Small Oregon companies are following the money overseas, but doing business internationally can be daunting.
By Ben Jacklet
Workers at Hydra-Power Systems in Portland build custom manifolds for vehicles for an industrial market that is becoming increasingly global. // Photos by Eric Näslund
For Oregon City’s Benchmade Knife Company, the next frontier is China. Not manufacturing there — selling there.
For Redmond-based Mountain High Oxygen & Supply, it’s the Czech Republic.
For Portland’s Columbia Green, it’s Canada.
For Clackamas-based Castor & Pollux Pet Works, it’s South Africa — and China if the rules ever change.
And for Columbia Industrial Products in Eugene, it might be India. Or Brazil. Or maybe both.
As the dollar weakens and overseas economies continue to grow, Oregon-based businesses are scrambling to go global with varying degrees of success. Young companies are moving into international markets for the first time. Veteran firms are following the money into nations once written off as not worth the effort. Some are selling finished products. Others are finding their ways into global supply chains. Still others are exporting First-World expertise to nations with rising fortunes.
It’s all part of a massive global power shift. The International Monetary Fund predicts that 87% of world economic growth over the next five years will occur outside of the United States. The opportunity is vast for exporters selling to China, Brazil, India and South Korea, not to mention Colombia, Indonesia, Saudi Arabia, the Philippines, South Africa, Turkey and Vietnam.
Oregon is already a strong exporter. A recent Brookings Institution report identified the Portland metropolitan region as the second-most export-heavy local economy in the nation after Witchita, Kansas. Portland was one of four U.S. cities to double exports from 2003 to 2008, outperforming larger cities such as Atlanta, Phoenix and Miami.
This should count as an advantage, since wages tend to be higher at firms that export and ripple effects can spread the prosperity generated by international trade far and wide. But the bulk of Oregon’s success as an exporter can be traced back to one corporation: Intel. For the small- and medium-sized businesses that make up much of the rest of the state’s economy, going global can be as daunting as it is tempting. “The U.S. has been outsourcing work for a long time,” says Noah Siegel, director of international relations for the City of Portland. “Rebuilding exports is easier said than done.” Barriers to trade include language and cultural differences, protectionist trade policies, prohibitive tariffs, opaque regulations, delayed payments, questionable governance, intellectual property theft and even flat-out bribery.
Oxygen systems manufactured in Redmond by Mountain High Oxygen & Supply sell throughout Europe, and the company is hoping to expand its business in South America.
The challenges vary from business to business, and from nation to nation. Robert Jamieson, CEO of 15-employee Mountain High Oxygen & Supply, says he is thrilled to provide oxygen systems for helicopter pilots in Afghanistan and glider pilots in Switzerland. But he’s in no hurry to move into Russia. “By the time you figure in your under-the-table costs in Russia, your return on investment is gone,” he says. “Everybody’s got their hand out there.”
About 25% of Mountain High’s sales are overseas. Jamieson sees opportunity in Eastern Europe, where gliding is popular, and in Brazil, where law enforcement relies on helicopters. Wherever the next wave of foreign business comes from, Oregon will benefit, since Mountain High does all of its manufacturing in Redmond and purchases 90% of its goods and services from local vendors.
Jamieson says Mountain High built its international business by attending trade shows, marketing aggressively and selecting partners carefully. When he receives an inquiry that strikes him as suspicious, he requests that the deal go through “proper channels,” and more often than not the would-be suitor vanishes.
Other local businesses count Russia as their top foreign market and report no problems. Portland-based Simplex Manufacturing, which builds aerial application systems for firefighting, landed a major contract with the Russian government in the wake of the devastating wildfires that overwhelmed Moscow in August 2010.
Larry Lichtenberger, vice president of sales and marketing, says Simplex works with independent representatives in Russia who are trained in the Foreign Corrupt Practices Act. “We are very, very careful about the rules,” he says.
Simplex makes more than 70% of its money from international sales, Lichtenberger says. The company frequently attends trade shows to bring in new business, with recent events in South Korea, Russia and Rhode Island. “We travel a lot,” says Lichtenberger. “We go there, which a lot of people are afraid to do.”
Business leaders say there is no substitute for traveling. At the same time, email, Skype and webinars have cut costs dramatically for small companies with global aspirations. Columbia Industrial Products owner Steve Phillips recently met with potential partners in Japan and Brazil without leaving its headquarters in Eugene.
CIP’s 16 employees make and sell custom composite bearings for hydropower dams and other industrial uses, exporting into about a dozen nations. The company first broke into global markets by partnering with a Swedish firm. Now they get unsolicited calls from India and they’re planning to travel to Brazil to capitalize on the brisk industrial growth there. “We never know who’s going to be on the other end when the phone rings,” says Phillips. He cites international sales as a stabilizing factor during turbulent times: “I felt bad over the past few years, when businesses were folding left and right. We were making money hand over fist.”
Hydra-Power VP for business development Dan Sowards is working to expand sles into England, Italy and Russia. // Photo by Eric Näslund
Futuristic industrial products from Corvallis-based Perpetua Power Source Technologies are widely available in Japan as a result of a partnership with a major importer there.
Portland-based Hydra-Power Systems is another local company that is becoming increasingly global. Dan Sowards, vice president for business development, says most of the company’s sales come from distributing hydraulic components and systems. But the company also builds custom vehicle manifolds in Portland for a growing number of international customers, mostly factories run by U.S-based businesses in Europe and Asia.
“We’re developing a more global sales team to capture this business,” says Sowards. “Because there’s business to be had. We’re growing it every day.”
Scott Goddin, director of the Portland Export Assistance Center, says one of Oregon’s strengths as an exporter is a strong supply of businesses that make components for industrial applications. Rather than moving into a new market independently, these companies partner with a larger business with global reach — say, Boeing or Intel or Apple or General Electric — and fill a niche in the supply chain. That business model has proved lucrative for two of Oregon’s healthiest corporations: Precision Castparts (which sells to Boeing) and TriQuint Semiconductor (which sells to Apple). It has also enabled far smaller businesses such as Columbia Green to go global for the first time.
Columbia Green was a tiny green roof business headquartered in Portland’s Central Eastside when CEO Vanessa Keitges signed a deal with Firestone Building Products in August 2010. The deal “expanded our reach overnight,” Keitges says. “In about six months we quoted $15 million in green roof projects. We never would have been able to do that on our own.”
A recent trip to Toronto with Portland Mayor Sam Adams helped Keitges close Columbia Green’s first major international sale, a million-dollar deal for the roof of a Wal-Mart planned for Vancouver, B.C. It probably won’t be the last sale of its kind, given strict new laws requiring green roofs for new buildings in Toronto and Vancouver. Keitges says she expects Columbia Green to grow from five employees to 12 in 2012, while providing significant work for the manufacturing company in Camas, Wash., that builds the roof linings, the Canby business that supplies the pumice-based soil for the roofs and the Portland freight company that ships it all into the Firestone supply chain.
Few businesses have wider global reach than Firestone. One of the few that does is General Electric, which signed a memorandum of understanding with the City of Portland several years ago to nurture green innovators. As a result of that partnership, eight local clean-tech businesses vetted by city economic development officials recently met with GE representatives to pitch their ideas and explore potential partnerships.
Perpetua Power Source Technologies hopes to get a similar boost from its recently announced partnership with Altima Corp. to distribute its products in Japan. The 20-employee Corvallis company has created an innovative small-scale power source that uses no fuel, instead converting heat from industrial processes into electricity. “We have a product that works, and it fits into their distribution channels,” says vice president of marketing Jerry Wiant.
Oregon Exports, 2001-2011
The value of Oregon exports have doubled over the past decade. The state’s largest category of exports is electronic and computer products, mostly from Intel, and the largest trade partner is China.
Partnering with a larger, more experienced firm makes sense because breaking into foreign markets is no simple task for a small Oregon company. But it can be done — even in China. Benchmade already sells its upscale knives into Russia, and the company is doing very well in China, says Rob Morrison, director of marketing. China baffles many local exporters due to various trade barriers and deep cultural differences. But Morrison says he’s found that the “Made in the USA” label carries surprising cachet in China as incomes there rise: “Our best selling products in China are our most expensive products.”
Morrison says Benchmade spends a lot of time researching and building relationships with local partners in China and Russia, interviewing candidates in person and talking to retailers and dealers to make sure “the credibility checks out.”
Benchmade has learned firsthand that selling internationally brings risk, especially if your brand name is well known. “We’ve seen counterfeit product in Hong Kong and China and also coming from foreign countries into the U.S.,” says Morrison.
“Fortunately we do a good business with U.S. Customs and they know us. If they see a container full of knives made in a foreign country labeled Benchmade, they know it’s a counterfeit.”
For now, the opportunities overseas are outweighing the risks. Benchmade’s long relationship with U.S. Special Forces has brought military contracts with France, Australia and Greece, and Morrison says international sales are growing by double digits each year. The 180-employee company makes all of its knives in Oregon City, where it recently knocked down a wall to expand its manufacturing space by 20,000 square feet.
Pet food products from Clackamas-based Castor & Pollux are selling well in Asia as incomes there rise.
Another company benefiting from the growing appetite overseas for upscale products is Castor & Pollux Pet Works. Brian Connolly and his wife and co-founder, Shelley Gunton, built the company on the notion that the “humanization of pets” was a long-term trend that would accelerate. Their experience living abroad in Hong Kong suggested that the cult of the happy pet was not merely an American phenomenon. The trend has accelerated as incomes have risen, especially in Asia.
Connolly says the business is exporting to seven countries in Asia, with business particularly brisk in Taiwan, Japan and South Korea and a new market soon to open up in South Africa. The biggest market of all, in China, remains blocked by Chinese trade laws, much to Connolly’s frustration. “I tried for two years to get into China,” he says. “It was just impossible.”
In taking its products global, Castor & Pollux isn’t just selling pet food; it’s selling the idea of pets as beloved family members. Similarly, Portland-based SERA Architects isn’t just selling planning services; it is selling the notion that cities can be built in harmony with the land rather than degrading it. That concept is being put to the test in Abu Dhabi, where SERA is designing a sustainable city in the desert that harnesses the power of the sun and recycles sewage water to replenish a depleted fossil aquifer.
It’s an elaborate plan, seeming closer to a whimsical science project than the business-to-business component sales of Simplex Manufacturing, Hydra-Power Systems and Columbia Industrial Products. But from a bottom-line perspective, it’s pretty much the same thing: a million-dollar contract that gets the money moving, from overseas into Oregon.