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Dynamic duo.

Exporting Profits Aren't Just For The Big Boys; Ask American Cedar Of Hot Springs And IQ International Of Little Rock

Foreign importers are hungry to tap into the diversity of consumer goods coming from Arkansas and other states.

Economic and political changes are creating new trade opportunities in Western Europe and elsewhere, and hundreds of Arkansas companies are attempting to take advantage of those changes.

American Cedar Inc. of Hot Springs and IQ International Inc. of Little Rock are two examples of small, Arkansas-based companies that have made exporting a lucrative part of their business.

American Cedar touts itself as the country's largest cedar products exporter. Company officials claim they have 80 percent of the European market for their products. They are aiming to duplicate that performance in Japan.

IQ International markets "Inner Quest," which is designed to aid in personal relaxation, stress reduction, etc. The product resembles a hand-held cassette player. It delivers sounds and light through headphones and glasses.

The product has sold abroad for 3 1/2 years. Exports to 33 countries now account for 65 percent of sales.

"We never envisioned selling overseas, at least initially," says W.A. "Rob" Robinson, president of IQ International.

The company's first break came in 1987 when an advertisement in a New Age publication attracted the attention of a German couple visiting San Francisco. That led to a 20-unit sale totaling $4,500, at the time the largest buy in the company's history.

Monthly sales in Germany now average $75,000.

Total company sales in October were $456,000.

"We expect |to~ exceed $4 million in fiscal year 1991," says Robinson, whose company has 47 employees.

IQ's work force could soon number 75. A second shift might be added.

That 1987 sale to the Germans, who carried the product back to Europe, was followed by a second 20-unit buy. But getting the product to European customers turned into a learning experience.

"Exporting is not as simple as giving the product to someone to carry under their arms," Robinson says. "We were absolutely lost and had no idea how it was done."

The company overcame those early exporting obstacles, while also increasing domestic sales. But cutting deals with American companies such as Sharper Image Corp., the trendy mail-order and retail merchandiser, wasn't easy.

IQ had to obtain a $250,000 letter of credit to operate under the 60-day, delayed-payment plan, a common practice in the United States.

"We jumped at it," Robinson says of the Sharper Image deal. "But it almost broke us because we're a small company."

That highlights one of the best parts of export trade. Payments are made in advance.

"Someone places an order with us, we send them an invoice, they wire us the money and we ship out the order," Robinson says. "|With this arrangement~ we could afford to solicit people for overseas business."

Knock On Wood

Cedar long has been a lining for hope chests, used to protect natural fabrics from hungry moth larvae.

The so-called green movement resulted in a resurgence of cedar as a natural alternative to mothballs and other chemical products.

Cedar products were sold through the mail and in specialty stores almost exclusively until 1988 when Target Stores began marketing them.

When American Cedar introduced its product line to Europe, wholesale buyers were reluctant to try it, fearing that geocentric Europeans might reject the native American wood.

Fletcher Morgan, sales and marketing manager for American Cedar, says those interested in exporting must have patience and determination because "it takes a lot of both."

Morgan has worked for four years to get company products into export markets, especially in Europe. The company made four false starts using European contacts and domestic liaisons. The efforts resulted only in contracts of $10,000 and $50,000.

While early sales were disappointing, the efforts finally led to a European distributor.

"Because of |American Cedar's~ determination, ... a successful import products distributor found out about us," Morgan says.

European sales should total almost $500,000 in 1991, and projections call for 1992 sales of $2 million to $2.5 million.

"Exporting is a terrific buffer from the bumps of the domestic economy," Morgan says. "If we had relied solely on domestic business, our overall business would have been down because of the recession."

American Cedar, led by President Julian McKinney, has 70 employees. It owns two sawmills, and five other mills cut cedar exclusively for the company. Timber is bought primarily from the U.S. Forest Service.

"We control every stage of production, literally from the tree to you," Morgan says.

Such is not the case when it comes to foreign distribution.

The distribution network in Japan is so heavily layered that an American Cedar product that wholesales for $1 and retails for $2 domestically retails for $10 in Japan.

Discovering where a distribution company fits into such a multilayered network (designed to create jobs) can be tricky.

"They fudge a lot," Morgan says. "... AIDC |Arkansas Industrial Development Commission~ and the Commerce Department help us check out companies. Everyone likes to knock the government, but let me tell you, these bureaucracies are worth the money."

In Europe, labor unions have a stronger presence than in the United States. And that requires flexibility on the part of companies that export there. For instance, boxed shipments of 75 pounds are allowed in the United States, but 40 pounds is the maximum in parts of Europe. That forced the creation of a new size of cardboard packaging, designed without staples since European labor unions do not allow staples because of safety considerations.

The various nationalities and languages haven't been large obstacles for IQ International, American Cedar and other Arkansas exporters.

"The language barrier is surprisingly low," Morgan says. "English is the primary world language of trade."

Sales and profits are two words that bridge the communication gap around the world.
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Article Details
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Title Annotation:Exporting Arkansas; American Cedar Inc. and IQ International Inc.
Author:Waldon, George
Publication:Arkansas Business
Article Type:Company Profile
Date:Dec 16, 1991
Previous Article:Continental consolidation.
Next Article:A $5 billion business: agricultural products account for $1.2 billion of state's export figure.

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