Taiwanese Gardening Tool Makers Fend Off EU Debt Crisis

Just when the global recovery seems to be on-track in 2010, with the financial meltdown but a distant memory, the Greek debt crisis and high unemployment in Spain as well as other shaky European economies as in Italy are rocking the EU market, hence impacting Taiwanese gardening tool makers, whose mid-to-high-end products rely on the EU segment. Furthermore the latest European debt crisis has softened the euro to make life rougher for Taiwanese gardening tool suppliers.

Taiwan's overall production value of hand tools, including gardening tools, plummeted 22.5% to only US$1.44 billion in 2009 from US$1.85 billion in 2008, with such exports also dropping to US$1.33 billion, 23.9% less than US$1.75 billion of a year earlier, according to statistics compiled by Taiwan's ITIS (Industry Technology & Intelligence Service).

The recovery in 2010 has turned the industry's overall production value to US$416.87 million in the first quarter, 15% more than a year earlier. Exports also rebounded by over 17% to US$393.12 million, with 27.3% going to the U.S., 7.3% to Germany, 5.54% to China, 5.23% to the U.K. and 4.8% to Japan. Significantly the whole EU market could be the largest for Taiwan's garden tool sector, as Germany alone imported items totaling US$131 million in the quarter, ITIS's newest report shows.

Budget Cuts

However, the recent euro depreciation has forced various EU nations to slash budgets to reduce deficits, after the EU agreed to a euro750 billion bailout for Greece, as well as to defend the euro.

The bottom-line for Taiwanese garden tool exporters is that the budget cuts in the EU also tighten consumer spending and sap confidence, making the selling of garden tools, non-essential products, more challenging amid the uncertain recovery.

Three experienced Taiwanese garden tool suppliers talked about their operations from 2008 through 2009, including their outlook and survival strategies in 2010 and beyond.

Wise Center

Bucking the seemingly rough trend, Wise Center Industrial Group Inc. surprisingly posted a 20% revenue growth in 2009, in contrast to performance of the hand tool industry in Taiwan.

Founded in 1991 in Taichung County, central Taiwan, Wise Center specializes in gardening tools and accessories as OEM (original equipment manufacturer) and ODM (original design manufacturer). Succeeding to quickly emerge in the line, the company is now a globally well-known maker that operates two factories in Taiwan and one packaging plant in China.

The company mainly supplies garden shears, hand tools sets and ladders, including pruners, gardening peripheral equipment and parts, shovels, water hose shears, ladders, saws and long reach shears, most of which goes to Europe and the U.S.

New Opportunities

Asked how he achieved sales growth in 2009, company president Thomas Lin credits changing market conditions as well as all-out R&D and production upgrades. The U.S. market amazingly fueled business growth when the country buckled under the financial turmoil, he says.

Lin says that rising unemployment and sagging market in the U.S. have changed spending habits, where they are more willing to buy whole sets of gardening tools rather than single items, enabling DIY garden upkeep. "So increasing American demand along with stable demand in professional segments, like fruit farmers, kept my company in good shape last year," says Lin.

Furthermore, surging housing starts in China strongly drove sales throughout the past year, especially when luxury garden apartments bring about more demand for professional gardening tools. "Partnerships with local distributors drove sales to China, achieving 8% of our total turnover since the beginning of last year. China was quite important to our growth and is worthy of our efforts to explore in the coming years," Lin says.

R&D and Production Upgrades

Lin's emphasis on R&D and production upgrades cannot be under-rated in analyzing Wise Center's sales growth in 2009, especially during challenging times.

The president says a certain proportion of annual budget is always invested in upgrading production and quality inspection equipment as well as output expansion. And amid market uncertainties in late 2008, the only aim was to enhance production efficiency, which he thought pivotal to stay competitive in the line.

Differentiation

Wise Center also differentiates itself from peers by focusing on product development, introducing practical, marketable new products almost every year. This year, its ace in the hole is a power scissors to broaden the range.

According to Lin, the comparatively lightweight and small power scissor adopts a micro-motor with advanced IC controller. To break the technical bottleneck of developing enough torque from the micro-motor called for, in light of Lin's lack of electro-mechanical expertise, partnering with 2-3 people from Japan and Switzerland. Over one year of hard work resulted in a customized micro-motorized scissors able to cut twigs up to 30mm in diameter.

Non-stick Coated Blade

This power shear also has Wise Center's "Non-stick Coated Blade," of special steel jointly developed with China Steel Corp. and Metal Industries Research & Development Centre, which maximizes corrosion-resistance, as well as being 15-20% lighter than conventional blades.

Proudly demonstrating the power shear prototype during the interview, Lin says a French customer is impressed and can't wait to import it, adding trial production is under way and delivery is scheduled for the second half of this year.

Feeling the effects of sales declines in Europe due to air traffic interruptions from the Icelandic volcano and euro depreciation, Lin has decided to raise investments in R&D, marketing and participation in global fairs. "R&D is especially important and we have budgeted for decades 3-5% of total revenue, and this year will be no exception despite market uncertainties," he says.

Winland

Another company who relies on the EU market despite having suffered deep sales drops due to various setbacks this year is Winland Garden Tools Co., Ltd., who exports 60-70% of its products to Europe every year.

Backed by over 40 years of experience, the company, headquartered in Taiwan's central county of Changhua, is a pioneer in gardening tool manufacture in Taiwan, turning out a full range of cutters, including long reach pruners, flower shears, multifunctional shears, flower scissors, edgers, telescopic loppers and gardening hardware in its two factories.

With ample capacity and time-tested capability, the company has a solid name as a world-caliber OEM and ODM. Plus, the company is increasingly focusing on own-brand marketing, hoping to build the Winland name for sustainable development. Winland, despite resource limitations, has gradually built recognition in some countries for products meeting PAHs (Polycyclic Aromatic Hydrocarbons) requirements and GS standards.

Uncertain Recovery

Despite having seen gradually rising production utilization due to recovering orders from Europe this year, company product manager Kevin Wu still frets over the uncertainty of the recent recovery on the island, saying that most of the orders are rushed mainly for downstream retailers to restock.

Sustainability of the recent recovery in the industry is uncertain, because these rush orders are smaller than before and will probably stop in the second half of the year when retailers will have restocked enough for Christmas and year-end sales, says Wu, also attributing the returning orders to customers' wanting to minimize operating risks by placing large orders, hence not a genuine recovery of the end-user segment.

"Even though the global economy looks promising this year, it's not yet time for us to talk about turnover, especially when our main market is troubled by the euro crisis," Wu says, "so we must keep concentrating on developing new, practical products to attract customers instead of passively waiting for recovery."

New Products

Two of Winland's new products are the Professional Bypass Pruner and Mini Pruning Shear series, which are expected to drive shipments throughout the year.

The Professional Bypass Pruner differs from the existing range, with the new pruner featuring simple exterior design and handles of drop-forged aluminum without using plastic. The upper blade is of the finest SK5 high-carbon steel for better durability, while the lower one is innovatively designed with a so-called "Sap Groove," which helps to keep the edge free of sap to enhance cutting performance. The bypass pruner is also notable for improved leverage, raising efficiency to save labor that is suitable for professionals, according to Wu.

While tapping the mid-to-high-end segment, the company also focuses on the DIY segment with the Mini Pruning Shear Series, which has micro-tip blades, TPR handles for non-slip, comfortable grip, as well as easy safety lock to enhance functionality. The series also targets female users with its vivid hues and floral exterior design, ideal for floral gardening, bonsai, house planting, and floral arranging. The shears can even cut cables for multi-functionality due to innovative blade design.

Undaunted by market uncertainties in the recent years, Wu says that output expansion has begun since last year, with the new capacity to fuel growth starting this year. "And we are also diversifying markets to the Middle East and India, which will be target segments in the coming years," Wu says.

Charming Young

Unlike the two aforementioned counterparts who mainly build competitiveness independently, Charming Young International Enterprise Co., Ltd. has been relying on synergy to create new opportunities to weather the tough times.

Charming Young is a 30-plus-year OEM and ODM of hand, gardening and DIY tools in Changhua County, offering scissors for barbers, tailors, electricians, as well as multi-purpose scissors, pruning shears, grass shears, hedge shears, lopping shears, hose sets and storage racks etc., most of which are VPS, TUV and FCCA certified for fine quality.

Lucy Lin, general manager, admits to also being battered by the global and European downturn. "We received only 12 R&D projects from customers because of the downturn last year, which was disappointing," Lin says. However, the number has grown to 28 this year and is expected to rise to fuel overall shipment thanks to global optimism about economic recovery. Sales for the first five months have rebounded by more than 20% from a year earlier and the company remains a first-choice when buyers seek a competent ODM.

Synergy and Branding

One key factor for strong sales growth this year is the company's year-long effort to develop synergy in the line: Charming Young has teamed up with over 20 companies to develop, manufacture and market scissors globally, aiming to boost exposure of made-in-Taiwan gardening tools, with branding coming a close second as important strategy, according to Lin.

Citing an example of synergy, Lin shows the Cordless Power Cutter as an item developed by Charming Young and its partners, and promoted under the private brand Green House. Being eco-friendly, the electric cutter is powered by a rechargeable Li-ion battery that works continually for 100 minutes on a full charge, as well as having replaceable blades of high-grade carbon steel that can cut PVC board, cardboard, leather, rubber, plastic and fabric.

Super Lightweight

More noteworthy is that Charming Young and partners developed an innovative, lightweight plastic housing for the cutter, which is ergonomically streamlined for comfortable grip and safely keeps blades away from user's hands, resulting in a total weight of only 210 grams. "Enhancing a traditional hand tool's value inspired us to devise such design, which is not only a tool but also a stylish home decoration," says Lin.

The synergy among the 20-plus Taiwanese tool companies continues making positive contribution. For example Charming Young has tapped other members' technical support to develop LED garden lights and eco-friendly building materials, the latter of which will be available later this year at the earliest. Although still unsure of the industry's recovery, she is quite optimistic about the future of the Green House brand.

"We are dedicated as a team for our goal is to put Taiwan's brands on the global map of gardening tools. Teamwork makes exploring new markets easier. Also we realize the urgency of market diversification for Taiwanese gardening tool suppliers, who must explore emerging markets to reduce risks of over-reliance on the European and U.S. markets after being buffeted by last year's global downturn and this year's abrupt EU debt crisis. The firm is ready to tap the markets in the Middle East, Central and South Americas and, especially China," she concludes.