Successful export ventures: profile of an entrepreneur

SUCCESSFUL EXPORT VENTURES

Profile of an Entrepreneur

Erwin von Allmen, President, W. C. Smith, Inc., has an M.A. in chemistry from Williams College and an M.B.A. from Harvard Business School. His experience includes 20 years of high-level management positions in consulting and manufacturing with Proctor and Gamble, Co., Quaker Oats Co., and Arthur D. Little, Inc.

In 1971, von Allmen decided that big company life was not for him. With the support of his family, he began to look for a company he could call his own. "I focused on manufacturing businesses because they were what I knew best,' he explains. "I knew the operational standards and some of the first questions to ask, and I also knew that when I went out on a factory floor, I would be able to tell a lathe from a milling machine. But before I bought W. C. Smith, I had never seen a candy machine in my life.'

Established in 1929, Smith was a family business with a tradition of supplying equipment to the small candymakers of Philadelphia. Its first products were simple chocolate melters, with some more sophisticated machines such as chocolate coaters and lollipop units. During World War II, sugar and chocolate became unavailable and steel went to higher priorities. The Smith marketing strategy failed to address this problem. Nevertheless, there were a number of practical reasons that made W. C. Smith an attractive risk for von Allmen.

"First of all,' he stresses, "I did not have a huge amount of money. I was going to have to do all the financing with mirrors. Smith's owners, the surviving sons of W.C. Smith, were themselves in poor health and eager to sell at a reasonable price. I knew from the outset that I wasn't going to get a gold mine, not for what I had in my pocket. The company was still respected in the business and a good name is a valuable commodity in the manufacturing industry. In addition, my experience at Procter & Gamble and Quaker Oats had acquainted me with industrial standards as they relate to food plants, so that was also in my favor. Still, from what I knew about acquiring companies for other people, I could see that if I bought it, I would have to get operational control of the place as soon as possible.'

Von Allmen did some background research into the industry. He discovered that the confectionary business--by virtue of its raw material sources and its longstanding traditions in Europe--was undeniably an international industry. He was immediately struck by the fact that only 1-2 percent of W.C. Smith's business came from outside the United States. Von Allmen describes how he began to reshape the firm's marketing strategy during his first day on the job:

"The Smiths were wonderful people, including the brother who served as general manager of the business and offered to stay on and help me for awhile. For the first few days, he said, he would just sit at the front desk and open mail. Well, I walked by the desk on the first day and saw that he was discarding everything with a red, white, and blue stripe on it. When I asked him why, he said it was because they were inquires from Europe, and no one there ever bought anything from the company. So one of the first things I did was open some of those foreign inquiries.'

The inquiries were intriguing, and von Allmen gradually became more and more excited about the potential for international expansion of the company. That first year he retained a representative in England and began a public relations and advertising campaign in the internationally-read British trade press.

At the same time, he also realized that it would be wise to broaden his product line to appeal not only to the small operator, but also to the more substantial confectionary manufacturers. With his instinct for innovation, von Allmen began to frequent the industry's trade shows, asking those larger manufacturers one basic question: What kind of machine would you like to see invented?

"What they wanted,' von Allmen recalls, "was a machine which could make chocolate nut clusters, and which could be rolled on and off a production line and used for a variety of different functions. After telling me that, they invariably laughed and told me that the candy industry is 4,000 years old, and if there could be a machine like that, someone would have already invented it.'

Von Allmen accepted the challenge. The war in Vietnam had just ended, and there were large numbers of Boeing engineers in Philadelphia who were no longer needed to build helicopters. The Federal Government had established a retraining program to help them make the transition into peacetime industry, and von Allmen hired a "very talented' aerospace engineer to work with him in the confectionary machinery business. He also hired a machine builder who had built high-speed typesetting machines for the lithography industry in Philadelphia.

"None of us had ever seen a candy machine before we went into the business,' says von Allmen. "We went around and watched people make these nut clusters by hand, and I can tell you some wild stories about the invention of this machine. The company janitor made one of the most important contributions just by watching the mistakes we were making He asked us what we were trying to do, and we said we were trying to mix nuts and chocolate, but the machine only makes good nut clusters for five minutes and then makes garbage. The janitor said that this was because the nuts were floating out of the chocolate. I said, my God, the guy is right! So we injected the chocolate into the nuts as they were pushed through, patented it, and that's where the machine came from.'

The nut cluster machine became a cornerstone of the business and was the vehicle for an innovative sales promotion that utilized a novel discount approach to selling capital equipment. "I looked at the production economics of those machines, and every one of them had to be custom built to the size and shape of the machinery they were to be attached to,' he says, explaining the rationale behind his concept. "I had to build them all on a cluster order basis, because there are lots of interchangeable parts. So I looked at the economics of it and figured if I could sell three of these things at once, I could knock the price off by 20 percent or so and make as much money as I do selling them one at a time.' To qualify for the discount, buyers had to pay 50 percent of the base price in advance and accept delivery within six months, at the convenience of W. C. Smith.

The scheme worked, and orders started coming in, mostly from foreign buyers. Von Allmen decided to introduce the nut cluster machine to Europe and selected a U.S. Department of Commerce-sponsored trade fair, Interpack, in Dusseldorf, Germany, as the first marketing vehicle to the international industry. Drawing on the U.S. Department of Commerce trade promotion programs, W.C. Smith, Inc. became a regular trade show exhibitor overseas. In 1976, the firm was granted the President's "E' Award for outstanding export performance, one of the smallest manufacturing enterprises ever to be so recognized. In 1971, exports amounted to only 2 percent of the total volume of sales. Today the 25-employee firm sells almost one-half of its products abroad in 40 countries, and agents have been appointed in many export locales. Smith advertising appears in English, German, Spanish and Dutch and product sheets have complete metric specifications.

Even if it hadn't worked, von Allmen would not have regretted taking the gamble. For in the final analysis, he feels that it was precisely that quality--the willingness to take risks--that enabled him to change his career path, and to put himself in a position to achieve professional success and personal satisfaction. In addition, von Allmen points out that in a small-to-medium-sized business, there are no alternatives to taking regular strategic risks. "About twice a week, we take a business risk which could not survive the committee deliberation of the big businesses I have known. I am convinced,' he adds, "that as economic conditions grow worse, business success is going to become tougher to realize, and will be limited to those companies and individuals who have the capacity and skill to take good risks, rather than make the more conservative, capital-preserving choices.'

COPYRIGHT 1985 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group