Doing Business in India and China
At CPCA 2015 in Shanghai, China, I spoke with Electrolube’s managing director, Ron Jakeman. The company, more than 70 years old, has evolved over the decades, from producing contact lubricants, to manufacturing globally, with subsidiaries worldwide, including Beijing, China. In this interview, manufacturing, state of the global markets, and even Indian cuisine are discussed.
Barry Matties: Tell us a little bit about Electrolube, Ron. What do you guys do?
Ron Jakeman: Well, we actually started back in 1941, believe it or not, with an electrical contact lubricant, which is obviously where the name came from. But over the years we've diversified into encapsulation resins, conformal coatings, thermal transfer pastes and cleaning products, and grown into a worldwide company with subsidiaries. The biggest one is actually here in Beijing, China, where we've got our manufacturing capability, together with a full R&D team and an international sales force. It's an amazing company, really. We’re still a family company, but run by an exact management team, which I lead.
Matties: Let's talk about India. What do you see?
Jakeman: Well, we got into India about three years ago. We were always there through distribution, but we owned the company in Bangalore with a warehouse in Mumbai where we stocked product locally, and that has transformed the business. The next stage is manufacturing in India, which we will be doing by this time next year.
Matties: They have all these visions of the India infrastructure improving and really becoming a strong competitor to China. You're there; what do you see?
Jakeman: There has been enormous change since Modi was elected. He did a great job bringing the future to that province. He removed all the bureaucracy, and made things happen. We're expecting him to continue as Prime Minister there, and already many initiatives are showing great benefits.
On the LED side, for example, they're offering a typically 300 rupee LED bulb to the consumer for 10 rupees, with the rest paid in installments on a customer’s electric bill. So that has fueled the growth of LED manufacture in India. And we have three products that fit beautifully, so we're obviously very happy. But what a great way to get LED to take off in the country. We could probably learn a lot from them in some areas.
But if you look at what's going on, it's a domestic market; it's not an export-led market like China. So in the longer term it's a bit more of a secure market. We've seen dips in the Chinese output and I think we'll see a few more over time. There are some issues developing; I think everybody's sort of accepting that and it's nice to be elsewhere when we need to be.
Matties: So you're based in the UK. You've covered China, India—the world, basically. But these are the three primary regions?
Jakeman: Yes, they are the three primary regions.
Matties: What is your take on market conditions? How are Europe, America, and Asia from your point of view?
Jakeman: We always get the most growth in Asia. But the European market, in spite of its problems, is doing very well for us, particularly in Germany. It's pretty slow in Australia, to be frank. They have problems there with the economy. But everywhere else is very buoyant. It’s just the currency that is giving us issues at the moment. You've probably seen the story of the euro and the dollar, and the pound sits in the middle. It can be challenging at times.
Matties: What markets are really driving the electronics area that you see?
Jakeman: We're having our most success in automotive, with coatings and thermal transfer products driving the growth.
Matties: The automotive industry seems to be really driving a lot of the new technology, now that it's basically a moving computer.
Jakeman: Absolutely. One of the key challenges is the under bonnet [hood] temperature, where it's going up all of the time. We're bringing out new products and enhancing existing products to cope with that increase in temperature. This is why I mentioned that thermal products are particularly attractive to the designers at the moment, because of the high temperature range we can go to, both in silicone and non-silicone products. A lot of people don't like silicone near electronics, so the non-silicone pastes are very attractive.
Matties: Right. Now another large growth area that I'm hearing about is in the wearable electronics arena. Are you in that space, at all?
Jakeman: Yes we are. We have an initiative with Farnell in the UK. There is quite a lot of PR going on about that at the moment through our digital marketing team.
Matties: Where do you see that headed?
Jakeman: I don't know. I've been looking, like everybody, at the iWatch. I'm not quite sure it's ready for me yet. It still needs the phone sitting alongside you, but I can see the advantages.
Matties: How many employees does Electrolube have?
Jakeman: Here in China, in the Beijing operation, we have nearly 70 people. But we've also got a joint venture just outside Hangzhou where there's probably another 130–140 people. We're just over the 200 mark, worldwide.
Matties: What do you see for the coming year, 2015–2016? Continued growth?
Jakeman: Yes, we plan to see group growth of almost 20%. Last year we did just over 30%. A little less than this year but that's because we've saturated a couple of the markets. But it's still pretty impressive growth.
Matties: It sounds like the big growth area for you is in India.
Jakeman: Absolutely.
Matties: Overall, how does it feel to do business in India right now and what's next for India?
Jakeman: I took my manufacturing guy with me two weeks ago, and it was quite interesting. The comment he made was that it had very much the feel of China back in 1999, when we first came out here to set up. And if you look at the development that's happened in China, you can see the same development happening in India. It's good to be at the start, you know? I mean, if we were trying to get India into China today it would be a very different story. And we're now here in China with part of that domestic market, as well as exporting manufactured products all over the world. We want to do the same in India.
Matties: Culturally, what's it like doing business in India?
Jakeman: It's funny. In theory, we all speak the same language but we both know that probably won't happen. It's actually easier, to be frank, for a Brit operating in India because of the language. Everybody speaks English of some description. The accents can be challenging, but you can usually communicate very easily. Whereas in China, as you know, it's a lot more difficult. We enjoy it though.
Matties: Now in China, in the early days, and all the way up to today, there is plenty of corruption. Are you seeing the same kind of corruption levels in India that we've witnessed here?
Jakeman: It sort of depends on how you operate. If you will not be a party to corruption, you can still operate quite well. It certainly exists and it can sometimes cause you difficulties, and it is hard to understand what they are. But there is always a solution that does not involve being part of it. That's what I've found over the years both in India and South America, and also here in China. But it can be a frightening place for Europeans. The harshness of life is much more evident in India than it is China. And the food is a bit more challenging, as well. I mean, the thing about India is that it's spices, spices, and spices! You have to be prepared for that, really. I certainly don't go to my local Indian takeaway for a couple of weeks after I've had a visit. [laughs]
Matties: Well Ron, it’s been great talking to you and catching up. I'm glad to hear you guys are doing well.
Jakeman: It was good to see you Barry.
