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Cape Town - US retail giant Walmart is warming up to small Cape Town manufacturer Econo-Heat as it is proving that growth in volumes help to reduce labour costs and to beat Chinese rivals.
Econo-Heat, a manufacturer of panel wall heaters, won the Cape Chamber of Commerce/Absa Exporter of the year on Thursday.
"We currently produce about 300 000 units a month and have just moved to a new premises that would allow us to ramp up to 1.2 million units per year and ultimately to 2 million units," said Econo-Heat director Pieter Bräsler.
He said Econo-Heat operated on a marginal costing model that meant the larger volumes one could get from suppliers meant the larger the discount.
"It's quite simple. You have a certain labour force and the business is all about volume. Now as your volumes grow your labour costs become a smaller component," he said.
Currently Econo-heat employs 91 staff, but demand has been so high that they are working double shifts and the company is in the process of employing another 43 staff.
Bräsler said the strategy to stave off Chinese competition was not just based on price and quantity but also on allowing his products to be branded for retailers' own in-house brands.
"We are not under-cutting them, but they are trying to come into the market and we have to be very vigilant," he said.
Econo-Heat already supplies to Sam's Club, a subsidiary of Walmart that caters for the small business sector in the US.
Bräsler said that last week his company had held meetings with Walmart and they would go to the US head office in November to negotiate a deal.
Walmart has committed itself to creating a R100m fund to help local suppliers become more competitive globally.
Econo-Heat's heaters are retailed in SA for R299 per unit and Bräsler said because they were made from fiber cement they aresafe to touch when on.
"We have a simple product to make in volumes, but it is difficult to copy," he said.
Econo-Heat, a manufacturer of panel wall heaters, won the Cape Chamber of Commerce/Absa Exporter of the year on Thursday.
"We currently produce about 300 000 units a month and have just moved to a new premises that would allow us to ramp up to 1.2 million units per year and ultimately to 2 million units," said Econo-Heat director Pieter Bräsler.
He said Econo-Heat operated on a marginal costing model that meant the larger volumes one could get from suppliers meant the larger the discount.
"It's quite simple. You have a certain labour force and the business is all about volume. Now as your volumes grow your labour costs become a smaller component," he said.
Currently Econo-heat employs 91 staff, but demand has been so high that they are working double shifts and the company is in the process of employing another 43 staff.
Bräsler said the strategy to stave off Chinese competition was not just based on price and quantity but also on allowing his products to be branded for retailers' own in-house brands.
"We are not under-cutting them, but they are trying to come into the market and we have to be very vigilant," he said.
Econo-Heat already supplies to Sam's Club, a subsidiary of Walmart that caters for the small business sector in the US.
Bräsler said that last week his company had held meetings with Walmart and they would go to the US head office in November to negotiate a deal.
Walmart has committed itself to creating a R100m fund to help local suppliers become more competitive globally.
Econo-Heat's heaters are retailed in SA for R299 per unit and Bräsler said because they were made from fiber cement they aresafe to touch when on.
"We have a simple product to make in volumes, but it is difficult to copy," he said.
