This story is part of the life sciences sector series.
To learn more about export opportunities for companies in this sector, please also read Exporting key to success for Canada’s life science’s sector.
Andrew Booth is the CFO of STEMCELL Technologies – a Vancouver-based biotechnology company that develops specialty cell culture media and cell separation products.
What was your first export sale?
In 1993, the first product on the market was called MethoCult™. It was used for hematepoetic stem cells found in bone marrow. Because of the reputation of Drs. Allen and Connie Eaves, this sold internationally from day one and the company was profitable in its first year. It would have sold first to the U.S. and likely to the Fred Hutchinson Cancer Research Institute in Seattle.
How did that first export opportunity arise?
Drs. Allen and Connie Eaves are well known in the global community of stem cell researchers. Following publications or presentations at scientific conferences, other peer researchers started asking for the same set of tools to be provided for their own research.
When it comes to exports, what do you know now that you wish you knew then?
It has taken a long time to learn not only the customs regulations that vary from country to country, but more importantly how the customs and culture of different countries affect how to present the data and the packaging of the product.
Japan, for example, is particularly difficult, and we have needed to rely on a local distributor partner to help show us the way. China has been a large focus for STEMCELL for more than five years when we established an office there. Recently, we have established a wholly foreign owned entity (WFOE) and we have just started importing product on our own and holding inventory in China. This has not been easy. We have come a long way in understanding how these different markets work, and we keep learning as we enter new global markets. India and Latin America are next!
How has the trading world changed since you started in business?
All of our product needs to be frozen or refrigerated so it should go on dry ice or cold packs. Because it has to be kept cool, everything is shipped FedEx. On Sept. 11, 2001, planes were all grounded so FedEx couldn’t ship anywhere. Shortly after, someone sent anthrax in the mail, so all of a sudden, we were restricted from flying and distributing biologics in the U.S. — especially as our products were originating in Canada. This is why we were forced to open a warehouse in Seattle in 2001. Today as a part of the US CT-PAT program, we have pre-clearance to drive a truck across the border with our products. Generally, however, compared to the early days, it’s a lot easier to move our products around. Europe wasn’t as seamless a trading zone as it is now and it’s nice that more countries now use the euro. It simplifies things.
What is the #1 thing new SMEs need to know about export and trade?
In the life sciences business, as with most technology businesses, the No. 1 thing to focus on is product. The product has to add unique value for customers. For this reason STEMCELL continues to reinvest a large amount of its revenues into research and development. Once product is in place, there is the challenge of thinking globally and focusing on how that value is going to get communicated and delivered to customers. This is about marketing, market-based pricing and servicing those global customers locally. STEMCELL has a global sales force in more than 15 countries to help deliver this value. The majority of those sales people are themselves PhDs who can convey our products’ unique scientific value to researchers. That is why we say that we are Scientists Helping Scientists™.
When and why did you first start thinking about exporting as part of your business?
The STEMCELL products – starting from the original MethoCult™ culture media product back in 1993 – were all developed with the needs of the global stem cell research community in mind. So the idea of exporting product to this global group of researchers started at the very beginning of the company, starting with the design of the first product.
What was your export journey like to get to where you are today?
Building a global channel for our products is a never-ending journey. As most Canadian companies, we started with direct sales to the U.S. and distributors in other markets (Europe and Asia specifically). Once we had the resources to build our own direct sales channel in other markets, we did. We started with Europe in 1997 and developed a small distribution facility in Grenoble, France. We then went direct in Australia and Singapore using our own sales team and a third-party company for logistics and distribution, which we still use today. We then built a direct sales team in the U.K. and Scandinavia and took over direct sales in Germany, Spain, Poland and nearly all Western European countries. In China, we started with a representative office in 2011 supporting Chinese distributors, and within the last year, we established on-shore sales to those distributors in China using a local third-party company.
Meanwhile, in other markets we continue to build a strong relationship with long-standing distributors in countries such as Japan, Italy, India and many countries in Latin America. Today, we have a 10-year plan that continues to expand our direct sales force globally, one country at a time. Over time, we see having a larger global sales force supported by logistics and distribution centres serving the Americas, EMEA (Europe, Middle East & Africa) and Asia Pacific.
What have you learned from exporting that has benefitted your sales/operations in Canada?
This is an easy one. Without the access to global markets for our products, we wouldn’t be a $150 million revenue company with the majority of assets and activities being undertaken by the great group of people and operations that we have in Canada. Exporting our products to international markets and having direct access to customers in this global field has made it possible for us to continue to invest in innovative new products and services. The vast majority of this investment is done in our research and development, marketing, manufacturing & process development, supply chain operations, and corporate support function teams right here in Canada. In our view, Canada needs more role model Canadian technology companies that are providing the globe with world class Canadian developed and manufactured products.
Can you share the best lesson learned from a bad exporting experience?
The vast majority of our exporting experiences have been very positive. We have had temperature sensitive goods sit out in Latin American tarmacs too long. Not fun. More recently, we underestimated the impact of local capital and cash flow restrictions in China when we started importing product to sell to our distributors in China on shore (rather than have our distributors buy from us in Canada and take care of import in to China on their own). We had believed that we understood these restrictions well and had a robust plan to manage this; however, our plan was not robust enough. In a hurry, we needed to set up domestic debt, which EDC helped us do along with HSBC. The lesson learned was that where we are expanding operations into regions that have capital restrictions, unexpected things can happen, and we need to set up those local capital lines in advance.
What is the one characteristic that you believe every exporter should possess?
Be aggressive in building the long-term vision of the global presence that you want your products to have, yet be humble enough to get the local help from smart people to implement it.