Whoever said exporting from Scotland is a piece of cake? It isn't. Don't expect your exporting journey to be an overnight success. Just ask Nigel Patch, who has been building a successful UK business in Edinburgh.
He is the managing director of Edinburgh-based Grant Westfield, an 'M' in the SME of small, medium-sized enterprises, with a modern office and manufacturing headquarters, a kick or two from Tynecastle Park, home of Hearts football club, and Murrayfield Stadium, where the dressing rooms were fitted out by Grant Westfield.
Nigel, a gently-spoken Englishman who is an adopted Scot, has grown a traditional shop-fitting firm into a branded supplier of bathroom and laboratory panels, along with a contracting arm undertaking work in places such as Gatwick and Heathrow airport. With the UK market performing well - and several national budget hotel groups are among Grant Westfield’s latest customers - he has been making tentative moves into exporting.
His experience shows just how hard it can be for a manufacturing business to break into overseas markets. He remains a cautious business figure who has worked with his colleagues to build Grant Westfield in a ferociously challenging market place. He is the first to concede that shower panels – which are laminated veneers bonded to a waterproof plywood core - might not sound as exciting as other industries but he is passionate about his company’s waterproof and robust, quality-led products and its ability to deliver value to customers.
The company was founded by Donald Grant in 1881, a shop fitter, supplying Edinburgh’s elegant department stores such as Jenners, Forsyth’s and Patrick Thomson, and then later the solid furniture and fittings for Edinburgh’s banks and building societies.
“It was traditional fittings and classic joinery work. Beautiful stuff that is too expensive these days and is rarely used anymore except perhaps in places such as Dubai,” says
Nigel, sitting in an upstairs meeting room with the whine of the factory audible in the background.
The firm’s fortunes waxed and waned and during the war the company even ran a Leith shipyard that produced parts for minesweepers. In 1975, the name was changed to Grant
Westfield to reflect its specialism, making furniture for science laboratories and washrooms. Today it is a sizeable manufacturing plant rather than purely a shop-fitting business. It has recently won major contracts to supply and install panels for 18,000 hotel bathrooms across
“The business has two parts: we still do the original specialist shop-fitting side, and call this contracting. Then there is our branded panels. We are looking at expanding the contracting arm of the business because it has been static for a while, but we have some new products for the market. For example, we also supply all the washrooms for British Airports Authority.”
Turnover this year is expected to be £28m, up from £25m in 2012, up 28%. The target is £50 million turnover in the next five years – with much of this from exporting.
Nigel Patch joined the business 1997 in sales and marketing. He has a degree in physics and management science from Stirling University and has always worked in manufacturing industries running his own metalwork fabrication company aming other businesses. When the previous director at Grant Westfireld retired, he became managing director in 2000, when the turnover was £2.7 million.
“In my view, the company was a sleeping giant. We were making very high quality products and there was potential for growth. We needed to invest in our people and their skills and our specialist precision equipment for cutting and bonding, which we have done continually,” he says.
In 1999 Edinburgh Council, in its wisdom, decided to run its now aborted guided-busway system directly through the site of the old factory, so a modern factory and offices were built, which was a shock because the business rates quadrupled. With 65 employees, many with over 40 years’ experience as wood machinists and joinery, it was time to move towards more modern methods of production. Today the company employs over 160 people, with four working overseas.
“There was already a small company manufacturing shower panels, so instead of buying that company we decided to produce our own multi-purpose panels. We began with a multiPANEL, which was just a simple 8X4 waterproof shower panel. As the business grew we realised that there were other things we could manufacture and fit within the bathroom and wash room,” he says.
This included waterproof vinyl flooring imported from China, then other wall products and ceilings. From the local manufacturing base in Edinburgh it quickly became apparent that if Grant Westfield wanted to increase its sales throughout the UK, it needed to market through the merchant network.
“The builders and plumbers merchants are basically, people who sell stuff to people who are fitting their bathrooms and changing rooms. We initially dealt with Jewson’s of St Gobain, then the Wolseley Group, Travis Perkins Group, Grafton Group, as well as independent merchants. Everybody who sells to the trade now sells multiPANEL and as a result makes a good profit, which is why they like to do it. It’s a good margin and they don’t even have to stock it.
Quality service has been at the heart of the supply chain. Careless damage causes a dent to profitability. A chipped or damaged panels delivered by others would be returned so Grant Westfield preferred to deliver their bigger 8x4 panels direct to the customer themselves.
“Our delivery network throughout the country was developed with Scottish Enterprise helping us to set-up distribution depots throughout the UK. We have nine centres from Edinburgh, Livingston and Aberdeen to Basingstoke, Leicester, Wakefield and Bishop’s Stortford.”
The company distributes to 5,000 merchant branches of merchants using over 30 vans, four large lorries and three 40ft trailers.
Scottish Enterprise helped Grant Westfield set up a distribution hub at Dunlop Square on Deans Industrial Estate, which holds stock, then supported the appointment of a logistics manager who has been taken on to streamline the distribution.
“We have a truck going up and down the country twice a week from Livingston delivering stock to our hub depots. Then we have a fleet of local vans dropping of at a small bathroom shops, builders merchants or whatever. We do all of this logistical work ourselves,” he says.
“Merchants require merchandise. If you are going to buy something, you have to be able to take a sample home to discuss with your partner or family, so a huge amount of merchandise is produced as a result. It is a fashion product and as such, we change five decors every year which often has implications because, when there are 32 colours to choose from, a decision has to be made as to which colour décor should be changed. Of course the standards remain each year based on high demand and popularity, such as the Classic Marble an old favourite which sells well,” he explains.
Grant Westfield manufactures 5,000 sheets a week and looks all over the world to source the best prices for laminate designs and finishes.
“When you do your bathroom up with expensive materials, you want to make sure that it is perfect otherwise it is going to be a costly experience to fix, involving plumbers and builders. We can’t afford to fit a bathroom and then find something wrong with it. Quality control should be a given and we’ve worked hard on this since I joined the company,”
The game-changer for Grant Westfield has been the development of its own brand called multiPANEL, a plywood core wall panel bonded with laminate.
“This is something that was developed and our customers are asking for it by name. Branding is important. It is all about multiPANEL, but within that, there are branded supporting products such as tilePANEL, polyPANEL, a more affordable plastic panel, and the CLEANpanel, sold to laboratories.”
Grant Westfield has been doing well in the UK market, with 12 reps on the road and the nine distribution depots all making an impact, business has increased by 15-20%
year on year.
However, exporting manufactured products overseas from Edinburgh was a completely new ball game.
“To be honest, it’s been a nightmare because I’m very naïve,“ he laughs. “I thought if we can open something in Basingstoke, then we can open in Frankfurt and do exactly the same. It is not the same: your VAT is a problem. You can’t simply have Grant Westfield gmb because it has to have a separate VAT entity and they are pretty hot on tax.”
Despite being in the European Union, there are different employment laws and this is another hurdle.
“When you are moving manufactured material from the UK, when does it become the other company’s material, and who is taking that margin? We’ve had to cope with all that.”
The strategy to export began three years ago, when Grant Westfield looked at Sweden, where the panelling product originated, because it had a prospective partner. While Scottish Enterprise helped to explore the market, the set-up didn’t go ahead because legislation on building products in Sweden was too arduous and expensive to overcome and the market was just too small. So the exporting focus shifted to the Netherlands and Germany with far larger markets and customer recognition of the panel product.
“The problem is, that the further you go south people say, ‘I’m not putting wood in my bathroom. I’m used to ceramic tiles because we’ve been using them since Roman times’.
In northern Europe, people are more familiar with wood products.”
Two new companies called Ocean Interiors GmbH, and Ocean Interiors nl, based in Huckelhoven, were created and the panels given the name of spaPANEL.
“We had to hire Dutch and German speakers to sell it. We had to hire sales people who could speak the language when it was being ordered. So the ramification kept building.
Suddenly, you had a lot of overheads and no sales,” he says.
Scottish Enterprise supported with a business development manager and there was a major marketing push for the products made in Edinburgh and transported to Germany.
“It is important in Germany to have a different name and German address. We’ve ended up with two separate companies, German and Dutch. This has to be set-up, audited and
have separate administrations, which again is a big overhead.”
Nigel Patch is acutely aware of the financial drain and investment. Thus far, the exporting drive has been time-consuming and costly. “But the market is massive and if we are
going to look further ahead and grow then we need to persevere,” he believes, although his finance director might take another view.
Grant Westfield, in its fourth year in Europe, is only now breaking even. The German bathroom showroom market is conservative, hard to break into with a strong preference for tiles. This is coupled with customer tastes that are distinctly different and so Grant Westfield had to modify its offering. It has been successful with local franchised hotels in Holland and Germany and, as a result, has pushed the style of wooden panels into builders and plumbing merchants. “It has taken three times longer than I thought it would. It is very hard.”
However, Australia and New Zealand are looking like better markets too with several containers sent across, particularly with the rebuilding of Christchurch after the earthquake.
Grant Westfield has continued to innovate, now offering new designs for the laminates and is even experimenting with digital photographic scenes on laminate which
could show an infinity pool, a beach scene, a tropical rainforest or cityscape scenes, such as the Manhattan skyline. This has great appeal for hotel groups who are looking for something new for their hotel bathrooms and washrooms.
Scottish Enterprise has appointed a local account manager to assist with new product development. It has also been helping with driving business efficiencies, looking at ways
of reducing energy costs. The company, with its largest-scale extraction system, circular
saws and computerised machine tools, uses a lot of power and has a £12,000 a month energy bill.
“Being an environmentally aware company and I’m very keen on energy savings. A factory like this takes a lot of power and we’ve made savings of £2,000 a month by using photo-voltaics on the roof and an energy modulator,” he says.
Grant Westfield is working steadily on its expansion plans. Nigel Patch and his team can
see plenty of market demand – it is now a matter of focusing on the prize, meeting the demand and ensuring that export success is bolted down.