After Years Behind the Scenes, Chinese Join the Name Game
In 1905, in a backyard factory in Cleveland, workers began making vacuum cleaners for a company that became known as Royal Appliance Manufacturing Co.
Almost a century later, Royal, which established the popular Dirt Devil brand, stopped making almost all of its vacuums in Cleveland because it realized it was cheaper to pay a Chinese company to do it.
Dirt Devil's departure would have been a relatively minor chapter in the grand exodus of American manufacturing to China. But this year the Chinese company that got the contract to make Royal's vacuums acquired something potentially even more valuable: It bought Royal and the Dirt Devil brand name, too.
Other Chinese manufacturing companies are also starting to buy the brand names of products that they formerly only produced. In some cases, they acquire the company, as with Nakamichi stereo gear, in others they get an exclusive licensing deal, as with Benetton eyeglass frames.
Hong Kong-based Techtronic Industries Co., the company that bought Royal and Dirt Devil, also grabbed the Ryobi tool brand from the parent company, Ryobi Ltd., in every market but Japan. As with Royal, Techtronic had been making Ryobi products for years. The Hong Kong company also bought two brands with products similar to ones Techtronic already made: the Homelite outdoor-products brand from Deere & Co. of Moline, Ill.; and the VAX brand of floor-care products, formerly owned by England's VAX International Ltd.
The purchase by Chinese manufacturing companies of Western and other foreign brands signals an important shift in the supply chain forged during the past three decades between the West and Asia. While such deals so far aren't numerous, conditions are ripe for many more, pointing to what may well be the next major phase in China's industrial evolution. Instead of constantly trying to lower their production costs to increase margins, Chinese companies are now trying to capture brand value -- the ability to sell their products at a higher price directly to consumers who are willing to pay for a recognized label. If this trend continues, it means more dollars paid for brand-name products will wind up in China.
BRAND NAMES
Some Asian-based manfuacturing companies that have recently acquired rights to international brands.
COMPANY BRAND INDUSTRY
Techtronic Industries Ryobi*, Homelite, Dirt Devil, Royal, Regina Power tools, outdoor products, vacuums
Grande Holdings Nakamichi, Akai, Sansui Consumer electronics
Moulin Benetton, Revlon, Sisley, Reebok, Nikon Eyeglass frames
Vtech Holdings AT&T wireline phones and accessories Consumer electronics
Sources: WSJ research, the companies
*In every market except Japan
Several factors are responsible for the increasing Chinese purchases of American brands. Many U.S. companies -- particularly those that own midsize brands such as Dirt Devil -- have been under pressure as Asia's cheaper, no-brand goods flooded into the U.S. and competed directly with American brands. Major U.S. retail chains have played these weaker brands against each other, demanding bigger discounts, faster delivery and lower inventories.
In addition, Chinese factories themselves are feeling the trickle-down effect of this pressure. The country's rapid development has produced an oversupply of factories, forcing Chinese manufacturers to vie with one another to produce the same goods for the American and European markets. The intense competition has driven down prices and made their margins razor thin.
"We looked at our product lineup and we saw this trend of shrinking margins, greater competition," says Christopher Ho, chairman of Grande Holdings Ltd., a Hong Kong-listed consumer-electronics manufacturer, which supplied Sony Corp., Pioneer, JVC and others.
Grande snapped up three Japanese electronics brands in bankruptcy proceedings. Its margins on those lines are between 8% and 10%, compared with 3% to 4% on the products it makes for others.
Similarly, Hong Kong firm Moulin International Holdings Ltd. in 2001 bought the licenses to a portfolio of brands including Benetton, Revlon and Sisley, from three European companies that were struggling.
In general, the Chinese companies acquiring foreign brands have been focused on making products, not marketing them. And managing brands sometimes puts them in unfamiliar territory, as they must respond to the changing tastes of consumers half a world away.
In the course of its brand-buying spree, Techtronic has increasingly moved away from its roots as a no-name, low-cost Chinese manufacturer and toward an integrated marketing and sales company. It deals every day with major U.S. retailers such as Home Depot Inc. and Wal-Mart Stores Inc. as well as European retailers. Since its first acquisition in 1999, Techtronic's revenue has risen more than threefold to $1.2 billion last year; profit has almost tripled in the same period, to $53 million.
At this stage, Techtronic maintains the same close relations with its Royal unit that it developed as a supplier. The U.S. subsidiary, based in Glenwillow, Ohio, still handles much of the marketing for the Dirt Devil brand, although Techtronic has begun working in that area, too. Hong Kong staffers are more involved with retailers and have taken a bigger role in dealing with product design and presentation.
Techtronic was an early beneficiary of outsourcing from the U.S. It was founded in 1986 by German-born Horst Pudwill and his Macau-born partner, Roy Chung. Their first product -- made at a 60-man factory in Hong Kong -- was a three-piece electric-drill-and-screwdriver set for Sears Roebuck Co.'s Craftsman line. Within a year, the company's output tripled to a million pieces.
Techtronic then opened a two-story, cinderblock-walled factory in Dongguan, a city in southern China. Utilities were so iffy that the company had to set up its own water and electricity supply. The skill level of the workers "was nonexistent," Mr. Chung says. "People were straight off the farm."
But from its first contract with Craftsman, Techtronic showed an ability to keep quality high and costs low. It soon attracted other customers, such as Ryobi and American vacuum-maker Bissell, and for its first five years logged a heady annual growth rate of 25%. By the early 1990s, however, competition had increased and Techtronic's growth had begun to level off; prices for its products were dropping by 5% to 10% a year.
Mr. Pudwill, an engineer who came to Asia as a Volkswagen AG sales representative, began to grow concerned about the future. "We realized that we needed a brand," he says. Without one, Techtronic had to rely on the whim of the U.S. and European companies it supplied in order to boost sales. "How much would they spend on advertising?" he says. "What would they do about pricing? We had no influence at all."
His first opportunity came up in 1999 when VAX was put up for sale. Mr. Pudwill made a successful offer of more than $7 million; a year later, he acquired Ryobi's power-tool line for $106 million.
The Ryobi line forced Mr. Pudwill to confront for the first time the mysteries of marketing to countless do-it-yourself buffs across the U.S. He tapped focus groups and learned that Ryobi's low prices made consumers think of it as a budget brand. Mr. Pudwill raised prices by more than 30% and changed the somewhat tacky stenciled Ryobi logo to uniform lettering and color set in hard, clear plastic. "I wanted it to be like the Mercedes-Benz symbol," Mr. Pudwill says.
To improve distribution, he cut an exclusive deal with Home Depot. He got his staff thinking about how customers perceive Ryobi products by building replicas of Home Depot aisles in Techtronic's offices. Ryobi sales at Home Depot have tripled since, according to Techtronic.
That same year, Mr. Pudwill heard rumors that another of his major customers, vacuum-cleaner-maker Royal Appliance, also might be up for sale -- and with it the Royal and Dirt Devil brands. Mr. Pudwill had first met Royal's chief executive, Mike Merriman, at a trade show in Germany in 1995. That year the Ohio company had seen competition drive the price for one of its signature products, an upright vacuum, to less than $100 from $149.
After the trade show Mr. Pudwill called Mr. Merriman and said, "I'm going to save your company." Techtronic was offering to make for Royal a new low-price, slim vacuum cleaner called the Broom Vac. The two struck a deal and Royal began marketing the Broom Vac with a two-minute infomercial. It sold 800,000 units at $40 each, enough to finance a bigger marketing operation. An ad that showed Fred Astaire twirling across a ballroom with a Broom Vac ran during the 1997 Super Bowl. Sales soared, and Techtronic began taking over more of Royal's manufacturing.
For Royal, the decision to send some of its manufacturing overseas had been difficult. Even in the mid-1990s, most of its parts came from small tool-and-die shops scattered throughout the Cleveland area, with Royal's own factories doing the final assembly.
Like some of its competitors, including Maytag Corp.'s Hoover unit, Royal tried moving production to Mexico, in 1998, but quickly retreated because factories there didn't have the same network of component suppliers as China. "We were molding plastic in Texas and shipping it across the border to Mexico and shipping [the finished machines] back," says Mr. Merriman. The cost savings were minimal. "Horst said he could do it all at a lower cost," Mr. Merriman says, referring to Mr. Pudwill. Royal found that China led to other savings as well. The cost of developing the machine tools needed for a new product ran about $5 million in the U.S., says Mr. Merriman, but Techtronic could do it for $1 million.
As Techtronic began to absorb more of Royal's manufacturing, the two companies forged a closer relationship. "What we liked best about Techtronic was that they had more English-speaking people" than the other Asian-based factories Royal had dealt with, says Mr. Merriman. Techtronic also was using the same engineering software. "We could pass drawings across the Internet and they could visit [the factories] to make sure it was working out."
By combining Royal's understanding of the American market and Techtronic's manufacturing know-how, the two companies could take a new product from drawing board to store shelf in less than nine months, compared with 12 months previously. In the fast-changing retail environment, rapid turnaround time is becoming more crucial. "Wal-Mart will have five products on the shelf and one will go well and the others get pulled. Really quickly," says Mr. Merriman. If Royal doesn't roll out a new Dirt Devil model fast, "a Wal-Mart or a Target can say, 'You know I'm going to replace you because you guys are getting old.' "
In 2002, an investment fund that held a large chunk of Royal's shares wanted to cash out. Word began to spread and several Asia-based manufacturers expressed interest. Mr. Merriman concluded that Royal's best chances might lie with the manufacturer it already knew. He contacted Mr. Pudwill and told him Royal was up for sale. Mr. Pudwill knew this was his best chance to grab a major brand in the floor-care industry. "We made a very fast decision," he says.
But the prospect of being taken over by a Hong Kong company was causing ripples of unease among the 400 Royal employees in Ohio. On the morning of Dec. 17, 2002, the day that it was announced that Techtronic was buying Royal, Mr. Merriman spoke to workers at the cafeteria in the company headquarters.
He said the buyout would end up making Royal more competitive, not weaker. "People seemed to understand," says Tim Araps, Royal's vice president for human resources. It also helped that many Royal employees had been working closely with Techtronic staff for several years.
That same day, one of Royal's biggest competitors, AB Electrolux of Sweden, announced it was cutting 6% of its work force, more than 5,000 jobs. It too was trying to respond to cost pressures and the rise in no-brand competitors from China.
So far, Royal hasn't seen any large-scale layoffs since the deal went through in April, and the company still maintains some U.S. manufacturing operations to handle high-end production for some models. Meanwhile, Techtronic is on track to have its best year ever. Profit for the first six months of the year was $27 million, up from $21.8 million for the same period a year earlier.
Mr. Pudwill is still striving to realign his business away from just manufacturing to one that is more retail- and customer-oriented. He spends more time meeting with senior executives at major retailers such as Home Depot and Sears to ensure he is meeting their needs. "You can't say no to these guys," he says.
In the U.S., he has put money into after-sales service teams to handle repairs and defective merchandise -- something that wasn't as important when Techtronic didn't own the brand name. In Asia, he has bulked up his product-design teams so he can keep new products rolling off his assembly lines and into stores before sales start to dip.
Mr. Pudwill says the branding strategy has finally given him the control over his business that he always craved. "Marketing and product development is all ours," he says. "I would say the future of Asia depends on looking for brands."
中国企业跻身品牌游戏
1905年在克利夫兰的一个家庭作坊里，一批工人开始制造真空吸尘器，这个家庭作坊最后发展成为Royal Appliance Manufacturing Co.。大约一个世纪之后，曾经创造出Dirt Devil等名牌的Royal在克利夫兰停止了几乎所有吸尘器的生产，因为Royal意识到付钱让中国公司来生产这些吸尘器将比在美国生产更加便宜。
在美国制造业向中国的大迁移过程中，Dirt Devil的离开仅是冰山一角。而更进一步的是，从Royal手中获得制造真空吸尘器合同的中国公司今年获得了更具潜在价值的东西，那就是Royal以及Dirt Devil品牌。
中国的其他制造企业也开始将从前代工生产的品牌纳入麾下，其采用的品牌收购方式不尽相同，有的收购整个外国公司，比如买下Nakamichi；还有的获得产品独家许可权，比如贝纳通(Benetton)眼镜镜框。
香港的创科实业有限公司(TechTronic Industries Co. Ltd., 0669.HK, 简称：创科实业)就是收购了Royal和Dirt Devil的中国公司。该公司还从Ryobi Ltd.获得了Ryobi系列工具品牌在除日本以外所有市场的独家拥有权。创科实业数年来一直为Royal和Ryobi两家公司生产品牌产品。这家香港公司还购买了与该公司目前的产品相类似的两款产品的品牌，即从位于伊利诺伊州莫林的迪尔公司(Deere & Company)手中收购了户外产品品牌Homelite；从英国的VAX International Ltd手中收购了地板护理产品品牌VAX。
中国制造企业收购西方国家以及其他国家品牌的行动是过去30年形成的东西方国家之间的供应链发生重大变化的信号。尽管到目前为止这样的收购还不是很多，但是现在催生此类收购的条件已经成熟，品牌收购将成为中国工业革命下一阶段的主要内容。中国企业目前正在尝试夺取品牌价值，而不是依靠不断降低生产成本来扩大利润率。收购这些公认的品牌之后，这些企业就可以将产品以更高的价格直接出售给认准这些品牌的消费者。
中国企业不断收购美国品牌是由数个因素引起的。由于亚洲更为廉价、没有品牌的商品涌入美国市场，并直接与美国的品牌进行竞争，许多美国公司承受著巨大的压力，特别是那些拥有类似Dirt Devil等中小品牌的公司。同时，美国主要的零售链也使这些小品牌自相残杀，要求这些品牌提供更高的折扣、更快的递送速度以及更少的库存量。
另外，中国工厂本身也感受到了这种压力的滴漏效应(trickle-down effect)。中国经济的快速发展使中国的工厂产量过剩，这迫使国内厂商为了能够生产销往美国和欧洲市场的产品而进行竞争。激烈的竞争导致他们的产品价格不断下降，利润也非常微薄。 香港嘉域集团有限公司(Grande Holdings Ltd., 0186.HK, 简称：嘉域集团)主席何永安(Christopher Ho)称，由于已经意识到目前利润减少、竞争加剧的趋势，他们将扩大该公司产品的品牌。嘉域集团是在香港上市的消费类电子产品制造商，为索尼公司(Sony Corp., 又名:新力公司)、先锋公司(Pioneer Corp.)和JVC等企业生产产品。
在3家日本电子产品品牌进入破产程序后，嘉域集团收购了这3个品牌。这3个品牌产品的利润率在8-10%之间，而该公司生产的其他品牌的同类产品的利润率只有3-4%。
与嘉域集团相类似，泰兴光学集团有限公司(Moulin International Holdings Ltd., 0389.HK, 简称：泰兴光学)在2001年获得了贝纳通、露华浓(Revlon)和Sisley等一系列品牌的生产许可证，而上述这3家欧洲公司目前的情况不容乐观。
总的来说，中国企业收购外国品牌的主要目的一直是为这些品牌制造产品，而不是对这些品牌进行市场推广。而中国企业并不熟悉如何管理这些品牌，因为他们必须掌握地球另外一端的消费者的消费习惯，并对消费习惯的变化作出反应。
在一系列的品牌收购过程中，创科实业逐渐从开始时的一家没有品牌、低成本的中国制造商转变成为整合营销企业。该公司现在每天都与Home Depot Inc.和沃尔玛连锁公司(Wal-Mart Stores)等美国和欧洲的大型零售商打交道。从1999年完成第一笔品牌收购交易时开始，创科实业去年的收入已经较当时增长3倍多，至12亿美元；利润在同期内也几乎增长了2倍，至5,300万美元。
目前创科实业与其子公司Royal保持同样紧密的关系，创科实业已经发展成为该子公司的供货商。尽管创科实业已经开始进行市场营销方面的工作，这家美国子公司目前仍然承担了Dirt Devil品牌的大部分市场营销工作。创科实业目前在香港的员工更多的与零售商打交道，并主要承担产品设计和展示方面的任务。
创科实业是美国公司外包业务的早期受益者。这家公司由德籍的霍斯特?帕德威尔(Horst Pudwill)和他的澳门籍合作伙伴钟志平(Roy Chung)于1996年合资组建。公司的首批产品是为西尔斯(Sears Roebuck & Co., S)的Craftsman生产线生产的电钻加螺丝刀套装，这批产品是在位于香港的由60名工人组成的工厂中产出的。在短短一年内，该公司的产量便增加了两倍，达到100万件。
创科实业随后在中国南部的东莞建了一栋两层楼的厂房。但该厂的公共设施实在是问题多多，因此该公司不得不自建自来水和电力供应。至于工人的技术水平则更是怎一个差字了得，据钟志平介绍，这些工人根本没有经验，均直接来自农村。 但通过与Craftsman的第一份合约，创科实业已经显现出了既能够保证较高质量，又能将成本控制在较低水平的卓越潜能。该公司很快吸引了诸如Ryobi和美国吸尘器制造商Bissell等其他客户，该公司前五年保持强劲增长，年增长率达到25%。但是20世纪90年代初，由于面临日渐激烈的竞争，创科实业的增势渐渐放缓，其产品价格以每年5-10%的速度下降。
曾任大众汽车(Volkswagen AG, VOW.XE)亚洲地区销售代表的帕德威尔开始对公司未来显现出些许的忧虑。他说道，他们意识到他们需要一个品牌，如果没有一个品牌，创科实业将永远只能依赖美国和欧洲公司的订单来提振销量。创科实业对这些公司的广告支出及定价策略都没有任何影响力。 帕德威尔的首次机遇是在1999年，当时VAX正待价而沽，他成功地以700多万美元的价格将其收购。1年后，他又以1.06亿美元的价格收购了Ryobi的电动工具业务。
此项收购迫使帕德威尔首次开始著手在全美范围内开拓复杂的营销渠道。他通过寻访目标客户得知，Ryobi的较低价位导致客户认为这是一个廉价品牌。因此他将该品牌产品的定价上调了30%以上，并将看上去俗不可耐的□纸印刷的标识改成由硬质塑料制成的色彩鲜明、字母统一的标识。帕德威尔表示，他希望公司标识看上去能像梅塞德斯-奔驰(Mercedes-Benz, 又名：平治)那样带有王者气息。
为了改善分销渠道，他与Home Depot达成了一项独家供销协议。据创科实业的纪录显示，Ryobi在Home Depot的销量自此提高了两倍。
同年，帕德威尔听闻市场传言称，该公司的另一家主要客户，真空吸尘器制造商Royal Appliance同样有可能面临被出售的绝境，因此其旗下的Royal和Dirt Devil这两个品牌也将被转手。
帕德威尔与Royal首席执行长梅利曼(Mike Merriman)的初次相遇是在1995年德国的一个工业博览会上，当年这家总部位于俄亥俄州的公司正因受市场竞争的打压，而将其拳头产品，一种直立式真空吸尘器的价格从每台149美元下调至100美元以下。
博览会后，帕德威尔便打电话给梅利曼，表示能挽救他的公司。创科实业提出为Royal生产一种名为Broom Vac的全新的低价位小型真空吸尘器。两家公司很快达成协议，而Royal则以每台40美元的价格售出了80万台Broom Vac，这些资金足以为一个更大的市场运作提供融资。随著销量的飙升，创科实业开始承接Royal更多的生产业务。
对Royal而言，将部分生产业务移师海外的决定颇费了一番周折。20世纪年代中期，该公司的大部分生产部件仍来源于散布在克利夫兰地区的五金厂，Royal自己的工厂则完成最后的装配工作。
与Maytag Corp的子公司Hoover等竞争对手一样，Royal也曾于1998年试图将部分生产业务移至墨西哥，但是很快退却了，原因是那里工厂的元件供应网络不如中国这样通畅和完善。梅利曼称，他们在德州制成模板后运送墨西哥，随后又将成品运返国内，这样一来一去所节约的成本是非常微小的。Royal发现，在中国生产还会另外节省成本。梅利曼称，在美国进行一种新产品所需的机械设备的研发至少需要500万美元，但创科实业仅需花费100万美元。
随著创科实业开始承接Royal更多的生产任务，两家公司的关系也更加密切了。梅利曼说，他认为创科实业的最大的优势在于其所拥有的说英语的员工数量多于其他同类亚洲合作企业。此外，创科实业与Royal使用的都是同一种工程软件，因此完全可以通过互联网传输图纸，且两家公司还能通过公司网站进行互访，确保生产质量。
通过结合Royal对美国市场的认知及创科实业的生产技术，两家公司可以将新产品的上架时间由原先的12个月缩短至9个月。在迅速变化的零售业环境下，快速周转变得愈发重要。梅利曼表示，5种上架沃尔玛的产品中，只有1款销售良好，其他都得撤下。如果Royal不迅速推出新款Dirt Devil的话，沃尔玛或Target将撤下公司的产品，因为它们已经不入时了。 2002年，一家持有大部分Royal股票的投资基金公司意欲套现。消息传开后，有几家总部位于亚洲的制造商都表示出收购兴趣。梅利曼认为，Royal最好的前景可能需依赖于它已经熟悉的制造商。他随即将此消息告知帕德威尔l。帕德威尔意识到这是收购地板护养行业知名品牌的最好机会。他们很快就做出了决定。
但是将被香港公司收购的消息引起了俄亥俄州400名Royal员工的一些不安。2002年12月17日，梅利曼在公司总部的自助餐厅向员工宣布了创科实业即将收购Royal的消息。
梅利曼表示，此番收购将使Royal更加强大，而非削弱公司实力。Royal人力资源部副总裁埃若普斯(Tim Araps)称，员工似乎对此能够予以理解。
同日，Royal最大的竞争对手之一伊莱克斯(AB Electrolux)宣布裁员6%，即5,000多人。该公司也正试图对成本压力和来自中国非品牌竞争对手的增多做出反应。
截至当前，Royal没有进行大规模裁员，公司依然保留了美国的制造业务以负责一些模型的高端生产。同时，创科今年有望取得前所未有的良好业绩。公司今年前6个月的利润为2,700万美元，高于上年同期的2,180万美元。
帕德威尔仍在努力将其公司由单一制造业向零售和消费者导向型公司过渡。他更为频繁地会见Home Depot、西尔斯等主要零售商的高层人士，以确保公司产品符合他们的需要。 在美国，他耗资建立售后服务团队，这在创科实业拥有自身品牌之后日显重要。在亚洲，他则建立了庞大的产品设计团队以保持不断有新产品面世。
帕德威尔表示，品牌战略对亚洲发展至关重要。
