Zoltán Érdi, Owner and Strategic Director
There are several niche markets globally where Hungarian medium-sized companies can achieve significant success. In many cases, they are linked to a piece of Hungary’s industrial past. No, this is not about Túró Rudi, nor is it about Rubik’s Cube, but in this case about sparkling water and chargers for whipped cream dispensers. Home production of sparkling water and whipped cream has been most popular in the Central European region over the past half century.
Today, nostalgic housewives search in vain for the old, returnable chargers for sparkling water canisters and whipped cream dispensers, but their manufacturer, LISS Zrt., is achieving great success on the world market. In Europe, North America, and Asia. True, the Répcelak-based LISS Zrt. still manufactures chargers for sparkling water canisters and whipped cream dispensers. It’s just that, in an age of carbonated mineral waters and soft drinks, and dozens of types of ready-to-use whipped cream sprays, demand for household chargers has fallen so low that it is not profitable to re-collect them centrally. (Today, you can drop them off at scrap metal collectors).
The former charger factory in Répcelak, which started up in the early 1960s, would today not be recognisable to a young person who might have visited the old, retro factory. Today, production runs in five huge halls, on professional, modern production lines, while domestic charger sales only account for a token share of the sales revenue, which has now grown to over HUF 15 billion.
Because chargers filled with carbon dioxide (CO₂) or dinitrogen oxide (N₂O) and other special chargers, such as those filled with argon gas, are by no means only used in old-fashioned siphons. A big market is the healthcare sector, where medical-grade gases need to be “packaged” in chargers, but there is also the construction industry, where smaller nailers, riveting machines and drain cleaners use CO₂, followed by self-inflating carbon dioxide-powered life jackets and smaller, metal-cartridge fire extinguishers. Then there are carbon dioxide weapons. Or, in the context of molecular gastronomy, the large café chains that require professional foam, where, instead of the simpler commercial whipped creams, serious siphons with dinitrogen oxide are used; or the fashionable way of fortifying wine, enrichment with noble gas (e.g. argon). But the list goes on.
The question is through what challenges did a former Hungarian subsidiary of a German gas company turn into a successful, but still Hungarian-owned, strong medium-sized company with a domestic decision-making centre and now employing more than 500 people. The medium-sized company started its operations in 2001 following a buy-out of a division in the form of an MBO (management buy-out). However, not everything went smoothly: the forced, but not sufficiently thought-out, and expensive expansion of export markets brought the company to the brink of bankruptcy, admits one of the owners, Zoltán Érdi, who was involved in the MBO from the beginning. The strengthening forint was not factored in to such an extent in the planning, and the costs also became very high. It was in this difficult situation that Zoltán Érdi took over the company from his position as commercial manager, and systematically set to work. Only a thorough due diligence revealed the root of these serious problems, but they were lucky. The company was shaken up just a year before the financial crisis, in autumn 2008, so it was somewhat stronger when the recession started in 2009.
The very broad product portfolio also helped a lot. The financial crisis hit in different geographical and temporal waves: first the US construction industry, then the food industry, but by the time one wave had passed, the other sector had somewhat found itself, so, as Zoltán Érdi aptly puts it, riding the waves of the crisis, they managed to pull through until 2012. By this time, the international climate had also improved and exchange rates were favourable. The sales revenue of HUF 2.6-2.7 billion in 2007 and 2008 finally started to grow steadily, and by the early 2010s it had exceeded HUF 3 billion and then HUF 4 billion.
Of course, this also required a complete reorganisation of the sales force, which involved long-term agreements with large customers, for whom they worked as back-end suppliers in order to build a stable revenue base. Even today, this so-called OEM production still provides 80 to 90% of the company’s stable financial basis, with private label products only slowly gaining ground.
The new strategy has worked so well, however, that there has been a need to continuously expand capacity almost every year for the past decade. Four new hall buildings were put into service in 2014, 2016, 2017 and this year, 2021. The first big boost to this steady growth came from the food industry, with the emergence of the café chains mentioned above, where they saw a surge in demand as suppliers for large foam machines. However, the food industry projects required the production of other chargers (for airguns, firefighting, and life jackets) to be organised in a separate hall. All the more so, because between 2015 and 2017 they have been increasingly successful in the fight against cheap Asian competition. (Apart from Japan, the only real competitors to LISS today are in Taiwan, China, and the Czech Republic and Austria in Europe). They are better than their Asian competitors because they can deliver to Europe in 4 weeks instead of 12, and they are also slightly more flexible in terms of volumes.
Profits have also increased nicely, as economies of scale are particularly important in this sector. Today, they are already filling their latest large hall with machines, which will be ready for spring 2021. Of course, the epidemic also brought a million challenges: In the spring of 2020, customers became scared, demand was rhapsodic for weeks and, in the autumn, nearly a third of the workers fell ill. And, by the spring of 2021, commodity shortages and inflation set in. As the chargers are manufactured in-house, the rise in the price of steel strips is causing a lot of headaches and redesign. But, with the resumption of life, catering orders have also been restored.