cens logo

Globe Union Looks to China for Growth

2011/07/26 | By Ken Liu

The firm is determined to make GOBO the No. 1 brand in the mainland's second-tier bathroom hardware market

The Globe Union Industrial Co., which is said to be the top bathroom hardware supplier in Asia, has set a consolidated revenue target of NT$1 billion for 2014. Demand in China, comments the company's president and CEO, Scott Ouyoung, will help it achieve that goal.

“Five years from now,” Ouyoung said, “mainland China will account for one third of our global sales, equaling North America and Europe.” That one-third figure looks somewhat distant; last year China contributed just 10.13% of the firm's revenue, compared with 45.49% for North America and 44.38% for Europe. The three markets together brought in revenues totaling US$750 million last year.

Globe Union has come up with an aggressive expansion plan to take advantage of opportunities provided by China's 12th Five-year Plan. “We believe the plan will stimulate the mainland's bathroom hardware market to grow at an impressive rate over the next 10 years,” Ouyoung commented.

The Chinese expansion plan includes promotion of the “GOBO” brand, increasing the number of GOBO stores to 1,000 in five years, and boosting the number of stores run by HBI Co., in which Globe Union has a more than 80% stake, to 40, also in five years.

In the fourth quarter of last year Globe Union contracted Ogilvy & Mather of the United States and SAKO of Japan to map out promotional strategies for the GOBO brand and its new sales locations. Globe Union is spending 30 million Chinese yuan (US$4.6 million at 6.4 yuan:US$1) this year and 35 million yuan (US$5.4 million) in 2012.

There are currently 180 GOBO stores in China: 178 dealers and two flagship stores. Two more flagship stores and 25 more dealers are planned by the end of the year.

Ouyoung says that GOBO is positioned as a symbol of high-quality, comfortable bathroom hardware aimed at middle-class consumers aged 25 to 35; this segment, he feels, is emerging as a new social elite. “In terms of pricing,” the CEO reports, “GOBO is below Kohler of the U.S. and TOTO of Japan, and above mainland China's homegrown brands.”

GOBO's to Be No. 1

The GOBO operation is targeted for revenues of 240 million yuan (US$37 million) next year, up from 100 million yuan (US$15.6 million) this year and 80 million yuan (US$12.5 million) in 2010. “We're determined to make GOBO the No. 1 brand in the mainland's second-tier bathroom hardware market,” Ouyoung says.” Once that happens the company may promote the brand in Taiwan, from which it is now absent.

HBI is a dealer for international brands of bathroom and kitchen hardware, such as Delafon, Kohler, Hansgrohe, AXOR, PHARO, ALNO, COSMIC, BONTEMPI, FANTNI, and Zeiko. Its mainland China operation will generate revenues projected at around 100 million yuan (US$15.6 million) this year, up from 70 million yuan (US$10.9 million) last year.

The company now has three flagship stores and is working with five dealers in Shanghai and Qingdao. Another flagship and three dealers are in line for this year.

Ouyang's operation is also doing well in the U.S. and Europe. Its Gerber brand, he says, has won 20% of the U.S. market for bathroom hardware. “When house values keep falling in the U.S.,” he explains, “homeowners prefer to refurbish their bathrooms with middle-range hardware instead of expensive products. Our Gerber is a middle-range brand.”

In North America, Gerber offers free water analysis to hotel chains and condominium buildings as a means of promoting its water-saving products, and its Danze shops are promoting secondary brands with the aim of expanding market share in the U.S.

In Europe, the company has built up its Lenz brand in Germany and the name is becoming increasingly well known in France, Belgium, and Holland.

Globe Union's English subsidiary, the PJH Group, has taken the lead in providing online trading mechanisms in cooperation with IBM and British consulting firms. The company also plans to set up a distribution network of conventional retailers within 10 months.

Industry watchers, however, fear that the gloomy outlook for the British economy will drag down European sales as a percentage of consolidated sales this year.

Other factors that might slow growth include rising commodity costs and clients' refusal to allow the company to pass on its added costs. Copper, the main material for bathroom hardware, makes up about 30% of total manufacturing cost.

These problems have prompted industry watchers to set Globe Union's revenue growth for this year at under 10%. They believe that the company will struggle to keep its core-business earnings for the year from falling below last year's NT$600 million (US$20.6 million at NT$29: US$1). Earnings from subsidiaries helped boost the company's consolidated pre-tax earnings to NT$1 billion (US$35.4 million) and after-bas earnings to NT$825 million (US$28.4 million) in 2010.