'Pop a video in the microwave, would you?'

Two visitors to a recent home appliances fair in Shanghai consult about prices of Galanz microwave ovens with sales women.

When most companies are frowning over their annual reports, a growth of over 130 percent might attract them like a shiny New Year's gift this gloomy winter. However, Galanz, a leading Guangdong-based microwave oven producer, is grumpy about that specific growth of their small home appliances business.

"Actually our boss is quite unhappy about the (130 percent) figure, we could have done it better," Yu Yaochang, deputy director of Galanz, tells China Business Weekly.

Yu is being modest by explaining that the "small home appliances account is a small sector of Galanz, therefore it's no surprise we can achieve such a figure." It can also be attributed to three other reasons.

The most important one is that Galanz's innovative technology means that its products out perform its peers.

Secondly the cost of raw materials like aluminum and steel plunged sharply in the first half of 2008 and lastly, emerging markets have contributed to increased sales as well.

Galanz began to export its microwave ovens in 2006 at the 100th China Import and Export Fair (Canton Fair) and it marked a significant milestone in the company's transformation.

In 2007, the company decided to upgrade its air conditioners and abandon low efficiency products even at the cost of losing market share.

The company was also promoting its new microwave oven with a video function, which turned it into to a multimedia player with a cooking function.

More recently, Galanz has been developing a microwave oven that can receive TV signals and be connected to the Internet.

And now Galanz holds a patent on its innovative technology of malting brown rice. The brown rice, or "coarse rice", refers to the rice after its threshed. Chinese people like eating white rice, or polished rice and generally reject the taste of the more nutritious brown rice. However, by malting brown rice, the nutrition can be maintained and the taste is described by many as better than white rice.

Malting brown rice requires strict temperature controls and after numerous experiments Galanz is now the only producer that controls this malting technology in China.

A brown rice malter in Japan may cost up to 6,000 yuan but Galanz's product is priced a bit more than 1,000 yuan.

"Small home appliances represent a lifestyle, and we are leading a healthier lifestyle with our technology innovation," Yu says. But Galanz's ambition is not only to promote healthier lifestyles. "We want to be the top in the industry and are targeting a transformation from a worldwide manufacturer to a worldwide brand," says Liang Qingde, director of Galanz.

Though the financial crisis has hurt the raw materials industries by pulling down their prices, it favors downstream companies such as Galanz. Thanks to the financial crisis, the price of talent and mergers and acquisitions also dived.

Eight headhunters in Japan and six in Hong Kong are looking for experienced marketing experts and an R&D team for Galanz. Vietnam, Turkey and Brazil are highlighted on its list of future factory locations. Mergers and acquisitions are in a new round of negotiations at lower prices.

"Actually the financial crisis has brought a special harvest for us. We can prepare for our strategic expansion as a multinational corporation," Yu said.

However, chance is not the only thing that the financial crisis brought to Galanz. Severe challenges have arrived as well.

Thanks to the financial crisis, the South Korean won has depreciated strongly and it follows that many of Galanz's overseas orders have been canceled and foreign vendors are now turning to low-priced Korean products.

"The won has plummeted by almost 40 percent, therefore their products have become much cheaper. But it is impossible for us to cut our cost by 40 percent to catch up," Yu complained.

Galanz has been calling for the government to depreciate the yuan, or let it float based on the international exchange rate. "Otherwise it will be very hard for export-led companies like us," Yu said.

(China Daily 01/12/2009 page6)