Export Sales Boom for State’s Medical Supply Industry : Trade: Many small equipment makers in California have found a huge market overseas. Their foreign sales rose 23% to $3.8 billion last year.
Matters were grim enough when Larry Beaty and Ed James began to look for a way out of their business difficulties in the summer of 1989.
The medical diagnostic kits made by their fledgling Santa Ana company, Zycal Ltd., were poor sellers in the U.S. market. In addition, Beaty, the firm’s chairman, was contending with agonizing disc-related back pains.
Before they could complete their plans for setting the company on a new course, a protruding disc paralyzed Beaty from the waist down.
“The injury could not have happened at a more inopportune time,” Beaty said last week, recalling the crisis.
Since then, Beaty has been involved in two medical success stories. Doctors surgically corrected his back problem, enabling the Santa Ana entrepreneur to regain use of his legs. Then Beaty and James used new strategies to correct Zycal’s problems, directing virtually all their marketing abroad to European and Asian markets.
Exports now account for 85% of Zycal’s sales, and business is suddenly brisk. The privately held firm, founded in June, 1988, made its first quarterly profit by generating revenue of about $100,000 during the first three months this year--equaling its sales for all of 1989.
Zycal’s surge in sales is a reflection of the growing export-consciousness of medical equipment makers.
The Commerce Department last week said sales of American-made goods overseas jumped to record levels in March, the most recent reporting period. Manufacturers of medical and scientific equipment were among the exporters generating the highest sales increases, contributing significantly to the $33.3 billion in total export sales in March.
Zycal’s products--pregnancy-test kits and devices used to measure tumors and hormone and thyroid disorders--are particularly popular in Italy, Belgium and Taiwan. The company’s sales are growing so quickly, said James, Zycal’s president, that the current pace would produce annual revenue of $1.5 million.
The turnaround was given official recognition earlier this month when Gov. George Deukmejian presented James and Beaty with a certificate proclaiming their firm California’s small business “Exporter of the Year.”
The award is significant, considering the large number of medical supply manufacturers in California. While the state is home to such major medical suppliers as Beckman Instruments, Toshiba Medical Supplies and Allergan Co., there also are hundreds of small firms. There are 231 companies in the state producing surgical appliances and supplies, for example, 111 that make dental equipment and 103 that manufacture eye-care products, according to state records.
In all, 621 medical instrument manufacturers operate in California--more than any other state--and nearly half are in the metropolitan Los Angeles area. Export data shows that more of these firms are thinking globally.
The value of California’s medical equipment exports rose 63% to $3.1 billion in 1988 from $1.9 billion in 1987. Exports climbed another 23% in 1989, reaching $3.8 billion. Medical equipment--instruments and related products--is now California’s fourth-leading export item.
The level of medical equipment exports from California will continue to rise because the products have a reputation for high quality, said Gladys Moreau, president of International Intelligence Services, a Los Angeles-based trade consulting firm.
“The prospects for growth are excellent,” Moreau said. “The level should increase because a lot of medical equipment manufacturers don’t export currently. Some of them will find marketing firms to handle exports--or will do it themselves. Either way, the potential for increased exports is there.”
Jay Ritter, an industry analyst at Duff & Phelps in Chicago, also expects continued growth in medical equipment exports.
“Some foreign economies--some of those in Asia, for example--are growing faster than the U.S. economy,” Ritter said. “They have a smaller base of installed (medical) equipment and they can afford to buy.”
Ritter also said entrepreneurs controlling smaller, less established firms have great opportunities to carve niches abroad because the industry giants in the United States do not have the same level of name recognition and market sway overseas.
“There could be a tremendous payoff for those who make improvements to current technology,” Ritter said.
California’s World Trade Commission, a state government office responsible for promoting export trade, has great expectations for the medical equipment industry. The commission’s promotion budget, which includes funds for subsidizing foreign trade show appearances by California firms, is based on a formula that considers sales and job growth in various industries.
The commission considers the medical equipment industry one of its top three trade prospects and is funding events designed to promote the business, said Paul Oliva, a commission research analyst.
The commission subsidized a Zycal appearance at a trade show in West Germany last November, and the show was crucial to Zycal’s turnaround, Beaty said.
“We were able to find customers . . . and distributors,” he said. “It made a big difference. We were at the right place at the right time.”
CALIFORNIA’S LEADING EXPORTS General machinery: $10.8 billion Electronic equipment and components: $9.1 billion Aircraft, automobiles & transportation components: $6.1 billion Medical instruments, laboratory materials & related products: $3.8 billion Food products (processed, packaged, value-added): $2.2 billion Chemicals and related products: $1.9 billion Crops: $1.3 billion Petroleum and coal products: $1.2 billion Fabricated metal products: $926,000 Waste and scrap: $919,000 Miscellaneous commodities: $735,000
Source: U.S. Bureau of the Census; 1989 State of Origin Data