Manufacturer cleans up in US

IF a business’ success was measured by the size of the managing director’s office or the office furniture and fixtures, Western Australian vacuum cleaner manufacturer, Pac Vac, would be seen as a failure.

However, hidden inside the firm’s inconspicuous white-washed Osborne Park factory the air is crackling with excitement over a $7.3 million contract to supply back-back vacuum cleaners to the US that is expected to triple the company’s size.

Pac Vac signed an exclusive deal in December with Royal Appliance – a world leader in vacuum cleaners with revenue in 2002 approaching $400 million.

This week the company, which employs 19 staff, is flying out its first 600 backpack vacuum cleaners manufactured under the Royal Appliance brand name to the US.

The company manufactures about 12,000 units a year and each unit retails for up to $350.

The US order is expected to lift production by an extra 16,000 units and, within three years, the company expects that to rise to about 38,000 units.

“This has been the break through we have been waiting for for three years,” managing director Douglas Riley said.

Royal signed the deal after trialing about a dozen different backpack vacuum cleaners from world-leading manufacturers and settling on the WA product.

Mr Riley said Australian expertise was held in high regard by US firms.

He said that when it came to vacuum cleaners, Australian firms were about a decade ahead of the US.

“Australian goods are held in very high stead in the US. We didn’t know to what extent until we went there. It was quite enlightening,” Mr Riley said.

For Pac Vac, the Royal order is by no means its first export venture. Around 60 per cent of its vacuum cleaners go to the UK, South Africa, Japan, Dubai, Malaysia and New Zealand. The company also lays claim to having cornered around 35 per cent of the Australian market for backpack vacuum cleaners.

The Pac Vacs are used to clean the Pentagon, airports in the UK, Qantas aircraft and the New Zealand Post offices.

Mr Riley said Austrade had been a tremendous help to the company in cornering overseas markets.

“As a Government agency Austrade copes a lot of flack at times but they have been good for us,” he said.

Mr Riley became a 50 per cent partner with Mario Pezzaniti in the 24-year old firm in 1999 after injecting an initial $500,000 in much needed capital.

He said he recognised that the firm had a winning product but needed the capital to market it to the world.

Within 18 months, the cost of producing each unit was slashed by around $40.

After two years work the company was in the black. This year it is forecasting a profit of $400,000 that will lift to $600,000 in the next financial year.

Securing the Royal order has not been without significant cost.

Mr Riley said around $180,000 had been spent to get to this point on research and development in order to comply with strict US and Royal requirements.

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