Cardon Carpet Mills, Inc

Ben Sudol

Cardon Carpet Mills, Inc.

1. Characterize the carpet and rug industry and Cardon’s Position:

a. In 1999 the US carpet and rug industry recorded sales of $11.69 billion which is a 7% increase from 1998. However, this total is well short of the $17.9 billion estimated by analysts.

b. The industry has two distinct target markets contractors (26%) and residential (74%)

c. It is estimated that that carpet and rugs commanded 68.1% of total US floorcoverings in 1999 which is down from 73.4% in 1995. Also, US Companies have noticed a decline in sales outside the US as the market has become highly competitive. Some industry analysts blame the carpet and rug industry itself for these declines. Stating that they don’t spend enough on marketing. The industry as a whole spends only around 2.1% of its sales on consumer advertising, which is below the average spend in similar industry’s such as household furniture (4.2%) and household appliances (2.5%). Instead, price has become the dominant marketing tool which has led in a dramatic upward trend in dollar sales but marginal profitability.

d. Since the mid 1980’s the industry has consolidated, from more than 300 companies in the mid 1980’s to about 100 companies I early 2000

e. The Largest US Company is Shaw Industries, with 1999 sales of $4.1 billion. Cardon had sales of $75 million in 2000 and is not one of the top 20 North American Floorcovering Manufacturers.

f. Cardon Carpet Mills, Inc. is privately held manufacturer of a full line of medium to high priced carpet primarily for the residential segment and has no export sales. The company markets its products under the Masterton and Chesterton brand names.

g. Cardon currently distributes its line through 7