A successful “joint” venture
Written by: Kateřina Zapletňuková
Photo by: Jan Vágner
A family business used the know-how of two generations to create a medical company. The firm has now become a global player among producers of food supplements for joint regeneration.
IN 1991 Petr and Kateřina Duškovi decided to move from the town of Louny in North Bohemia to Ústí nad Orlicí. Biochemists by education, neither were satisfied with the jobs they had found in a local firm. In an effort to change their fortunes, in 1992 they decided to set up their own company. Orling came into existence, to a great extent, thanks to Kateřina Dušková’s father, Professor Milan Adam, a rheumatologist and biochemist who developed a food supplement for joint regeneration based on collagen hydrolysate. Orling currently processes about 150 tons of collagen hydrolysate per year, while according to Dušková, all US companies combined annually process about 600 tons. This makes the Czech firm the largest manufacturer of such products in the world.
– Exploiting scientific know-how
– Filling a gap on the market
– Targeted, cost-efficient advertising
– Using region-savvy distributors for export markets
A clinical approach to business
The initial stages of Orling involved the firm taking a CZK 1 million loan from Česká spořitelna, in order to purchase equipment and raw materials. The bank agreed to provide the money thanks to the generosity of the couple’s business partners, who used their family homes as collateral. The firm was founded by six partners, but two of them left in 1995, leaving the current owners – Kateřina and Petr Duškovi, Milan Adam and Eliška Jansová – to operate the firm. “My husband and I had nothing but know-how,” recalls Dušková.
Dušková says that, according to doctors, about two million people in the Czech Republic have problems with their joints – and many patients never get to a doctor, in spite of the fact that these problems can lead to invalidism. This accounts for the product’s immediate popularity among Czech customers – from the elderly to sportsmen, who use Orling products as preventative medicine. Orling’s turnover reached CZK 3 million during the first year, and it took the firm only 2-3 years to achieve current revenues amounting to about CZK 100 million.
Orling’s assortment comprises about 20 kinds of products, including supplements for animals such as dogs and horses, and a wide price range to accommodate different customers. The company is constantly developing new products, and Dušková points out that one new product may take up to two years in development alone. After that, another year will typically pass while the State Health Committee decides upon approval. Finally, production may last for about two months. “Some products get updated or phased out. We try to introduce new ones twice a year,” says Dušková.
Honesty cures advertising
From the very beginning, the entrepreneurs decided that their product should be distributed through pharmacies and not grocery chains. During the first year they worked meticulously creating a name for their product among average consumers as well as professionals. The company’s main marketing tool is advertisements in print – from industry publications and lifestyle magazines to daily newspapers. Orling also participates in exhibitions and seminars for doctors, pharmacists, and other medical professionals.
The company owners dismissed radio and televisions commercials as being too superficial. “We manufacture a product connected with a health problem that requires some serious talk,” explains Dušková. Partially due to the lower costs associated with print media, Orling invests only about 15% of its revenues into advertising, and prepares all advertising materials itself, without cooperation from any agencies. “We did not have a single good experience with advertising agencies,” says Dušková. “We realized that our customers expect professional information, and all the agencies reduced our advertisements to superficial praise of the product,” she adds.
Getting the product out there
In 1995 Orling bought its own building, which it reconstructed twice to bring it in line with EU regulations. About two years later, the company started exporting its goods. Now shipments (mainly veterinarian products) to Ireland, Saudi Arabia, Russia, Germany, and Italy account for about 7% of annual revenue. Sales in foreign countries are carried out through exclusive distributors, all of whom are locals who know the territory. “It is necessary to have a partner who understands the product and can introduce it to the given market properly,” notes Dušková, adding that in most cases distributors contacted Orling themselves. The firm has even developed customized products for special distribution – such as the product created for racing camels, which was to be sold in Saudi Arabia.
This year Orling expects a great increase of exports, due to the Czech Republic’s entry into the European Union. “Membership will make foreign markets much more accessible for us,” says Dušková, pointing out that Asian countries only recognize US- and EU-made products. The businesswoman also expects that western markets will become more accessible for her firm once the EU recognizes the Czech Republic as a full-value member. This, however, will take several years. “Western markets accept the Czech Republic as a supplier of parts, but never final products – especially medicine and food supplements. This needs to change,” she says.
|Force majeure factorsNot everything has gone smoothly for Orling, due to circumstances beyond the firm’s control. In 2000, BSE cases were discovered in the Czech Republic. Customers lost faith in any products made from beef – and Orling’s supplements are based on collagen hydrolysate, which is derived from cow and pig hides. Consequently, around that time sales decreased by about 20%. “This was an artificially provoked hysteria, designed to eliminate overproduction,” says the firm’s marketing and development manager Kateřina Dušková. Competitors that import supplements from Canada seized on the situation to promote their products, which are based on substances not connected with beef. To minimize the damage, Orling’s management heightened PR activities, publishing safety information about the firm’s products in magazines and newspapers. Pharmacists also received data proving the products to be safe and beneficial. However, the firm was unable to completely overcome the drop in demand.|