The first time I sat down to a bowl of frog-leg porridge, I knew I was on to something. There was a whole new world out there to explore—and a new opportunity for me to grow.
My host had enthusiastically brought my business partner and me to a restaurant on the streets of Singapore and introduced us to the specialty of the house. I felt a hundred eyes on me as I looked down at what was surely the Arnold Schwarzenegger of meaty frog quadriceps sitting in cold, white porridge. I paused, trying to think of a polite exit, when my business partner and traveling companion suddenly grabbed hold of this unique dish and took a big bite. “Wow, that’s delicious,” he declared with real enthusiasm. There was nowhere for me to go. What choice did I have? I picked up that meaty frog leg, lifted it slowly to my mouth and took the largest bite I could. “Delicious!” I said with the biggest smile I could muster.
The business trip to Tokyo and then Singapore to meet a prospective M&A target allowed me to expand more than just my dinner-menu horizons. It was another step in expanding our company on a worldwide level and creating a broader global footprint, something that had become a strategic focus for Coastal Contacts and our Canadian brand, Clearly Contacts. As we have grown, we have continually pushed the boundaries of our niche by taking on an ever-growing list of additional markets. Sometimes these expansions are product related; other times they are geographic.
In my view, Canadian business must get excited about the global economy and the opportunities to take what we do here outside our borders. Growing up in the shadow of the U.S. allows Canadian businesses to compete with some of the strongest businesses in the world. It’s good training, and as the U.S. economy has foundered now, U.S. businesses are turning to global markets to stimulate their growth. This is where Canadians have an opportunity to shine. It has certainly worked very well for Coastal Contacts.
Canadians have a tremendous reputation internationally, and that is something that we can take advantage of. We are seen as trustworthy partners, and the success of the resource markets here are known throughout the world, exposing financial investors worldwide to Canadian businesses and products. To some extent, our reputation gives us a competitive advantage over many other countries. Not all citizens of the world are willing to mould themselves culturally to interact with potential strategic partners, leaving ego at the door and focusing solely on the opportunities. The cultural mosaic that forms our country is a key to allowing us to understand other cultures and to work with them.
When we started Coastal Contacts, our original focus was on the U.S. market. As we grew, we realized that we were not going to be the largest player in that market for some time, so we looked internationally and made a conscious decision to expand our company laterally into other geographic markets.
Europe quickly became a hot market for Coastal Contacts. With our first two acquisitions completed in the Nordic region of Europe in 2004, we had learned first-hand the strength that came from combining businesses with synergies globally.
Lensway, our Scandinavian brand and one of our Nordic acquisitions, grew from $18 million in annual sales when we bought it in 2004 to a fast $50 million by 2006. Taking what had been predominantly an offline business and adding our specific knowledge base of online marketing combined to produce great results.
That deal wasn’t without its frog legs, although in Scandinavia, it’s the cold herring for breakfast that will get you. There are challenges to expanding globally, including cultural differences. Although the Swedes share many of the same values and beliefs that make up our core vales at Coastal Contacts, in Japan the differences are more material. Obstacles to exporting such as value added tax (VAT) and import/export restrictions at customs add complexities, as does foreign exchange. In Sweden, business is done in kronors, not euros, adding additional currency exposure. Many of these issues result in material expenses, including accountants to help resolve transfer pricing issues and time working out the best hedging strategies.
In our acquisition in Sweden, we took a collaborative approach allowing us to communicate in different ways and adjust to a different culture. Listening to the management team and taking action on their thoughts aligned our team. As a result, we have not lost any members of that senior management team in the years since the acquisition. We had to have the mentality going in that the transaction would be collaborative and win-win. Ultimately, that has played out very well.
Our success in Europe, and all the delicious cold herring, encouraged us to look to other global markets and was a catalyst for what brought us to the table in Singapore. Eating Kermit’s cousin is not an experience I ever want to repeat, but it paid off: we struck a deal, and the acquisition at the end of 2006 contributed more than $10 million in additional revenues for 2008 in one of the fastest-growing markets in the world. That is something I would repeat!
Ultimately, the decision to branch out into the global economy was an easy one for Coastal Contacts. We went from targeting a $1-billion market opportunity to a $5-billion market opportunity. For Coastal Contacts and our Canadian offering ClearlyContacts.ca, the effects have been dramatic. We went from a business with 100% exposure to the U.S. market in 2003 to 15% in 2009.
Today, we have offices in Vancouver, Blaine, Stockholm, Amsterdam, Singapore and Tokyo, and we ship to more than 150 countries worldwide. Among our staff we speak 16 different languages and hold semi-annual global summits where we come together to unite as one company under multiple flags. We often feature unique and different menu options at each of the summits we hold, and my advice to anyone at the table now is: go ahead, try it. It may taste better than you think!
Roger Hardy is the co-founder, president and CEO of Coastal Contacts Inc. (TSX: COA), an online retailer of contact lenses, eyeglasses and other optical products, and a three-time member of the PROFIT 100.