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Choices

Andrew Patterson finds a local manufacturer selling a basic plastic homeware product range around the world and prospering despite the exchange rate

Posted in Business
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By Andrew Patterson

Sistema is Italian for system.

Not the sort of business name you’d expect to find in New Zealand and perhaps even more unlikely that it manufactures plastic food containers and exports them to 47 countries from a plant in Penrose that operates round the clock 24/7.

Yet Sistema is all of these things.

The company is testament to the fact that manufacturing low value consumer products from NZ and sending them around the world is not only still possible; it can also be highly successful.

Sistema was recently named Supplier of the Year at the annual charity bash put on by the country’s most well-known retailer The Warehouse.

It was a fitting choice for two businesses that both turned 30 this year with each sharing in the success of the other.

The Warehouse is Sistema’s biggest NZ customer and Sistema is the largest supplier of plastic homewares to The Warehouse.

While the history of the infamous Red Sheds is well known, growing from a single retail business on the North Shore, the same is also true of Sistema which grew out of a single garage in Cambridge.

Warehouse founder Sir Stephen Tindall describes Sistema founder Brendan Lindsay as a “go-getter.”

“Brendan is one of those guys who can never sit still. We went to visit him just recently and he still sells to us with the same energy and enthusiasm as he did when he was a tiny one man band. I really respect what he’s achieved.”

Right now Sistema’s biggest problem is simply keeping up with demand for its vast array of products, despite having almost doubled its production capacity and warehouse floor space in the last two years.

It’s a problem many business owners would envy with no evidence of the global economic slowdown impacting on the number of orders flowing into the company from its global network of distributors.

For company founder and managing director Brendan Lindsay, it’s a long way from 1982 when the business started out manufacturing plastic coat hangers; something it still does to this day.

“Back then I was looking around for other ideas and I decided to branch out into making children’s school lunch boxes and drink bottles and that really provided our entrée into the food storage container business.”

Back in the 1980s Tupperware was all the rage and quickly became the dominant brand for food storage. However, it did come at a price.

“I didn’t really see Tupperware as a competitor because they were a premium brand and we were really just looking at what was being stocked on supermarket shelves. Most of the product available was being imported and we saw an opportunity to put a local brand on the market.”

What makes the Sistema brand attractive for many customers, and has becomes a strong selling point, is the modular nature of the product. It fits together neatly in a way that both looks attractive, but also maximizes storage capacity.

“Really the essence of Sistema is that our range locks, stacks and packs. It’s a system, which is why we chose the name. So when you have our product in the pantry or the freezer everything fits comfortably together so it looks like a range rather than a whole lot of individual items.”

“As Allin Russell our marketing director constantly reminds me, we sell a range not a product. I have to admit that in the early stages of establishing the business I found that concept really difficult to grasp, particularly when I was trying to secure orders to keep the factory going. But over time he has proven to be 100% correct.”

Manufacturing in NZ

At a time when it seems almost every local manufacturer either has or is considering moving their production to Asia, Brendan Lindsay says he has no plans to replicate this trend.

“I have a real desire and a vision to keep this business here in NZ; otherwise I would have moved it long before now.”

“Our business these days is largely driven by our offshore markets, particularly America and Japan and they obviously have a range of different requirements. So we have the opportunity to both design and manufacture the products here, which is an exciting challenge. I’m at that point in my career that doing something different is what keeps the blood flowing.”

“Every now and then you get wound up about something and you think I’ll just move it to China but that would mean I’d have to fly backwards and forwards to China all the time and I don’t want to do that. I want the business to remain here and I enjoy the challenge of sticking to that approach.”

“Many people are really surprised at what we’ve achieved and that our entire product range is produced right here.”

“However, it does mean we end up exporting a lot of NZ air in the plastic containers we ship offshore so from that perspective we’re obviously at a disadvantage when it comes to our location on the map. But in the end, the advantages definitely outweigh the disadvantages for remaining in NZ”

Growth

With annual growth rates that have consistently ranged between 80 and 120% over the last five years, Sistema is living proof that despite the recession, the high NZ dollar and just about everything else it’s having to deal with, it is possible to prove the pundits wrong.

Its product is now stocked in 47 countries and that global footprint continues to expand, with a few unlikely inclusions.

“I never expected we would grow as quickly as we have. Initially our strategy was to expand into the English speaking countries so we started with Australia and then moved on to America, primarily because of its size and its huge network of retail channels. These days we’re dealing with multiple non-English speaking countries so all our different product collateral and labelling has to be produced in 12 different languages. Just recently I was amazed to discover our product is even being stocked in Malta. A friend of mine jokingly pointed out that our expanded production facility these days is almost the size of Malta!”

Made in NZ branding

There’s debate sometimes about the value of the “Made in NZ” designation, particularly when it comes to products such as homewares. Does it really matter to the customer where it comes from?

Brendan Lindsay gives an emphatic “yes.”

“It’s so important, because it’s not just what the end user picks up when they’re in a supermarket or retail outlet it’s the statement that it makes to everyone in our business and the pride that they take in producing it.”

“Over the years, it’s also produced a lot of loyalty.”

“One customer recently placed an order for 80,000 units to be shipped the following week. We can’t actually supply product that quickly but it gives you an idea of the volumes that we frequently have to deal with.”

“Another customer recently placed an order for 600,000 units for a promotion in June next year and they expect to move that entire quantity of stock in just 24 hours. These are the moments when you find it’s not hard to get up and go to work each morning.”

In fact, walking through Sistema’s vast warehouse facility with product packed from floor to ceiling Brendan Lindsay casually waves his arm pointing out that everything that you see before you will be turned over within three weeks. It gives you an idea of the volume of product the company moves each month.

Innovation

Sistema is constantly adding to its product line up including soup cups with lids for use in a microwave. The product has been a winner with customers far exceeding initial sales expectations.

Its latest innovation is a plastic rice cooker for cooking rice in a microwave; an idea that came directly from a customer in Japan.

“We’ve been doing some good business with Cosco in Japan over the years and they suggested we produce a rice cooker because you can microwave rice in a third of the time that it takes using an electric rice cooker. So we spent three or four months on the design process, took a model to Japan and secured a large order from them. Of course it also means that we can sell the rice cooker through the rest of Asia as well.

“I like to encourage all our staff to keep coming up with ideas so that we can continue to innovate solutions.”

But perhaps the ultimate compliment to any business is the loyalty of its staff.

Brendan Lindsay is justifiably proud of the fact that the first two employees he recruited 30 years ago when he first started the business are still with him today.

“That means a lot to me and speaks volumes about the culture I’ve tried to create at Sistema.”

Who knows what Sistema will be producing in another 30 years? Plastics houses perhaps?

KEY FACTS

Sector: Manufacturing / Homewares
Founded: 1982 (1992 as Sistema)
Staff: 490 (Intl: 50)
Turnover: Not disclosed
Annual growth rate: 80-120%
Biggest market: Australia
Fastest growing market: USA
Global footprint: Product sold in 47 countries
Domestic : export: 20% : 80%
Profitable: Yes
Ownership: Private
Likely to IPO: No

 

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8 Comments

Well done; great story.

Well done; great story. Reinforces that manufacturing can be done here. I still would have thought that in the end the exchange rate will be important to marginal exporters or import substituters, but a note to myself is that some businesses anyway can apparently survive and prosper even with a considerably appreciation in the currency.

At last a more substantial

At last a more substantial business...when will you talk to someone outside Auckland...at present they think we are just growing apples and sheep....

Great story.  Good for New

Great story.  Good for New Zealand and Auckland too.  Please don't sell it to somebody who will almost certainly move it offshore.

This was not on John Keys

This was not on John Keys list of competitive advantages. It is impossible to know who will make it in the world or what they will be doing. They are a great business who seem to still be here because the person that owns it wants to be here
 

Really good NZ company mixing

Really good NZ company mixing up with the big boys. Great to see a positive story. Go for it Sistema!

A feel-good story . There

A feel-good story . There will always be examples of businesses that can compete on quality , or uniqueness or technology in the face of  a strong domestic  currency ,  low wages in South East Asia and high NZ wages high input costs in NZ .
Its more difficult to do here when large scale mass production lines are needed  so that when its best left to the Asians.
Sistema is a quality product so it will succeed in its niche.
 

Congratulations Brendan! I

Congratulations Brendan!
I have used your products for a few years, and I think they are better than TupperWare.
Keep up the good work, and maybe you should run for PM and manage this country into becoming a worldwide manufacturing exporter. You have my vote.
As I said in another posting today, good times are coming!
HGW