Fast Track

Fasttrack/–“/dt1st/mark2nd By SHELLY GARCIA Staff Reporter Avi Cohen didn’t hesitate when a friend suggested they start a bed linens business. No matter that he didn’t know anything about manufacturing bed linens or the retailers who sold them. The two had $150,000 to invest and, thanks to Cohen’s father, who had sold fabric seconds (manufacturing irregulars sold at a discount), a few friends at textile companies in Israel. Since those seat-of-the-pants beginnings in 1991, Veratex, which makes bedding ensembles that retail for about $400 for a comforter set, has grown to a $25 million company with a customer list of about 400 retailers, including some of the biggest names in home fashions. But not before it narrowly escaped going bust twice. “It’s extremely impressive to come into such a (mature) business and make the inroads he did,” said Donna Aidekman, vice president and divisional merchandise manager for Strouds. “Most of it stems from his ability to recognize fashion and be on the cutting edge, as well as pricing it for a value equation.” As Cohen, who is president of Veratex, sits in his cluttered Van Nuys office chain-smoking cigarettes, he doesn’t bother to hide his astonishment at how far the company has come. He was an auto mechanic when he arrived in this country in 1980 from Israel and started his first business an auto parts distributorship with $30,000 in seed money financed from three credit cards at 25 percent interest. Later, he opened a small chain of pet stores. By the time his friend Moti Katz, who is now senior vice president in charge of the company’s production and operations, approached him with the idea of starting up Veratex, Cohen figured he could sell anything. What he didn’t know was, unlike the cash-and-carry businesses to which he was accustomed, the bedding industry is dominated by huge multinational textiles firms with powerful brand names and the ability to deliver hundreds of thousands of pieces of merchandise to stores nationwide. After plunking down their investment on a container of fabric from Israel, Cohen found little success at the specialty chains. Veratex had no track record to convince retailers it could deliver the goods. He made his first sale only after the chief executive of now-defunct 3D Bed and Bath demanded that they visit his Israeli suppliers together. Largely because of his father’s connections, the vendors they visited in Israel vouched for Cohen, and 3D placed an opening order. The pattern began to sell well enough so that 3D wanted to reorder it. But retailers typically take 90 days to pay their invoices and Cohen hadn’t received any payment on the first container yet. He had no money to reorder the goods. It was only after his father agreed to act as a guarantor for the shipment that the company secured its second container of goods. In 1994, Veratex caught the attention of a home textiles trade magazine. The story attracted a number of new customers, and the company’s revenues reached about $2 million. For the first time, Cohen was able to think about how he wanted to shape the business, and he decided to upgrade the line. He recognized that while domestic textile mills enjoy tremendous cost efficiencies, what they cannot do effectively is produce smaller runs for niche markets. “I couldn’t compete with the mills on the low end,” said Cohen. “Why would the retailers buy from me? So I said, ‘I have to go to sateen.’ ” Cohen decided to focus on luxury cottons and woven jacquards. He accessorized comforters and pillows with tassels and cording typically found on custom-made bed linens, and he upgraded the packaging. Orders were coming in at a brisk clip, but because of the industry’s 90-day payment terms, Cohen couldn’t meet his payroll or pay some of his suppliers. He tried traditional lenders, but because of the company’s short credit history and size, he couldn’t get the funding he needed. “We had the money on paper, but I was almost out of business,” Cohen said. Finally he stumbled on a program offered by Los Robles Bank, a community bank in Thousand Oaks. For a service fee that was comparable to some high-interest bank loans, Los Robles bought Veratex’s receivables, giving the company the operating cash it needed. “He’s your typical entrepreneur,” said Bob Young, vice president for asset-based loans at Los Robles Bank. “He had the energy to put into the business and he’s a good salesman, but at the same time, he seemed to have a good business sense of what he was doing and where he was going.” “From that moment, I stopped worrying about collecting money, and sold customers whatever they wanted,” Cohen said. “I also started buying like crazy.” Consumers seem to like the Veratex designs. Veratex makes six of Strouds’ 10 top-selling patterns, and the retailer recently opened a shop within a shop dedicated to the company’s lines. “I don’t even trust my own judgement anymore,” Aidekman said. “His track record is so good, why would I even second-guess him?” Cohen has built a client base of specialty chains that includes Linens ‘n Things and Bed Bath & Beyond, as well as Strouds. And Sears Roebuck and Co. has recently contracted for a private-label brand, which, with fewer adornments, will retail for about $199 for a comforter set. Last summer, Guess Home Collection awarded Veratex the license to manufacture its bed linens line, a business for which Cohen had to compete directly against the textile mills. “We were really impressed with what he’s done in such a short period of time with Veratex,” said Lawrence Sass, executive vice president of the Guess Home Collection. “We really respect his passion and commitment. His word is good.” Veratex, which now has showrooms in New York, Atlanta and South Carolina, this year will move from its current 55,000-square-foot facility in Van Nuys to a 140,000-square-foot build-to-suit in the new Panorama City industrial park, The Plant. “I believe business is always beautiful,” said Cohen. “The problem is, we don’t like to work hard enough.” Snapshot Veratex Year Founded: 1991 Revenues in 1994: $2 million Revenues in 1998: $25 million Employees in 1994: 20 Employees in 1998: 180 Top Executives: Avi Cohen, president, Moti Katz, senior vice president Goal: To repay the work and loyalty of the employees by providing them with a secure financial future Driving Force: “The consumer is spoiled. They want to see new things. If you bring them new items, they will buy it.”