Cheap alternatives and lack of capital destroy business

By Yoke Har Lee

Enamelling company Ceratec New Zealand tried to move upmarket when the going got tough, but to no avail.

After seven years in business and investment of $5 million, the company has been placed in receivership and is being wound up.

Entrepreneur Brian Cox said the decision to let the business go was the right one.

The company failed, he said, because of "The Warehouse mentality" - where consumers did not want to pay for something they could buy cheaper elsewhere.

"Under normal circumstances, it probably wouldn't have gone as far as it did. We had to make that decision in the end and the decision was a correct one," said Mr Cox.

A former executive associated with the company said the collapse of Ceratec was another export opportunity lost though the lack of organised support for innovative companies.

Ceratec had recognised early last year that it was facing a saturated domestic market.

With the help of Technology New Zealand, it sought expert knowledge through the Graduates in Industry Fellowship (GRIF).

A graduate student from the University of Waikato centre for technology worked with the company to find ways of improving its vitreous enamelling technology.

The re-engineering that followed also helped Ceratec develop a seamless finish for enamelling panels that competitors found hard to achieve.

It found export markets for cladding in Hong Kong (in Tai Kok Tsui and Tung Chung train stations) and Australia (Royal Melbourne Hospital and the Homebush rail station in Sydney).

But the Asian crisis stifled further opportunities. Hong Kong suspended infrastructure projects, and when work returned, every company in South-east Asia was competing for it.

"Everyone was doing work for nothing," Mr Cox said.

"We couldn't find the cash to run that sort of business any longer."

Rod Hall, the former general manager contracted by Ceratec from a company called Marketstrat Management, said the closure of the company was a shame because the export markets were there.

"What would have given the investors confidence - and that was what was really needed - was the availability of some seed capital for the development stage. Instead the export business that New Zealand could have tapped is now gone to Australia and Southeast Asia."

In Australia, Mr Hall said, a company such as Ceratec would have access to working capital based on signed contracts.

"It was a matter of how long the family that owned Ceratec could hold their heads under water when the Asian crisis hit," he said.

"The cycle has turned now and there is demand again for quality products."

Parts of the enamelling business have been sold to GLG New Zealand, which also owns the BBQ Factory. But GLG is not interested in developing the cladding business, which lies outside its core activities.

Mr Cox said Ceratec had been manufacturing enamelled products under contract to local woodfire producers among others.

"The business failed because we lacked support from the New Zealand market. We were competing head-on with cheap imports. We were producing a Mercedes Benz and competing against a Lada."

The technology gained from having a GRIF student helped the company sharpen its competitive edge, he said.

"But it didn't help because the mindset of the people we were working for could not be changed.

"You've got to know when to cut losses. If we had gone for another six months, the family home would have gone."

Mr Hall said the New Zealand market would still find enamelling contractors, but Ceratec's demise would add to the disappearance of manufacturing skills.