Trio matches designs to markets

By Selwyn Parker

When Ross Pratt and Chris Wilkins, two of the three partners running Auckland's BEP Marine, went fishing for bass on West Point Lake on the border of Alabama and Georgia, they were just, well, fishin'.

A client had invited them out before they flew back to New Zealand from a sales trip.

But when your business is marine equipment and you're always looking for opportunities in export markets, you can't entirely switch off.

So it wasn't long before they started looking for ideas around their craft - a low-freeboard, flat-decked bass boat.

They noticed that one of the components - a significant electrical item on the drive system - was somewhat agricultural by their standards.

A New Zealand boatie certainly wouldn't put up with it.

Suddenly, catching the bass didn't matter too much. Here was something they could make and export, and on the way back to New Zealand the pair excitedly discussed what could turn into a lucrative prospect.

"We just saw a need," explains Pratt. "All three of us are tradesmen and we're all boaties. In this business, that's absolutely vital."

BEP Marine's factory in Albany is now working on the product.

If there's an archetypal Kiwi export company, it's probably BEP Marine. Established 15 years ago by Pratt and his now retired father, Bruce, it's highly informal. The three partners - Pratt, Wilkins and Mark Raines - wear jeans and open-necked shirts at work. They know each other so well that they finish off each other's sentences.

Informality is part of the wiring in this company - even junior staff don't think twice about giving cheek to the partners.

"We try to run a very friendly workplace," adds Pratt. This mickey-taking greatly amuses the Asians working there.

With all three partners involved in each other's business, the management structure is so flat that a spirit level wouldn't register any slope. Staff numbers have jumped from eight four years ago to 23 now, plus eight out-workers.

Being yachties and boaties, the partners spend every weekend in the great R&D department called the sea. Pratt, who was once a boat-builder and started sailing in the P-class, is a marine electrician by trade. Wilkins, who specialised in industrial electronics, managed the electronics for three of New Zealand's America's Cup campaigns. Even Raines, who has mainly administrative responsibilities, is a cruising yachtie.

The three partners got serious about exports in 1995. At that time export revenue represented just 10 per cent of turnover. Now it's up to 55 per cent. And this year they will exceed $2 million in export revenue.

BEP Marine provides the electrical components for Riviera, the big Australian boat-builder, and is quietly pursuing one of the major American boat-builders. That sort of deal could mean 30,000-40,000 components.

In the last few years, the partners have learned a lot of tricks about exporting and, for BEP Marine, it starts very early with the product.

"We identify our market at the start of the design process," explains Wilkins.

For example, they typically find that New Zealand marine products are over-engineered for the American environment where fresh-water boating is much bigger than here and equipment typically lasts longer.

It's a BEP Marine golden rule to be different. The firm aims to produce only products that stand out from the competition.

"We learned quickly that having something different gives us a captive market," explains Pratt.

"If we were to sell something that was the same as everybody else, we could only compete on price. We target a niche [and think] outside the square."

Innovative as they are, the company's export products could excite only boaties and boat-builders. Its control panels have lots of LED read-outs, knobs, buttons and switches. Its latest seller is a battery distribution system and related equipment. They're the sort of components that generally attract attention only when they go wrong.

However, even landlubbers will notice that BEP Marine can make control panels and battery master switches look quite stylish.

"We approach everything from an aesthetic as well as a practical viewpoint," says Wilkins.

The components come together from a brains trust that Professor Michael Porter would probably call a cluster and others would describe as out-sourcing. They emerge from a satellite structure of similarly small and enthusiastic companies that supply expertise in design, plastic-moulding, tool-making and other skills where BEP Marine's owners feel they need assistance.

Pratt is quite passionate about the virtues of this flexible arrangement. "It's the only way New Zealand can compete in exports," he declares. "Overseas, they would have these skills in-house, but we're too small for that. This way, we're all learning together."

Having produced something that is hopefully unique, does BEP Marine do what many pricing experts suggest and cash in by charging a premium?

They aren't that silly. "We charge basically the same as the ordinary competition," adds Wilkins.

"If you try to charge a premium, people will try to copy it and undercut you."

Adds Pratt: "With a standard margin we can win market share right away."

The partners have run into rip-offs. Taiwanese manufacturers have made an art form of the sincerest form of flattery, namely imitation, and can have an almost identical product out in weeks.

Patents, which can cost $40,000 for BEP Marine's main markets of USA, Europe and Australasia, help prevent knock-offs but are expensive to defend. And registered design certification, which costs around $2500 per country, is the approximate equivalent of a copyright.

But this is a jungle and somebody will try to knock the product off anyway. BEP Marine's tip: Pursue the importer.

"You'll never get the Taiwanese manufacturer who's making [the copy]," says Pratt. "But you can always get the importer. That's where you start." The other landmine in exporting is money. The production of an export-quality product over several months can easily cost the firm $200,000, and of course it takes a lot longer for the rewards to flow back.

So far, BEP Marine's owners have financed their exports through bank loans anchored, to use a nautical metaphor, on their equity in the business.

"None of us have a lot of money," says Raines. "We cashflow fund our exports. When our equity in the firm goes up, we just borrow a bit more."

They tried to bridge the financial gap with Technology New Zealand money but it proved to be a fruitless exercise. After a couple of months of time consuming to-ing and fro-ing, the partners were effectively told that they weren't technological enough.

Scary though exporting may be, BEP Marine's partners love it.

Generally, the returns are higher than from domestic sales, and they're certainly more prompt. Like many a New Zealand manufacturer, BEP Marine's owners bemoan the infamously tardy payment habits of domestic customers.

"In the States, there's none of this 'payment within six weeks of delivery' rubbish," says Raines.

And, of course, you can go bass fishing there too.

* Contributing writer Selwyn Parker is available at wordz@xtra.co.nz