Innovation

Swimming against the currency tide

Written by ProfitGuide Staff

Winner Pacific Region: Chrislan Ceramics and Glassware Decorating Inc.
Location: Maple Ridge, B.C.
What it does: Manufactures ceramic beer-tap handles and distributes glassware
Executive team: Glenn Laninga, secretary; Alan Laninga, vice-president; Jack Laninga, president

Sometimes growth is all about hitching your wagon to the right star. That’s what happened to Maple Ridge, B.C.-based Chrislan Ceramics and Glassware Decorating Inc., when it reinvented itself in the late 1980s to tap into the fledgling craft-brewery market.

Back then, Chrislan’s main business involved buying blank glassware from suppliers and decorating it for major breweries. But the firm’s dependence on the pricing whims of glassware suppliers had vice-president Alan Laninga feeling vulnerable. “They dictated the price to us, and we knew they could go direct to our customers any time,” he says.

Meanwhile, microbreweries were just starting to take off in the Western U.S., spurring demand for branded beer-tap handles. Chrislan moved to exploit the opportunity management had spotted to sell premium ceramic handles for higher-end craft beers. The company sold its glassware business to a competitor and used the proceeds to start producing ceramic taps.

Two decades later, the rise of the microbreweries has made the firm Laninga runs with two of his brothers into what he says is the world’s biggest maker of ceramic taps.

And their client base is continuing to grow rapidly. Data from the Boulder, Colo.-based Brewers Association shows that craft beer sales in the U.S. grew by 7.2% last year, even as overall beer sales slumped by 2.2%.

Yet it hasn’t all been clear sailing for Chrislan. It has had to overcome major challenges, such as the soaring loonie and growing competition from cheaper plastic and wooden handles. Chrislan’s ability to boost productivity, source from U.S. suppliers in order to hedge its foreign-exchange risk and differentiate its product from cheaper competitors has been instrumental to its major success as an exporter. The firm did $4.5 million in exports in 2009, on total revenue of $4.9 million. Fully 86% of its exports went stateside, with the other 14% heading to the U.K.

Exporting—especially to the U.S., by far the biggest microbrewery market—was always part of Chrislan’s game plan, says Laninga. Whereas “Canadians like to cocoon—we drink our beer at home,” he says, Americans have more of a bar culture. And having a customized handle is a cultural—and, in some states, a legal—requirement for persuading a bar to stock a given beer on tap.

Laninga says ceramic handles are a distinguished alternative to cheaper wood or plastic competitors—a big differentiator in bar culture, in which good looks go a long way.

He estimates that about a third of buying decisions are made at the bar, where a distinctive-looking handle can boost draft sales by as much as 10% within the first three months. That’s why Chrislan’s customers, including brewers of brands such as Stella Artois and Guinness, don’t mind shelling out extra for a ceramic handle. But only up to a point, says Laninga: “Our prices have to be in the ballpark.”

That became tougher this past decade as the loonie’s sharp rise in value against the U.S. greenback drove up the cost of Chrislan’s taps in its chief market. “We knew we had to boost productivity if we wanted to grow,” says Laninga.

This required rethinking a manufacturing process that used to require 18 staff across six production lines to hand-pour liquid ceramic into porcelain moulds. About 30% of the handles made this way wound up in the reject pile. In 2007, Laninga and his brothers decided they needed to automate production—a first in their industry—and found a German-made pressure slip-casting machine that would let them do so.

Another barrier to productivity was that the firm’s staff worked in six factory bays scattered throughout a large building. “We were using forklifts to move product back and forth, wasting a lot of time,” says Laninga. Three years ago, Chrislan built a new location that consolidated manufacturing into a single line. Today, just three people handle the casting (Chrislan has moved the other production staff to new roles), and the defect rate is only 2%.

Another strategy that has helped Chrislan hedge against the risks from currency volatility was its decision to identify and buy from U.S.-based suppliers. “You want sales and supplies to be in the same currency,” says Laninga.

Chrislan, to distinguish itself in the minds of export clients who might be tempted to source cheaper tap handles locally, hosts a customer-appreciation event every two years in Vancouver, with top brass providing seminars on subjects such as the art of making beer taps.

Today, Chrislan is looking to expand its tap sales into hotter countries, now that new technology makes it cheap to sell beer on tap in open-air bars in Latin America. The firm is in negotiations to produce taps for Grupo Modelo, Mexico’s dominant brewer. “It’s a trendsetter in the Latin American beer market,” says Laninga. Which means Chrislan may be about to hitch its wagon to another rising star. 

Originally appeared on PROFITguide.com