Ronstan - Sailing Around The World

L. Welch, D. Welch, D. Black, R. Arambewela (copyright 2001)*

* The authors acknowledge the invaluable contribution of the managing director of Ronstan, Alistair Murray, in the preparation
of this case. He not only provided key information about Ronstan’s operations but also a critical historical perspective based on
his extended role in developing exporting activities.

Ronstan International is an Australian company specialising in the production of high quality fittings for
yachts and of architectural products (various stainless steel applications). For its type of marine hardware,
Ronstan is the leading manufacturer in Australia and is third in the international sphere, with about 7-8% of
the global market, after Harken in the U.S.A. and Lewmar in the U.K. who each produce a similar range of
marine hardware. It has been a successful exporter from Australia over many years, winning a number of
government sponsored export awards in recognition of its achievements. International sales in 1987/88 were
$2.75 million (AUD), which represented 30% of the company's total sales. Its overall sales increased to
about 15m (AUD) in 1994 and to 27m (AUD) in 2001, about 50% of which are represented by foreign sales.
Ronstan has a strong identification with Australian participation in international yachting contests such as
the America's Cup and the Olympics. It is currently a private company, with the bulk of equity held by its
managers. It has recorded steady increases in profit over the last 5 years, and is currently operating at a ’very
healthy’ profit level.

The domestic phase - origin and growth

The company was started as a backyard boat building project in 1953 by two partners, RON Allatt and
STAN Lenepveu in the Melbourne bayside suburb of Sandringham. The company is still located in
Sandringham. Production was mainly wooden hulled yachts but some stainless steel yacht fittings were also
manufactured to satisfy their own requirements and also the growing requirements of local yachtsmen.
These requirements resulted in the setting up of a retail showroom in 1954, the Ronstan Marine Centre, and
in 1956 Ronstan was incorporated as a company.

The decision to leave the boat-building field and concentrate entirely on the manufacture of fittings was
taken in 1961. To remain as boat builders the company needed to convert from wood to fibreglass
construction due to the rise in popularity of this material. The capital required was not forthcoming due to
the government's credit squeeze at the time, but sufficient capital for tooling and machines to make marine
hardware on a production basis could be raised in conjunction with the sale of the Marine Centre. This
ability to mass produce fittings gave Ronstan a significant advantage over the competition and in particular
its major Australian competitor Fico.

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The off-shore phase - getting their feet wet
Up to this time Ronstan had given no particular consideration to the possibility of export but in 1965 an
order was received from Canada from a Canadian airline pilot who had become familiar with the products
on visits to Australia and who saw a potential for them in the Canadian market. The trial consignment
proved successful and the Canadian became the first overseas distributor for Ronstan. The company realised
that further expansion would be greatly limited if it were to rely solely on the Australian market. Also the
market was highly seasonal which resulted in the need to retrench staff in winter, a procedure which the
company disliked. The opportunity to establish a distributorship in the U.S.A. arose through an order from
an American of Australian origin living there who had had contact with the Canadian distributor.

Over a period of time the exports to these two markets grew on an ad hoc basis. The company was primarily
concerned with the domestic market in Australia although it had become more responsive to the export
market, but the lack of key personnel with relevant international marketing experience at this time made it
reluctant to commit limited resources to servicing a distant market of which it had little knowledge.
Consequently, no formal plans were made to increase penetration of these markets or to attempt to enter
other export markets. However the Australian government's support for exports with export promotion
grants and market advisory services for which Ronstan qualified as a new exporter resulted in a change of
thinking. The success of more committed export efforts led, in 1970, to its first export award. A further
influential factor in setting Ronstan's course was the success of Fico, the main Australian competitor, in its
export activities.

The American experience

From the time of establishing the distributor in the U.S.A. in 1966, Ronstan was quite happy with the
progress made there. Sales grew steadily, mainly on the west coast but in 1977, without warning, sales
suddenly dropped by 50% following strengthening of the Australian dollar. As the distributor was
independent, the company had neither control over the internal working of the agency nor service to the
trade, and therefore lacked the ability to deal with problems that arose. Further, it had no real knowledge of
the distribution system in America, having relied entirely on the distributor to market the products there. At
this stage Ronstan was faced with the decision of whether to find an alternative distributor or to set up a
company owned and staffed operation. As Ronstan's marketing manager at the time said "It is difficult to
recover or remedy the situation as you do not actually know the people who have been buying your product
from the distributor". The American market for marine hardware of the type made by Ronstan was
substantial (annual retail sales exceeding U.S. $60 million) and competition was intense. Distributors
required a stock turn rate of 4 to 5 times annually otherwise they dropped the product. High standards of
product, price, service and delivery were required to maintain sales.

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In view of the potential of the U.S. market and the success of the company's products up to this time, it was
decided to incorporate Ronstan in the U.S.A., setting up a subsidiary with warehouse facilities and a
comprehensive inventory, hiring staff and developing a total service and promotion programme. The
appointment of American selling staff who had a deep knowledge of the nature and subtleties of the market
was effective in increasing sales. These sales representatives operated in a different manner from their
counterparts in Australia, not being actual employees of the company but representing several companies
and selling on a commission basis. It was found that the more time that could be spent with them in
imparting product knowledge the harder they would sell for the company.

This policy produced such successful results that in 1980 a second warehouse facility was opened in
California, which gave the company a presence on the west coast as well as the east coast, the first
warehouse having been established at Clearwater in Florida. Sales in the U.S.A. continued to grow at a
satisfactory rate, increasing from $1.53 million in 1982/83 to $1.91 million in 1984/85, which represented
25% of total sales worldwide, until the fall in the Australian dollar between June 1984 and June 1985 caused
distribution costs in Australian dollar terms to escalate sharply. As a result, Ronstan's parent at the time,
Australian Reinforced Concrete, which had purchased the company in 1977 as a diversification into the
leisure industry, felt that the higher distribution costs were unwarranted and was uncomfortable about
involvement in offshore investments. As a result, the two warehouses were sold to the former manager of
Ronstan USA and the American operation reverted to a distributor basis.

Developing other markets

Following its early success in the Canadian and American markets Ronstan began to investigate the
possibilities of other overseas markets, taking stands at major international boat shows in Europe such as
Hamburg, London and Genoa as well as exhibiting at the major American boat shows in Chicago, Miami
and Long Beach in California. The initial purpose of these exhibitions was to attract interested parties, who
would be suitable for appointment as distributors in the various countries, on the principle of one distributor
per country. Subsequent exhibitions were used to support Ronstan's international marketing effort. In 1970
Ronstan appointed its first European distributor in Switzerland, a market where there was no local
manufacture of similar products. This lack of local competition enabled Ronstan to achieve a 50% share of
the Swiss market whereas in other countries, where there are local manufacturers, market penetration has
been significantly lower.

A somewhat extreme example has been the French market, penetration of which has been difficult for
Ronstan. Indifferent performance from earlier distributors resulted in less than 1% market share in the late

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1980s. The strong nationalistic character of the French people enabled French manufacturers to hold 95% of
the market. These manufacturers on the other hand made no international sales. To try and rectify this
situation Ronstan exhibited at the Paris International Boat Show in 1987 for the first time, which resulted in
interest being shown by four or five different companies. After difficulties for about 2 years, as a result of a
fortuitous approach, a new distributor was tried and sales began to ‘take off’. This distributor has remained
with the company, and progress in terms of market penetration has continued, although it is still regarded as
a market with “opportunity”.

While early penetration of the Japanese market resulted in steadily increasing sales of marine hardware, this
has stalled over the last 5 years, with overall sales steady at about $ (AUD) 100,000. Asia in general has not
proven to be a rewarding arena for Ronstan’s marketing efforts. The managing director commented that “for
a given amount of effort there has not been the same return in Asia”. Nevertheless, there is an intention to
upgrade the marketing effort in Asia, but that would be focused on architectural products.

Principal Markets (in order)

Countries 1996-7 2000-1 (est.)

United States 1 1
New Zealand 2 2
United Kingdom 3 3
France 4 4
Canada 6 5
Switzerland 5 6

Ownership changes
1977 Ronstan acquired by Australian Reinforced Concrete.
1981 Ronstan acquires Fico, its main Australian competitor.

1985 Fortuna (a New Zealand conglomerate) acquires Ronstan from Australian Reinforced Concrete (a
subsidiary of Humes). In addition, Fortuna acquired RC Marine, a New Zealand producer of marine
hardware and other products.
1990 Fortuna goes into receivership, although Ronstan is trading profitably.
1991 A syndicate of investors buys out Ronstan – 10% held by company executives.
1995 Ronstan acquired by a UK company, Chemring.

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1999 A management buyout (buyback!) from the UK parent: ownership in the hands of 16 people, 14 of
whom work for the company.

Current Issues
Product aspects
Ronstan has always been heavily involved in product development as part of its strong emphasis on product
quality and seeking to be at the leading edge of technology, for a market that is highly concerned about
product performance. The association with yacht racing has helped to enhance the company’s image as a
producer of high performance equipment.

A problem facing Ronstan for some time was the duplication of the company's product line under the brand
names Ronstan and Fico. Fico, originally Ronstan's main Australian competitor, was acquired by Australian
Reinforced Concrete in 1981 and merged with Ronstan. There was some differentiation of products but also
considerable duplication. The two brand names were maintained as separate identities for some time.
Acceptance of and loyalty to the Fico brand had been built up both domestically and overseas over the same
length of time as the Ronstan brand and represented a significant part of total sales in the 1980s, particularly
in the U.S.A. where 30% of Ronstan's sales were under the Fico brand. As a result, Ronstan was reluctant to
drop the brand. Dual distribution was used in the US, as Fico used a separate agent from Ronstan. However,
there were costs associated with this duplication, and the current managing director commented that “it was
pointless to promote two brands, because you would promote each of them half as well as you would one”.
In the end, it was decided to “put all our eggs into the Ronstan basket”, so from 1992 to 1996 the Ronstan
name was heavily promoted in the US, and Fico gradually phased out. As less and less Fico product was
sold, Ronstan was able to smoothly halt the separate distribution arrangement. Fico ceased to exist in 1996.
The Fico brand had become virtually unknown outside the US. The current managing director commented
that ”we actually parted [with the Fico agent] amicably, to the extent that we ended up buying them”, more
specifically the yacht fittings side of the business. In the process, Ronstan acquired a new brand, Nicro.
Under the Nicro label, the Fico distributor had produced a number of products, such as stainless steel snap
shackles, that complemented Ronstan’s range. The current managing director said that “the Nicro brand still
means something in the US and we share it with Ronstan…we are now No.1 in the US selling his [Nicro]
products, and moved the manufacturing here [Australia]…and it is a really good product line for us”.

In the 1990s Ronstan diversified its product range into the architectural/industrial area, utilising its expertise
in stainless steel technology (eg cables). Its products were used, for example, on building sites at Sydney’s
Darling Harbour and on American jets during the Gulf War. The architectural products side of the business
has been very successful in Australia (“If an architect thinks stainless steel cabling, it is Ronstan. We are the

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main player.”), and has achieved some success in the US (about 1m AUD of architectural/industrial product
sales), but overall it has not been an export success in the same way as the traditional marine products area
has been. One of the problems is the distributors: while enthusiastic, even dedicated to marine products, they
have tended to be less inclined to push the architectural side, which of course requires the opening up of a
new customer base, and requires new types of expertise.

During the 1990s Ronstan expanded also into importing activities, developing a portfolio of products for
which it acted as distributor, for example, lifejackets from New Zealand and rope from the UK. The current
managing director observed that the “Marlow line from England, which is the best yachting rope in the
world, we have only had that for 2 years [since 1999] as a distributor and they are so pleased with the job we
did that they have given it to us in America as well. We are now the American, Australian and New Zealand
distributors”. Overall, the importing business is worth about $AUS 4 million (about 15% of total sales in
2001). In addition, Ronstan has begun to sell a line of branded clothing, produced for it on a subcontracting
basis.

Distribution
A critical part of the export success of Ronstan has been its distribution network. It currently has distributors
in 29 countries: mainly Europe – 16; 4 in Asia – Hong Kong, Thailand, Singapore and Japan; 4 in different
Pacific islands; and Canada, South Africa, Chile, United Arab Emirates and the US. Overall they provide
relatively widespread coverage of the global market for yacht fittings. The current managing director refers
to the distributors as a major strength, even though there are no formal agreements with them – only
“handshake agreements”. “It is amazing the relationship with our agents. Talk about long standing. We have
a fantastic relationship with our distributors. We have some who have been with us for more than 30
years...I mean to stay with them. And we have a lot of success with them…We have spent a fortune over the
years [with them]...bringing them over here [Australia]. We have had a program for years of bringing
distributors over here at our expense. They are our friends, our allies, our partners. Part of the family…If we
come out with a new product we have people around the world who can hardly wait to get their hands on it.
Without doubt our biggest strength is our distribution. [Although] if we had lousy products, our distributors
would lose interest, it’s all part of the package.”

Ronstan operates through subsidiaries in New Zealand and the US. The subsidiary in NZ is a sales office.
The US subsidiary (Ronstan International) handles Ronstan’s business in the US, its largest foreign market,
although Ronstan does export directly to one large retailer in the US (about 1.2 m. AUD of sales). The US
subsidiary also sells about 0.6m AUD worth of product to this same customer, West Marine. It is the largest
retailer of marine products in the US, with 238 stores, and Ronstan is its no. 2 brand of yacht fittings. From

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1985 to 1992 Ronstan was represented in the US by an independent distributor. As to why the company set
up its own subsidiary in 1992, the current managing director said that: …“sales had started to slide and we
were not doing [as] well…It was the realisation that nobody is as dedicated as yourself. That is what it really
came down to.” We decided to … “commit ourselves to the US market and the big commitment was putting
me [Ronstan’s export manager at the time] there. We incorporated and ended up buying his [the independent
distributor’s] business out and taking on his employees.” Ronstan’s US subsidiary currently has 13
employees. The current managing director of Ronstan spent four years in the US, from 1992-1996, setting
up the subsidiary and re-launching its marketing efforts. Since that time there has been substantial growth in
US sales. The two persons currently running the US subsidiary are shareholders in Ronstan.

Pricing
Ronstan’s products are sold at premium prices reflecting an emphasis on high quality and a niche market in
which assurance about product performance is of critical importance (racing and safety perspectives).
Exports are priced in Australian dollars.

Market Strategy
Ronstan has been far more successful in the US market than elsewhere: sales are about three times those in
Europe taken as a whole. Sales in Asia lag those in the other main market regions. Asia has come to be seen
as more promising for architectural products than marine products.

Marketing Activities
The upper management group in Ronstan is heavily involved in foreign sales visits to distributors,
attendance at trade shows, and building and maintaining relationships with customers. The current managing
director commented that: “There is a core of 6 of us that travel a lot, and another 6 that swing in and out of
it.” The managing director has been spending about 3 months himself ‘on the road’ but indicates he is likely
to have to reduce that commitment in the future. He added: “It is the relationships with the customers. They
want to be dealing with us. It is not just showing your face, it is the market intelligence, seeing what our
competitors are doing, meeting the owners of the businesses, rather than just dealing with them at the
purchasing level, looking at the trends.”

Organisation and Staffing

Ronstan’s organisation chart is shown below. The current managing director is a part of the shareholding
group and has been heavily involved in the development of Ronstan’s international operations: earlier as
export manager and later as general manager of Ronstan (US). The Board of Directors of the company is
composed of 4 people, including the current managing director. As a way of consolidating and developing

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its European activities, in 1994 Ronstan appointed Louis Sander, from its Italian distributor, to perform this
European development role. He was then transferred to the Melbourne office as overall director of
marketing and development at the beginning of 1999. In mid-2001 Ronstan had 160 employees in total.
Ronstan was just about to send an Australian employee to its US subsidiary. The managing director
commented: “One of my main motivations for sending Peter to the US for 3 years is not just to do better in
our sales. I want somebody else in our company to understand the US company, to learn the US market, to
gain the relationships”.

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 Ronstan: Organisation Chart (simplified)

Board of
Directors

Managing
Director

General Marketing & National Architectural/ Manufacturing Financial

Manager Development Sales Industrial Manager Director
USA Director Manager Manager

Marketing Product Engin- Regional State State State Southern Purchasing

Services Mgr eering Manager Mgr Mgr Mgr States Manager
Manager Manager NZ NSW Qld WA Marine
Manager

HR
Officer

Export
Administrator