Research Leads To More Than Gut Reaction

Fred Schwacke is a man with a mission and it’s paying off with jobs and export earnings for rural New Zealand. He believes producing value-added products, rather than selling commodities, is the key to improving New Zealand’s economy.

Combine this with listening to customers’ needs and developing innovative ways to use technology and you have his recipe for turning around one of New Zealand’s most unusual niche businesses.

The company, Pacific Natural Gut, is one of only a small handful of manufacturers in the world making natural gut strings for racquet sports. Made from beef intestines gathered from abattoir by products, they are washed, treated, dried, polished and coated. Natural gut strings power the racquets of more than 75% of the world’s top tennis players on the ATP tour, including John McEnroe and Michael Chang.

Mr Schwacke sums up the benefits of high value added products to New Zealand with startling figures. “ If we didn’t take the raw products, they would be rendered and, at best, turned into meat meal which is sold at around $200 a dry tonne. If we take the same amount of material and turn it into tennis strings, we are looking at export receipts of around $1m, virtually all of which goes right back into the New Zealand economy in the form of salaries, goods and services.”

His American accent sits oddly with the smalltown Taranaki home of Pacific Natural Gut, but he says it was more of a case of ‘being in the wrong place at the right time’ than a clear career step. As one of the rainmakers who turned around the Tyrolia ski binding company he was shoulder-tapped to come to New Zealand, with the clear mandate to either turn the company around or close it.

As a chemical engineer, he realised that there had to be a more scientific approach to a product being created in the eight person factory more by ancient arts than technology. Since his arrival four years ago, PNG has adopted a scientific strategy, defining its products and processes to get greater yield from resources and doubling the strength of the string. Teamed with staff that Schwacke calls ‘outstanding’ , and a great deal of local help, this change of philosophy and attention to details has allowed the company to make a dramatic turnaround.

The company has just received a grant of $100,000 under Technology New Zealand’s new Grants for Private Sector Research and Development (GPSRD)scheme that could catapult the company into the premier position. “It will allow us to dramatically improve the overall string quality by increasing durability, improving ‘stringability’, while lowering production costs,” says Mr Schacke. “That should result in a lower cost, high quality string that the market demands, without diminishing our margins.”

John Gibson, investment manager of the GPSRD fund at the Foundation for Research, Science and Technology, says Pacific Natural Gut’s R&D project fits nicely in the criteria for funding assistance –helping a technical or technological risk taker. The fund, which has $12m available per annum, is intended to encourage SME investment in R&D, by providing up to one third of the cost of the research.

Pacific Natural Gut’s research will put the company, in Mr Schwacke’s vernacular as going from ‘workers in the pineapple field to the top of the hill. It will also fuel a further move into another high value-added niche, the medical market, with membranes for procedures like wound closure and a new generation of natural surgical suture.

Currently exporting 99% of its product to Europe and Asia, it is hoping to re-enter the huge and lucrative US market soon.

But one problem the company faces is the lack of high quality raw materials. “Most of it still eludes us because of old methodology in abattoirs,” he says. “We are working on advanced harvesting methods and better production methods through the GPSRD project.”

Mr Schwacke is lyrical about the virtues of natural gut strings; “hard hitting, with greater playability and performance life than synthetics, and it just keeps on playing.”

But ask him about his own tennis game and he admits he needs all the help he can get – rating himself as ‘one of the four worst in the world’.

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