How Ohio Is Milking Exports
COMPANIES LIKE UDDERLY SMOOTH’S MANUFACTURER ARE SUCCEEDING INTERNATIONALLY WITH A LITTLE IN-STATE HELP
Earlier this year, Redex Industries, Inc.’s operations director, Linda Kuzior, received a phone call from a customer who had packed a tube of the company’s Udderly Smooth skin moisturizer on a recent expedition to Antarctica. The news was a big deal to Ms. Kuzior, who had publicly announced her goal was to bring Udderly Smooth to “all seven continents.” Now she could claim victory.
“I don’t believe the product was actually sold in Antarctica,” she said recently. “But I think it counts.”
Now selling in 14 countries around the world, Udderly Smooth started out in 1978 in the basement workshop of Bill Kennedy, then a retail pharmacist in Salem. Kennedy at that time had begun working for a dairy farm cooperative that specialized in veterinary pharmaceuticals. Responding to a customer’s request for a product that would smooth and moisturize cow udders, Kennedy developed a cream that also worked on human dry patches, as his family members discovered.
The entrepreneurial Kennedy snared an SBA loan and began commercializing his formula. Marketed with a Midwestern sense of humor, the skin-care line is packaged with graphics featuring bovine-style black spots on a white background, a logo that plays up the word “M-o-o,” and directions for both human and bovine applications. The brand mascot, a giant black-and-white spotted cow outfitted in a Viking helmet, tours the country, making regular appearances on the county-fair, parade and balloon-festival circuit.
To launch the product, Kennedy persuaded a few stores in Youngstown to stock the product. One was the locally headquartered Phar-Mor drugstore chain, which brought the product nationwide. Largely a family affair, Udderly Smooth’s low-budget marketing efforts caught a big break when it was featured on The Oprah Winfrey Show and then in The People’s Pharmacy, a nationally syndicated newspaper column.
Redex’s first export market was Canada. Seeking to expand sales overseas, Kennedy reached out to a local source of export training and advice, the Ohio Small Business Development Center’s International Trade Assistance Center at Youngstown State University. At the recommendation of Mousa Kassis, a trade adviser at the center, the family members began taking the center’s educational programs and signed up for state trade missions to Europe, Asia and South America. For research into overseas markets, Kassis steered Kennedy toward the Williamson College of Business Administration, whose MBA students provided customized market research at no cost to the company. Kassis also put the Kennedys in touch with Ohio’s overseas trade representatives, who operate in 10 cities around the world.
Kassis picks up the story.
“When they began exporting, they were not familiar with payment systems and custom compliance issues,” he says of the family business owners. “They were unsure how they would get paid. We helped them develop payment systems, get letters of credit and buy insurance through Ex-Im Bank.”
As overseas distributors signed on, the clan brainstormed over how to introduce this heartland product into foreign markets. The answer: with as few concessions as possible.
The company’s folksy branding style “works well in the Asian market,” says Kuzior, citing China, Japan, Korea, Singapore, Malaysia, Australia and New Zealand. “When we go to meet with distributors, I get the impression they think we are cowboys. I guess the cows suggest a frontier atmosphere.”
She adds, “They feel the visual is very appealing to their population.”
Europe, in contrast, required some tweaking, she says. “Europe is very different, one reason being memories of mad cow disease.” Packaging for the European Union refers to hand cream or body cream; the word ”udder” is dropped. Marketing strategies also take local lifestyle factors into account. In the U.K., for example, bicycling is big, and products are brought into channels reaching cyclists.
Brazil, potentially a huge market, also required a packaging overhaul. “The word ‘moo’ doesn’t really translate into Portuguese,” Kuzior observes.
Over time, other adjustments have been made to the company’s packaging and promotion efforts. “What we think is funny can be offensive in other cultures,” Kuzior says. “You have to tap dance around the fact that this product was developed for use by dairy cattle. That history may not appeal internationally.”
At Kassis’ suggestion, the company began working with a distributor in South Africa. Next, the company plans to find a distributor for Scandinavia.
“Overseas is a big market for us,” says Kuzior. “It’s getting bigger for us all the time.”
As a successful exporter, Redex has plenty of local company. The value of products shipped out of the Youngstown metropolitan area led the nation in export growth between 2009 and 2012, according to “Export Nation 2013,” a study by the Brookings Institution released in September. Led by resurgent steel mills like V&M Star, metropolitan Youngstown has the sixth-most “export intensive” economy in the nation, according to Brookings; the value of regional exports increased 22 percent over the past three years, reaching a value of $4.7 billion.
The Toledo area, whose chief exports are coal, petroleum, car parts and glass products, grew exports 12 percent over the past three years, the ninth-highest growth rate in the country, according to the study. Akron and Cincinnati both experienced 10 percent growth during this period, led by airplane products and various refined industrial products, including resins and synthetic rubber. Greater Cleveland, which grew exports 8 percent during this time, remains Ohio’s top metro area by export value, shipping $14.5 billion of chemicals, machinery and motor vehicle parts among other products.
“Exports have been a critical driver of the post-recession recovery in the U.S. and its metro areas,” according to Brad McDearman, co-author of the Brookings’ report. “Metro leaders that make boosting exports and economic development a priority are better positioning their regions for success in the more globally connected 21st century economy.”
Overall, Ohio exported just more than $50 billion worth of products and services in 2013, representing just over 3 percent of the national total. Aviation, automotive and automotive-parts manufacturers paced the export parade, followed by soybean producers. Exporters tend to stay on the continent: Canada and Mexico combined absorb a little over half Ohio’s exports, followed by China, France, Brazil and Japan.
The Buckeye State’s export value increased 3 percent in 2013 over the previous year, says Wesley Aubihl, export assistance manager at Ohio Development Services Agency, which operates economic-development programs across the state. Ohio plans to create two new International Trade Assistance Centers in January, expanding the total to eight from six. The centers, including the one that helped Redex, are state-funded free consultation services offering international market research, international business planning, foreign market certification and export-regulation assistance. The agency also maintains commercial offices in eight foreign countries, which help local distributors and customers for Ohio manufacturers.
The state also organizes a couple of trade missions every year, either independently or in conjunction with the Council of Great Lakes Governors, Aubihl says. On the federal level, the government offers a variety of programs through the U.S. Commercial Service and the Small Business Administration, including the SBA’s E200 Emerging Leaders programs, a certificate course taught at area universities. The Development Services Agency and the SBA jointly fund the IMAGE program with the state, a grant program that reimburses exporters for certain market-entry costs. In 2012, 112 Ohio companies were reimbursed for $850,000 of export expenditures. In 2013, 117 companies were reimbursed approximately $1.2 million.
Last year, more than 32 college students participated in Development Services Agency’s export-oriented internship program. Kathi Leiden, president of Avon-based Zephyr Solutions, a provider of helium to retailers and others, took on Lynn Lun, a junior at Fisher College of Business. The intern “increased our export sales, educated our staff on government programs and funding available to us, and gained us three new international distributors in less than three months.”
She adds, “Her knowledge and abilities far exceeded our expectations.”
TWO COMPANIES, TWO EXPORT PHILOSOPHIES
Replex Plastics in Mount Vernon supplies optical domes, mirrors and custom-molded plastic parts to industrial customers around the world. At Replex, export sales have grown to help defend the company’s domestic business, as well as open new markets.
Exporting reached about 20 percent of sales “without any sort of strategy,” acknowledges Mark Schuetz, Replex president. As manufacturing has become more global in sourcing and logistics, so has Replex—primarily to thwart off-shore price competition. “When our customers move their plants to China, they typically source locally—and we lose,” Schuetz says. He blames China’s lower cost structure for the defections. “If we are not globally competitive, it’s just a matter of time until someone starts exporting into the U.S. and takes our market.”
In recent years, the company boosted exports by 50 percent, largely by participating in trade missions organized by Ohio and the Council of Great Lakes Governors, adding several South American distributors. “We’re making a major push this year and next,” adds Schuetz. His near-term goal: drive export sales above domestic revenues.
He adds: “I see no reason why we can’t do that.”
The Cleveland Vibrator Co., based where its name indicates, has been building material-flow and component-separation industrial products since 1923. Exporting has always been part of the business plan. “We’ve had an international presence for many years, including Japan for over 30 years,” says Craig Macklin, vice president of Strategic Development.
When Macklin came on board three years ago, exports accounted for about 15 percent of sales. Today, it’s 20 percent. Advantageous foreign-currency rates favored a strategic emphasis on foreign markets. “We applied for an IMAGE grant and got it,” he says, referring to Ohio’s export marketing-expense reimbursement program. He signed up for a series of trade missions, translated promotional materials into several languages, and tapped Commerce Department’s Gold Key program which produced several overseas meetings with key end users.
This year, having secured a second IMAGE grant, he continues to explore new marketing approaches, including investing in Google Ad Words overseas. On a recent trade mission to Australia, he revived a sagging relationship with a long-time distributor. “Reestablishing relationships and renewing commitments seems smart,” says Macklin.
Today, the company’s key export markets of Japan and Mexico are rounded out by new business in Australia, Spain, India and Chile. “I see the future as overseas,” says Macklin succinctly. “That’s our direction.”
– Warren Strugatch
State of Emergence