The pandemic and post-pandemic period had a unique impact on Kactus Republic, a young company specializing in importing and selling garden furniture. The success of their products and the surge in demand after the lockdown was the flip side of a coin that saw a collapse in maritime transport and a dramatic increase in costs. To tackle the challenge presented by the new scenario, the company needed to expand both its foreign trade lines and liquidity lines and turned to Kaizen Consulting to secure them. Their CEO, José Puig, explains this in the following interview.
– Your financing need arises from the consequences of the pandemic.
– Yes, rather from the post-pandemic period. We are a young company founded in 2018, dedicated to importing and selling garden furniture for large retail chains, which are our main clients. When stores reopened in May 2020 after the lockdown, there was a boom in sales of our products: terraces and gardens gained significant value, outdoor spaces became much safer for avoiding contagion, and sales of outdoor furniture soared. Anything we could have sold would have been sold. By June, we had sold all our stock. Customers were asking for more items, but within a month, there wasn’t enough time to bring more furniture from China.
– What was the problem?
– That summer, we decided to leverage the situation by turning our website into a showcase for our customers and also as a new sales channel for a line of higher-end products that we planned to market online and in which we also invested. We devised a growth strategy, but we encountered a problem: starting in October 2020, after the lockdown, the cost of shipping from China began to rise. We went from paying 1,500 euros per container to up to 11,000 euros. It was a progressive and unstoppable escalation: it rose to 3,000 euros, reached 6,000 and 7,000 euros by the end of the year, and by early 2021, costs exceeded 11,000 euros and have not decreased since.
– What did this excessive transportation cost mean?
– It coincided with a 30% increase in orders for the 2021 campaign because, logically, after the previous campaign, where large retailers had sold all their products, a very good sales expectation was anticipated. Additionally, we had invested in the new line of furniture we were launching for the website. We went from bringing in 130 containers to 240 for the new 2021 campaign. This, which should have been very good news due to our exponential growth, became a handicap for us due to the increased cost of containers. In some cases, the transportation cost was higher than the cost of the product in the container. It was the perfect storm due to the collapse of maritime transport from China, which originated as global trade resumed after the pandemic.
– How did the 2021 season turn out?
– It was extremely complicated because it broke our system. We always work on a made-to-order basis, which is our business model, with lead times of 9 months. The garden furniture season in large retailers is limited, running from March to late July. Everything that arrived outside of that period we could not deliver to customers and had to store ourselves. It was a time of change: we had to raise prices several times during the campaign, causing issues for our customers. To compensate for these price increases, we agreed to the possibility of returning part of the material that remained on their platform. The late-arriving material that we could not deliver became a significant stock for us, adding extra storage costs that we did not incur in previous campaigns.
– What financing did you need?
– It was necessary to expand our financing lines for the 2022 campaign due to a 30% increase in orders compared to the previous campaign. Until that point, we had worked with a few banking entities and needed additional credit lines to cover material purchases and the new costs of our business.
– What was the request to Kaizen Consulting?
– It was very difficult for us to access new banking entities at that time. That’s why we turned to Kaizen Consulting to help us expand our banking pool and cover our purchasing and liquidity needs. It was very challenging for a company like ours, with only three years of operation and in the current situation, to involve banks in our project. We needed support.
– How was the process?
– It was a success. The Kaizen Consulting team immediately understood our needs and goals. From the first meeting, they went to work and didn’t stop until they achieved it; they met our expectations within a short period. We set a goal to enter 2022 with our needs covered, and that’s exactly what happened. They opened new lines with other banking entities, supported us, and helped us present our case. We achieved our financing goals with traditional banks, expanding our pool to new entities. The process went as the Kaizen Consulting experts described. We are more than satisfied and have even introduced them to other companies in our corporate group for financial and consulting assistance.
– What is the perspective for this campaign now?
– It is good; we already have almost all the material in our warehouses, ensuring that deliveries to our clients this year will not be delayed, and we will be able to fulfill all orders. Since we started, we have grown year after year, increasing our revenue from 2 million euros in the initial years to 6 million euros in the most recent year. We have adapted to the new situation and taken on new projects to consolidate our growth. Through our relationships with ceramic companies in Castellón, we have also started producing tables with aluminum structures and ceramic surfaces in Spain. An innovative piece of furniture suitable for both indoor and outdoor use, with unique properties and a refined aesthetic. This is a project we are pursuing with another company in the group, and in addition to producing these tables, we will explore further possibilities for manufacturing aluminum furniture
