40 years of Rinnai in Australia
Rinnai Australia has a lot to celebrate. Market development dominance over a 40-year period has cemented the company’s reputation as Australia’s leading gas appliance manufacturer. The company has reached this position by following the values of its long-serving chairman of the Japan Board, Mr Susumu Naito who flew to Australia earlier this year to participate in anniversary celebrations.
Those values are reflected in comments Mr Naito made to Appliance Magazine.com: “We constantly set ourselves higher goals. Rinna’s philosophy has always been a concentration on technically sophisticated products. Our aim is to improve people’s quality of life by offering high-quality products and service.”
Indeed, since Rinnai Australia was established in 1971, it has been providing Australians with the world’s most advanced heating systems. According to Rinnai Australia managing director Greg Ellis, Rinnai’s vision is to be market leaders in the provision of innovative products and services within synergistic business arenas, to meet a growing global demand for value based products, environmental sustainability and renewable energy efficiency.
To move forward, you must first look back
Mr Naito’s history is stuff of legend: a legend born during World War 2, when at a young age and still at University, he was propelled into the business world as President of the corporation.
Behind the boardroom table Greg relays some of the background to Mr Naito’s pre-eminence in the global gas industry.
After completing formal engineering qualifications post war, Mr Naito travelled to Europe building relationships and alliances with European gas technologists. From here he expanded the business into an international powerhouse following his simple creed: ‘Quality is our destiny’.
“We maintain that living mantra of quality, integrity, responsibility and environmental harmony that was the original philosophy behind Rinnai,” Greg says.
“Rinnai was not built on post war technology coming out of the United States. Rinnai already had its disciplines and cultural philosophies in place and expanded on those through internal investment and very adept alliances and joint venture R&D with key utilities around the world. Mr Naito as President and later as Chairman, had the vision to take the company from local Japanese icon to international player. It wasn’t done through predatory means, but through alliances, joint ventures and technology.”
Mr Naito seized on the opportunity that presented itself as Japan moved away from kerosene cooking to gas. Japan has always imported high volumes of LPG on the basis of its calorific value and the value of its instantaneous heat capability.
“In the late 1940s and 50s Japan went through what Indonesia is going through now – a conversion from kerosene cooking to gas,” Greg says. “Indonesia is a huge growth market as the government continues to encourage LPG in preference to kerosene as a domestic fuel, and naturally Rinnai is the leading provider of contemporary LPG cooking appliances to that market in Indonesia.”
In 1955, a joint venture was struck with a German manufacturer of radiant Infrared (IR) gas burners. Mr Naito was convinced by the potentially high demand of such appliances in the Japanese market,
“And in terms of ceramics, when you review the technology and understand the combustion efficiency achievable from ceramics, this was a ground-breaking development as well in gas appliances,” Greg says.
At that time German technology was expanding rapidly and by the 1970s the emergence of radiant gas burners and ‘Ceran’ caught Rinnai’s interest. The manufacturer of this product was Schott Glass, with whom Mr Naito built a strong alliance and constructed a dominant position across Japan and Asia.
This partnership produced the now famous Ceran glass ceramic cooktop panel. The high-temperature resistance of the glass ceramic made it possible to combine efficient gas combustion with the convenience of glass cooktops.
Mr Naito continued to build alliances with Tokyo gas and other major gas utilities, and through technology joint ventures and high level R&D, Rinnai developed the continuous flow range of hot water gas products for which they are world famous.
It is interesting to note that Australia never entered the cooking appliance market with Rinnai Japan products, because the Japanese/Asian market at the time simply was not an appropriate design for the Australian cooking market. “There are approximately 78 cook top brands in Australia, which means the market is already over saturated,” Greg says. “There is little margin and at this stage, and strategically there is no intention to drive Rinnai Asia cooking product ranges into the Australian market. However the changing dynamic of Australian residential and kitchen design will ultimately see consideration for more compact space utilisation, and this may present opportunities for the Rinnai cooking range in the future.”
Australia: Nothing ventured, nothing gained
Forty years ago, British company Parkinson Cowen were importing small portable gas appliances into Australia. The company had branches in the UK, Canada, Australia and New Zealand. Mr Naito saw huge potential in this market throughout Australasia and subsequently acquired the Australian and New Zealand branches.
Again, he began to build alliances, the most important of which were with utilities AGL (NSW) and Gas and Fuel (Victoria).
“Gas and Fuel was the bread and butter for Rinnai,” Greg says. “Their business was about gas load and our business was about products that generate consumer gas load. There was good collaboration with those markets, but it wasn’t until the market started to realise that continuous flow technology was very advanced technology and highly beneficial, with astounding benefits over electric tank water heaters of the day, that the market started to embrace the now famous Rinnai Infinity continuous flow product. It was when the consumer understood the safety benefits of temperature controlled hot water, in the mid 1990s that demand for Rinnai Infinity really took off.
“There was an intuitive understanding that temperature control meant that children were safe in the bath, and the elderly were protected from high temperature hot water scalding, ” Greg says.
“The public really accepted that, and the utilities became the perfect vehicle to spread the message because they had staff who engaged the consumer and explained the benefits of continuous flow temperature control. But the utilities in the main seemed to have lost that understanding of the ‘power of customer engagement’, and with the proliferation of distribution channels now, such technological advancement is often blended into the basket of commoditised products with price being the salient differentiator. Despite this, Rinnai have retained strong market shares and strong growth in the continuous flow hot water sector, and still lead the world with innovation, efficiency and product development enhancement. The Rinnai Infinity 26 is still the flagship that launched Rinnai water heating in Australia.
To be the best, you must look for the most logical outcome
Greg has strong views about where technology is heading and the requirements of modern day living. He feels that in some cases Australia is missing the mark for effective product implementation, driven by short term governments who strive to bask in the regulatory and legislative spotlight, but with little credibility in hoping that a self-regulated economy will deliver safeguards and protection of the consumer. The facts are that while credible brands comply and lead the industry, the government opens the playing field to ‘fly by nighters’ who gain accreditation for products with carefully hand-fabricated samples, but who then import underperforming and fundamentally different and lesser products for the mass market.
Back in the mid 1990s, Rinnai introduced the direct vent (DV) heating product. It was marketed under the energy saver brand. The product was so well made that today’s model has the same engine driving it.
“The efficiency is right up there with world’s best, so is the flueing technology.”
Rinnai product was also prolific during the Gillard government’s schools infrastructure program (BER). In fact 98% of the time, the building industry chose to install the Rinnai DV Energysaver into schools and infrastructure projects for space heating. However Greg says the technology doesn’t receive the recognition it deserves among the consumer market yet, although it was hands down the technology and product of choice across the country for nearly all government projects.
“Mythically, the Australian market is still a ducted heating market. This used to be reasonable, however we are increasingly building on slabs, which mean the ducted heating market is now the ceiling heating market. If you compare floor baseline space heating discharge and hydronic heating, you get the homogeneity of room temperature and you don’t have the hard velocity of ceiling systems. We have performed hundreds of thousands of dollars of tests with VIPAC and other labs over the years, to gain room temperature profiles and measure the ‘comfort index’ of Rinnai space heaters compared to other technologies. The technical advocates and the testing give far greater credence to heating products that rise from floor level. It makes sense, hot air rises.”
Rinnai is number one in the Asian for hydronic heating, however in Australia the market is constrained at approximately 12,000 units pa.
“There is little economy of scale. This product suits small business tradies and mum and dad businesses where the margin is essentially made on higher installation costs,” Greg says.
Rinnai Australia takes its R&D seriously, examining leading technologies in other countries and mapping those into similar environments in Australia. It is then a matter of convincing the market, that certain products and hybrid technologies have benefit and scale.
Know your allies
To gain market traction, in Australia in particular, it is important to shift a plumber’s mentality. This means confidence from manufacturers in how to go to market.
“It’s a long journey to convince and change stoic views held by tradesmen,” Greg says. “Over 80% of consumers make their decisions based on referral from their tradesman and gas fitter/plumber. If you break that down to the moment of truth between the consumer and the tradesman, it’s the tradesman who has the influence.”
Gas fitters and plumbers can be the manufacturer’s best friend, but Australian tradies are notoriously stubborn. So to convince the consumer, you must convince the tradie, or market your messages strongly enough that the consumer will make a considered choice regarding their purchase decisions.
Ironically, while Australian consumers are generally in the mix in decision making associated with new house appliances, the replacement and break-down emergency market generally involves a grudge purchase, and the decision is slanted towards the cheapest plug and play replacement in this market.
“To establish the market in continuous flow, we invested millions of dollars to train plumbers. We had TAFE colleges fitted out with plumbing training centres teaching electronic control of gas hot water. We had to infiltrate TAFE, teach emerging apprentices, convert the industry stalwarts and gas fitters and plumbers – it was a step up in technology. I would say that was one of Rinnai Australia’s greatest achievements – to change the paradigm of the plumber’s and consumer’s mindset and train the plumbing network in Australia to engage the new technology.”
Perseverance is power
In its 40 year reign, Rinnai has become a company known for its product innovation. While growth and success is a part of this, product and brand are the focal points. Again, this is down to Mr Naito’s vision.
“We are fortunate to still have the man who started it all,” Greg says. “He invested in Australia and built the subsidiary businesses. It was great to have him back to celebrate the milestones. He lives on a jet and travels the globe giving encouragement and a lifetime’s knowledge to the subsidiary businesses.
“I am certainly grateful for the support and encouragement that Chairman Naito provided to me personally as Rinnai Australia diversified into new technologies and business streams in 2006. And we have never looked back.
“We are also fortunate that the company has recently appointed Mr Naito Hiroyasu as the new President. He is also an accomplished engineer, and his experience in R&D follows on from Naito senior, and he continues to drive quality and innovation as tenets of the organisation.”
Rinnai commits investment of 2% of annual turnover to R&D in Japan, and it is this determination to strive for technical advancement and excellence that sets Rinnai apart in the gas appliance industry.
“Historically our company in Australia was a sales branch of Japan. My visions for Australia were that a single category business would ultimately fall, no matter how strong the brand. I was able to persuade the Board to allow Rinnai Australia to invest in solar and commercial technologies. We constructed a R&D and assembly facility at Adelaide and started to produce quality solar thermal products and high tech commercial turnkey plant. It was a timely entry to the renewables sector, just as it picked up with government subsidy, visionary Howard Government policy, and increasing consumer awareness.” Greg expects the industry to decline marginally and temporarily as rebates are repealed by a Government ‘so called’ committed to greenhouse abatement. He sees this as another short-sighted and unnecessary Federal Government mistake in a history since 2007 littered with labour Government policy gaffs. However, Greg believes that nothing will halt the determination of consumers in Australia to commit through considered decisions to a renewables and greenhouse abatement future, where solar thermal technology will find a solid part.
“I also think heat pump technology will become a major hot water technology as well in Australia, because it is a fine technology that the rest of the world incorporates well in hot water applications. The problem with this technology in Australia is that it is dictated by a bureaucracy of faceless academics in Canberra who just have to tinker with the science, and craft it to fit an AGO ORER mould that is technically out of synch with the same technology well employed in the rest of the world.
However, Australia has vast access to gas resources. Whatever the outcome and decisions of future Australian generations in the determination of fuels and energy generation, gas will have a strong place in the mix for a very long time to come.
As for Rinnai, Japan now invests in Rinnai Australia as an R&D centre of excellence as well as a manufacturing arm and sales extension of the corporate. Nearly 30% of all products sold in Australia by Rinnai have a genesis as Australian manufactured. That is an excellent achievement that bucks the trend for Australian manufacture. All solar research and development for Rinnai corporate is now conducted in Australia and the organisation is building momentum diversifying it from the totally gas-centric focus of past decades.
There is a vision to expand through innovation in Rinnai; it will adopt new hybrid technologies going forward and keeping with tradition will create the right affiliations.
“You have to have strong pragmatic vision, and be committed to markets,” Greg says. “Economies of scale and technical efficacy will solve the cost and differentiation issues.”And with a history of 40 years in Australia, and another Naito in the leadership mantle, it will be this attitude that will keep Rinnai moving forward successfully in the next 40 years.