Trend spotter converts slack turnover into healthy profits

It may be only a matter of time before Slendertone has a celebrity sports personality endorsing its product, but for the moment the Donegal-based company is concentrating on building up brand awareness of its fat-reducing product. "We are now becoming a marketing company," says Mr Kevin McDonnell, the managing director of BioMedical Research, Slendertone's parent company.

It is the kind of product which, although you may never have used it, somewhere in your mind is the image of the pads and the electrodes attached to people's torsos. The Sunday Mirror has included the product as "a nifty way to change your lover" and although sceptics may take the no-pain, no-gain line, the product has a proven record.

"You would be hard pressed to find a winner of the all-Ireland Gaelic football championship that had not been using our product extensively prior to the final," Mr McDonnell says. "We have not really had access to the hurlers. Maybe it's because I'm a Kerryman," he adds.

Amid the angst of the declining textile industry and factory closures in Donegal, Mr McDonnell has been quietly building his business in Bunbeg after becoming its owner nine years ago. The Gaeltacht factory manufactures Neurotech muscle stimulators and the Slendertone body-toning products.

"Our principal market would be the UK for consumer products and the US and Germany for medical products," he says. He expects turnover to reach £40 million (€50.79 million) this year, with a quarter coming from the medical side and the remainder coming from normal consumer use. He is aiming for a profit margin of 78 per cent. By 2003, the turnover will have risen to £150 million, he predicts.

As a medical treatment, the products are used in physiotherapy and backache treatments and for cerebral palsy.

"Everytime you exercise a muscle, an electrical signal is sent from the brain to the muscle. We use a very crude signal which we send through the skin barrier to bring about the same result. It is extremely effective," he says.

Its use can bring about increases of up to 30 per cent in muscle strength and improve muscle tone. "The ordinary person uses it for dealing with shape. Shape is a critical issue as far as confidence is concerned," he says. Mr McDonnell describes research which examined what young people thought was important in life. Compared to the early part of the century when character and education were valued, appearance is a key issue for today's youth.

"We find that about 68 per cent of adults over the age of 18 would be unhappy with their stomach profile," he says.

With certain stomach muscles being difficult to exercise, Mr McDonnell is keen to point out that his product will succeed where sit-ups have failed.

Its use by men is increasing since fat became a male issue and the vanity stakes on personal appearance increased during the 1990s. "Male and female sales would be almost on a par at this stage," he says.

But the product has been manufactured in the Republic since the early 1970s. Mr McDonnell describes how he arrived in Shannon, Co Clare, to retrieve stock from the company which was closing down. At the time, he ran a printed circuit board factory, MDR, in Co Donegal, an operation which has continued. "I went down there because they owed me money and there was product I wanted to get out of there."

Instead, he was shown a business plan. He went through it and totted up the numbers again, liked what he saw and bought the company out of receivership. "We put it all on the back of a lorry and moved it to Donegal," he says.

He took just two of the original staff with him and trained a new Donegal staff. "I have a huge admiration for Donegal people and their work ethic and the great things they have done for me over the years," he says. In 1992, he began marketing the product in the Republic, expanded into Britain by 1995 and since then he has established marketing subsidiaries on the continent and in the US and Japan.

"The biggest change we made was to move away from just a professional product into consumer applications," he says.

The business has been funded from cash flow: "As we tackle more complex markets, that may not be possible. In the long run, we may find it necessary to raise funds in the market place," he says.

He now employs about 300 people, half of whom are based at the Galway operations where the research, marketing, human resources and financial functions are based. "We have been reinventing the company to have excellence in terms of our marketing," he says.

Slendertone has built its customer base through supplying its product into beauticians. "That in turn gives a lot of confidence to the consumer."

The product is also sold directly by mail order, accounting for £9 million of its turnover, mostly generated in Britain, and giving the company a database of over 250,000 people. .

The third prong of what Mr O'Donnell calls his trinity strategy is increasingly to introduce the product in retail outlets. Slendertone is getting into Boots, the pharmacies, the "quasi-medical stores" and department stores. "We are devising an in-store tester allowing people to experience it," he says.

Users of the product will go back to the company to purchase fresh sets of electrodes on average about every four to six weeks, creating an ongoing relationship.

Originally from Tralee, Co Kerry, Mr McDonnell studied economics in UCD before moving to London in 1967. He trained as an accountant with a London company of which Lord Cecil Parkinson was a partner. He worked for Elan Corporation for eight years before establishing a veterinary medicines company, Ashford Laboratories, in Bray, Co Wicklow, which is now owned by Pitmann Moore. After that, he moved towards electronics, and was appointed managing director of Melchert Electronics in Listowel, Co Kerry, before setting up MDR which employs around 50 people. He went into accountancy because "somebody said to me that it was the fastest way of getting to understand how a business operates.

"Now I would say there is a switch from cost effectiveness to understanding the delivery and needs of the customer. Marketing and that side of the business is more important," he says.