With what technology did you enter the Chinese market?
Nafigate owns the first and the only technology in the world that is able to produce biopolymers out of 100 % waste on an industrial scale. Moreover, we have a clear idea about the final product for China. The first must-have product will be foils that will fall to pieces on the Chinese fields. China processes 70% of the world’s production of the polyethylene synthetic foils that contaminate soil and represent a huge problem. We are able to produce at least a fraction of the amount needed by China thanks to an unlimited amount of the input – used deep-frying oil, and at the same time, we are solving the problem with the excess of used deep-frying oil. China doesn´t know what to do with it. We could build twenty factories and it wouldn´t be enough.
What is your biggest competitive advantage in production of bioplastics out of the used oil?
All other biopolymers are made of sugar, corn, starch or something else that needs agricultural soil, which is scarce. From my point of view, it doesn´t make sense to produce bioplastic made of corn because you can use the soil or the corn for a better purpose. Moreover, these parts of the food chain are too expensive and dependent on the commodity exchanges. In the case of bioplastics, total waste is used. Normally, raw material costs are approximately 50% of the final price and we get it practically for free. Another 25% are energy costs. The used deep-frying oil is also possible to be used as an energy source for a factory because the oil is possible to burn. If we sum up, 75% of the total costs are substantially lower than our competitors’. In addition, the source of the deep-frying oil is infinite. As China and other countries are getting richer, their oil consumption is growing.
What was the motivation for the step onto the Chinese market?
First of all, we asked where the biggest market for nanofibre applications is today. The answer is very simple – in China. You can think whatever you want about this region, because lots of prejudice is connected to it, but it is the biggest market for all environmental technologies in the world. It is necessary to clean the air, the water and to solve other problems. China has an extreme excess of used deep-frying oil. There is really no other utilisation for it. Furthermore, China centrally buys the oil back. There are other countries with high oil consumption and excess of the used oil, but the infrastructure in comparison with China is missing elsewhere in the world.
What helped you to prepare to enter the Chinese market?
We were learning on the way, and that naturally led to many mistakes and blind alleys. We felt prepared based on our previous long cooperation with Hong Kong and Singapore that are some kind of a gateway to China. However, it was not true. On the other hand, we always represented the rich bride for the Chinese side. From the very beginning, our partners recognised our value added. The suggested cooperation exactly matched Chinese government needs – to get hi-tech to China in environmental technologies. But China is interested only in the best technologies that cannot be developed locally. The Chinese mentality is to be interested in everything, but starting the real business is a different story. I can´t imagine the negotiation position of export companies – an unenviable situation.
Did you use local consultant services or any governmental support?
At the beginning, we financed everything from private sources. Every partner or investor differently perceives a project, in which the key people invested all their savings because they truly believed in the project. Even though we did everything in our own way, we closely cooperated with the Czech embassy in Beijing and the CzechInvest branch in Shanghai. They helped us a lot – de facto and with consultancy. And I do not mean it as a formal statement. Going in your own way can be very risky. China is a hierarchical, administratively very demanding market. You can´t penetrate the market without government auspices, participation at business missions or formal presentations, otherwise you disappear in a crowd. Without this support, we wouldn´t be where we are now.
How big was the team that helped you to realise the expansion?
While receiving the Frost&Sullivan Innovation Award for the best technological innovation for biotechnology Hydal in London in 2015, we introduced ourselves as a nanocompany. The Hydal team consists of only 5 members. But we cooperate with tens of other people who are not our direct employees but we consider them as irreplaceable team members. For example, we develop our applications at VUT in Brno, at the microbiological institute of the Academy of Sciences and also in Duslo-Šaľa in Slovakia. They are all part of our success that depends on product quality and sophistication. It is not a large team that brings you the success in China.
Who is your partner on the Chinese side? Is it a university or a commercial entity?
Chinese universities are generally open to cooperation but this type of academic cooperation goes nowhere. The deep-frying oil market is strictly monitored. There are not many companies that can get a license for purchasing used oil. The ideal partner for us is a commercial entity with infrastructure for oil purchase so that we can avoid investments into a material purchase network. The partner has to be open to innovations and experienced in hi-tech areas, since it is different from typical industrial production. Jiangsu Clean Environmental Technology Co. from Suzhou met our requirements. We are also gaining advantages from the environment in Suzhou. There is a nanotechnology-oriented industrial park where many people speak English, and it is a very convenient place close to Shanghai. From the view of our partner, the government supported us, we had a ten-year history in the nanofibre field, and brought a game changing technology. Chinese do not like risks and the risk is minimal with us.
How did you arrange the cooperation with your partner?
It happened very quickly compared with Chinese usual experience. We met in June 2013 and signed the first memorandum of understanding in autumn, and the cooperation agreement in January 2014. The pilot line construction was confirmed in June 2014. Negotiations often last for years in China, but our partner knew that the market wouldn’t wait for us. A year ago at a seminar with a vice minister of the Chinese Ministry of the Science and Technology, I presented our plan in China. And the vice minister asked me twice whether the timeline was correct, and he confirmed that such progress is really unbelievable. However, it was that we founded Czech-Chinese joint venture. From the authorities’ perspective, Chinese entity has more open doors than any other world giant. Chinese don´t want to import foils, they want to produce their own.
How do you protect your unique know-how in China?
It is not possible to enter the Chinese market only with a patent, but with a ready technology at hand. In China, we are transferring technologies which we fully own. It is extremely important because the willingness to copy everything is generally known. However, Chinese are excellent businessmen and can assess whether it is better to copy for years with unsure results, or to speed up everything and earn money with a Czech partner. There are situations when the Chinese are more afraid of the Chinese than of the Czech businessmen. In our case thanks to the used oil excess and big business potential, it is easier to cooperate with us. To reach our level of know-how would take years of development with very unsure results and the market won´t wait.
What would you recommend to companies that are trying to step onto the Chinese market?
If you can, avoid China. But if you want to do business in hi-tech fields and environmental technologies, there is no option but to do so. You have to stay on the ground and not to succumb to giant potential, not to give up and go step by step. It is nice to read about win-win and not losing your face in literature. But the Chinese are the hardest businessmen in the world. You have to stick with your vision. Don´t be soft and don´t try to be forthcoming. Chinese do not know the word “no”. You think you agreed on something but it is just the beginning without any value. The real business in China starts when you get paid. Also you have to communicate key issues in person – no calls, no mails, no Skype. You must go there and work it off. It is enormously demanding and you should ask the question: Do I really have something to offer? China doesn´t want any second hand, only the best technologies in the world that are not available anywhere else. It is a very fine sieve that only the best technologies can pass through.
Lenka Mynářová – Member of the Board, Nafigate
Lenka Mynářová is a marketing strategist, author of books, and board member of the Nafigate Corporation based in the Czech Republic. She has pursued marketing and brand management for more than 20 years. She specialises in marketing of R&D and participated in implementation of corporate strategies of many significant companies – eg. Vítkovice Machinery Group, Biochemie Group, or Elmarco a.s. Moreover, she supervised the foundation of the Science and Technology Centre in Ostrava.
Nafigate Corporation was founded in 2011 as a so called knowledge based company offering unique know-how to other companies from around the world that want to produce their own nanofibres applications. The company´s mission is to transfer game-changing hi-tech products and innovative technologies on the world markets. Nafigate owns the first and the only technology in the world – Hydal Biotech – that is able to produce biopolymers out of 100 % waste, used frying oil, on an industrial scale. The first pilot factory is currently being built in Suzhou, China. In 2015, Hydal Biotech also won the Frost and Sullivan Technology Innovation Award.