Achieving export success

Exporters are contributing significantly to the UK’s return to growth. The latest figures from the Office for National Statistics (ONS) show exports contributing a change in real GDP of +2.7% in Q2-Q3 2018 – part of the highest increase in growth since Q4 2016. Recent research from HSBC shows that 74% of UK companies now have a positive outlook on international trade – driven in part by expectations of global economic growth (27%) and buyer/ supplier relationships (24%).

SMEs are demonstrating this bullish approach to export, regardless of Brexit concerns, and capitalising on the weaker pound. But how are manufacturing companies succeeding?

Luxury children’s clothes and accessories manufacturer Britannical has developed both a short-term and a long-term export strategy. “Short term, we’re focusing on the US and Western Europe,” says managing director Rachael Attwood Hamard. “Long term, we’re looking at Asia Pacific, particularly South Korea, China and Japan.”

“We’ve built up revenue from exporting to territories that culturally and economically are easier for us to access. Then we invested the revenue from those exports in reaching markets that are more difficult and time-consuming to enter.”

Export sales are higher than at home by quite a margin, she explains: “Our overseas customers are more inclined to buy at full price than UK customers. We suspect this is due to the culture of heavy discounting in the domestic childrenswear market.”

In fact, the company’s export turnover has increased hugely over the past year, by around 700% to 800%, as it gained a major US stockist as well as several individual customers across North America. “We hope to see a similar increase next year when we start to make more inroads into Japan and South Korea,” Attwood Hamard adds.

While emphasising the Britishness of the brand is helpful in conveying the quality of the products, it is not enough in itself to sell them, she adds. “The childrenswear market is image- and trend-driven. If we didn’t produce designs that appealed to parents it wouldn’t matter how British our coats are.”

But creating a good export strategy doesn’t have to break the bank. “Our export strategy hasn’t cost a great deal more than the price of stands at trade shows and effective social media management,” says Attwood Hamard, who argues that there are economical ways to build your export strength. She recommends a number of cost-effective ways to build up revenue to invest in export, including selling on commission in target territories; being listed on international trade directories; gaining sales in English-speaking countries where similar British brands have already made headway; and trialling affiliate marketing and territory-specific social media campaigns.

Weedingtech, a company making non-chemical weedkillers and street cleaning products, developed a three- to five-year business plan to identify staggered growth based on criteria specific to the nature of the product. For example, locations that have legislation stating agrichemicals are no longer in favour or where public pressure is particularly strong.

As well as political considerations, there are economic ones too, explains Thomas Hamilton, commercial director: “Crudely speaking, they need to be relatively rich municipalities and they also need to be verdant, high-vegetation areas.”

With this in mind, the business started in the UK before expanding to Scandinavia and then wider Europe. “That allowed us to move to Canada where the high-population densities on the east and west coast make the decision-making easy. In the US we’ve taken a state-by-state approach and will continue to grow there on that basis,” says Hamilton. As the product is in many ways a seasonal one, the business has started to think about the need in some southern hemisphere countries, and Hamilton is investigating the opportunities in Australia and New Zealand.

Weedingtech’s growth is now largely based on its export capabilities, says Hamilton: “Our UK revenue is only 15% of our total. We’re building the UK market rapidly – we’ll be looking at more of a 30/70 split in future – but for a long time, the UK wasn’t sufficiently interested in anything green. The official line was that traditional products carried no risk.”

He notes that it was welcomed in Benelux, France and Scandinavia, where the combination of legislation and public pull was strong. The product is a premium one: “It’s as effective as using chemicals, but takes longer to put down. You can get cheaper non-chemical alternatives, but the weeds will grow back after a short period. So part of the sales skill is to communicate that the total cost of ownership is a good investment.”

Despite it’s global reach, Weedingtech doesn’t have international offices. Instead it sells through distributors, with two overlapping approaches. The simplest is through turf machinery distributors, such as the US dealership John Deere. Alternatively, in countries like France the company uses agricultural conglomerates, because the agricultural machinery market there is declining.

Selling across Europe also raises the challenge of language, so the company has a multilingual technical support team of mobile mechanics who are responsible for fixing machinery and training customers in usage.

The company’s growth figures are now very impressive. “In the past three years we’ve doubled revenue growth each year,” says Hamilton. “This year won’t be quite as spectacular, but we’re looking at around £4m-£4.5m revenue.

“In any growth story there’s a year when you breathe a bit – it’s really good now to be able to look at the long term and we’ll be looking at big increases again next year.”

“Our product is niche,” says George Ponsford, managing director at Kestrel Medical, makers of Vocalzone, a throat pastille lauded by singers, musicians and actors. The product has been around for a long time – more than a century, in fact – but was ticking along without much input when Ponsford moved back to the UK from Australia to focus on it. “What got me excited in Sydney was that I saw rapper Snoop Dogg carrying Vocalzone around with him – that means there’s an export market,” he says.

The barrier for export, which Ponsford has now overcome, was that Kestrel Medical had a medical licence in the UK – purely because it had been around for so long. “This meant that any country we went to wanted a certificate of free sale. But we were classed as a pharma product, with documentation from the 1940s.”

Having spoken at length with the Medicines and Healthcare products Regulatory Agency, it has now been agreed that the pastilles can be produced as unlicensed, although they are still manufactured with the same diligence. “As a result, the export market has exploded,” Ponsford explains.

The fastest-growing market is Turkey and the company has recently launched in Romania, with plans to expand into Russia. Ponsford is also in discussions with distributors in Malta and Spain, with another 30 countries lined up.

Just a decade ago, about 5% of Kestrel Medical’s business was exports, but now it’s nearer 45%. The company has had a 60% increase in unit sales this year to date. “If we carry on at the same rate it will be a 100% increase,” Ponsford predicts, with 90% of that increase being in exports.

Again the model is distributor-focused and growth is incremental. “Everything is made in the UK. There are very few factories left in Europe that can make these products,” he says. “Sometimes we’re approached by distributors, sometimes by the Department for International Trade introduces us and sometimes we go directly. We’re restrained to an extent by resources, so the key is to get a distributor who knows what works.”

However, Ponsford outlines the problems that can arise when working with very large distributors, one of which spent a huge amount of money but quickly moved onto other things when the launch wasn’t as successful as hoped and sales didn’t take off quickly enough. “The lesson is to always keep an eye on advertising, promotion and artwork. I trusted them because I thought they would know what they were doing; if I had seen it, I would have known it wouldn’t work in the market,” he says.

Now Ponsford makes an effort to stay on top of the distributor relationship: “A phone call once a month to be updated on sales means you can keep an eye on stock; it also keeps the distributor motivated because they know you’re interested. It’s important to have a visit once a year to keep the relationship going. Keeping contact is the key.”

While the company is making great strides, Ponsford recognises that there will still be challenges in future. “However long you think something will take, double it,” he says with a smile. “But we have some amazing stories. Tom Jones is a big fan. He has used Vocalzone since the 1960s and I now have a huge picture in the office of him chatting with my mother and sister – he wanted to meet us. It has been a great experience.”

Jim Drew, director at Fuzzy Brush – the chewable toothbrushes widely found in transit locations – sees exporting as a far more appetising model than UK markets. “85% of my business is now abroad because businesses in the UK are so hard to deal with in the retail sector,” he explains.

Drew mentions a major UK retailer who wanted a £20,000 listing fee, which was nowhere near sufficient coverage for its first order of 1,300 stock. “A few months later, our products were still only in 30% of the stores. Buyers changed all the time and no one sorted the problem,” he says.

Instead, Drew wants to focus on 18 product lines in various languages and a new range of products in 17 countries such as South Korea, India, Turkey and China.

Legislation is often considered the biggest barrier to exporting, but Drew explains that every country is different: “On average it takes between four and 24 months to get all the paperwork done. Indonesia took two years, but Malaysia only took two to three months. All countries want the same thing – to know what the product is, what’s in it and to have the right paperwork. I spend a lot of time providing documents to people who work in food administration.”

Investment into overseas growth has been incremental and organic. “We send samples worldwide and usually get two or three enquiries from various countries. I’ve dealt with about 65 countries over the past five years. But 99% of enquiries go nowhere. The key is to find the 1% who have the time and money to do the product justice,” he says. “I have a distributor in each country, bar China, which has two as it’s so large. I use distributors instead of international offices, but that might change if I duplicate my factory (currently in Durham) elsewhere.”

“This year’s profits will be lower as I’ve invested in machinery; but I’m hoping to do a deal with airlines soon. If that happens the business will take off hugely – the brushes are perfectly suited.” New products include Fuzzy Rock: “We have six different flavours and are about to do a grapefruit flavour especially for South Korea.”

Tempest Designs, a jewellery designer and wholesaler, also uses trade shows to help build its export strategy. “Through those, we get international customers and from there, we work out whether there’s strong interest from a particular country or region and can do more targeted trade shows,” explains Tempest Designs’ director, Lawrence Webster. The next steps are to find a distributor in the region. “Sometimes we might try to piggyback a bigger brand like TK Maxx. We’ll put some products out into the market, build a database, get data on how quickly things sold and go from there,” he says.

For Webster, successful exporting starts with the website: “It’s obvious that it has to look good, but it also has to work well. Try to remove as many barriers for the customer as possible. Display prices in different currencies – don’t make the customer do the work.”

The company has a policy that if a customer returns something, the company pay for the postage: “That keeps us focused on ensuring quality.”

The website also contributes directly to growth because it encourages repeat orders, he says. “Customers need the ‘touch and feel’ of the product at the trade show, but once they know it’s good, they’ll reorder through the site – as long as they can use their own currency. We make sure we facilitate that.”

The company exports to Ireland, Germany, Italy, Spain and Poland, and is also pushing towards the USA, Australasia, South Africa and the Middle East. “We are focusing a lot on the handbag range and new lines in Sarah Tempest jewellery. Sales in the UK are greater, but our presence overseas is growing,” says Webster.

He recommends companies looking to grow their exports ensure they do their research and get support, including talking to the Department for International Trade. “But crucially, don’t rely on them – do the groundwork yourself, look at the target market, contact some of your potential large customers and liaise with them before they go to a show. Invite them along and create a rapport – don’t expect them to just turn up. If you are proactive, you will get results,” he concludes.

• Achieving export success
  Business & Management Magazine, Issue 270, December/January 2018

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