Made in Australia: A look at three successful exporters

Brent Balinski speaks to three very different Australian manufacturers about how, despite the strong dollar, they've remained globally competitive.

“Bounce-back tipped for industries” read a headline accompanying a story about a Grattan Institute report released in July, suggesting that manufacturing had survived the boom “in reasonable shape” and is set to rebound.

The possibility of a declining dollar is usually thought of as good news for manufacturers. “It’s going in the right direction now,” offered Ian Harrison, the CEO of Australian Made, when the subject came up.

With the worst of the pressure from an unusually high dollar hopefully over, we asked a few exporting success stories how they've been able to sell a significant chunk of what they make overseas, and who were able to compete on quality, with cheapness – especially to a customer overseas – not available as a selling point.

Carving out a niche

Macnaught has been in business, at the same southern Sydney of Turella, since 1948. It makes fluid transfer-related products, about half of which are exported. It exports to over 60 countries.

 “Our key to success has been that most of our products are tailored to very specific applications and we understand who uses them and why,” CEO Bob Hill told Manufacturers’ Monthly.

“Many larger competitors design their products to suit a broader range of applications, whereas we tend to focus on niche markets with specific needs.”

Hill gave the example of metered hose reels. He explained there were companies that built hoses suitable for service vehicles, sure, but Macnaught had developed a reel for this specific market. As the needs for such an item were similar over the world, export potential has been strong.

Adapting to the high dollar had had its challenges, but the company retained considerable overseas demand for their products, which include flow meters, hose reels and grease pumps.

After-sales offerings – including two- and 10-year warranties on products, and a guarantee of replacement parts being available for 10 years after purchases – are also an important part of the business.

“A key point of difference to many of our competitors is Macnaught actually designed the products we sell and therefore we can support our customers with technical expertise directly over the phone without delay,” operations manager Steve Gavin explained.

 “Time is money for all of us and getting answers quickly is a valuable resource to our customers.”

The GFC forced the company to re-think what it does well, as well as adapt to the disappearance of a lot of companies in its supply chain. Macnaught has developed the ability to manufacture some components in-house, and invested in equipment to boost their agility, with machinery that enables them to quickly switch “from one of two or three products during the same day.”

“We have invested heavily into CNC machinery to produce components effectively from billet materials which are still readily available from local suppliers,” said Gavin.

“With this internal manufacturing perspective it has been essential that we adopt a LEAN manufacturing philosophy to remain competitive both locally and overseas.”

On a different note

Something that’s said of locally made products is that they can be expensive. The received wisdom is that Australian companies would be best suited trying to compete on quality rather than price.

“Rarely is a product or produce from Australia going to be at the cheaper end of the market,” Harrison told Manufacturers’ Monthly.

“Very recently, a company from Sydney launched their mattress range into China – AH Beard – and the uptake has been sensational.

As an example of offering quality rather than price as a competitive advantage, Harrison said this where an Australian company could do well, especially in the Asian Century, where many recently affluent Asian customers view an Australian product as a luxury they can suddenly afford.

“There are companies that are exporting other types of furniture into Asian marketplaces, not because it’s cheap: it’s not. But because it’s very good quality – it’s unique, it’s Australian, and there’ll be a demand among the middle- to upper-class areas.”

One company that’s been enjoying increased overseas success has been Maton Guitars. With a history going back to 1946, Maton is a distinctly Australian brand operating at the premium end of its market, and has a global reputation for its high-quality acoustic guitars and pickups.

According to general manager David Steedman, exports have grown from 10 -15 per cent of total revenue to almost 25 per cent.

“Domestically we still enjoy leading brand status, and our domestic market is still our bread and butter, and is really, really important and always will be,” Steedman told Manufacturers’ Monthly.

 “But of course we need to export to survive and export to grow.”

He listed countries including New Zealand, the US, the UK, Japan, Germany and Hong Kong as mature markets, and said that lately Continental Europe and China had emerged as growth export destinations.

“We’re particularly excited about our market in China,” Steedman said.

After a long, careful search for the right distributor, one was appointed this year and sales outstripped expectations very quickly.

Being Australian and being known as a premium product are huge parts of Maton’s success. It uses uniquely Australian materials as a point of difference against its competitors.

“Queensland maple, Victorian blackwood, and we also use Bunya pine: we were the first to use that in the world,” said Steedman, who has been with the company since 2004.

“And what that does is give a unique tone as well as physical style.”

He added that the attention to detail given to the company’s products was also a hugely important part of what made them successful, as was the dedication to innovation.

“We do things in such a way that our staff here are more like craftsmen, whereas overseas guitar makers are more like production workers,” said Steedman. “It’s a really important difference.”

“Consistency of tone, quality, appearance and performance are what we are known for.  If someone goes to a particular model in our stable, they know that if they pick up that guitar out of a factory or out of a shop in Parramatta or out of a shop in Perth it’ll play the same”

He singled out the development of a new pick-up, the company’s AP5 Pro, as an example of thoroughness with research and development.

The product’s designers, engineers and others involved in the process – including elite Australian guitarist Tommy Emmanuel – spent four years testing, developing and replicating the version it was based on, and finally improving on it. 

 “The final version of the product was revision number 68,” said Steedman.

“We thought we were there about two years ago. That was a great product, and it was at the level our artists required. And we had to do two more years of work to develop that tone and get it to the stage where we are now.”

Again, this is an example of a company working in a niche, investing heavily in time and money, and creating a qorld-beating product.  

Stepping up to the challenge

Last month Manufacturers’ Monthly went to Quickstep’s Bankstown site, where the carbon composites maker was announcing the fast-tracking of commercialisation of its Resin Spray Technology for vehicle parts, which it hopes will be eventually used in Audi cars.

Quickstep, a supplier to US aerospace giant Northrop Grunman on the Joint Strike Fighter project and the winner of Manufacturers’ Monthly’s Manufacturer of The Year award in 2011, is often held up as an example of what Australian manufacturers can do well: produce a highly advanced, unique product that forms part of a global supply chain.

Examples of companies doing this include Textor Technologies (who sell to Kimberly-Clark), Ferra Engineering (Boeing) and ANCA (General Electric, Boeing and many others).

Quickstep announced in July that it had provided its 100th part to the JSF project, and, the month after that, that it agreed to licence its patented Quickstep Process to Russian firm ORPE Technologiya.

The company employs 80, though predicts this will rise to 100 at the end of the year.

Quickstep’s precision manufacturing creates skins and wing-flaps for American planes, and its technology will soon be used to protect Russian satellites, and it has – though cash flows have sometimes been an issue – been held up as an example of where the future of Australian manufacturing might lie.

And how much of what it makes is it able to export?

“Well that’s easy: 100 per cent,” managing director Philippe Odouard said.

“We don’t supply anything to the Australian market. We might if this [RST] takes off with the car industry, but there’s probably a fair bit of work to get done to get there.”

Asked what Quickstep said about where Australian manufacturing could do well, industry minister Kim Carr gave his opinion.

“This is able to move the whole issue about the economics of manufacturing in Australia,” Carr told Manufacturers Monthly.

“There are still high-skill, high-wage jobs here, but there’s still a capital-intensive process. So the proportion of labour costs and the total cost of production is reduced, but the opportunities to produce on world markets is enhanced.”

And what would companies need to do to successfully export?

“We have the very best science, the very best universities, the very best research capacities in the world,” he said.

“We’ve got to utilise these more effectively. What we need is people that have got the right attitude, the entrepreneurial spirit to want to get out there and make a quid, to apply new technologies to develop new industries.”

According to figures from the Department of Foreign Affairs and Trade released in June, Trade in Primary and Manufactured Products, Australian manufactured exports were down 4.4 per cent in 2012 to $33.0 billion. The persistently, unfavourably high dollar and other factors mean this wasn’t an unusual result.

…Products lets us know that the industry’s exports “have decreased by an average of 3.8 per cent per annum over the past five years.”

But there’s reason for optimism. There are Australian manufacturers – such as those above, but there are many, many more – whose wares have been internationally in-demand, despite the difficulties.

“The currency has come off about 15 per cent since April,” Innes Willox, the CEO of the Australian Industry Group, noted in July

“If it is held down or falls further, those companies that have been able to stay afloat will be very globally competitive.”

As we write this, the opposition has just announced that if elected its manufacturing policy will include increased funding for manufacturing exports, through $50 million in export market development grants.

And the federal government has spent the last year – following Ken Henry’s Australia in the Asian Century white paper – encouraging the industry to try and reap the future rewards of the booming Asian middle class, and the estimated 2 billion people living in Asian cities by 2025, some of whom will want and be able to afford quality imported products.

There’s a growing realisation that what’s being made in Australia is going to be very important. When the hunger for our resources has evaporated, the need for a diverse economy – and healthy exports from manufacturing – can only become more apparent.

And why shouldn’t this be a focus? We make a lot of great things, including but nowhere near limited to flow meters, guitars and high-tech carbon fibre panels.

As far as the markets Australia should be targeting, Harrison believes that there are many countries where this could be done successfully. The Asian century might offer rich rewards, but it’s a big, wide world out there.

“Even though the government has announced a strong focus in the last 18 months on Asia, and that’s very relevant, it is inappropriate for the government to not provide support for Australian exporters in a wide range of other, more supposedly mature markets, such as the US, the biggest consumer economy in the world, Europe, South America, and in due course Africa,” said Harrison.

“We can’t put all our eggs in the Asian basket. We have a natural relationship with Asia because we’re in proximity, but there are established markets that will always be important for Australian businesses.”



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