A SECTION FOR ENTREPRENEURS: How to regain the sweet smell of success - A soapmaker and a high-tech materials specialist: two small businesses that could hardly differ more. Yet both are breaking with the past to find new markets. Andrew Saunders reports

A SECTION FOR ENTREPRENEURS: How to regain the sweet smell of success - A soapmaker and a high-tech materials specialist: two small businesses that could hardly differ more. Yet both are breaking with the past to find new markets. Andrew Saunders reports

by ANDREW SAUNDERS
Last Updated: 31 Aug 2010

Droyt's soap factory, home of the finest-quality transparent glycerine soap, does not look like a business in the throes of a 21st-century re-invention. A trip around the works, in Chorley, Lancashire (the heart of the old industrial North-west), is a step back in time. Original plank flooring smooth with soap, racks and shelving in age-darkened wood that interior designers would kill for, and everywhere the heady smell of soap perfumed with geranium, rosemary oil and musk.

Established in Saratov on the banks of the Volga in 1897 but pogrommed out of Russia by the 1917 revolution, Droyt's moved to Berlin. But by 1937 it was on the move again - a Jewish company escaping the anti-Semitism of Nazi Germany - washing up this time at its present home, the old red-brick cotton mill on Progress Street.

Except for the white coats and hats now worn by the 25-odd staff, the factory floor area hasn't changed much in 64 years. The few machines in sight are hand-operated and pre-date the company's move to England. For example, the press that forms the soaps into neat bars is an octogenarian German device, still going strong. The atmosphere is scented as much by tradition as it is by the exotic perfumes of the products.

But appearances can be deceptive. Traditional doesn't mean backward-looking and nowadays Droyt's has some chic customers. Once the soaps are finished, packed and shipped, they'll grace the shelves of stores like Heals, Selfridges and Muji worldwide.

A far cry from the situation that faced managing director Chris Effendowicz when in the early 1990s he quit a career in the City to take over from his 85-year-old uncle. The soap was then being made and sold in the same way it had been since 1907, when synthetic detergents had yet to be invented and Anita Roddick wasn't even a twinkle in her grandfather's eye. 'We had one type of soap, which came in only two colours, and a handful of customers,' he recalls, Boots and Smith & Nephew being the biggest. Packaging was dowdy and more likely to appeal to hard-up pensioners than to the well-heeled urban 30-somethings who make up today's target market. Droyt's was ripe for re-invention, but with turnover down to pounds 167,000 in 1991-92, Effendowicz knew he'd have to move quickly.

Effendowicz's partner and sales director Alistair McCracken says: 'The first part of our strategy was simple - sell more soap.' McCracken, who came on board as a partner in that year, is a Cambridge University-trained geologist. The company had never actively sold before; customers would come to Droyt's because of its reputation in the industry. Attracted by the quality of the product, designer outlets such as Liberty and the Conran Shop soon showed an interest, but McCracken had to be flexible. 'I learned to say 'yes' when asked if we could do something - embed chunks of one kind of soap in a bar of another, make a particular shape or colour - and then go away and work out how to do it.'

The old cardboard packaging had to go too, replaced by the simple-yet-sophisticated look of clear cellophane wrap.

But they didn't change the manufacturing process. After the ingredients - including food-grade palm oil, glycerine and Tate & Lyle granulated sugar (which no doubt finds its way into staff cups of tea) - have been cooked up in a big pot they are poured into one-ton moulds and left to set for several days before being cut up into blocks. Thence to the drying room, a 40 deg C hothouse that smells even more exotic than the rest of the place. It takes at least six weeks to manufacture each finished bar - costly and labour-intensive but the only way to produce the best-quality soap.

The company now makes 25 standard varieties (plus dozens of special one-offs), and in a decade of experimentation has discovered only two things that can't be done: making the soap light blue (it is naturally pale yellow so blue dye turns it green) or forming it into a ball (squash it too much and it goes opaque). Turnover has been rising steadily and now stands at around pounds 500,000.

On the face of it, Droyt's is about as different as it is possible to get from Crompton Technologies Group, based in the high-tech enclave of Banbury, Oxfordshire. But this is another business in the process of being re-invented. CTG specialises in composite materials and its main revenue-earners are ceramic suspension devices for supporting the heavy superconducting magnets used in medical magnetic resonance imaging (body scanning) machines.

Both have been hampered in the past by poor a sales effort - neither soaps nor body-scanners sell themselves. This was the first area to be tackled by managing director Dr Scott Roberts when he and two colleagues bought out the business in November. 'CTG had been run as a lifestyle company by the previous owners,' he says. 'It had award-winning technology but no growth culture.'

Now a full sales team and investment in new technologies is driving a shift into fresh markets - components for Formula One racing cars and the International Space Station, for a start.

The comparison works in reverse too. For all Droyt's olde worlde persona, it is also pursuing new business - in the low-tech but lucrative giftware market. 'I knew when I took over that I wanted to get out of selling single bars of soap and into higher-margin products,' says Effendowicz. A large bar of Droyt's finest weighs 800 grams and has a ticket price of about pounds 8, but the company takes very little of that - most is the retailer's mark-up. So now a growing proportion of Droyt's output ends up packaged with flannels, sponges or shaving gear as profit-rich gift packs.

CTG's new products are more likely to arrive in a helicopter than a rafia basket. 'Motorsport is a good market for us, as it is price-insensitive,' says Roberts. The flip-side to that is the high level of service required.

'We have to be ready to fly out new parts to our F1 customers at a few hours' notice.' The company hopes to attract customers for its other technologies, including a thermal barrier metal treatment licensed from Russia and a polyurethane moulding business that makes fittings for sailing dinghies.

Droyt's is wholly owned by McCracken and the Effendowicz family - the modest company cars of the two partners may be contract lease deals but the building and all the other major assets are paid for. 'We could write a great business plan to build a new factory and turn this one into a working museum,' says McCracken, 'but we don't want to get into debt and we don't want to give away our equity.'

With company turnover at only pounds 100,000 beyond the break-even point, they have to spend wisely. A scribbled wish-list hangs on the wall, comprising about half a dozen items ranging from 'New computer, pounds 800' to 'Better trade stand, pounds 4,000'. The whole lot adds up to about pounds 7,000. 'We only spend if we can see the money coming out the other end,' says McCracken.

Thanks to a good agent, one of Droyt's strongholds is, bizarrely, the Canary Islands. 'You can walk into a tiny beach-hut store on the smallest island and our soap will be one of the half-dozen products on the shelf,' says Effendowicz. More recently acquired export markets include Japan, Italy and France, which the partners are assiduously trying to grow, government-subsidised trips to trade and gift fairs being the latest wheeze. 'The DTI will pay half your costs for overseas fairs,' says McCracken. This can make a trip to the gift fair in Bologna cheaper than attending its equivalent in Birmingham.

Having raised pounds 4 million in venture capital, Roberts and his partners at CTG, Roger Davidson and Mike Dewhirst (all ex-Atomic Energy Authority materials scientists), are investing heavily to hit ambitious growth targets of more than 20% a year. A new factory costs pounds 130,000 a year in rent but has doubled manufacturing capacity, and they have spent about pounds 250,000 on new technology, which they can cross-sell to their existing client base. 'We want to be ready to float on AIM in five years, when the venture capitalists want their money back,' says Roberts. 'That might not happen - we could end up with a trade sale or an MBO. But what we are aiming for is flotation.'

By contrast, the re-invention of Droyt's is happening at a steadier pace. 'When I joined the company I thought it would take two or three years to make the changes we wanted to make. Now I realise it could be a lot longer,' says McCracken. 'But there's no hurry. Soap has been around for centuries. It's got a long-term future, and if we carry on growing carefully, so have we.'

So with a fair wind, Progress Street will still be Chorley's most fragrant spot in another 60 years.

Alistair McCracken and Chris Effendowicz have revamped Droyt's range of soap products in a bid to win new customers

THE RULES OF RE-INVENTION

- Assess your weaknesses. Are you hampered by an old-fashioned image, chaotic management processes or moribund R&D? Once you know what's holding you back, you can start fixing it.

- Make the most of your USP. It could be a great product, tremendous service levels or innovative technology, but every business has one. Find out what it is and build your strategy around it.

- Do the sums. What needs to be spent, and can you afford it? Now's the time to decide whether to go for a loan or finance it yourself.

- Find new markets. For real growth you'll need to find new business. Make a list of dream customers and what would make them buy from you. Look outside your existing sectors and be ambitious.

- Lead from the front. You stand a vastly improved chance of success if you can bring your staff along with you, so set them a good example. Why should they change if you don't?

- Be realistic. It's good to take risks, but taking too many too quickly could land you in trouble. Don't let enthusiasm blind you to the pitfalls.

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