MASTERBRAND CABINETS

HAWAII TERRITORYREVIEW

January 2011

Susan Wagner spends 70% of her time dealing with Hawaii◦ 30% of time on administrative duties, payroll, ordering product for training, etc.

◦ 15 year relationships with Hawaii dealers

◦ Handles many routine calls from dealers as well as all correspondence and administration

◦ Pam, Dick and Chris copied and discussed at Highline-Southwest meetings

◦ Derrick makes regular sales calls/warranty

◦ Quarterly visits by Susan, Dick, Pam, Chris Last visit: Susan, October 2010 Next visit: Chris and Pam, February 27, 2011

REP COVERAGE

Derrick Partain◦ 20 year Hawaii resident◦ Former Kitchen Craft, Diamond, Decora’, & Omega dealer◦ Accomplished, award-winning designer: kitchen featured on

cover of Hawaii Home◦ Active member of Honolulu chapter of NKBA • Maintains contacts and relationships within the industry

◦ NAHB Certified Green Professional◦ 20/20 trainer Derrick spends about 40% of his time on MBCI◦ Flexible time as construction project manager◦ Provides intensive 20/20 training for dealers

LOCAL REP COVERAGE

All Plywood Construction STRONGLY preferred due to consumer perception that APC holds up better in Hawaii’s humidity ◦ Small percentage of builders will accept MDF, usually on lower-end projects

Frameless cabinets much more prevalent than on Mainland - over 50% in dealer channel

Miter-corner doors pretty much not sold due to joint expansion.

There is demand for exotic woods i.e. Bamboo, African mahogany

HAWAII MARKET TRENDS

• In a recent survey of 33 dealers on Oahu, 13 had gone out of business • Most featured high-end lines, but mid-priced lines affected as well

• Hawaii is first US stop for low-end Chinese lines resulting in an even higher penetration than in Southern California

HAWAII MARKET CONDITIONS

Most frameless competition is from West Coast Manufacturers DeWils

◦ Framed and Frameless: Washington◦ Market leader

Columbia◦ Frameless : British Columbia

Canyon Creek Aristocratic Huntwood Pacific Crest Hertco

Kama'aina Local Hawaiian Cabinet Manufacturer◦ used by 10% of dealers

All feature “GREEN PRODUCT” on their websites 

WEST COAST COMPETITION

Came to Hawaii early with both framed and frameless and developed a good reputation

Plywood construction only – no MDF Framed: Alder, Maple, Cherry, Hickory, Oak,

all priced same as Oak Frameless: All wood species plus African

Mahogany and Bamboo all priced as Oak

DeWILS IS PRIMARY COMPETITOR

Consumer recognition due to full page monthly advertising in Hawaii Home magazine, listing dealer locator

Frameless 15% higher than Framed

4 week lead time framed

6 week lead time frameless

DeWils

Mods: 2 prices ◦ $175 for all minor mods, i.e. moving a rail on an oven cabinet.◦ $350 for major mods requiring engineering.◦ Increased width, height in 1/8” increments - flat charge◦ Reduced width or height –next price up.

Special Pricing on projects only

No promos because of all wood species same as oak

Product to Hawaii is will-called at plant by freight forwarder; dealer arranges for ocean shipment

DeWils

6 simple price buckets based on door style.

Good Customer Service ◦ “Easy to work with”◦ “Fair with credits”

DeWILS

Less expensive than Decora in popular wood speciesCherry is priced like oak¾“ construction, APC, DT, full extension, soft close drawer

standard

Frameless - ¾” box, solid wood edge banding

Small, privately-held company $25 million in sales

No co-op. Provides monthly magazine ad for dealers

DeWILS

Mainland rep visits every 2-3 months. No help with ocean freight Express Response program

◦ Small items are sent Fed-Ex ◦ ER cabinets picked up by the freight forwarder◦ Dealer may wait until the next full order is ready

to be picked up, otherwise expensive.

DeWILS

Kona Kitchen and Bath

Kona Building Supply

SHARED MBCI/DeWILS DEALERS

Hawaii Planing Mill (4 locations – Big Island) Hawaii Carpet One Highline Kitchen Systems Island Home Building Materials Emee Kitchen and Bath Busekrus Pacific Source- packaged sales – 3 island

locations

DeWILS DEALER TARGETS

Privately held =flexibility and fast reactions

Higher-priced than DeWils

Normally 15-25% higher than KC on standard sku’s ◦ with 10% off promo can get pretty close, depending on the style

Becomes less expensive than KC on many jobs because of no charge or “next-size-up” mods

Matt finish similar to Medallion, preferred by many over the higher KC sheen

5/8” box, good joints, very nice matt finishes

Kitchen Craft has better paints, but not sold much in Hawaii due to joint expansion in humidity

Aggressive Promos:◦ $5800 vacation contest entered with points from sales ◦ On-going$20 a box spiff

COLUMBIA

WELLBORN Homeowners Design Center

◦ Wellborn owner flew to Hawaii and then flew owner, manager and designers to Alabama for plant tour

◦ Offered free displays

◦ Came back obligated to Wellborn and Rutt

HAWAII DEALERS

HOMEOWNERS DESIGN CENTER New in 2010

◦ $10,000 sales in 2010 Kitchen Craft, Schrock, AOK, Omega Competition in showroom: Wellborn, Rutt, Canyon Creek Ready to order Kitchen Craft Display

◦ Offered free in 2010 Costco call with Mike Land well received Filling out Costco questionnaire MSA planning proposed to be presented by Brad in

Hawaii◦ Free displays for Kitchen Craft, Omega, Schrock selection center◦ No-upcharge APC◦ $10 spiff matched by Highline-Southwest◦ Patrick Littell sent to Hawaii for formal training

Secured Brookfield Homes 98 home project with Kitchen Craft on the Big Island◦ Aggressive SDA

Model home order has been placed, with 3

to 4 to follow every few weeks.

Projected as $615,000.◦ Most projected to ship in 2011 ◦ 2010 sales $178

MAUI HOMES

An MBCI dealer for 10 years◦ Diamond, Kitchen Craft, Decora, AOK

Competition in showroom: DeWils, Hertco

Has struggled the last couple of years, however, he has revived State of Hawaii Diamond project ◦ 22 unit third phase of a state project. A SPA has been approved at .2045 collect,

to help secure this project that the state sent back to vendors to re-bid.

Ran January pre-select for 10% off cherry, maple, alder and rustic alder.

DeWils is major competitor

$25,000 sales in 2010 ◦ down from $80,000 2008

KONA KITCHEN AND BATH

10 year Kitchen Craft dealer ◦ $76,000 2010 sales, mostly from the Oahu main branch

Competition◦ Local custom “house” brand, used for projects◦ Canyon Creek.

Locations on all major islands. MSA planning • Free KC sales centers for branches • No up-charge APC‣ January Pre-select : 5% off $10 spiff

HONSADOR LUMBER

Nicest showroom on Maui with many brands

10 year MBCI showroom

Columbia taking market share

$70,000 in Decora business in 2009, $120,000 in 2008 ◦ Took Decora out in 2010 because of presence at Home Depot ◦ Took Schrock out with introduction into Lowes

Still has KC but mainly sells Columbia because of the $20 a box spiff

Target this account for Omega/Dynasty◦ Interested in Costco program◦ Offer no up-charge APC

EXCLUSIVELY YOURS

New in 2010 Brought container load of Contractor’s Choice into

stock Bringing in APC product from Indiana adds too

much freight to compete with local Chinese cabinets◦ Re-visit when CC APC available from Las Vegas

Recently multi-branded this account with Diamond and Decora’◦ Secured Decora’ for NAHB “New Hawaiian Home”

MSA Planning◦ Offer no up-charge APC

COLLABORATIVE SOLUTIONS

New in 2010 with Kemper

Just multi-branded with Kitchen Craft

CONCEPTS 2 COMPLETION

Mostly project work with Kitchen Craft◦ $92,000 sales in 2010

Current approval for an SDA of .23 to secure a 93 home upscale project in Waikaloa

Six kitchens and baths ordered on 3rd phase of HR Horton project◦ Request for SDA of .23 wood and .22 thermofoil to “keep” these 60 homes from going to local

competition

Using January pre-select to try to “get him into our book” for other than project work.

Competition in showroom: DeWils, Canyon Creek Obstacle: He doesn’t sell maple. Alder is preferred and KC only offers APC on

maple and cherry

MSA Planning ◦ Offer free KC display◦ Offer no-up-charge APC on all KC wood species

Kona Building Supply

TARGETS

Honolulu location

Not currently selling cabinets

Interested, but some hesitation because they are very close to Homeowner’s Design Center, which refers appliance sales to Ferguson’s

Target Omega, KC and Schrock as National Account

FERGUSON’S DESIGN CENTER

Decided to stay with local Ohana product for low end.

◦ Target with Decora’ for higher end market

◦ MSA planning• Offer no UP-charge APC• Free display

HARDWARE HAWAII

◦ Target with Kitchen Craft

◦ Looking for something less expensive than Columbia

◦ MSA planning◦ Offer no up-charge APC◦ Free display or sales center

EMEE KITCHEN AND BATH

Target this DeWils dealer with Omega & Diamond

Discuss Costco program Offer free display Offer no up-charge APC

HAWAII CARPET ONE

Oahu and Maui locations:◦ Interested in Contractor’s Choice, Diamond◦ MSA planning◦ Offer no up-charge APC◦ Free sales center for each location

MIKAKE CONCRETE

Addition of All Plywood Construction to the Aristokraft product available in Las Vegas May 2011

Will open up new opportunities in the Hawaii market

Offering a no up-charge for APC in Hawaii would help compete with the Chinese product

APC FOR ARISTOKRAFT

Five member rep team alternating visits will bring individual expertise to Hawaii market

MSA Planning to grow territory◦ Aggressive promos◦ Free displays◦ No up-charge APC for Hawaii territory◦ SDA for KC dealers to order APC on all wood species◦ Approach Homeowners Design Center as partner◦ Provide factory training on island◦ Target new dealers with above plan to take market share

Attack the competition

SUMMARY