Having part of ownership on site in Indonesia ensures pieces like the Monterey Dining Chairs with Chelsea Extension Table are produced the right way every time.
A key to the rise of Three Birds early on was fi nding teak plantation owners in Indonesia the company could trust.
The Monterey Bar Chairs with 42-inch Bar Table (pictured) and other Three Birds furniture are under constantly evaluation to meet market needs
Despite their hands-on approach at Three Birds, Victor Lewis (back row, second from left) and Kim and Tad Varga (back row, fi rst and second from right) always make time for their families.