The CEOs of small family firms and corporate giants alike have been restraining themselves for the past 18 months. They have tried so hard to control their ambitions for international expansion; they have tried so hard to listen to their finance directors. But you can only be good for so long. And now from the boardroom of IndiGo in India to the factory floor of The Impossible Project in the Netherlands, people are unleashing their global expansion plans. Meet the Uniqlos and Hyatts of tomorrow.
Retail outlook: independents profit
Strangely, the recession did some brands a favour. Cheap rents created international opportunities for a number of pop-ups (Tenet, a touring seasonal shop in the US, is one of the many innovative examples), and allowed independent boutiques to enter new markets (Opening Ceremony, the New York store with outlets in Tokyo, is the perfect example).
As the market gathers pace again, these independents might expect a helping hand from global retail groups to grow even further. They have focused increasingly their attention on smaller, niche brands to broaden their coverage across the consumer market under the downturn.
H&M has recently bought up a small stable of niche, contemporary brands such as Cheap Monday and Weekday. Taking these brands global is going to give the group a larger share of the market, following the example of Inditex’s successfully diverse brand list. “Diversification has helped them [Inditex], and they got access to loads of different customer segments, and different geographical markets,” explains Simon Chinn at retail analysts Verdict Research.
Following suit is Fast Retailing. Its gathering momentum in the marketplace will see it try a few more brands out on the global scene, after Uniqlo’s success. “Fast Retailing will go up the ranks. They have lots of brands well established in Japan which they are hoping to boost their presence in Singapore and China,” says Chinn of brands including Cabin and Zazie.
Silicon Valley start-ups
Most people have not heard of San Francisco-based Zynga, but its online games – notably FarmVille and Mafia Wars – attract tens of millions of players, and are at the forefront of a social networking boom. Valued by trading platform SharesPost at around $2.6bn, Zynga is now going global. It recently opened an office in Bangalore to cater to Indian gamers, and is planning a base in Ireland.
Foursquare is another phenomenon set for the big time. It’s a genre-blurring game-cum-socialising tool, whereby users send updates on their location, letting friends know where they are and, somehow, winning points in the process. Foursquare went live in January, and Yahoo! is reportedly interested in acquiring it for over $100m.
The tech and games market is global but Silicon Valley will retain primacy. “They know how to make things work, how to make things go viral,” says AnnaLee Saxenian, dean of the School of Information at UC Berkeley.
Also look out for: Japengo, Dubai
The UAE is not famous for its homegrown enterprises. This might change with Japengo, a Dubai restaurant concept that offers a mix of Pan-Asian and western food. Having completed the franchise structure, the powerful BinHendi group behind Japengo is now opening franchises in Cairo, Kuwait, Qatar, Bahrain and Singapore.
Japan’s most exportable ideas
They may have no plans to go global, but we wish these businesses would look beyond their borders.
Giken, an engineering company based in the southern city of Kochi, builds multi-storey, earthquake-resistant automated parking systems in Japan that store and retrieve cars and bicycles in underground compartments with robotic hyper-efficiency, thus freeing up more ground-level space for parks and plazas.
Mozoroff scores among chocolate aficionados in Japan. Founded 79 years ago, the venerable Kobe-based company sells its premium chocolates (and confectionery) at 912 shops – mainly department stores – in Japan.
Clean Venture 21 might be a minnow in the solar energy industry, but the nine-year-old Kyoto venture was the first in the world to mass-produce a solar-panel technology: spherical silicon solar arrays. These solar cells are made of 1mm silicon balls that are dripped into tiny bowl-shaped reflectors, and use just one fifth the amount of silicon found in normal PV cells.
Wellthy Corp builds groundwater-filtration systems for hospitals and hotels that use municipal water but which also want a backup supply for emergencies. Its business has surged since the 1995 Kobe earthquake, which cut off water to some parts of the western Kansai region for up to three months.
Echizen Japan Knife Consortium Knife makers in Echizen, on the Japan Sea coast, have been carrying on a 700-year-old tradition. In July 2009, eight small knife-makers, a steel maker, wholesalers and export-import companies formed this consortium to create a brand they can market overseas.
Daimasu Eki-ben is unique to Japan: lunch boxes with local ingredients sold in train stations and on shinkansen bullet trains. Most makers are small scale but a mid-sized firm, such as Daimasu in Tokyo, that ventured overseas would likely win over commuters.
Chinese firms going global
A couple of years ago few people outside China had heard of BYD. But in January 2008, the Shenzhen-based battery maker wowed the Detroit motor show when it unveiled its hybrid and fully electric plug-in cars, which are due to go on sale in the US this year and Europe next. With the backing of US billionaire Warren Buffett and a design partnership with Daimler, BYD is likely to become Chinas’s first truly global car mark.
Cross-town telephone network maker Huawei Electronics has been expanding into developing countries for several years, outselling Lucent Alcatel and Nortel. It was reportedly eyeing PDA maker Palm to give it a leg-up in the smartphone market (Hewlett-Packard beat it to the prize).
Another Chinese company to set its sights beyond the Middle Kingdom is Haier Electronics Group that made headlines in 2005 during an aborted effort to buy the US appliance maker Maytag. Still, that hasn’t stopped it from becoming the world’s largest maker of refrigerators and washing machines by volume and expanding into 60 countries.
1. Rapha, London
Rapha’s cycling clothes seem like they belong to a brand from 1950s Italy. In black, red and grey, Rapha roadwear is a far cry from the Day-glo Lycra horror that has defined cycling wear since the 1970s. “We are selling the beauty of the sport,” says founder Simon Mottram (above). “And performance is intrinsic to our products.”
In addition to its home market, UK-based Rapha already sells in Japan, the US and Australia and is rolling out to South Korea and more European markets. Rapha expects Germany to be a key new cycling market this year.
This summer, Rapha will launch seasonal shops in New York and London, skincare products and Rapha Randonnées – long-distance bike holidays. But the future seems destined for the big city. Rapha is set to launch a men’s bespoke jacket for city riding, as well as a range of products with Paul Smith. “It’s a bigger challenge to design performance clothes for city riding than for racing,” says Mottram.
2. Indigo, Gurgaon
Indian budget national carrier IndiGo likes bold moves. After stunning Airbus with an order for 100 A320s as a little-known start-up in 2005, the carrier now plans to fly internationally.
India won’t license airlines for international operations unless they have at least 20 aircraft and have been running for five years.
IndiGo passes the five-year mark in August this year and has already applied for its international licence.
If it receives approval, the airline will be flying from its hubs in Delhi and Mumbai to the lucrative destinations of Singapore and the Gulf, along with other cities across Asia.
“I think there is an opportunity for Indian carriers to be successful internationally,” says Ernst & Young’s Kapil Arora. “Low-cost carriers need to be efficient in their operations, and that comes down to pricing right and managing costs. IndiGo has done that well in the domestic market. International is a different ball game.”
3. Adaptive Wear, Oxford
UK-based not-for-profit Adaptive Eyewear has set its sights on Rwanda as the first territory in its grand mission to rid the world of needless blindness “one nation at a time”. The 10 million people of Rwanda are served by just eight ophthalmologists and four registered optometrists, and more than 10 per cent of the people who need glasses are without a pair. “Rwanda is a small country, and relatively organised after the misery of the past,” says CEO Sjoerd Hannema. “It’s a great place to start our mission.”
The Oxford-based organisation distributes a series of “adjustable eyeglasses” – versatile specs with silicone oil in the lenses that can be adjusted by dials on the side to correct vision there and then. Each pair costs about $20 to produce, though as distribution increases, prices will get lower.
Adaptive Eyewear led a pilot programme last August, distributing 250 pairs of eyeglasses in one Rwandan village. Later this summer they will go in again, hoping eventually to dispense around 50,000 pairs. Depending on funding, Adaptive Eyewear is then hoping to take the scheme across Africa: around 95 per cent of people in sub-Saharan Africa who need glasses do not own a pair.
4. Alrov Hotels, Tel Aviv
Israel has yet to develop a truly global luxury service brand. But the Tel Aviv-based Alrov Group is aiming to become the first. A 30-year-old property veteran, Alrov raised international eyebrows last year with the debut of the Mamilla (pictured) in Jerusalem – a 194-room contemporary-design hotel with architecture by Israeli-Canadian Moshe Safdie and interiors by Italian designer Piero Lissoni. Now the group’s Alrov Luxury Hotels division – led by managing director Georgi Akirov – is shifting focus to Europe.
Over the next two years the 160-room Café Royal Hotel in London and the 130-room Conservatorium in Amsterdam will be open as Alrov properties. Pairing Levantine traditions of hospitality with European standards of functionality, Alrov intends to create a guest experience that is as warm and welcoming as it is efficient and exacting. “Our goal is to open a property a year,” says Akirov. “In heritage buildings, in prime locations using top-quality talent.”
Also watch out for:
Almost a decade after the arrival of its first Mexico City property, the Habita Hotel group is finally going global – with a New York City outpost slated to open next year. Located in Manhattan’s Chelsea district, it will include designs by Mexican architect Enrique Norten, whose translucent façade caused a commotion with the group’s original Polanco namesake back in 2000. With additional projects from the Financial District to the outer boroughs, Norten is all over town. So too, it seems, will be the Habita folks.
5. Next, Lagos
Dele Olojede wants to transform Africa’s media landscape. The Pulitzer Prize-winning Nigerian journalist launched NEXT, his own newspaper (now daily), in Lagos in 2008. It has broken stories about corruption and questioned the health of Nigeria’s ailing President Umaru Yar’adua.
Now Olojede plans to turn NEXT into Africa’s first continental newspaper. “There is a need for a newspaper for the African metropolitan middle- classes, along the lines of the International Herald Tribune,” he says. The core of each edition will be the same but local stories will fill the various front pages.
It is an ambitious plan but Olojede, a former foreign editor of Newsday in the US, believes the success of NEXT in Nigeria shows that it is possible. In a crowded news market, NEXT has also established itself as the number one news website in Nigeria.
But he claims rivals have tried to sabotage his distribution network, forcing him to organise direct sales and subscriptions.
6. Vinícola Miolo, Bento Gonçalves
Brazil might be better known for its flip-flops but its wine industry is on the up. Total production is now half a billion bottles a year. The best wines come from the region of Serra Gaúcha in Rio Grande do Sul, Brazil’s southernmost state. With a little government help long-established family-owned estates are now starting to market their wines overseas.
Established by descendants of Italian immigrants, Vinícola Miolo is the most enterprising winemaking operation in Serra Gaúcha. It sold off its grapes until the early 1990s when it began bottling its own wines. Money has been pumped into Miolo by the family owners and investors – more than $60m since 1997.
And as Brazil’s economy has expanded, so too have Miolo’s ambitions. French winemaking consultant Michel Rolland has been employed by the company to craft modern wines that suit international tastes.
If Brazil wins the football World Cup in July, expect some bottles of sparkling Miolo to be popped.
7. Scotiabank, Toronto
Canada’s third-largest bank, Scotiabank, has cleverly focused on markets traditionally overlooked by other western financial institutions. It opened its first overseas offices in Jamaica 120 years ago but recently the bank has made inroads into South America. Branches from Belize to Venezuela have opened in the past five years and now it is looking to expand operations in Asia.
With some $2bn (€1.5bn) invested in overseas acquisitions since 2007, Scotiabank bought a stake in Thai bank Thanachart in March this year and is now eyeing up Vietnam, the Philippines and Malaysia. “Emerging markets are a great growth platform for our bank. The past 20 years have seen fantastic growth in the regions, in part due to economic expansion, attractive demographics and low banking penetration. These markets will continue to grow and we intend to be a part of it,” says Lauren Mostowyk, a Scotiabank spokesperson.
8. Volley Internationals, Melbourne
Dunlop Volleys are taken for granted in their homeland: simple sports shoes supposedly worn by one out of five Australians.
Melbourne-based Pacific Brands sold the US licence to JM&S Projects, and Volleys made their international debut in Steven Alan stores in New York and Los Angeles this winter. They are being sold as Volley Internationals but the marketing strategy is likely to emphasise their Aussie origins. So far, the best marketing tool has been word-of-mouth among Australian expats. “They all know each other,” says spokesperson Liv Odegard. “It’s weird.”
9. Bourbon Coffee, Kigali
Rwanda produces some of the best coffee in the world, but until recently the country has struggled to market itself and its assets positively to the rest of the world. But the owners of Bourbon Coffee are trying to change that.
Emmanuel Murekezi and Arthur Karuletwa, two Rwandans living in the US, believed that the coffee culture they saw in their new home could be transported back to Rwanda. Murekezi and Karuletwa were both part of the founding team in 2007 when Bourbon opened a Starbucks-style coffee shop in Kigali, allowing Rwandans to enjoy cappuccinos and croissants while browsing the free wi-fi. Two more cafés opened in quick succession, including one at the city’s main airport.
As the company grew in Rwanda, they began to explore whether they could export the idea back to the US. Attempts to market Rwandan coffee to the rest of the world started last year when the first overseas Bourbon Coffee outlet opened in Washington. Two more – in Boston and New York – are planned to open by the end of this year. “We hope to expand even further,” says Murekezi, Bourbon Kigali’s acting general manager. “Congo, Burundi, Tanzania, but also in Europe. We think the concept can work there too.”
10. Procedural, Zürich
Procedural’s 3D modelling software CityEngine was originally targeted at local architects to help them plan buildings. Today, Procedural is licensing its tools to urban planners all over the world – and to film producers.
Procedural entered the global market of software development two years ago, when the company worked on the Rome Reborn project. First, CEO Pascal Müller and his team placed landmark structures such as the Coliseum on a map of 340AD Rome by hand. The 7,000 surrounding domestic houses, temples and Roman baths, however, were created by a computer algorithm. Automating the process saves time and costly labour. Müller says: “We can’t build Rome in a day, but we’re not far off.”
This appeals to architects such as Zaha Hadid and Norman Foster, who use CityEngine in their work – for example to model the energy efficient city of Masdar in Abu Dhabi. Now film studios DreamWorks and Pixar are licensing the software. The first film using CityEngine is due in March 2011. Müller says: “When we started out, we never imagined our software was so versatile.” Next up, Procedural is targeting the global gaming industry.
11. Wing Zone, Atlanta
How do you make a splash in the world of chicken wings? Should you offer free-range birds, glittering restaurants? For Atlanta-based fast-food chain Wing Zone, the answer is more basic: bigger wings and 15 unbeatable flavours tailored to local palates. Wing Zone was founded in 1991 and today it has 75 outlets, the majority of which are franchises in central and eastern US. Sales topped $40m (€30m) in 2009.
A Japanese franchise has agreed to open 100 units, while 10 are due in Panama and around seven in the Bahamas. Wing Zone has also inked a major deal with the US military. Ten outlets are being developed for US bases, with potential for around 160 domestic locations and 60 abroad.
12. Plumpy’Nut, Normandy
NGOs once fought hunger with provisions that had to be mixed in clean water and administered in hospitals. Not any more if Normandy-based Nutriset has anything to do with it. Its vitamin-packed Plumpy’nut is a Nutella-like paste that can be used without cooking, dilution or refrigeration to treat severe malnourishment in the developing world.
Adeline Lescanne, the daughter of company founder Michel, is now spearheading the second phase of her father’s concept: to open a series of international plants in Africa and beyond, run and owned by people on the ground. Nutriset’s factory in Malaunay, France, will slowly decrease its output with the 10 developing-world plants picking up the slack, churning out the majority of food products by 2012. “We develop business plans, test machinery, offer tech support and train employees,” says Lescanne. Nutriset even tweaks recipes to use native ingredients.
13. Funstation, Sao Paulo
Bruno de Marchi, 35, is responsible for a small technological revolution in Brazil. With computer science student Armando Périco, 24, and Marcos Maynard, 60, former chairman of EMI Records in Brazil, he created FunStation Entertainment two years ago. It is a digital kiosk where you can buy half a million songs, videos, ringtones and audiobooks, all available for download to mobile phones and MP3 players. Of the 55 kiosks in operation half are in northern states. De Marchi explains: “People are poorer in those places. Usually they have an MP3 player but no computer.” Switzerland’s University of Lugano is developing new software for FunStation. “We plan to transfer our headquarters there later this year,” he says.
14. Impossible Project, Enschede
The founders of The Impossible Project, Florian Kaps and André Bosman, met at the closing-down party for Polaroid’s last factory in Enschede, the Netherlands. Entrepreneur Kaps had long been convinced that a disenchantment with digital photography would give analogue a second chance and Bosman, the factory manager and a Polaroid employee of 28 years, didn’t need much convincing. “People were clearly missing the fact that photography should be a tactile adventure,” says Kaps. “Polaroid had no understanding of how attached people were to the medium, and their business plan was too inflexible to react to the unexpected growth in demand,” continues Kaps.
Starting with a skeleton staff of nine former Polaroid employees, Kaps and Bosman bought up the last 10 machines at Enschede. Kaps emphasises that “we’re not keeping a dying medium alive, we’re creating something completely fresh and feeding a growing cultural movement in analogue.”
With an estimated 300 million working Polaroid cameras in existence, and a new generation of young instant photography fanatics swelling, they plan to triple production in 2011.
15. Tata Nano
The Mumbai industrial heavyweight introduced Indian drivers last spring to the Tata Nano as a “people’s car”: a city vehicle that’s compact and – at 23.6km a litre – doesn’t guzzle fuel. Most important for the Indian urban market may have been the sticker price: only 100,000 rupees, or less than €1,700.
That number will certainly increase several-fold when Tata introduces versions of the Nano in Europe and North America, but it is still likely to be priced as a relative bargain. (The cars will also be different overseas.) A European model should be out next year, and an American version by 2013, according to a company official, who says Tata is still deep in US market research.
Tata markets Tetley tea, Taj hotels and wholesale steel in North America, but has yet to test the Tata brand with consumers. “The auto market in America is a tough market, so it takes more planning,” says David Good, Tata’s chief US representative.
16. Fee Brothers, New York
Fee Brothers produces jugs of fruity mixes and cordial syrups supposed to make alcohol tastier. But the product that’s moving fastest internationally is the one in the smallest package. Bitters, an aromatic mixture of fermented herbs and roots, are riding a wave of self-described “mixologists” testing ever more complex drinks. “There was a period of discovering classic cocktails,” says Joe Fee, a fourth-generation owner of the Rochester, New York company. “Now we’ve come to the stage of what has been called the craft-cocktail movement.”
It has put Fee’s small, paper-wrapped bottles in bartenders’ arsenals worldwide, and now the company’s global ambitions are getting a lucky boost. Over the past year, Trinidad’s Angostura, the bitters world’s dominant player, faced a production slowdown, blaming a bottle shortage. As a result, bartenders have been forced to try less familiar brands including Fee Brothers and its novel flavours such as rhubarb and grapefruit.
Fee sees growth in Europe and Australia, but the small company doesn’t aggressively market new products, hoping bartenders will discover and find uses for them organically. “There was no call for rhubarb bitters when we brought them out, but we thought: what the heck?’” Fee’s long-term prospects depend on whether craft cocktails are really a movement and not just a fad.
17. Rakuten, Japan
If you’re hunting for Kyoto rice crackers or Shogun action figures, an internet search will likely lead you to Rakuten, Japan’s top online retailer. Rakuten hosts goods offered by third-party retailers and in 2009 racked up around $11bn (€8.2bn) worth of transactions (Japanese kitsch accounts for only a small portion). The firm, headed by the charismatic entrepreneur Hiroshi Mikitani, is currently valued at over $10bn (€7.5bn), a figure that looks set to grow.
For many years, Rakuten was largely a domestic phenomenon but in January it announced a deal with Baidu, China’s most popular search engine, to create an online mall for Chinese shoppers. The firms are jointly investing $50m (€37m), and the venture (whose name is yet to be decided), is to launch in the second half of 2010.
Rakuten hopes to repeat the success it enjoys at home. “The internet user base in China reached about 384 million [at the end of 2009],” says Hirotoshi Kato, a Rakuten spokesman. “Demand from Chinese consumers is very high.”
18. Hyundai Capital, Seoul
While US and European credit card companies have for decades courted overseas customers, Asian lenders have been slower to go beyond their borders. But a South Korean giant could change all that. The country’s number one car maker, Hyundai, is also a financial star and is about to take its services global.
Hyundai Capital is the market leader in South Korea as are the company’s loan and mortgage services. Following on from the successful business model of lending money to people buying its Hyundai and Kia cars – the scheme has been up and running in South Korea for the past 17 years and is now being rolled out in India, China and beyond – the company’s other financial products will be introduced internationally in the next few years.
“Our extensive know-how of auto-financing, combined with the deep local expertise of regional partners will present an even more powerful proposition to our customers,” says Fiona Bae, a Hyundai spokesperson.
19. Zeebo, Brazil
Brazil is fertile ground for cultivating young talents who are able to master new technologies and are capable of competing in the global market. Reinaldo Normand (pictured), 34, is a prime example. He is hoping to convince at least some of the 1.3 billion people in China that he has a revolutionary product that they need in their homes. His creation, Zeebo, is a video game console (created with help from Californian designers and Chinese component factories) that doesn’t require a CD or DVD. The games – some made by Zeebo, others bought in from the likes of Electronic Arts and Activision – are downloaded directly from servers via an internal 3G mobile chip. Each game costs between €4 and €11.
“By 2011, I want to close deals in China to manufacture televisions with this technology built in, therefore entering the homes of millions of families,” he says. Normand has already managed to convince two giant US companies of his break-through product.
20. Bharti Girtel, India
India’s largest mobile phone operator is in a race for Africa as it puts the finishing touches to a $10.7bn (€8bn) deal that will make it one of the world’s largest mobile operators. Bharti Airtel has acquired almost all of the African assets of Kuwait’s Mobile Telecommunications, also known as Zain. This takes Bharti’s number of subscribers to 180 million. Its Africa headquarters will be in Nairobi.
The Indian phone market is cut-throat, with a rash of competitors entering over the past few years and driving down prices, making Africa – with its low but growing mobile penetration – attractive. Bharti’s experience of making money in India’s rural areas, where logistical obstacles and low incomes hinder profits, will help it in Africa. “Bharti is one of the best companies positioned to wrestle with the challenges of Africa because of its experience in India. It has the ability to run a very low-cost business,” says Angel Dobardziev from analysts Ovum.