Mattress Market: The last 12-months have been tumultuous for the mattress market with several plant closures and consolidations. Key market changes are summarised below:
Tempur Sealy signed a definitive agreement to acquire Mattress Firm, the largest mattress specialty retailer in the United States.
Serta Simmons Bedding announced that it has concluded its financial restructuring and emerged from Chapter 11.
Soft-Tex was purchased out of bankruptcy by Devolli Corporation and is now operating under the name of SFX Sleep.
HK Foam added a business unit named Healthcare that is focused on top-of-bed products to complement their MLilly mattress line.
These changes present opportunities for Alexium to further expand its position in the bedding market.
Billy Blackburn’s description of the mattress market as “tumultuous” over the last year or so probably surprises few. At first glance, the key market events outlined here might appear unfavourable for Alexium; yet Billy Blackburn states that the various changes represent opportunities for Alexium to expand its position in the bedding market. Therefore I thought it was worthwhile to examine these changes more closely.
Tempur Sealy acquisition of Mattress Firm
In May this year, Mattress Firm, the largest mattress/bedding retailer in the United States, was acquired by Tempur Sealy for US$4 bn. It is expected that Mattress Firm will operate as a separate business unit within the Company.
Mattress Firm stocks most major brands, including Serta and Beautyrest. I believe that Alexium technology, which has been supplied to SSB via SSB’s technology supply chain manager, Soft-Tex, is incorporated in select products of both of these brands.
It’s unclear to me how this change might impact Alexium.
Mattress major, Serta Simmons, has been one of the most high profile victims of the recent vicious downturn in the US bedding industry, filing for Chapter 11 protection in January this year and re-emerging earlier this month. During this restructuring period, SSB maintained usual operations and continued to fill orders for its partners.
Serta has announced that it plans to “refresh the vast majority of its product portfolio” over the next 18 months and is aiming to more frequently update its product mix in the future.
Perhaps this will provide Alexium with further opportunities.
Soft-Tex bankruptcy, purchase by Devolli Corporation, establishment as SFX Sleep
In April 2020, Alexium entered an agreement with Soft-Tex to exclusively purchase Alexicool products for bedding systems based on Soft-Tex’s Reactex technology. The agreement was for 2 years, with provision for automatic renewal. While I can’t find exactly when Soft-Tex declared bankruptcy, I can see that the company was still operating in May last year, when it appointed a new CEO. Purchased by Devolli and relaunched as SFX Sleep earlier this year, the new company has retained all the Soft-Tex product brands and technologies, including Reactex.
New owner, Devolli Corporation, is based in Kosovo and has an unusual division of interests between coffee and mattresses and foam. Devolli’s mattress and foam interests operate under the Ventius International banner. Ventius has 2,500 employees, and currently produces 36,000 tons of foam, 2.5 million mattresses, 600,000 mattress toppers and 2.5 million pillows per year. It exports to the US, Canada and across Europe and also sells online.
The good news here is that Reactex is still going strong (and I don’t think the Soft-Tex changes would have been mentioned if Alexium was no longer involved) but the business behind the brand is now much larger and stronger, is also a major foam producer and has strong presence in the European market as well.
Perhaps Devolli is linked to the statement The company is in the final stages of trials for its first two placements of Alexicool®/BioCool® products in Europe. Shipments for both are scheduled to commence in Q1 FY24.
Mlily owner, HK Foam, adds Healthcare business unit focused on top-of-bed products
Chinese company, Healthcare Co Ltd., established the Mlily brand of mattresses and pillows in 2008 and entered the US market in 2011, followed by the European market and Thailand and Malaysia in 2018.
Healthcare Co. currently has 8 facilities worldwide, located in China, Thailand, Serbia, Spain and USA. The company claims to have the largest foam production base in Asia and produces 2 million moulded pillows every month.
Mlily has a 650,000 sq ft factory and distribution centre in South Carolina where beds are assembled from components made at Healthcare’s manufacturing plants in Serbia and Thailand.
Mlily products are distributed to over 70 countries worldwide, including Australia and New Zealand.
In Europe, Mlily is known for being the official global mattress and pillow partner of Manchester United Football Club.
I wasn’t aware that Alexium was a supplier to Mlily but the mention in today’s Quarterly Activities Report seems to me to imply that Alexium will be supplying cooling technology to new top-of-bed products for the Mlily brand.
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