THE Opportunists-Monte Lewis Dunn-Edwards

0:05

Hey everybody, thanks for joining me today. With me today on my podcast is Monty Lewis. He is the Chief Operating Officer of Dunn-Edwards. They're a paint manufacturer headquartered in Los Angeles, California. Good morning, Monty. How are you? I'm doing really well. Good morning, Mark. Hey, thanks for having me on your podcast. I'm really excited and appreciate the opportunity to talk about Don Edwards.

0:38

Well, I'm looking forward to hearing your story about what happened in the wake of the Kelly Moore incident from you guys. That's why we're here on this series. But before we do that, why don't we start with just a little introduction? Tell us a little bit about yourself and tell us a little bit about Don Edwards as well. Happy to do that.

0:57

Just a few words about myself. I've been with DE for about 15 years. Actually, next week, I started in 2009 as vice president of sales. If you go back far enough in my history, I'm actually an engineer, process engineering and computer science. Somewhere in 97, I took a wrong turn. I mean, maybe it was a good one and wound up being in sales with Hilti.

1:20

And I've spent the last 25 years in construction materials and services industry ever since, mostly in sales and really haven't looked back. Whatever path you took, it led you right here today. And this is where you're supposed to be. So good job. Oh, thank you. I think things work out. You know, Dunn Edwards was founded back in 1925, and we were founded as the Consolidated Wallpaper Company here in L.A.

1:44

by Frank Dunn. And then in 1938, Frank invited his friend, Art Edwards, to join the company. Dunn Edwards Corporation was formed, and we really began to focus on paint. And Art's philosophy was make the finest line of paint and give the best service at a fair price. You combine that with the green legacy that we've had that's really unmatched in the industry.

2:04

We've been lead free since 1954. That was 25 years before the EPA banned lead. We've been mercury free since 79, 11 years ahead of a partial ban. We're ethylene glycol free to this day since 1983. And many manufacturers still use ethylene glycol. Really, under that leadership, we've grown to 174 stores, five states. We've got 100 dealer locations in 10 additional states.

2:29

And then we're in 15 countries internationally with another 350 locations. In 2017, we agreed to be acquired by Nippon Paint Holdings Group. They're the fourth largest architectural coatings group in the world, at least at the moment. And I'm excited about the years to come. After 100 years, we're just getting started. So you guys are part of Nippon.

2:52

You're part of a multi-billion dollar industry, right? That's Nippon, the Japanese coatings manufacturer. Yeah, yeah. They're $10 or $11 billion in 2023, and they're around the world.

3:06

So now you've already explained where you got the resources to pull off what we're about to share with people that you guys did. Why don't we jump right into it and share a little bit how your business has changed before we get into sort of how it changed. Let's talk a little bit about how your business has changed since the events at Kelly Moore.

3:29

So I said I was an engineer. I tend to lead with numbers, but I'll try to talk people a little bit also. You know, from a numbers perspective, we're adding 17 stores, about 125 people in less than three months. That's really unprecedented in our history. And of those 125, I think 124 of them, if not 125, are all former Kelly Moore employees.

3:51

From a business perspective, there's really no change. We're still focused on supporting our customer, the professional painter, with the best service and products available. That hasn't changed. Culture is really the more interesting question. Kelly Moore had a long, rich history. In 15 months with Flax Group ownership, can't and didn't erase that.

4:11

Everyone we hire brings a piece of that with them. They bring the wins, they bring the losses, they bring the battle scars. And our role is to integrate that experience and that talent into our team in Northern California and create an even better team for our customers. So that's the piece that's exciting and the piece that's changing for us as our culture develops.

4:30

And one of the reasons why I asked you to be on this show, you know, we call it the opportunist for people that moved aggressively right in this space. The amount of people that you guys added, you know, you mentioned Nippon, $10 or $12 billion. But you guys are not Nippon. You guys are a small local subsidiary, so to speak. So you guys made a very significant– that 17 stores, 125 people.

4:56

Talk about– That in context of what you had here in the States, you guys grew significantly. We did. That's about a 10% growth point overnight. And we really are fortunate to have Nippon. I sometimes call them our rich uncle. It stands over our shoulder and has got our back if we need it. We stand on our own two feet. But if we ever needed them, they're here for us.

5:21

And so they've been a great support for us. And we were able to count on them as we took this journey. I mean, it's not a it's not a mess up the business type of risk, but it's a risk nonetheless. Yeah, 100 percent. But I want to get into the actual process of how you guys accomplish this. That's why we're here. Let's talk a little bit about how this got started.

5:44

How much time did you spend even thinking about it before you said, go, no, go. OK, we're in. was none. Before the end of that day in January, we were fully committed. But kind of to understand how that's possible, I need to share a little bit of history. Dunn-Edwards entered Northern California in the 60s. You know, we were the clear leaders in Southern California, but Northern California was all about Kelly Moore.

6:08

We spent decades since then. We got stronger and better in Southern California and Arizona and Nevada, but we were always in Kelly Moore's shadow in the North. And when I joined Dunn-Edwards in 2009, the financial drag of that asbestos litigation was kind of beginning to show around the edges. You know, over the next decade, for example, they did sale and lease backs on properties, just trying to generate cash to fund that settlement.

6:32

So seeing that and through a number of initiatives, we made progress in Northern California, but really it was marginal if I'm being candid and being honest, like I know you want me to be. They had a great name and a great following. Their problems really were financial and in their management, right? Not addressing issues that they had or not addressing the, as you said, the asbestos, whatever.

6:55

Yeah, they had a great name, they had a great position, and they had great people. We're going to come back to that again and again. Then October 2022 happened.

7:04

When the Flax Group bought them and our CEO, Carl Altercott, has got some pretty significant experience with companies that buy distressed businesses and attempt to turn them around. I have a little bit in my history. So we kind of sense that for better or worse, things were about to change at Kelly Moore.

7:22

You know, by early 2023, we put together a plan to start to grow aggressively in Northern California. We were focusing on the commercial segment. We were fortunate. We got to hire a couple of really talented people from Kelly Moore due to all that turmoil. And then by the middle of the year, it just became obvious that they were struggling.

7:41

There were rumors about product shortages, sundry shortages, rumors about what was going on in the plant. We started to sense that something was coming. I had heard that they had stopped making paint as early as July, or at least with any kind of regularity. And so that must have put an enormous burden on the stores to operate for another five months, basically.

8:04

We heard the same thing. I have to say we almost just didn't believe it. I mean, for a paint manufacturer to not make paint is we heard rumors about, oh, they're not paying this third party vendor and they're having trouble with odd industrial products. And that kind of made sense. But to not make paint that that seemed too, too unbelievable.

8:23

Turns out it was true. So by late 2023, we put together what we call a what if document. Like, what if this happens? What if that happens? And one of the considerations was what if Kelly Moore seizes operations? We thought bankruptcy. We didn't foresee, you know, an orderly wind down of operations. We were thinking chapter seven, maybe chapter 11, a gap for us to step into.

8:48

Nonetheless, we had a list of people that we wanted. We had a list of locations. We figured out who the property owners were. We figured out the customers. This was all in advance. This was in advance of Kelly Moore closing. Yep. This was in November and December. Most importantly, we went to our board. So even though we're a subsidiary of Nippon, we have a board of directors, we went to the board and said, this is what might happen.

9:14

They trusted Carl. Carl trusted his team. We had the support of Nippon. So it was just a matter of what would happen and when.

9:23

And so you were preparing and basically laying in wait. And so there really was no go, no go for you. Kelly Moore closed and this is it. We're turning on the light switch. This is the plan we've got in place for just this moment. And when they wound it down, as you alluded to before, for you, that effectively was a bankruptcy chapter seven.

9:45

They just ceased to operate. Right. And so you guys jumped in. And so we talked a little bit about the planning. Walk me through some of the execution. You had a plan in place. How did you go about getting all of these leases and the people, everything that was needed? So a little bit more set up. As December approached, they closed seven or eight stores.

10:06

I forget which the exact number was. So we started kind of, oh, well, let's pursue those stores. We came into 2024 thinking the end was going to be here. And then literally, I think we got rumored of it Thursday the 11th, but we saw the announcement on January the 12th. We're closing. And we just hit the go button. Clearly, the first thing was we needed to get our real estate team on those stores.

10:33

We had a list of 30 stores. We wanted 15, we thought. But it's like, go. We didn't know what Sherwin was going to be doing. What's Vista going to be doing? What's Benjamin Moore going to be doing? We just didn't know how the industry would react. We wanted to be first. And all were being aggressive. All were being aggressive. Every name you mentioned was moving quickly in that market.

10:54

yeah yeah so by the close of business that friday we had the real estate team moving we had our store operations people cutting pos because if you're going to open a store you need tint equipment you need shakers you need shelving you need and you know we live in this world right now where sometimes it's hard to get things and so we had those people going most importantly we had the store and sales teams on the ground in northern california making phone calls.

11:20

And we made a strategic decision. We were going to go after people one-on-one. We picked up the phone and called people and said, gosh, we've heard what's going on. We want you. We didn't do job fairs. We didn't do broad promotions. We did some stuff on LinkedIn, but mostly it was pick up the phone, call somebody. If we had somebody on our team that knew them, they picked up the phone.

11:45

It didn't matter if they were a tender or a sales rep or a manager. It was call the people you know and let's get them. Interestingly, the most challenging thing in that period was confusion. What just happened? I've never seen a business just shut down like that, not in our industry. I was on the ground the next week driving around. I must have driven around to probably 30 different locations.

12:11

And every store I drove up to was a little different. I ran into a handful of painters that would say, you know, the Concord store is closed and this one's closed too. Is the one in Pleasant Hill open? And I just have to look at them and go, I'm sorry, they're all closed. And some of them had paint inside. The Kellymore employees were in shock.

12:31

I spoke to one guy who was in the middle of tinting 175 fives in one of the bigger stores. He's literally in the middle of tinting them when he gets an email from his boss saying, put it down and go home.

12:48

Some of the stores had notes. Thank you, Mr. Custer, Mrs. Customer, for 75 years. We've really appreciated servicing you. Sorry, we're closed. We're out of business. Some of them had nothing. Some of them, the lights were still on. You could just tell the level of shock that hit people. Some of them had other postings that will just... not repeat.

13:09

There were orders locked behind doors. There were pissed customers. There were financially harmed employees. There were financially harmed landlords and vendors. There was a lot going on in this little pile of mess that was happening, you know? Yeah, we just opened the safe in the Brentwood store, and we found the cash bag. And it's got cash in it, which obviously we're sending to our contact at Kelly Moore.

13:37

It had cards. I'm not sure, by the way. I don't give legal advice, but I'm not sure that belongs to them. I believe that they've abandoned all of that. I don't know. We're hopeful that it'll get into the right hands. Yeah, whatever. It's not your problem. Right. Exactly. Debit cards that they were using to pay employees. It was just I mean, it's I read science fiction to be these post-apocalyptic stories.

14:00

And it was almost a little bit like that. And so how do you overcome that confusion, right? You say one of your biggest early hurdles was the confusion of the circumstances, which I can imagine because I was just a journalist covering it. And my phone during that time, during those first three, four weeks, my phone and my LinkedIn were exploding.

14:22

Yeah. And I wasn't trying to open stores. I wasn't trying to hire people. I wasn't trying to get tint machines replaced. I was just trying to answer the phone. So how do you clear all of that clutter and make progress? I think in any situation that's chaotic or confusing throughout my career, I found the first thing you do is you don't speculate.

14:45

You don't fall victim to the, well, this is what might be happening, or I think this. You just stick with what you know. And we leaned on the bedrock of Dunn-Edwards and said, whether it was to a property owner or to a salesperson, we've been here for 100 years. We operate stores in this industry. We know how to do this. Here's references you can call.

15:04

We just tried to talk about what we knew and what we wanted to do. We didn't speculate about what had happened. We didn't speculate about what the competition was doing. We just kind of focused on ourselves and tried to create a clear, concrete message of support. And so, Monty, tell me a little bit about what this took from your team, because it had to have been an enormous amount of bandwidth suddenly needed, right? How did you guys pull this off with the people you had in place? And fortunately, we've got great business leaders in all areas of the business.

15:36

So we were able to look at Northern California and take the senior team and go there. So the core team was Carl, our CEO, Nick Hess, who's our EVP of store operations, and myself. We were fully engaged and on the ground in that first week and beyond. But really, the initial execution fell to the real estate team. It fell to the store operations team and it fell to our two local leaders.

16:02

So we're split store and sales. So Michael Vester leads the store side. Sylvia Flores leads the sales side. And we had to lean on them because they were responsible for hiring. The initial phase was lease negotiation and getting that done. That's really more legal and finance and real estate. But Sylvia and Mike had to go get the people, which really necessitated a change for me.

16:25

Since 2009, I had been the final interview for almost everyone that's ever come into sales. Maybe I only saw him once a year after that, but I interviewed him. I had that one-on-one thing. And instantly, I had to give that up. I was literally in the way of Sylvia. I can't interview 150 people.

16:45

No, I can't. I can't do that. So when I went up there for district meetings last week, it's really the first time I've stood in front of a room full of salespeople and I didn't know half of them. I trusted, but I didn't know. You know, Nick had the same experience, maybe even more so because he was hiring the store people. He had to trust Mike.

17:02

Then we had to we had to let the store ops teams go and just say, lay the building out, get the permits. Don't wait for us. And we got the keys to Cupertino on the 20th of February. We opened it on the 6th of March. That's less than three weeks. Gerard Simpson, John Faulkner, Maria Flores. So many people pulled off not just that miracle, but 16 more after it.

17:28

And at an enormous pace of work, I would think, right? You guys were not even stopping to contemplate. In some cases, you were just taking actions. It trickled all the way back to the factory. We have a factory that's got enormous capacity, and our VP of manufacturing said, can almost literally just turn the dial and crank up manufacturing.

17:50

But we open four or five stores a year to open 17 in three months, pushing the amount of volume of sundries and paint into the distribution center, onto trucks, out. Oh, by the way, we were launching a couple of products. We had a dealer promo going on. And Seasonality is ramping up. Right. I was just going to say regular life goes on, right? You're still selling.

18:12

Yeah. And now I got to open up 17 stores. Yeah. So, you know, it was really all hands on deck and we're going to have the last ones for this round open in a couple of weeks. And I think they're going to give Gerard and John and the team. Couple weeks of breather, and then we got to go back to phase two. Now, I want to talk a little bit about phase two in a second.

18:34

But before we move on to that, I wanted to talk a little bit about what was your personal involvement. You must have dished off a lot of your regular work. You talked about not hiring. How were you personally involved in this process? So we set the priorities for what stores we wanted to go after. We reviewed the leases. We made sure that that process was in place.

18:56

We worked on kind of the overarching compensation. This is a little different world. We wanted to make sure that we had that set up. And then we really just laid out the roadmap for how we're going to proceed once we've got the stores in place. What comes next? That's where we've been focused and where I've personally been focused. So what efforts are ongoing? Where do you go from here? You guys have already transformed your business.

19:24

We have. In Northern California, there's just no question about it. So we're going to have the 17th store open by mid-May. Uniquely in this case, we were a paint company going into a paint company store. So we just took what we were given in the vast majority of cases. We didn't do a lot of remodeling. We did what was necessary. We just said if that's where they had their shakers, that's where we're putting our shakers.

19:49

It's only water-based paint. Just whatever we could do to get local permits, get it up and running immediately. Phase two, which comes next, is we'll run through and turn those stores into Dunn-Edwards stores. You know, put the signs up, do the painting, do the reorganization, do the remodeling. Some of the stores are beautiful. Some of them need some work.

20:09

We'll also have to figure out things like industrial tent centers. How many more industrial tent centers do we need? We'll get into the mundane things like, okay, our business is 3X what it was. What's the trucking schedule look like? How do we support those stores? All that's got to be gone through. While we're doing that, we're going to get feedback from customers.

20:29

You need this. You need that. That's phase three. Do we need to infill two more stores or five more stores? We'll listen to the customers and they'll tell us how we need to continue to iteratively expand the business. And then it'll be a focus on best location. We won't worry about, oh, it's an old Kellymore location or not. It'll be where do we need to be to react to the customers and react to the competition.

20:52

Which is more getting back to your original practices on opening stores and stuff like that. So sort of through this burst and then get back to regular business. Yeah, that's as simple as that. And then, you know, we haven't really touched on it, but Kelly Moore had a lot of dealers too. And we've been contacted by a number of dealers. We talked about one briefly at the beginning of this, HIS Paint, where we have a relationship with them.

21:20

We're in a few other small mom and pop and chain paint stores between here and Arkansas where we've supported them and moved in to replace Kelly Moore. And we continue to expand our dealer network through this effort. And that's, I don't know, phase 2B, if you want. And HIS is one of the other participants in this series. They also completely transformed their business.

21:46

And they basically added architectural coatings in response to Kelly Moore going out of business. They said, all right, we're industrial, but now we're both Yeah. If you know it better than I do, I'm sure. But I think they had three of their own plant stores that they sold their industrial coatings and some other architectural coatings, including ours.

22:04

And now they've picked up, I think, four more between Oklahoma and Texas, which is to throw a plug in for my home state. I love because I'm from Oklahoma originally. Right, right. And so tell me a little bit about what this was like for you as a learning experience, Monty, as an executive who's really accomplished an impressive task. You must have learned some things during that process.

22:28

What do you think they are? Really two things. You've got to trust your people. You've got to have at every level, people that you can rely on. And when times are calm and you have plenty of things to consider, that's one way of operating. But if you don't trust those people to make those decisions in those moments, when you get to an opportunity or a crisis, they won't be prepared to do it.

22:54

So it really is Trust your people, enable them, and prepare them for times like this. And no matter how much I think I've done that, it's just very clear I can do 10 times as much. So it's been a learning effort for me as an executive in terms of, having a team that I can rely on that operates without me. Some of us have some control issues and at least I'm aware of it.

23:23

The very best executives I know all do a great job of delegating. It's not a natural task. It's something that good executives need to teach themselves. They need to trust the people around them and they need to let people make decisions in their stead. And that goes hand-in-hand with the second lesson. And it's the job of the CEO or all of the senior leaders to– From time to time, sit back in their seat, put their feet up on the table, stare out the window, and think about what comes next.

23:56

What could happen? Where do I want to take this business? What are my opportunities going to be? If you're so focused on controlling what goes on in the day-to-day, you're only working in the business. It's got to be our job to work on the business, and that is far easier said than done. But, yes, lessons learned. There's a lesson learned.

24:17

Right. And, you know, one of the things that I've probably made common to every company that I've worked for is who's doing the vision work. I understand that all of you guys are doing a great job making sure the paint cans get delivered every day. Who's thinking about 10 years down the road, five years down the road? Because as an executive and particularly as a board, you said you had a board.

24:41

That's the only place they should be looking as a CEO or a board should only be looking down the road. And it's not just about words on a board or words on a motto somewhere. It really is that stare down the road and imagine all of the things that could go wrong. Imagine all of the things that could go right. And then put together a plan to take advantage of those opportunities or at least put together a list of, hey, if X, then Y.

25:08

Somebody's got to be doing that. And if you're micromanaging people, you're not doing that. Well, one of the things that impresses me about your response is that it really wasn't a response. In fact, you guys were ready for it. And in the case of the other recording that I made with HIS, and we have others coming, but in the case of the other one, they were kind of caught off guard and they just sort of responded, which is interesting in one story.

25:37

But you guys are different. You guys saw this in advance and you made a plan and then just executed it. And so really, that's fabulous work on your guys' part. Yeah, we've just, we've stared north at Northern California for years and years and years and made plan after plan after plan and You know, some of them were marginally successful.

25:58

Some of them weren't. But we were at least ready. We had been through the thought exercise 10 times over. Monty, thank you so much. What a great story of accomplishment that you guys had at Dunn-Edwards. And I really appreciate you making the time to share with my listeners. Any final thoughts as we wrap this up? Yeah, if I may, I'd really like everyone to know that kind of one overall impression.

26:25

And I really do appreciate the title of this series, The Opportunists. I've read some commentary over the last months in various places that leans a little altruistic and maybe a bit too much that makes me a bit uncomfortable. We're running a business and we want to grow and we want to expand and we want to be successful. But our history in so many areas says that we can do the right thing and we can be successful.

26:49

You know, I really can't wait to see how the team in Northern California and Dunn Edwards everywhere comes together in this moment to be better today than we were yesterday and to be better tomorrow than we were today. We're here to support painting professionals, and that's what makes Dunn Edwards possible. Well, it's what makes Dunn Edwards the company that I've been at for 15 years and don't plan on going anywhere else.

27:14

Well, good for you guys. That is a great way to end it, Monty. What a terrific story. Monty Lewis, Chief Operating Officer of Dunn-Edwards Paint Manufacturer Headquarter in Los Angeles. Thank you so much for joining me today. I really appreciate the time. Thank you, Mark. I appreciate the opportunity. I appreciate the work that you do, the podcast, and I look forward to seeing not only this podcast, but where it goes from here.