In 2014, Adrian Maxwell, Managing Director of cappuccino and espresso coffee machine manufacturer, Fracino, was named as an exemplar in the inaugural intake for The Manufacturer Top 100.
To mark the tenth year of the prestigious awards ceremony, we caught up with Adrian to find out what’s been happening at Fracino during the last decade and the impact his involvement in The Manufacturer Top 100 has had on the company.
There’s no doubting that being part of The Manufacturer Top 100 was very prestigious, and it helped us win other awards . It’s also helped us to market the company. Up until that point we were fairly unknown. Now, however, we’re being consulted around policy, which is absolutely incredible – government are looking to us. Being recognised by The Manufacturer enabled that and really helped us promote the business and push it forward.
In addition, it’s really helped us from the perspective of being in a global market as, when people notice these recognitions we’ve achieved, it gives us extra kudos and credibility with potential customers. That’s really helped. We didn’t even export a single product until around 2009; now our export market represents around 35-40% of our turnover.
Tell us about Fracino?
After 30 years of servicing and selling coffee machines, in the early 1990s, we took the decision to control our own destiny and manufacture the machines ourselves. Since then, we have grown the company and now offer over 70 different models. We now have an engineering business rather than just a pure assembly shop. We have CNC lasering and machining, robotic laser welding as well as automated TIG, so we are extremely self-sufficient and make approximately 85% of all our parts in-house.
This helps us to control quality, price and supply. That’s been an absolute godsend since COVID, because we’ve heard some horrendous stories of what’s been happening elsewhere in the marketplace, as the supply chain is still in pretty bad shape. Because of the way we operate the business, our supply chain is very small and we’ve been lucky in that we haven’t experienced any problems with our UK suppliers – any issues we’ve had have come from abroad.
We don’t buy too much in, but there are specific parts that must come from Italy, where we’re still seeing lead times of four to nine months on certain components. That’s awful and it’s a situation that doesn’t seem to be improving. We’ve only just received a batch of electronics delivered from a supplier that we’ve dealt with since the 1970s (so it’s an established relationship and we were one of their first customers). This order was made back in October and we’ve only just taken delivery of the product, which is far from ideal. We’re fortunate in that we carry huge stock and we dual source every component to counter this problem.
Our inventory levels have probably increased by around 30%. Anything we can manufacture in the UK is not an issue but sourcing raw materials, such as steel, has caused real problems, particularly through COVID. Countries around the world, including China, are beginning to wake up, but materials such as copper still have to be ordered about a year in advance. If you’re using copper in any form in your production then your inventory needs to be full.
Shipping time and costs are coming down which is good to see, as that was escalating to ridiculous levels – $20,000 per container is in some cases which is absurd. However, we’re still not back to where we were pre-COVID and that’s affecting prices, which in turn is hitting margins terribly.
In addition to raw material prices being unsettled and destabilised, we also have energy problems that are hitting us hard. Plus, while oil prices are coming down, we’re not yet seeing the benefit. Therefore, we’ve had no choice but to increase our prices accordingly, but we’ve also been very cautious in doing so, because if you keep putting prices up, you’ll ultimately lose business.
On the bright side, the difficulty with getting hold of foreign products has been a benefit to us because if you want a machine or equipment in a hurry, we’re probably the only company in the world that can supply quickly. Our lead times are close to two weeks; not the four or five months we’re seeing from some of our competitors.
We have the British flag on every machine which is a huge bonus as British products are still renowned the world over. And we’re also going through Kitemark as well, which will make us the first coffee machine manufacturer in the world to achieve that standard. We’re working on it with the British Standards Institution (BSI) at the moment and once achieved, that will be quite prestigious and will definitely give us a lift.
What was it like to be named as an exemplar in the first ever Top 100?
There’s no doubting that it was very prestigious, and it helped us win other awards too. It’s also helped us to market the company. Up until that point we were fairly unknown. Now, however, we’re being consulted around policy, which is absolutely incredible – government are looking to us. Being recognised by The Manufacturer enabled that and really helped us promote the business and push it forward.
In addition, it’s really helped us from the perspective of being in a global market as, when people notice these recognitions we’ve achieved, it gives us extra kudos and credibility with potential customers. That’s really helped. We didn’t even export a single product until around 2009; now our export market represents around 35-40% of our turnover.
I still like to be very hands-on, although I don’t have as much time to do so as I once did. I oversee and run the business, and I have a core team that run each department and report into me. I’ve constantly learned new skills as the business has grown, and I always listen. That’s something that my father taught me. You don’t have to agree with what’s being said, but as long as you’re listening, you’re always learning.
What’s been some of the major milestones for the company over the last decade?
The awards have been great but in addition, as we have developed new models, pushed forward and won bigger contracts, I’ve seen more and more containers of our machines heading abroad, which is incredible. When I travel around the world and see one of our machines in a hotel in Dubai or Australia, for example, it’s amazing to think that it was made in Birmingham. That gives me great pleasure.
COVID, of course, had a big impact and we dropped about 17% percent that year. However, considering what was happening around us, and the fact that the hospitality sector ground to a halt, that wasn’t too bad. We’re fighting back now, we’ll keep pushing and moving forward. For us, as a business looking to the future, the sky is blue.
How have you managed recent challenges?
As far as Brexit is concerned there was certainly a lot of unnecessary hype and panic in my view. Yes, it was a bit painful for the first two to three months. But we were smart; we knew Brexit was coming so we put partners in place to enable us to ship into Europe the same as we have always done. We established the same for shipping from Europe to us for our spare parts supply.
We partnered up with Europa Road, who have a DDP system that works great. It’s all just a documentation exercise really, and I think people made it a much bigger issue than it was. Before the common market, we shipped in from abroad, and carried on doing so after the common market was established. I remember when I was younger, and we started importing for the very first time, we used to pay VAT as the goods entered and there was a free trade agreement. That’s what it was then, and that’s what it is now – nothing has really changed.
What Brexit did do from a positive perspective, certainly for some of our distributors, is that we used to get problems when some parts of the world would try and cut corners. We’d often have someone with a cafe and a VAT number who would try and buy something in the UK from a distributor and ship it over to Poland and undermine the Polish distributor.
Brexit stopped all that nonsense, because if buyers haven’t got a proper business premises and an Economic Operators Registration and Identification (EORI) number, then the cost to import is too high.
Undoubtedly that has been a good thing, because previously we had a situation where people weren’t really dealing, they were just dumping product on the market to make a quick buck by cutting out the middleman. You don’t want that; you want the system to work like it should, where there’s back up in the country and problems can be solved if they arise. That’s particularly pertinent for our products, as they’re not fit-and-forget machines. As well as set-up, they need maintenance, service and technical backup.
Listen to Adrian’s views on the shortage of skills in this episode of The Manufacturer Podcast (Timestamp: 17:10)
On environmental issues, we’ve been working on this for quite a long time. We installed solar panels around eight years ago, and at the time were able to take advantage of the buy-in-tariffs. That means we can use all the power we generate and get paid for it, which is absolutely wonderful. That was a 25 year contract so is still ongoing. The solar panels are well paid for following our initial outlay of around £40,000.
That demonstrated a bit of foresight on our part and you can’t underestimate the importance of reinvestment; it really is a no brainer – particularly at the moment with the current energy crisis – so the measures we implemented a few years ago have been an absolute godsend.
We also recycle all our metal and our machines themselves are 96% recyclable. We recycle all our own cardboard and reuse all our own waste. We recycle everything we possibly can, even down to our own oil. We’ve been involved with these types of sustainability initiatives for a considerable amount of time.
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