With air pollution being one of the top focus points in China, one would expect outstanding market opportunities for top quality filters that protect people and machines. In fact, it is a tough market, with cut-throat competition from thousands of filter manufacturers in China. “Nevertheless”, says AFPRO Filters VP Joost Verlaan, “starting our activities in China, ten years ago, was one of the best business decisions we have ever made”.
In Europe, AFPRO Filters stands out as a manufacturer of advanced, highly efficient filters. The filters are known to keep air conditions safe – and dust and other particles out – in the food and pharma industries, in schools, hospitals, museums, retail and commercial buildings as well as in datacenters.
When the Netherlands-based company decided to start producing and marketing its products in China (Shandong and Hebei provinces), it found a joint venture partner in an air conditioning manufacturer to help set up production, sell and distribute. Business has taken off. Verlaan: “We benefit greatly from their sales network and customer base. Our advanced filters offer them an edge over the competition. We complement each other.” While China’s pharmaceutical and nuclear and other advanced industries are highly appreciative of AFPRO’s quality products, the company’s VP Joost Verlaan admits that market conditions were tougher than he had anticipated.
Overpromise & underdeliver
“First of all, there a more competitors than I had ever imagined before we started here. Most of them compete on price, many overpromise and under deliver. We make great efforts offering proof of the efficacy and the high-value of our products, which has led to a good position at the top end of the market. But I often find competitor’s promotions and specs that literally copy our efficacy reports and claims, while their products do not deliver the same result. Also, they have different ways to handle sales.” Meaning? “Let’s just say they offer large buyers and purchasers certain other benefits…”
Protect humans and machines
These less positive experiences seem to point out that, in China, anything goes in the fight to protect humans and machines against pollution, particulate matter, dust and contamination. “This market could benefit greatly from some government regulation. To provide a reliable benchmark for customers, we are cooperating with other leading filter producers to establish a certification procedure or some kind of quality assurance system for this country.”
Effort to cut cost
It is not the only challenge that AFPRO faces. “The price competition is fierce. Although we are aware that our products justify a premium, we need to make every effort to cut costs. In our two production plants in China, with 200 and 50 workers respectively, we have succeeded to produces more materials and parts ourselves. We invested heavily in new product lines for our own media and frame materials. This allows us not only to cut costs and improve our margin, but also to ensure more control over our production quality.”
Joost Verlaan trusts his local Chinese management, but still tries to come over to China at least eight times a year. “Staying in touch is vital. And although our management is very competent, taking big decisions proves to be tough without someone present from senior management”, says Verlaan, who regards overcoming cultural differences as one of the important challenges. “As much as European and Chinese managers like and respect each other, it remains difficult to really bond to the same level I am used to at home. Discussing each other’s home situation, or any exchange of ideas on a more personal level may be how we would do this among European managers. In China it takes more time and effort to become personal with people whom I see as colleagues. Let alone with business partners.”
Still, AFPRO Filters’ touchdown in China was a huge, but successful step. With next steps that followed. “Because of the tough completion we have decided to enter other markets in the region. We opened sales offices in Melbourne and Sydney is our next stop to sell the filters we produce in China. In a way, China used to be a hurdle, a challenge. Now it is a strong stepping stone, allowing us to open new markets.”