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 | | HUSKY KEEPS ITS TRADE TAIL WAGGING | | | Husky Group | | 17/07/2008 | | | Business success tends to favour innovation rather than imitation, delivering the best rather than merely following the best practices of others. So it is that Husky Group bucked the trend by starting out with its sleeves rolled up as a refrigeration service company in Blackburn back in 1957, dealing with the general public. Only later did the Lutterworth-based company evolve into a full service partner to almost every FMCG (Fast Moving Consumer Goods) brand worldwide.
Its competitors invariably have their origins in a trade-only model. Then, as times got tougher commercially over the past two decades, many manufacturers decided to branch out into direct sales. This has led, effectively, to cutting out the “middle man” in the shape of an established distribution chain.
Today, traditional refrigeration companies are unable to compete effectively as there is simply no margin left in their offering to end-users. The end-users can get far better deals directly from the manufacturer, now that it has cut out the middle man. The irony is that it is this very same distribution chain that helped establish the manufacturer’s brand.
Global vision
Having established a strong direct sales and support arm from the start has meant that Husky can zig while others zag in relation to supporting the increasingly beleaguered trade side of the equation. But what makes Husky different?
With 50 years under its belt, Husky Group today designs, manufacturers, services - and ultimately disposes effectively - a broad range of chillers, with over 200 model types for commercial and domestic use. Moreover, Husky’s vision stretches not only way beyond the East Midlands, where the company has its Lutterworth headquarters, but way beyond the UK. Husky is now an international leader in refrigeration sales and service, with divisions in Europe, India, China, South Africa and – perhaps most significantly for the time being, the US.
Geoff Thomasson is Husky’s globe-trotting chief executive, a role that he defines as responsibility for all aspects of the business and net profitability, but focussing primarily on marketing and sales. He has paid his dues, working for Husky since 1995 after spells as a salesman, sales trainer, key account manager and brand manager with the likes of Princes Foods and Mars Group, before becoming managing director of a Dutch refrigeration manufacturer.
The subsequent experience of running his own successful refrigeration service business revealed to Thomasson the enormous potential of being cold hearted: “Husky has evolved from a service company to selling commercial and domestic refrigeration worldwide, trading globally with currently 10 separate companies established overseas, either wholly-owned or as a joint venture, supported by an extensive international distributor network.”
Husky’s product design and manufacturing capability, too, is thriving, overseeing the launch of no less than 42 new products in 2007 and working with four joint venture companies in China and Europe.
Chinese whispers
Today Husky Group supplies 80% of the UK branded commercial chiller market and holds a strong exclusive niche in the personal refrigeration market. It has also expanded its business model into numerous other countries. Nine years ago, Husky began producing its own domestic range in China, with most of its commercial product produced under licence in Finland. Understanding of the Chinese way of operating grew until, four years ago, Husky decided to shift production of the commercial range there, under the auspices of a joint venture.
Juggling logistics and customer supply outside of Europe carries risk, but the cost of materials and labour is advantageous. Husky has weathered a few storms setting up its China operation and gained invaluable experience and strategies, such as holding more stock than usual.
“There were growing pains, but now we are definitely seeing cost and quality rewards. Switching production to China has opened up markets in the Far East and Australia, creating fantastic business opportunities in the southern hemisphere,” Thomasson adds. The flip side of this is being better able to ride out the vicissitudes of the UK business which, to an extent, relies on good summers.
Husky is now turning its attention to the US – an opportunity equivalent to the whole of Europe and a country in which there are more restaurants and fast food outlets than anywhere else. Geoff Thomasson explains: “It brings tremendous challenges and opportunities. For one thing, despite the fact that Americans strongly favour American products, the best-selling car in the US today is Toyota – and Boeing no longer dominate no longer dominate American airspace since Airbus entered the field. This proves that it is possible to break this mentality as long as we have a strong product offering.”
Trading places
With the rise of direct sales from manufacturers to the public - often through Web sites run under pseudonyms - distributors have been put in an invidious position. Having built their business around supplying the trade at a given margin, manufacturers have also built their overheads relying on that margin. So, while the competition can sell to end users at low margins and still make a profit, they are not in a position to drop their prices to existing trade customers.
Unlike its competitors, Husky evolved from direct sales to encompass trade sales, so its overheads are therefore effectively taken care of by its direct business. This means Husky can offer advantageous deals to its distribution chain. In turn, the chain can maintain their margins when selling to their customers, even when selling at Husky direct prices.
Thomasson adds: “Other manufacturers are unable to do this as their overheads are essentially subsidised by their original customer base – the trade. The low margins these manufacturers create to encourage direct end-user sales are essentially throttling their original trade custom.”
Without cutting back on its direct business, Husky plans to promote sales to the trade even more than before. The most likely scenario is a third-party structure of distributors or joint ventures to handle its UK business. This will enable Husky to focus on manufacturing, product innovation and its global brand development.
Geoff Thomasson continues: “Unlike other manufacturers who allowed the trade to develop their market for them in the UK, Husky has done things in reverse. We built a very strong and well-recognised brand by selling direct. We now invite the trade to supply our products and make excellent margins [30%-plus], even when selling at the same price as Husky.”
Thomasson is overseeing a cost-reduction drive, not in marketing but in general overheads to ensure it is equipped for the future and to free up capital to invest further in its manufacturing facilities.
Husky continues to expand its operations at home and overseas - not least increasing the UK cash flow through these manoeuvres, enabling it to pay for its overheads and continue to offer its distribution chain a profitable deal.
Thomasson sums up: “We never want to lose sight of the fact that our success is dependent on delighting our customers whenever we can. For our indirect channel, of course, this includes supporting their opportunity to do business alongside our own.” | |
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