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Priva Inc. recently
announced the pending acquisition of $6 million USD in annualized customer accounts from
Waterproof & Absorbent Products
9100 Ray Lawson Boulevard
Anjou, QC Canada HIJ 1K8
President and CEO
Interview conducted by:
Walter Banks, Publisher
October 6, 2005
David Horowitz, born in Montreal, Canada, moved to Western Canada as a teenager. He then
completed his Bachelors of Commerce Degree, specializing in Marketing at the University of
Calgary, and continued his education with the completion of an M.B.A. in Finance at McGill
University. Upon graduation, he was recruited by the Royal Bank of Canada, one of Canadas
major banking institutions, as a Commercial Loans Officer, managing a loan portfolio of
small business clients. This background, coupled with 2 entrepreneurial ventures that lead
to his experience selling and marketing to retailers, had positioned him to launch Priva
Priva Inc., is a manufacturer and marketing company that specializes in the waterproof and
absorbent specialty textile market, catering, currently to the young infant market and the
aging population market segments. Product ranges include both body worn garments such as
reusable adult diapers, to baby bibs and adult bibs, to crib waterproof protectors and
complete adult size waterproof mattress protectors. Customers include Wal-Mart, Sears,
Toys R Us, CVS Pharmacy, Eckerds, Albertsons, and Kroger to name a few.
CEOCFO: Mr. Horowitz, will you tell us about Privas
background and where it is today?
Mr. Horowitz: Priva is a company that was initially
created to deal with the long term care facilities that are overloaded and needed people
to be taken care of at home. Priva is an offshoot of an institutional company that
specialized in incontinence products for the elderly in hospitals and nursing homes. As
more people were being cared for at home, because of the expansion of this market, they
needed the products that were in the hospitals and they needed access to retail stores so
they could purchase it and have it available to them. Over time, we noticed that not only
is there an elderly incontinence bedwetting market, but there is a youth bedwetting
market. To us, the product became irrelevant and the market place is what we were after.
We actually expanded the company in order to grow it into a waterproof and absorbent
textile specialty manufacturer that gave us real unique items for the very old and the
CEOCFO: What are your
Mr. Horowitz: We are in two segments of the market. One
of them is body worn garments for the adult market. We offer reusable adult diapers rather
than disposable. Reusable is our niche and the reason for that type of product is that
there are people that are on fixed incomes, not just the elderly but also the handicapped
population. One of the benefits is for those who are washing their own garments or paying
to have their products washed for them, because it does come out cheaper. It comes down to
body worn garments and that would include briefs and bibs and at the second market are
bedding protectors, because when they are bed ridden, as most of our customers are, they
would need products that can protect them from any kind of soiling that would occur in a
bedroom. They can even be bathed in the bed or wiped down in the bed, and our products
protect the linens even if they are bleeding or have any other issues with any leakage of
any fluid. We have a whole variety of bed protectors, so that sort of characterized the
two areas that we focusing on.
CEOCFO: Is there much competition in this area?
Mr. Horowitz: The competition is actually interesting
because I would say that we do not have direct competition. That would be a company that
does exactly what we do, where they cater to both the very old and the very young; a
company that specializes in just waterproof, absorbent textile product. Clearly, we might
have a competitor that sells a disposable diaper for an adult and there are disposable
diapers for adults, so we have more competition that is indirect. We love the fact that we
play within our own arena and it allows our customers who are predominantly retailers, to
view us as the go to company when they are looking for a type of specialized product that
is waterproof. That has given us a real edge over someone else who is just an indirect
CEOCFO: How do you reach your retail customers?
Mr. Horowitz: We actually try to reach them through two
angles. Moreover, you are correct in saying the retailer, because the retailer is the one
who is going to purchase it and put it on their shelves. However, today the retail
environment has become so difficult, because there are so many new products trying to
chase the limited real estate that is available in the store. Therefore, we have to have a
two-pronged approach, because we need to push our product onto the shelves, but we need to
figure out another method. What we do best is pull the product off the shelf; in other
words, we have grown and become successful because our job does not end when the product
hits the shelf; it actually just starts when it hits the shelf. If we are going after the
adult incontinence bedwetting market, we target urologists in a community where there
happens to be a strong retailer and get demand so that we can put the product on the
shelf. Once we have the urologist on board and believing in our product, we then turn to
the major retailer in that community and say now this is what we are doing in your area.
There is not a retailer today that is not looking at the aging population and because we
have product for that market, we have all of their eyes and ears. So combining the two is
how we do the approach.
CEOCFO: It sounds a little slow going community by community;
how does it work as a long-term plan?
Mr. Horowitz: I think if anything, community by
community is important, not so much that it is slow going, but every retailer sits there
wanting the newest and most innovative product. However, at the end of the day few of them
are willing to come up to the table and make a decision to be the first. As a result, what
we find more effective and ends up helping the speed is that while we get into one
community and have a success rate, the retailers want to know who else is selling it and
at what movement. The moment you can prove just a single community that has a success
story, every other retailer ends up coming on board quicker than trying to have each one
be a Guinea pig. So it allows us to walk before we run, but as soon as we have that
success, which wont take much time; we will then blanket the country.
CEOCFO: Is there much
word of mouth among users of your products?
Mr. Horowitz: There is actually an incredible amount of
mouth from two areas. The first area is that our user of the product is not necessarily
the purchaser. Typically, the purchaser is a primary caregiver buying it for their elderly
parents. Keep in mind that the reason why word of mouth is so powerful in this area is
that caregivers have to deal with the overall bigger issues of the real problem.
Incontinence is a symptom of something major, whether they have spin bifida or multiple
sclerosis or prostate cancer. The fact is that when they find something that helps them
deal with all the other issues related to the problem, they help each other. What a great
word of mouth. The other area is mothers that have young children. So when they find our
product, mothers are a great word of mouth source, the most powerful.
CEOCFO: Will you tell us
more about the geographical areas in which you are located?
Mr. Horowitz: Even though we are Canadian based, the U.S.
is the largest part of the North American market. We first began in the U.S. and then
approached Canada, and then from Canada, we approached the U.K. and Australia. All four
markets are very strong markets for us. What we have done to strengthen ourselves in America,
is that we just recently announced the acquisition of a competitor that is a major player
in America and that competitor allows us to penetrate new channels. They service many
department stores that are different from the drug stores and supermarkets where we are
presently. It allows us to go strong in America and be able to be into as many
distribution channels as possible.
CEOCFO: Will you tell us
about your manufacturing facilities?
Mr. Horowitz: Our manufacturing facilities work in
multiple ways. We, as manufacturers, purchase the raw materials but we do not actually own
manufacturing equipment. Instead, given the market place that we are in, we dictate where
the product will be sewn. If we need to be competitive, we purchase these raw materials
and send them to China, Bangladesh or Cambodia to be produced and shipped back to us. If
they are smaller more private label programs that we do, we have the product domestically
made within North America, and select the contractor that can do the best work for us.
That flexibility with control has given us inroads into accounts because we consider
ourselves mass customization and it has been great for us.
CEOCFO: Is pricing a big
consideration for your customers?
Mr. Horowitz: Pricing is not number one. Today, the
number one issue that our customers and consumers are looking for is value. They are
looking for the opportunity to fix the problem. If you have loss of bladder control, the
last thing you need to do is worry about price. You want to make sure that you have a
product that works well. As long as the price/quality ratio is there, then that is
important. The value and making sure that the product performs wash after wash is number
CEOCFO: Will you tell us
about the financial picture at Priva?
Mr. Horowitz: The financial picture has brought us to
where we are today, different than where we were yesterday. The entry into retailers has
been difficult. The retailers have merged; today you have multiple retailers that are no
longer in business. If you look at the New England area, multiple retailers are no longer
there. The retailers demands have caused constraints on our financial situation
because many times, you are paying for shelf allowance, and all entry costs are expensive
initially. We have been in a comfortable situation with enough sales to warrant all these
charges, we have now turned around the company in the last 24 months, and it has put us
into a good growth opportunity. Our long-term debt is very limited and as we take over and
close this acquisition, we will be close to sales in excess of $16 million, of which we
will only have approximately $600,000 in long-term debt. We have used our banking credit
line facilities, and have had enough access to working capital that allows us to grow.
Currently we are in a very good financial position.
CEOCFO: Because of the
mass customization, do you need to maintain much inventory?
Mr. Horowitz: Because our specialty is waterproof
absorbent fabric, few raw materials are used in multiple products; it is the end product
that changes. The fact that we use identical raw materials in multiple products, it helps
us reduce the inventory so that we get the greater returns that we need.
CEOCFO: Are there new
products that you are working on?
Mr. Horowitz: There are two key areas for our growth.
The one area that we are targeting specifically is stores that sell new mattresses. We
have created a wonderful program, that because our product is waterproof, it helps protect
the new mattresses. We are tying in warranties together with the retailers to expand into
this area. In America and Canada, there are multitudes of furniture retailers whether they
are chains or in many cases, strong successful independent stores. Not only are there
great growth opportunities in terms of going after a new channel of distribution, but I
like the idea that we are taking our products and our specialty and determining where else
we can go and what other retailers we can sell our products to, so that is one area of
growth. The second area is in the incontinence market. With this acquisition, we have some
great opportunities to become even stronger in the incontinence market. We still only have
a fraction of the market and our combined effort will give us this great opportunity in
this aging population.
CEOCFO: In closing, why
should potential investors be interested and what do people miss about Priva?
Mr. Horowitz: Priva is a niche player that has unique
items and a competitive edge because of their expertise in its raw materials. The second
reason to be interested in Priva is the fact that we are a small sized, profitable company
and has only recently been acknowledged, so, in my opinion, our share price does not yet
reflect what programs and potentials we have right now. We have just been found.
Getting in at an early stage certainly makes for a potentially dramatic growth
opportunity. In terms of what might not be realized, we currently see that we live in a
global economy, and from both a negative and positive standpoint, we want to make sure
that with all the products being manufactured, that we make sure we do the proper juggle
between domestic manufacturing and offshore manufacturing to be competitive. We believe
that we have that strength because we do not own the sewing machines in any particular
city; we just own the raw materials. We need to competitively produce our goods to keep up
our margins. Margins today can be eroded because not only are costs rising such as
insurance, but also freight rates due to gas increases that also affect raw materials.
Currency fluctuations also play a key role in todays global economy. We have to make
sure our margins are not eroded by these extra costs. Being flexible in how and where to
manufacture the products is the key.
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