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LOS ANGELES-The rising cost of raw stainless steel, an issue that has been looming in the flatware category for many months, has come to a head as manufacturers plan to raise their wholesale prices.

During the Gourmet Products Show here last week, vendors discussed the issue as one of the biggest business challenges they face in the second half of this year. While some will raise prices in the third quarter, others are holding back until early next year. And those holding off with price increases until next spring are finding other ways to maintain their bottom line, such as reconfiguring expanded sets to lower costs.

"It is a struggle. It is affecting everyone in the business; everyone is under the same pressure," said Felix Amar, president of Hampton Forge. The company has raised some of its prices as a result. "Retailers are not very happy obviously, but nobody can control the price of raw materials."

"I think you're going to see price increases soon, but not in the immediate future," said Scott Bial, vice president of marketing and sales for Wallace Silversmiths. "The Japanese have tightened the production cord. It's the mills."

According to Bial, the cost of a ton of steel has risen from $1,100 to $2,000 within the past 12 to 14 months. Stainless steel as a raw material accounts for roughly 35 percent of a flatware company's production costs, Bial said, but even though prices will rise, they will not be as as high as they were five years ago. Bial also predicted the increase will have a greater impact on promotionally priced items, rather than bridal department stainless.

Alan Buff, vice president of retail sales at Reed & Barton, disagreed with Bial. Buff said he thinks the cost increases will affect high-end stainless products as well as promotional items. Promotional items can be made in any number of factories, he said, and thus moved around to lower labor cost areas to offset prices. Higher-end goods are more difficult to execute and thus are more difficult to relocate. Contrary to Wallace's experience, Buff also said retail prices have increased in the past five years, although consumers are purchasing better-quality products of higher value.

Stainless-steel flatware has become an enormously competitive category because advanced manufacturing techniques have enabled vendors to produce good-looking, fashionable product at lower prices. Until now.

Buff said Reed & Barton will begin raising the wholesale price of its better stainless in the third quarter by about 5 to 10 percent. Retailers are aware of this increase, Buff said, and their response has varied. Many of them have no choice but to pass the cost on to consumers, he said.

Jerry Nardone, national sales manager for Excel, the parent company of Excel, Retroneu, Farberware and Sabatier, predicted a possible price increase of stainless steel flatware in spring 2001. In the meantime, the company will probably reconfigure expanded sets as a way to cut expenses.

Some vendors predicted that consumers will not be put off by higher prices. "I don't think it is as price sensitive as it used to be," said Amar. "Having a good economy helps."
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Author:Zisko, Allison; story, Kristen Bryceland contributed to this
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Article Type:Brief Article
Geographic Code:1USA
Date:Apr 24, 2000

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