From Israel to China, and Then Back Again

Ora Coren
Ora Coren
Ora Coren
Ora Coren

In about two weeks, industrialist Zvi Yemini and Home Depot CEO Bob Nardelli will meet in China at a convention of Home Depot's biggest suppliers. The venue was chosen to reflect the current global focus for marketing.

Home Depot is not the only corporation that sees the growing Chinese market as the future focus for both manufacturing and consumption. However, unlike industrialists who discover China and transfer factories eastward, Yemini already has brought his plant from China back to Israel. That happened last year when Yemini decided to close one of his factories.

"The Chinese were not as efficient as Israelis," he explains. "The factory in China had 400 workers, and their output was the same as that of 40 Israelis."

Yemini began his career in plastics at Keter, which makes plastic equipment for home and garden use. He left Keter in 1986 to set up a product development company, ZAG, and now he owns YMY, a company whose holdings generate estimated annual sales of $150 million, 99 percent of which are exports filling over 30,000 shipping containers a year.

YMY owns 6.5 percent of ZAG, the largest toolbox maker in the world, whose controlling shareholder is the giant American company Stanley Works. Other YMY holdings include water-powered machine manufacturer Hydro Industries (35 percent) and plastic packaging maker Polymer Logistics (10 percent). YMY also has a high-tech investment arm that has invested in Versamed, Midbar Technology and Elpaz Instruments.

Along with his business pursuits, Yemini is active in several public bodies, including serving as chairman of Adopt-a-Soldier and the Plastics Institute at the Shenkar School of Engineering and Design. Yemini also promotes innovative industrial designs in conjunction with the Industry, Trade and Employment Ministry.

Yemini enjoyed his first business breakthrough thanks to former Home Depot CEO Bernie Marcus, who invited industrialists to a lecture he gave at Tel Aviv's Dan Hotel and asked them to present their products to the retail chain. Yemini came with an innovative tool box. Marcus liked it and ordered 300,000 units.

"The shelves filled up, but no one bought [that product]," Yemini recalls. "We did not understand the market, and the first order was actually a failure."

During manufacturing of the first product, the company developed two tool boxes better suited to consumer demands that became a success story.

"Those products were a tremendous hit," Yemini says. "In the first year, we had $2 million in sales, and in the second, $10 million. In 1995, sales rose to $30 million and in 1996, to $50 million. The development company turned into a manufacturing company."

That year Yemini floated ZAG on Nasdaq at a value of $80 million. Two years later, Stanley Works acquired 90 percent of ZAG. Despite foreign ownership, most of the manufacturing remained in Israel. ZAG now has annual sales of $130 million, and enjoys 50 percent of the global market for toolboxes.

Yemini believes the key to continued growth for both commercial and industrial products is innovation.

"We were the first to invent a toolbox on wheels, the first to put an organizer on the toolbox, the first to combine plastic and metal, and the first to produce an all-plastic toolbox, including the hinges," Yemini says.

The last toolbox developed by ZAG won the design prize from Chicago Museum, which chose 100 innovatively designed products from around the world. ZAG has 500 direct employees and 500 more indirect employees.

Hydro Industries, which was founded in 1991 by former workers at the Rafael Armaments Development Authority, was discovered by Yemini at a technology incubator run by the Technion - Israel Institute of Technology. At the time, Hydro was making expensive garden accessories and was on the verge of closure.

Yemini's initial investment of $300,000, in partnership with Carmon, as well as a change of direction led to $13 million in further investments during the next 3 years. Yemini says the company's 2002 sales totaled $2 million, then grew to $5 million in 2003 and $10 million in 2004. He hopes to double sales again in 2005, to $20 million.

Hydro developed a product based on a patented mechanism for reeling in a garden hose with a water-powered motor that has become a hit in the United States, where it can be found at major chain stores such as Walmart and Home Depot. The product is also available in Britain, France, Spain and Germany. Hydro is working on the development of other water-powered machines, such as a washing machine for use on yachts and other places where electricity is in short supply.

Yemini is also planning to join the wave of investment funds eyeing Israeli industry. He is considering setting up a $30 million fund that will invest in companies with innovative technology that can be applied to consumer products and will help them market their products overseas.

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