BC Business
LICENSED TO DRILLKen Anderson with David Freeman, co-owner and manager of operations at Atlas Manufacturing
As NAFTA talks heat up, our handy guide offers real-life lessons, practical tips and expert advice to tapping markets beyond the U.S.
Want to break into the export game? Already taken your business global? As NAFTA talks heat up, got a Plan B for tapping markets beyond the U.S.?
Powered by the BC Chamber of Commerce and its provincewide network, our handy guide to international trade offers real-life lessons, practical tips and expert advice for newbies and veterans alike.
When Ken and Vaughn Anderson founded Atlas Manufacturing Ltd. in the late 1990s, they knew the Canadian market for their water-well drilling equipment wasn’t big enough. So their small Vancouver Island company looked to the U.S., where a boom in single-family home construction was creating huge demand for their casing hammers, used to drill wells on individual properties. That business dried up in the 2008-09 financial meltdown, but the Andersons designed new products for other industries, including oil and gas, and built a global customer base.
When it comes to trade with other nations, Atlas and its peers play an outsized role. B.C.’s small and medium-sized enterprises generated almost $12.9 billion worth of exports in 2014, according to Statistics Canada and BC Stats, accounting for 36 per cent of the provincial total.
Not bad, says Dan Baxter, director of policy development, government and stakeholder relations at the BC Chamber of Commerce, but there’s room for improvement. “It’s an amazing number—over a third of our exports are coming from SMEs,” Baxter notes. “But it also goes to show that those larger companies are doing 64 per cent. So that’s where there’s still so much opportunity to get more of those B.C. exporters not just into the export game but to increase the value of their product and do more trade.”
But as uncertainty swirls around the renegotiation of the North American Free Trade Agreement (NAFTA), many of those firms must be nervous. Although B.C. is less reliant on America as a trading partner than other provinces, 54 per cent of our exports go to U.S. markets. The new CanadaEuropean Union Comprehensive Economic and Trade Agreement (CETA) will probably change the picture. Currently, mainland China, Japan and South Korea follow the U.S. as the top destinations for the province’s goods and services. Watch for the U.K. (No. 11) and other European nations to grow in significance.
Here, we check in with four small B.C. companies that are thriving everywhere from Australia to California to Saudi Arabia—and with experts who share their tips for conquering international markets.
Constructive approach: Ken Anderson, president of Atlas Manufacturing, invented his first specialized tool to make his own work easier
Just off the Island Highway between Courtenay and Campbell River, surrounded by fields of grazing horses and cattle, is the home of Atlas Manufacturing. The long, low building where the company makes its specialized drilling equipment looks like a hobbyist’s machine shop.
“The reason we don’t put a sign out,” says co-owner and operations manager David Freeman, “is that we don’t want people stopping in and saying, Hey, can you weld up my boat trailer?’ That’s not what we do.”
What nine-person Atlas does is design and build innovative products that ship worldwide. Many of its patented designs stem from a specific kind of inquiry—someone contacts them for a piece of equipment that doesn’t yet exist.
The Merville-based business was born—and now thrives—through invention. As a teenager, co-owner and president Ken Anderson worked on drilling rigs for a water-well company owned by his father, Vaughn.
After a couple of decades driving pipe into the ground, Anderson started designing a new kind of casing hammer. “I think I was lazy, so I was trying to make the job easier,” he recalls.
His first casing hammer, a hydraulic machine de-signed for a cable tool drill, boosted his production by 100 per cent and used far less fuel than other models, Anderson says. There were already casing hammers for rotary drills, but they ran on air pressure, which is expensive to generate, and froze in cold climates. After starting by selling to other water well drilling companies, Anderson promoted his device at a groundwater industry trade show in Las Vegas. Sales took off.
The Andersons sold their water-well drilling business so they could focus on the casing hammer, founding Atlas Manufacturing in 1989. They soon acquired a patent on the mechanism that runs the hammer. From the beginning, well drilling for single-family homes drove their business. The company now makes seven models, ranging in price from US$20,000 to US$65,000; the largest weighs about 3,200 kilograms.
When the 2008-09 financial crisis and the accompanying U.S. housing crash killed the demand for casing hammers, Anderson turned to another tool: the casing jack, which pulls pipe out of the ground. It was used to drill water wells, but more demand came from the oil and gas industry, for one-off designs. “We didn’t invent the casing jack, but we developed a custom market,” Anderson says. “You tell us what you want, and we’ll build it.”
It proved an expedient model—they introduced the casing jack at trade shows, and the commissions came in. Customers now include Houston-based Occidental Petroleum Corp., Singapore’s EMAS Offshore Ltd. and Santos Ltd. of Australia.
Freeman, a former Air Canada pilot who joined Ken as a partner a few months after Vaughn died in 2013, estimates that the company exports 95 per cent of its products; half of that share goes to U.S. customers. He admits to some anxiety about the NAFTA renegotiations and President Donald Trump’s rhetoric about buying American, given that purchasing materials and components such as steel and chain from the U.S. and selling Atlas products there has always been fairly easy.
“Our customers are largely Trump supporters,” Freeman says. “They wear Made in America hats. But we have a good rapport with them. They can always pick up the phone and call me; it’s not like phoning a big company. So I think the service we provide outweighs the Made in America thing.”
Atlas machines are definitely made in Canada—Freeman recently counted 130 suppliers on Vancouver Island. But the company, a Comox Valley Chamber of Commerce member, employs Americans, too. With about 500 casing hammers in use stateside, it has distribution centres in Milwaukee and Spokane, Washington, plus a third in Perth, Australia, to handle sales of component parts.
Atlas will also significantly expand its U.S. sales with the recent acquisition of its main rival, Weldco-Beales Casing Hammer, a division of Edmonton-based Weldco Cos. Previously manufactured in Seattle, Weldco-Beales products will now be made in Merville. Other promising projects in new industries include the Mole Rat, which Anderson and his engineers developed after a Victoria environmental remediation company requested a soil-sample drill that could fit through an eight-foot doorway.
Now in his fifth decade of drilling, the self-taught Anderson enjoys the creative challenge of these efforts. “When somebody comes to us with a job, we take a good look at it and see if we can see something there,” he says. “It’s a lot more fun than just building the widget.”
*Source: BC Chamber of Commerce and Abacus Data
After launching Icicle Technologies Inc. in early 2015, Steve Burton concentrated on food producers in Canada. Burton was selling a cloud-based software system that helps such companies manage many aspects of their operations, with an emphasis on food safety. Given this country’s high rate of food-borne illness—it affects one in eight people a year, according to the Public Health Agency of Canada—he figured there would be enough demandat home.
Burton was onto something: many companies saw the need for an automated subscription service that would help them document their processes and pass audits from customers and safety inspectors. By the end of 2015, three dozen Canadian businesses had signed on to Richmond-based Icicle’s service, including bakeries, meat processors, chocolate makers, dairy facilities and blueberry farms. Then foreign customers came knocking. “We were a bit surprised when we got our first call from overseas,” Burton says, referring to a Heineken beermaking facility in the Caribbean nation of St. Lucia that became a client in 2015. U.S. food producers also started subscribing to Icicle, which has six employees.
In early 2016, Burton was contacted by Brian Roberts, vice-president of international business development at Wavefront Wireless Communication Centre Society, a Vancouver-based organization that helps mobile and wireless companies with early-stage development, growth and building international ties. Roberts was taking a group of B.C. agri-food executives to Australia and New Zealand to meet potential customers, and he asked Burton to join him. Since Wavefront launched in 2009, 230 companies have participated in these targeted trade missions, resulting in about 100 foreign business deals. Burton’s interest was piqued by Australia and New Zealand because of the familiar language and regulatory environment. He decided to go.
Wavefront receives funding from federal agency Global Affairs Canada for its Global Market Entry Trips and works with Canadian trade commissioners based in foreign cities. On this journey, the commissioners helped set up meetings in Melbourne, Sydney and Auckland over five days. Burton, who was looking for a partner in the region to sell his software and act as a consultant, met several possibilities. He chose an Auckland-based company that also works in Australia, with experience in both food safety and information technology. “They are our boots on the ground,” Burton says. “They use their network to drum up their leads. We do back-end support, technical support, and they provide consulting expertise and sales. We share revenues.”
Icicle now counts 12 customers down under and more than 500 worldwide. “It takes time for the brand to permeate the market, and I think we’re still in early days there,” Burton says. “But I’m very optimistic.”
In one of a series of commercials by Lincoln Motor Co., actor Matthew McConaughey drives a sedan through city highways at night, looking contemplative. He delivers a script over music in his slow Texas drawl: “Sometimes you got to go back, to actually move forward…” The ads, which also feature McConaughey staring down a longhorn bull, have been credited for a spike in Lincoln sales and parodied by Jim Carrey on Saturday Night Live. The ambience may go over the top, but it’s undeniable.
That atmosphere—at least inside the car—is created by a Nelson-based automotive parts manufacturer, Pacific Insight Electronics Corp., whose product lines include light-emitting diode (LED) systems for interior and exterior applications. If you watch the commercials carefully, you’ll notice a technology that Lincoln calls Embrace Lighting. “[McConaughey] gets in the vehicle, and the lights go on, then they work from front to back,” says Pacific Insight COO Ian Scott. “It kind of wraps around you. Everything lights up to your liking, and you can change that as you go.”
Other functions of the system include welcome lamps, which light up the interior foot areas as the driver steps into the vehicle, and lighting in the door panels and around cup holders. The lighting system incorporates Pacific Insight’s other product lines: electronic modules that control features such as heated seats, steering lock, gauges and instrumentation; and wiring harnesses, electronic cables connecting the various components.
Besides Lincoln parent Ford Motor Co., Pacific Insight sells to Portland-based Daimler Trucks North America LLC and to auto parts suppliers such as BorgWarner Inc. of Michigan and Shanghai-based Yanfeng Automotive Interior Systems Co. Ltd. About 75 per cent of the company’s products go to U.S. clients and 15 per cent to customers outside North America, Scott says. From the unlikely location of Nelson, far from the well-established cluster of auto plants and parts makers in southwestern Ontario, Pacific Insight proves that small B.C. businesses can compete globally.
Director and CEO Stuart Ross founded the company in Prince George in 1984 and moved it to Nelson in 1987. Pacific Insight entered the international arena that decade by selling something new—daytime running light control modules—to General Motors’ aftermarket division and heavy-truck makers. The company’s Nelson facility, a few minutes outside town in a valley near an arm of Kootenay Lake, now employs about 200 people, and another 20 work at a Burnaby corporate office. Pacific Insight also has a factory in Fresnillo, Mexico, and an office in Detroit.
For the 2016 fiscal year, the Toronto Stock Exchangelisted company posted some $127 million in sales and a net profit of $9.8 million. Both were records, and revenue surged 54 per cent year-over-year. But Scott notes that this haul is tiny compared to firms like Grupo Antolin-Irausa S.A., a Spanish maker of parts for automotive interiors, which reported sales of 5.2 billion (about $7.5 billion) in fiscal 2016.
A key accomplishment last year for Pacific Insight was the development and prototyping of advanced lighting systems for an important new customer: U.S. electric car maker Tesla Motors Inc. The ability to service conventional and electric vehicles positions the company well for the future, Scott says. Ambient lighting will become even more of a focus with the advent of self-driving cars. Envisioned as an office or entertainment centre on wheels, autonomous vehicles will deliver a personalized experience, with sophisticated lighting as a selling feature.
Pacific Insight’s design philosophy sounds like a catchphrase from a Lincoln commercial: evolution rather than revolution. This is how to take on the big players, according to Scott. “Some companies might have billion-dollar research departments that are looking at white space 10 or 15 years out. We tend to come up with innovative ideas that are extensions of our product lines today,” he says, explaining that clients like that approach because they can get the new products into their vehicles within a few years. “We service the heck out of our customer, and we very rarely lose a customer. It’s that old adage where you don’t have to be way ahead of your competitors, as long as you’re constantly ahead of them.”
Source: BC Chamber of Commerce and Abacus Data
One day in June 2014, Raj Bhangu got off a plane in Riyadh, Saudi Arabia. The vice-president, business development, of Vancouver-based mobile software developer AirG was there on a trade mission to meet with executives of cellular service providers.
As he waited for his luggage, he saw a billboard advertising a one-terabyte (1,000-gigabyte) data plan—about 100 times what a typical family plan offers in Canada.
“That’s nuts!” Bhangu said. “Who uses one terabyte a month?”
A lot of people, he was about to learn. Although his company already offered its packages, including games, chat rooms and dating sites, in North America, Western Europe, Latin America and parts of Africa, Bhangu had been a bit intimidated by the cultural barriers of the Middle East. Saudi Arabia is led by an Islamic dictatorship with religious police enforcing ultraconservative laws on all manner of public behaviour, including dress codes, a ban on women driving, strict separation of the sexes, and attendance at prayer five times a day.
Game changer: AirG’s Raj Bhangu found a new market in the Middle East
After encouragement from VP Brian Roberts at Vancouver’s Wavefront, which helps startups in the wireless industry with development, growth and building international ties, Bhangu decided to join a trip with a handful of others. The billboard told him he’d made the right decision. “Here’s the reason that games do really well in Saudi Arabia,” he says. “There’s no movie theatres, no Netflix, no Apple TV, no porn, no alcohol. There’s nothing else to do.”
Since its founding by Frederick Ghahramani in 2000, BC Chamber of Commerce member AirG has done well at providing things to do. It now employs about 130 people in its Vancouver office and counts more than 100 million registered users in 135 countries.
But Bhangu was right about the cultural barriers. At the first meeting in Riyadh, an awkward moment arose when the Canadian consular representative, a woman, extended her hand to an executive of one of the Saudi companies, who refused to touch her. Bhangu was offering a package of 1,000 games available by subscription, and he’d done an unusual amount of preparation. All of his presentations had to be wiped clean of references to AirG’s chat or dating sites, or any suggestive words like “single.” The trade mission resulted in deals with several cellphone operators in Saudi Arabia, Qatar and the United Arab Emirates.
First, however, the games needed work. The company hired a Lebanese woman who spoke Arabic to vet them. One in particular, Big Barn World, had to be entirely redesigned. It’s a social farming experience in which players can buy animals, raise crops, and sell eggs and milk, relying on puns and innuendo (“I just fertilized your garden”).
Big Barn World is immensely popular—paying users across the globe spend an average of US$108 a month buying add-ons and play for 82 minutes a day—but for Saudi Arabia, the developers created a separate universe as a straightforward game with no flirtation. The female host, originally a cartoon figure holding watermelons and wearing overalls, was dressed in a head-to-toe hijab. Pigs were replaced by camels and ostriches.
There were other cultural challenges. Soon after the first trade mission, Bhangu went to a recruiting company in the UAE to hire a salesperson. The recruiter asked if he wanted a Sunni or a Shiite. “I said, I didn’t think of that,'” Bhangu recalls, “and he said, You have to.'”
The recast games caught on, and AirG signed deals in other Middle Eastern countries, including Bahrain, Jordan, Iran, Kuwait, Oman and Yemen. This February the company opened an office in Beirut. In the Middle East alone, AirG is on track to do $3 million in revenue for 2017. The company doesn’t disclose financials, but Bhangu says total sales are above $70 million.
Though AirG was willing to adapt its products, sometimes Bhangu needed to draw a line—and found that being Canadian offered a kind of neutrality. When the contract was presented to the Saudi company, the executives noticed the name of AirG’s lawyer and asked if he was Jewish. “I said to my sales guy, You tell them he’s Canadian,'” Bhangu recalls. “You have to have the same mentality as we do. We’re just doing business.”