Shaw Industries grew out of a Dalton dye house and two brothers’ calculated risks
Before it became a Berkshire Hathaway company, Shaw began as a Dalton family finishing shop with four machines, and two brothers spent decades betting it could be much more.
Dalton, GA
In the mid-1960s, Julius Clarence Shaw, known as Bud, was running Dan River Carpets’ mill in Cartersville, Georgia, and he held the company Christmas party at 2 a.m. “Those third-shift people are just as important as our first-shift people,” he said, as his colleague Warren Sims recalled it in Randall Patton’s book Shaw Industries: A History.
His son Julius remembered watching his father shake the hands of third-shift workers as they left work and thank them. “That impressed me. It impressed me even more that he knew a large percentage of their names,” Julius Shaw, then an executive vice president at Shaw Industries, told the Dalton Daily Citizen in 2015.
The company that carries the family name grew from a small dye house in Dalton into one of the largest flooring makers in the world. It has been a wholly owned subsidiary of Berkshire Hathaway, Warren Buffett’s holding company, since 2001. Its history turns on a handful of bets, some of which people close to the Shaws thought too risky, made by two sons of a Dalton dyer.
Dalton made tufted bedspreads before it made carpet. The trade took off around the town in the 1930s and 1940s, and Clarence Shaw, a Georgia Institute of Technology graduate, went into the work that came after the tufting. In 1946 he bought a commission dye company, Star Dye Co., which dyed and finished bedspreads, robes and small rugs for local manufacturers. It built a steady list of customers.
His oldest son, Bud, was born in Dalton in 1929, the first of four children. He played varsity basketball at Georgia Tech and earned a degree in textile engineering there in 1950. He later started a carpet yarn division at Dalton’s Crown Cotton Mills. His younger brother, Robert, known as Bob, also left Dalton as a young man.
By the end of the 1950s the market was turning under the family’s feet. Bedspread sales stalled and then fell. Many Dalton-area makers of small tufted goods shifted to a heavier, more expensive product, which was carpet. When Clarence Shaw died, his sons came home to decide whether to sell the business or close it. They did neither. They retooled it as Star Finishing Co., a supplier that dyed and finished carpet for other mills. It started with 10 employees and four machines.
Bob ran Star Finishing through the 1960s, and it rose fast. By 1967 it was the top commission finisher in the carpet industry. Bud, meanwhile, was managing mills for other companies, including the Dan River operation in Cartersville.
In 1967 the brothers joined forces. The family and its associates formed the Philadelphia Holding Co. to buy Philadelphia Carpet Co. of Cartersville, a woven carpet mill founded in 1846. Bud had just launched a carpet start-up of his own, Sabre Carpets, and some of his closest associates questioned taking on such a large purchase so soon.
“Everyone said it was too risky,” Julius Shaw told the Dalton Daily Citizen. “But he always told me that it was a calculated risk. It was also an example of his unconventional thinking. After successfully getting a start-up running, no one thought he would buy an ongoing mill within a year.”
The brothers folded Star Finishing and Sabre/Philadelphia together. For a logo they chose a star emblem with a Liberty Bell in the center. When the holding company went public in 1971, it took the name Shaw Industries.
The early years were hard on carpet makers. The oil embargo of the 1970s slowed housing starts and squeezed the supply of the petrochemicals used to make synthetic carpet yarn. Shaw kept growing anyway. It bought yarn spinners so it could make its own supply, and it picked up Elite Processing Co. of Dalton for its newer equipment. That included “TAK” dyeing machines, which create designs by sprinkling flecks of dye onto the carpet. In 1975 sales fell for the first time in the company’s history.
What Shaw did well, according to Patton, a Kennesaw State University historian, was turn new technology into profitable operations. Other mills were sometimes first to bring in printed carpets or continuous dyeing ranges. Shaw’s finishing division tended to run them more efficiently once it had them. The company also kept standing orders with top equipment suppliers and bought the best machines as soon as a new development appeared.
Bud had served as the first president of the Carpet and Rug Institute when it formed in 1969. He took a less active role in daily operations after a restructuring in the late 1970s but stayed on as chairman. Ben Laughter, a former legal counsel and secretary to the board, remembered those meetings as tightly run. “The board meetings were always very focused, and they were focused on the big picture,” Laughter told the Dalton Daily Citizen.
The bigger gamble came in 1982, at the bottom of an industry downturn. Bob Shaw, the chief executive, decided to compete with his own largest customers. Wholesale distributors sold most of the carpet in America then and kept a sizable margin. Shaw added eight regional warehouses to its original two and built out its own sales force. In a second bet, it put those salespeople on salary instead of straight commission and invested heavily in their training. That same year it set up its own trucking subsidiary to get carpet to retailers faster.
In 1982, 55 percent of Shaw’s sales went to distributors, according to the Atlanta Journal. Three years later, retailers accounted for 80 percent. By then Shaw was the largest carpet maker in the country, and by 1986 it led the industry by a wide margin.
“We are a one-industry company: carpeting,” Bob Shaw told Textile World in 1985, when the magazine named the company its Mill of the Year.
In 1987 Shaw bought the carpet and rug division of WestPoint-Pepperell, bringing in the Cabin Crafts and Stratton brands and becoming the largest carpet manufacturer in the world. The purchase set off a wave of consolidation across the industry, and Shaw kept buying, including Salem Carpets and the carpet division of Armstrong World Industries.
Not every bet worked. In 1995 Shaw tried to sell directly to homeowners, buying large retail chains and individual stores. The move drained the company, and its stock price tumbled. In 1998 it began selling off the stores and went back to what it knew, which was making carpet efficiently and serving the retailers who sold it. It then merged with Queen Carpets, founded by Harry Saul, whose son Julian Saul later served as Shaw’s president.
Bob Shaw often said he had no interest in building a business in order to sell it. He wanted to build an institution that would last. The sale to Berkshire Hathaway in early 2001 fit that idea better than it might seem. Buffett tended to keep existing managers in place, and the deal left Shaw with a single stockholder, free of the short-term outlook Wall Street analysts had imposed.
Under Berkshire, the one-industry company widened its idea of that industry to include nearly anything people walk on. In 2002 Shaw opened a laminate plant, its first step into manufacturing hard-surface flooring. In 2006 it announced plans to turn a former yarn plant in South Pittsburg, Tennessee, into an engineered hardwood factory. It opened its first Asian plant, in Nantong, China, in 2013. In 2016 it began making carpet tile in Adairsville, Georgia, in its first newly built facility since 1997, and it bought the competitor USFloors.
The brothers stepped away in turn. Bud retired to chairman emeritus in 1996 and died in 2015 at 85. His son Julius said his father had always been convinced carpet was the future, even when many in the industry thought the merged company would not last. Bob retired from Shaw in 2006 and in 2009 founded a new carpet company in Dalton, Engineered Floors.
Bob Shaw had his own explanation for why so much of the American carpet business stayed close to the town where his father once dyed bedspreads. “Very few, if any, carpet mills have been successful outside a 30-mile or 40-mile radius of Dalton,” he told the Dalton Daily Citizen-News in 2017. “It gives you a moat around you, so you aren’t constantly having to worry about currencies and things like that.”