A few years after the founding of the Hűtőépítő Ltd., the founders decided to start manufacturing cold room doors on their own due to problems with their previous supplier. They bought the necessary components, went to the workshop on a Saturday ‘so that no one saw what they were doing.’ ‘We forced, we squeezed, we punched the components, but it didn’t want to work out, so we were all on edge. Feri tried on Sunday too, and finally, he succeeded.’ – Gábor, Hangosi, who founded the company in April 2009 in Gyöngyös with his uncle, Ferenc Dávid, recalls a key moment in the company’s ten-year history.
The timing of the foundation is noteworthy, as the economic crisis was at its peak in Hungary, so it was not typical to start a business at that time. They could not predict the future, but foresight played an important role for both founders. Before all that, Ferenc Dávid had worked at Politechnik H-M Ltd, also located in Gyöngyös, probably the best-known Hungarian company constructing cooling chambers after socialism ended. During the 2008 – 2009 financial crisis, however, the formerly successful company’s situation became unstable, and – according to Ferenc’s opinion – the management did not want to take the necessary crisis management steps. That is why he felt that the days of the company are numbered and thought it was time for him to start his own business.
He convinced Gábor Hangosi, who had also worked at Politechnik, but had left earlier to join an American-owned company specialized in refrigeration. He was about to switch jobs when his uncle told him that if he ever starts his own business, it should be now.
It was not only their professional network that guaranteed that they did not have to start from scratch. That time, Gábor Hangosi had been working for years to ensure that when this moment came ‘we would be standing in the middle of nowhere with two toolboxes in our hands’. Keeping brand-building considerations in mind, he chose the word ‘hűtőépítő’ (English: refrigerator builder), bought the domain for the website, uploaded professional content on it, as well as created the hutomester.hu blog. Since he had some experience in search engine optimization, the websites started generating leads very quickly. Anyone who would search for information on cold room construction and its prices was sure to find themselves on Hűtőépítő’s website.
As a result, several inquiries and orders started coming in, even from the Ministry of Defence. Since his own company did not yet officially exist, he overtook part-time projects beside his full time job. The construction works were carried out by Politechnik and partly by his parents’ company, the Hangosi és Társai Csőszerelő Ltd.
Thanks to starting to build a business besides his main job, he gathered enough capital to be able to found Hűtőépítő Ltd.
‘At the beginning, there were only the two of us. Feri was managing installations and I was the helping hand. Sometimes things did not work out the way we wanted them to. There were times when I thought oh my God, we’re on the brink of bankrupcy.’’
– Gábor Hangosi recalled the beginnings.
They successfully overcame the challenges of starting a company, partly thanks to recruiting four retired professionals who had also previously worked at Politechnik. As a joke, they were initially referred to as the retirement club.
After all, they maintained a good partnership with Politechnik, because Hűtőépítő did not intend to poach their customers. What’s more, Politechnik had been the primary supplier of cold room doors for Hűtőépítő until their production started failing due to their management problems.
Lack of capital
The initial idea was that orders would be carried out through subcontractors and the office would be provided by the accounting firm of Hangosi’s mother, so there was little need to spend money on the company’s infrastructure. It soon became clear that this would not work. They needed to store the stock needed to build cold rooms somewhere, so they rented a 200 m2 site in the south-east part of Gyöngyös.
Keeping a stock was also among the reasons why securing financing was a major challenge during the early years:
‘Due to the crisis, banks refused to partner with us, therefore, we had to switch banks four times a year until someone finally understood that this company is already developed enough and is in need of capital. Ever since K&H has been our partner.’
– looks back Ferenc Dávid.
Local entrepreneurs already knew the founders, so they trusted themwith the purchased material. Thus they did not have to pay in advance.
The company started out as a cold room construction business, however, due to the closure of Politechnik, they began manufacturing cold room doors too. Main parts of cold rooms such as the wall structure and mechanical components could be purchased locally, while windows and doors would have had to be supplied either from abroad or from Transdanubia. Hűtőépítő was in the need for one or two of them at a time, making logistics uncomfortable and costly.
At first, their aim with cold room door production was to meet only their own demand of 50-100 pieces per year. However, it turned out that other companies were also having problems procuring windows and doors, so they started selling these items to them. Last year 850 pieces were sold and this year they will exceed 1000. All of these are custom products, as they are made for different cold rooms, so they vary in size from standard door sizes to those that can be used by forklift trucks.
Searching for premises
This relationship has helped to build a partnership with companies that compete with the Hűtőépítő Ltd. within the cold room construction sector. Hűtőépítő has built partnerships with some of them to take over when maintenance needs to be carried out close to them. McDonald’s, for example, has a maintenance contract with Hűtőépítő for 30 restaurants, and if such work needs to be done in Győr, the partner company in Győr usually goes to the site, instead of sending people from Gyöngyös. The boom in door production also caused the company to outgrow its premises, even though they rented and bought land across the street.
‘It was a logistical nightmare to walk across the road with 6-meter long steel bars, the trucks couldn’t get in and the ownership of the lot was also a complicated matter.’
– Gábor Hangosi recalls why, besides funding, the premises gave them headaches.
Then fortune smiled on them. Although they won an EU tender for the development of the site, they could not get the fund due to lack of resources. Still, since they had no debt, they were able to purchase Politechnik’s premises from a bailiff. So they finally had a site with offices, a production hall, and a vacant area where they plan to build smaller warehouses soon.
The present-day production hall
Building on the former relationship with Politechnik, a few years ago they bought the brand name Frilux and everything that comes with it, from its logo to its website. It was put to rest for a while, but this year it was put to use. “In Hungary, it is a prestigious brand and logo in the industry, and anyone who works in a commercial kitchen has almost certainly come across it. Many places have 20-year-old Frilux cold rooms in operation, and if one of them needs to be rebuilt, they come to us,” says Ferenc Dávid. They were already aware of the importance of the brand, cold room doors are sold under the name Igloodoors and, like Frilux, the name and logo are protected at EU level, as is the term “cold room builder”.
New range of products
Exports may not be very significant at the moment, but the owners hope that this will change. In the past, hundreds of cold room doors have been sold to logistics centers in Saudi Arabia and dozens to mortuaries in Kenya. However, there are not high hopes for exports of this product line due to very strong competition from Germany, Denmark and Italy. Italian firms are sometimes more competitive in terms of price because they produce much higher quantities and economies of scale play at their advantager.
Cleanroom technology is however a very different market. This is a production or research area, where air enters through filters and the number of airborne particles must be kept below a certain limit. Materials also get into these rooms through special box or room-sized transmitters. They are highly labor-intensive to produce – so they can offer a better price than, for example, German competitors. They have everything it takes to be a successful exporteur: they are typically worth tens of thousands of euros and are easy to transport. Currently, the company is making deals with Bosnia, Ukraine and Saudi Arabia, which will hopefully increase the number of pass boxes produced per year from the current 30-50 units.
They are also building clean rooms with robotic arms inside, for example for Continental. The thousands of square meters of cleanrooms at the laser research center in Szeged were also built by the Hűtőépítő Ltd. They are most proud of the extreme climate chamber at Audi’s manufacturing plant. Vezess.hu, a recognized site in the automotive industry, has even shot a video in the chamber.
Such prestigious projects are the result of constant hard work. Hűtőépítő has a considerable budget for online marketing to make sure that potential customers find them.. This way, they also save on personnel costs of the sales team. The six-person office staff is still quite large compared to a 30-35-person manufacturing and export company, but it is what they need to work directly for large companies (their references include Egis, Richter, Bosch, Lidl, Samsung, GE and UPS). These companies require much more professional and sophisticated business processes. Thousands of different documents are needed, sometimes one person works on preparing a quotation for a week,” explains Ferenc Dávid.
They are also consciously moving towards more complex orders, where there is more risk but also more profit. Construction work that would have to be carried out on an hourly charge-out rate basis using imported materials is usually rejected, even though it promises a high return. They also avoid general contractors who are suspected of being dishonest in their accounting. In any case,profit shares are lower on large jobs, which is why they have set a limit for themselves, meaning that they will only accept orders of more than 100 million forints in very exceptional cases. The result of this is already visible in last year’s higher return on sales.
Indicators of Hűtőépítő
They prefer smaller jobs because it helps the company to stay profitable, so it doesn’t become dependent on a few big customers. This balance is also reflected in the activities: more or less one-third of the turnover comes from:
- construction of cold rooms,
- construction of clean rooms
- and clean and cold room door manufacturing.
This attitude is partly why the company’s growth has fallen short of its potential.
“With a different business policy, we could be a general contracting company with hundreds of employees and billions of forints in sales, but we don’t want to be that kind of company.”
– stresses Ferenc Dávid
The turnover in 2016 spiked because of a carryover project, but also fell afterwards because the owners decided that prudent, manageable growth was better.
Productivity and profit share
True, labor shortages have played a part in this.
“This is a disaster. There is no vocational training in the metal industry, so we have started training people, some of whom are qualified as structural fitters, waiters and bakers.”
– Ferenc Dávid and Gábor Hangosi say.
This prudence is also reflected in the fact that, alongside some funding, 90% of the improvements are financed from their own resources.
“We have a massive stock that changes every month, and we only take out loans up to the value of that stock, so that if a crash hits, we can pay it back by reducing the stock.”
– says Ferenc Dávid.
According to him, an economic crisis is yet to come and they can only see six months ahead as far as their orders are concerned.
Even so, business development does not come to a halt, for example, they are buying sheet metal working machines. This work is now being done by a supplier, but it was for fragile parts, and the logistics will be easier in-house. They have also won funding through a tender to manufacture cold room doors with recycled insulation inserts. The technology has been developed, they are just waiting for the machines. They have many ideas beyond that, but are holding back on them and not hiring R&D staff for the time being.