Exports bring woollen mill in from the cold
Thursday, February 8, 2007/
A Tasmanian woollen mill was close to the brink when Bruce Grant stepped in and targeted China, through exports and TV home shopping. By KRISTEN LE MESURIER.
Summary: A Tasmanian woollen was close to the brink when Bruce Grant stepped in and targeted China, through exports and TV home shopping .
By Kristen Le Mesurier
Waverley Australia chief executive Bruce Grant is blunt about his company’s venture into exports: “There really was no option. We had to grow sales to survive.”
He is not exaggerating. Just 18 months ago receivers were scouring Waverley’s 133-year-old woollen mill for signs that it had a future. Waverley owed close to $3 million and a series of cash flow crises had made servicing the debt a nightmare.
But continuing revenue of $7.5 million a year convinced a group of local Tasmanian investors that the business was worth saving, and in July 2005 they settled $1.5 million worth of debt and took control of the business. The new owners hired Grant to bring a fresh outlook and the pluck to make changes.
“My first job after conducting a wide-sweeping review of the organisation was to look at sales opportunities,” Grant says. “There lay the obvious answer: we had so much capacity we could treble our output without investing a cent in infrastructure. We had to find new markets, quick.”
Seven months later, Grant and his recently appointed export manager have signed five contracts with Chinese agents and distributors for its blankets and quilts, contracts worth $2–4 million in the next 12 months and much more in the long term.
“We’ve shipped $500,000 worth of stock in the past two months. I’m expecting these contracts to grow revenue by $20 million in five years,” Grant says.
Be innovative about reaching the consumer
Those who think selling to China means fighting for shelf space, think again. For Mark Bramich, Waverley’s international business development manager, it means bright lights and a camera crew, often in the middle of the night.
“If I sound like I haven’t had any sleep it’s because I haven’t,” Bramich says. “I was the first foreigner to appear on China’s number one 24-hour shopping channel last night.”
Between 11.30pm and midnight on February 5, Bramich ripped up quilts live on television to show viewers in southern China how Waverley’s products compare with the competition.
“I learned how to introduce myself, say ‘Good evening audience’, and explain that I was an Australian in Chinese. That always gets a chuckle from the viewers,” Bramich says.
Home shopping across South-East Asia
“We tested the concept a few months ago in Taiwan. We only had 100 quilts sitting in a warehouse nearby, they sold out in 32 minutes,” Grant says.
Grant and Bramich say the trickiest thing about starting in China was knowing how to structure their entry to the market: whether to use agents, distributors or both; whether to try to sell directly to retailers and who to grant exclusivity to.
Online trade portals were initially used to make contact with agents, distributors and retailers. “It’s like an electronic dating service. You post what you’re selling on the internet and you hear back from anyone that’s interested,” Grant says.
But the resulting hotch-potch network of agents and distributors is at times messy. Bramich has had to settle disputes over who has the right to sell what, where.
“Just last week I had to sit down with my agent in Shanghai and one of my big distributors and sort out a conflict because both claimed they had the exclusive right to sell in a particular area,” Bramich says.
Now, having learned that clear distribution structure is critical, Bramich has signed a deal with one of China’s biggest manchester distributors, the Yiyuan Trading Company in China’s north. “Yiyuan will have exclusivity for distribution from here on in,” Bramich says.
Waverley’s woollen blankets and quilts will be sold in Waratah branded stores within China’s most luxurious department stores. Yiyuan will own the stores, but Waverley will keep control of the Waratah brand and how it is marketed. Waverley’s other agents and distributors have agreed to open identically branded stores.
“It will be run similar to a franchise. Think of each distributor as a master franchisor with the right to open stores within their own territory. The brand and marketing strategy will be governed by a body corporate with representatives from each ‘master franchise’ and Waverley,” Bramich says.
Bramich learned not to expect deals to be signed overnight; it sometimes took him weeks to get access to the decision makers.
“One day I’d meet the buyer. At the next meeting I’d be introduced to the manager. Then the manager would take me out to dinner. Then I’d be told the director makes the decisions. After dining and drinking with him I’d be told, ‘No, the managing director makes the decisions’,” Bramich says.
Agents and interpreters are a must because they act as facilitators, translators and they warn you when you’re about to commit a faux pas. “Even when it comes to presents. In the wrong context, giving a scarf as a gift can be seen as a bribe,” Bramich says.
Bramich never hands over a list of Waverley’s prices until he is sure the other side is serious about buying. He says he fields hundreds of queries from businessmen posing as buyers. “They turn out to be competitors sizing us up or agents or distributors after exclusivity agreements,” Bramich says.
All distribution contracts have performance targets. If agreements are kept short term they can be terminated if a distributor isn’t buying enough to justify being exclusive.
Having Waverley representatives on the ground in China is critical. Bramich says the next step is to open a sales office in China with sales and marketing representatives. “There needs to be that first line of contact for distributors,” Bramich says.
Grant’s priority is to educate consumers and build the Waratah brand in China.
Bramich says: “People aren’t going to fork out top dollar for a brand they don’t know, so we’re working with our distributors to come up with a marketing strategy that everyone will pay for. We have a story on our side – consumers love hearing the 130-year old Tasmanian woollen mill story.”