They export traditional sheet metal toys to twenty-six countries around the world. This year, however, both co-owners of a historic Czech company – today KOVAP, formerly Kovodružstvo Náchod – decided to sell their shares to Sages Consulting. One of them, Lubomír Hošek, in an interview for INFO.cz describes what they expect from making this step. Hošek, who has been with the company since 1974, also explains how they managed to save KOVAP after the velvet revolution and turn it into a prosperous company that exports its products to many foreign countries.
Can you, please, first explain to me the following: the former cooperative has already a new name, that is KOVAP, but in it, you still keep the name of the city of Náchod, even if you have nothing in common with this original seat and you are seated in Semily. Why?
You are right. After restitutions in the early 1990s, we had to leave the original historical residence. However, the name of the city of Náchod we kept because of a kind of nostalgia. Maybe because for many generations of people our toys symbolise nostalgia for their childhood. And, my colleague with whom we as co-owners were restoring this limited liability company in 2009 was born in Náchod, and he wanted to have the city mentioned in the company name, so I did not object.
You are a relatively small company; how many people work in your two branches?
There are about twenty people in the first branch and seventeen people in the other one in Nový Hrádek, which is kind of a preparation facility for us.
You joined the company immediately after you had finished the compulsory military service in 1974. It was a famous factory at that time: it was founded as a family business of two brothers, existed since 1946, and despite the communist regime, it managed to export to Western markets. Besides, you worked your way up from the ordinary worker adjusting the machines to the co-owner of the factory. Did not your friends warn you that you were rather too old to buy an investment in the amount of a quarter of a million crowns, that it was nonsense?
Of course, some people thought of me as a fool and warned me, “You are returning to the Middle Ages! The future is in plastics.“ But I trusted the company. From the historical perspective, the project was based on metal sheet material, on the other hand, it is true that at a certain time sheet metal toys stopped being manufactured. In 1987, it was even decided to stop manufacturing of the famous little tractor and the red ladybug capable of making turns not to fall from a table, for example; they were the last ones still in production in 1987.
Who decided then and why?
The then management decided, and in my opinion, it was economically speaking a correct decision. The government then did not want to subsidize the toy tractor manufacturing any longer. Understand that in 1977 there were pretty large exports to foreign markets. The government gained foreign currency out of the business, nevertheless, they already considered to stop production of toys made of the sheet metal. Only the large export volumes to Canada kept the manufacturing going. And why? Well, the price of production was 72 crowns per piece, it was quite a lot in those days, and our cooperative was subsidized by the government, but with 20 crowns only.
Why did the state subsidize you?
Do you remember the price tags of the time? They read Kčs (Czechoslovak crowns), but the price of goods was SMC, which meant the State Retail price. And it was always determined by law. Not by the market. Thus, the toy cost a customer 52 Kčs, but the production price was 20 crowns higher. The state i.e. the government needed foreign currencies and Canada was a favourable target market. And that meant the toy tractor saved us. Its production was completely stopped in 1987, it was decided to replace it with a plastic one. Its name was Agro, unlike the Zetor made of the metal sheet. And we started to produce toys made of plastic: little scales resembling the real scales used in shops, then the money-box, or the Turbolet plane.
But a regime change came…
Exactly. And companies with plastic toys penetrated the Czech market, they produced them much cheaper than we could afford. So, people enthusiastically started buying foreign toys and we suddenly found out that we had no sales.
In 1992, however, we were approached by the German company Succo and this was a good opportunity to return to sheet metal production. They saved us. They offered us to make tin toys for them that were fashionable in the West at the time. And thus, we resumed production. Fortunately, we scrapped nothing at that time, as it was done in many factories - we just moved the machines away. Meaning, we had old machines and presses for everything, on top of that, in the 1980s we bought other machinery from a famous German company where production ended, and the owner retired. They offered us to buy their equipment, and later we just dusted them off, adjusted them and we could start working. And suddenly we had a new portfolio of toys. We produced a camper van, Volkswagen and Mercedes toy cars, a crane, and other models.
The glorious era of the factory has returned, right?
Of course, we were no longer manufacturing, as we did in the 1980s, 120 000 ladybugs and 50 000 toy tractors, or 80 000 road-rollers, but we produced much smaller series. The numbers went down, but we expanded the range. Now we make 70 different toy models, which is probably unique for such a small production, but you must always take into account that regarding some toys you sell 5,000 or even only 500 pieces a year.
How did you get into foreign markets?
If I do not count the German market where we entered due to contacts established from the early nineties, we were approached by a Canadian customer who chose our products, the crane and the tractor. We signed a contract worth about 2.5 million crowns. That's a lot. We have adapted to this, started to produce more and tried to get to other markets also.
And where do you export then?
Well, we are talking a long list of countries: Chile, Estonia, then Austria and Germany of course, but we export also to Italy, Belgium, Canada, Spain, Lithuania, Finland, France, Great Britain, Greece, Hungary, Switzerland, Mexico, Norway, Holland, Poland, Sweden, Slovenia, the United States ... And now also to Japan, where sales are starting to look good and the market is also developing well.
Where do you have the largest sales?
Of course, we sell most domestically and then in neighbouring Germany. This year alone, revenues are CZK 2.3 million. Surprisingly, Slovakia is in second place with 800 thousand crowns, then Austria with almost 600 thousand, followed by Switzerland with 222 thousand. And as I say, Japan is starting to be very interesting right now. Overall, we make about 25 million crowns per year.
This year you sold the company to Sages Consulting. Why?
One important reason is that we want to go to foreign markets more. Somehow, we didn't do the marketing well.
What are you now trying to do to promote your production?
Apart from the Moravské ústředny Brno, which is also a toy manufacturer, we are probably the second Czech company that has been exhibiting at toy trade fairs in Nuremberg for 25 years. And that's a very important thing.
And otherwise, anything else?
Well, that's the point: a number of newspaper articles have been published about us. But improving our sales abroad, it still fails. Therefore, we wanted to work better regarding foreign markets. For example, we export to the US market for 218,000, but we feel the potential is much higher.
How will your cooperation with the new company work?
Honestly, I am happy that even though the production of many other companies was moved from the Czech Republic abroad in recent years, our new owner promised to keep the manufacturing in the Czech Republic. And I remain an advisor to the company, although I am otherwise a "working pensioner".
