Sweet smell of success
Wednesday, May 21, 2008/
John van Roemburg survived the collapse of his furniture business in the 1990s to create a business around the concept of scent marketing. He explains to AMANDA GOME how he is running a global business from Australia.
By Amanda Gome
John van Roemburg survived the collapse of his furniture business in the 1990s to create a business around the concept of scent marketing. He explains how he is running a global business from Australia
It’s second time around for mechanical engineer John van Roemburg. After closing his furniture business in the mid 1990s, this entrepreneur took the lessons he learnt and is now building a business, Air Aroma, based around scent marketing. The business is global, profitable (revenue is now $20 million) and he did it without an overdraft.
He tells Amanda Gome how he did it. John is available to answer your questions. Simply email [email protected]
Amanda Gome: Your business Air Aroma is in “scent marketing” as businesses seek to express their brand and enhance customer experience through scent. How did you get the idea for the business?
John van Roemburg: I was living in Holland and a friend was involved in a scenting business. He was using it to scent a fitness centre against body odors, and swimming pools to eliminate the smell of chlorine. I wanted to return to Australia and was looking for a business to set up.
Why did you come back to Australia?
It’s hard to describe, but when we were in Europe we realised; our life is here. Life is very crowded in Europe.
Why not return to a big company? Why start your own business?
I worked for a large company for many years. But it’s difficult. At least I can determine my own future. I mean it is determined by clients, but I didn’t have the freedom I do now when I was at big companies.
I also wanted to set up a business and grow a larger company. It is easier here because there are a lot of restrictions in Europe. So I saw the idea and set the business up in 1998.
Yes. It was easy. I still knew my old accountant so I asked him to do the paperwork and ground work.
How much did it cost to set up, and how did you come up with the name?
It cost $500, and we had three or four names. But Air Aroma was available and we then got a trademark, which was great because it is two common words and that usually means you can’t get a trademark for them.
What did you learn from your former business?
I designed sleek modern Italian/Swedish furniture and set the business up in 1982. The designs are still popular today, but back then it was ahead of the market. We closed it in 1994 after a few years of recession.
Was it hard to close?
Yes. We had 17 people at the time when we had to close. When you build it up yourself and know you are doing great designs, that’s very hard.
What did you learn?
I learnt to do marketing from day one when you start a company. We did a few ads around sales when we got desperate, because we had the attitude that people would come to us. We did not do enough PR.
We also learnt not to take an overdraft. We did not do organised accounting and this time around it is different. We have completely self funded this business.
Times have changed between the late 80s and 90s. When we launched Air Aroma we built a website and that let us go international from day one. That meant we could be based in Australia but be an international company. That wasn’t possible in the 1980s. We still do expos but we focus on the website and the interest came very quickly.
Where did the interest come from? What is your most popular market?
Scenting is very popular in Japan. But large companies that were providing the service failed because it was too expensive. The use of oils was too great.
How have you addressed that problem?
We started the business by importing products to distribute the scent. But we ended up throwing them out because we could not sell them. Then we developed and designed our own professional scenting equipment.
Air Aroma not only provides the technology with which to diffuse the scents, but we work with the customers to deliver the right smell for their brand.
In our lab in Melbourne, staff mix pure essential oils to come up with signature blends for specific companies.
What problem did you solve?
The main thing is to create a micro mist. So we developed equipment to turn the oil into a mist. The air is compressed and turned into a mist that travels very easily through the air and gives off the scent.
How long did it take to develop?
About a year, and the R&D cost about $50,000. My wife Rita and myself paid for that.
Did the design of the scent dispensing machines matter?
Design is incredibly important. It should not just be pleasing to the eye but it must work efficiently and reliably.
Also some of the products we sell are quite expensive, but because of the design you get a sense of quality.
Has pricing been an issue?
We have been able to hold our prices to 2002 levels because as we have grown as a company the increased quantity has helped me keep prices down.
Only 5% of revenue comes from Australia. How do you sell to countries around the world?
Distributors; nearly all of them coming from the website who contacted us. We now have 34 distributors in 34 countries. Japan is the biggest market and the second biggest would be China. Where we see more potential we set up partnerships with the distributors.
So distributors contact you?
Yes, there is a lot of interest in this niche business. We do have competitors in the world but that just spreads the word and grows the market.
Have you had trouble with distributors?
Our main distributor in Australia left and set up in competition, but we have a better product and are running the business better.
We tried to take legal action against them but were told it would cost $250,000 and it was better to stick the money into R&D. So we sent some letters instead.
That must be difficult…
The first year was very difficult, but we know their weaknesses.
You are now pushing into the US?
Yes; we have General Motors as a customer. The dealers can tick a box to include scenting so when you go to pick up your car after a service it is a relaxing atmosphere.
They had developed a fragrance and were dispersing it without equipment and then they became aware of us.
We now have 40 to 50 dealerships signed up, and if they all take it that could be worth more than $20 million a year. That started in late February, and the first 40 or 50 have signed up.
What’s your revenue?
About $20 million. We are aiming at $24 million for 2008-09, growing to $35 million by 2012.
We started to make a reasonable profit two years after we started. Our costs were low at the start. We began the business in my garage in Brighton (Melbourne).
Is it hard to explain the products to the marketplace?
It depends. Hotels get it, so you don’t have to explain it there… as for airlines, we were speaking to Qantas but the board decided against it at the last moment.
What is your business model?
We never just wanted to sell the equipment. You work very hard for the sale and then that’s it. So when you sign a contract you get the machine, the scent and a two year contact. We don’t just sell the car, but the petrol as well.
It sounds like you are building a franchise model.
That’s a path we have not taken yet. But we have mentioned it many times. It’s hard to generalise, but I see potential in the franchise idea, and it is an easy option for us, especially to do that from Australia.
With a lot beaches and warm weather, people don’t expect certain technologies to come from here. In the US for example, they don’t tend to look across their borders – “why get it from there, sounds expensive”. But these are the little hurdles we have to overcome.
How do you fund your R&D?
Out of 21 staff, we have four people working on R&D. We got a Commercial Ready grant just in time.
Yes, well that has been chopped by the Federal Government. How important was that grant?
It was extremely important. We are working on a project and we are putting in half a million and the Government is financing half a million. We were extremely surprised it has been cut. We have an expert from AusIndustry working with us and this will make it very hard.
We are an export company and it is very important to the country that companies like ours can get assistance with developing their technology.