Up, up and away

Many companies change direction when control is passed from one generation to the next, but few turn the steering wheel as sharply as Conwin Carbonic. The company, once an industrial gas supplier in the Los Angeles market, is now a leading player in balloon entertainment around the world. In its early days, Conwin sold prosaic CO2 regulators used in restaurant beverage dispensers; today its products enable balloon artists to create intricate, fanciful displays. Under the leadership of second-generation owner Michael Wing, 43, Conwin transformed itself from a product-driven industrial operation to a customer-driven marketing company.

Even though it eventually involved nearly every aspect of the company’s business, Conwin’s transformation wasn’t the result of heavy number crunching, in-depth market projections or extensive financial analysis. “It was a very evolutionary decision,” Michael says. “Knowing this was going to be my company, that’s the direction I wanted to go.”

In a way, Conwin got its start in adversity. Not long after company founder Albert Wing earned his civil engineering degree from USC, he developed Guillain-Barré syndrome, a nervous system disorder that can cause paralysis of the legs, the arms and other body parts. He entered Rancho Los Amigos Hospital, where he became fascinated by the devices used in rehabilitation. After he overcame his illness, Al went to work with the institution’s research group making what he terms “artificial muscles powered by carbon dioxide” to assist invalids, many of whom suffered from polio. “We gave people an opportunity to do some basic things for themselves, like scratch their nose and comb their hair,” Al explains.

Regulators that control the flow of gases were important components in such devices, but they had other applications as well. Al secured distribution rights for a regulator and started Conwin Carbonic with his wife, Alberta, in the garage of their Whittier, Calif., home in 1960. The Wings had a partner named Jack Conroy (hence the name Conwin), but Al and Alberta bought him out after about a year. With Alberta managing the office and Al running production, they sold regulators and CO2, largely to restaurants for beverage dispensers. Over time, the company expanded its product line to include high-pressure cylinders and other gases including helium, oxygen and nitrogen. Dry ice grew into a big part of the business, and Conwin became a major supplier to nearby Hollywood studios, which used tons of it for special effects. The 1984 comedy hit Ghostbusters was one of Conwin’s biggest projects, according to Michael.

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The Wings’ eldest daughter, Patty, introduced balloons into the family in the ’70s when she opened a Los Angeles balloon decorating company, Balloons by Patty. The balloon industry was then in its infancy, and Al recognized a challenge as Patty described her struggles with existing technology. The industry lacked a device that would inflate lots of balloons precisely and efficiently.

“We saw that there was a need for equipment that would be more user-friendly,” he says. “The regulators that were used at that time were borrowed from the welding industry. They performed the function OK, but they didn’t lend themselves to balloons very well.”

Al’s first innovative breakthrough was the Dual Split-Second Sizer, a high-speed multi-nozzle inflator that reduced the time needed to produce large balloon displays. The product revolutionized the industry by making it possible to stage million-balloon extravaganzas. To Al, this was just one more engineering problem solved; to Michael, it was opportunity incarnate. “Dad didn’t just build a better mousetrap,” Michael says. “He invented the mousetrap.”

Patty was killed in a tragic auto accident with a drunk driver in 1988 at the age of 35, but her foray into the balloon business had already left its mark on Conwin. Michael, ten years younger than Patty, recalls having great fun as a boy helping her out during a balloon release on opening day at Dodger Stadium. When he graduated from Pepperdine University in 1985, he joined Conwin as its first vice president of marketing with a head full of aggressive ideas for growing the balloon business. At that time, balloons still represented less than half of the company’s total revenues, but the market segment was growing rapidly.

Al says with pride, “I didn’t develop the business like Mike has. He has the vision and the energy.”

Balloons were the future for Michael. “The industrial side of our business was easy, but there wasn’t much growth potential,” he says. “It was pretty much tapped out.” Conwin sold its dry ice business, which provided a third of the company’s revenues at the time, to a competitor in 1987. Michael says the low-growth, labor-intensive dry ice operation didn’t fit his vision of the future and diverted time, energy and funds from the growing balloon business.

Conwin still serves the industrial gas industry and provides specialized, low-volume equipment like nitrogen dispensers for wine bars, pneumatic regulators used in vineyards and auto racing, and medical devices like the insufflator, which pumps carbon dioxide into a body cavity to give the surgeon room to work during laparoscopic surgery and other procedures. Today, that division represents about 20% of Conwin’s total sales. The company designs and manufactures products for other firms, which market them under their own labels.

“We never made a decision to not market to the industrial side of the business,” Michael explains. “It is very turnkey in many ways. People come to us and ask for something with this connection and that setting and this style gauge and that output pressure. It’s just that more and more of our energies went into the balloon industry.” Conwin didn’t turn away from the industrial gas business; the balloon business simply outpaced it.

Growth in the balloon business was fueled by a stream of innovative products Al designed based on feedback gathered by Michael from party planners and other participants in the rapidly expanding industry. Balloons may be the ultimate non-digital one-piece toy, but the products that put Conwin on the map are anything but simple. Conwin’s equipment&151;automatic shut-off foil balloon inflators, pneumatic balloon exploders, low-temperature fluorescent balloon light bulbs, and pneumatic cannons that spew more than a pound of confetti in one blast—raises balloon fun to a higher level. According to Michael, all Conwin’s products are manufactured in the U.S., although most production is outsourced to provide greater response to spikes in demand and preclude the necessity to invest in expensive, high-tech machine tools. Conwin employs about 40 people.

The products Al designed enabled balloon artists to create displays featuring thousands of balloons and spectacular special effects. Before Al invented the multi-nozzle regulator with a foot pedal control, for example, each worker inflated one balloon at a time from a cylinder of gas. Gas cylinders are very heavy and awkward to handle, so balloon artists don’t want to haul around any more than absolutely necessary. “One worker tying up one tank doesn’t make a lot of sense,” Michael says. “The three-operator regulator was the home run.” It allows three people to work from one tank of gas simultaneously.

Michael terms the invention “a huge breakthrough.” He explains, “Generally on a balloon job, one of the constraints is time. The wedding or the party is in a public facility like a country club or banquet hall that’s booked with back-to-back events. There will be just a little time in between to set up. You can’t build these large balloon structures off-site because of the logistics. With equipment that’s very efficient and fast and easy producing consistent results, you can have an inexperienced worker do it.&”

Balloon decorators have small staffs. Their workers are often inexperienced friends and family, so the precision must be built into the tools, not trained into the workers.

Al’s inventions also improved architectural effects like balloon columns and arches, created by tying two balloons together with a square knot. That’s called a duplet, Michael explains. By twisting two duplets together, then continuing to stack them on the line, a designer can build anything, he says. If the balloons aren’t inflated to exactly the same size, though, they look like a bad ear of corn with different-sized kernels. “We use solenoid valves that are very, very, very precise to the tenth of a second,” Michael explains.“You can set it and work really quickly.” It takes about two seconds to blow up an 11-inch balloon. One person can inflate the balloons while another one ties them together.

These innovations helped launch a cottage industry that Entrepreneur Magazine calls one of the top self-employment opportunities available. “One thing I’ve always felt good about is that we have given all kinds of people opportunities,” observes Michael’s mother, Alberta Wing. “For a few bucks, they can get a cylinder and a few balloons and they’re in business! I’ve seen plenty of people who start out in that very small way—working with church groups and such—and now they’ve got great businesses. I take great pleasure in that.”

It didn’t take Conwin long to replace the revenues from the dry ice business with sales of balloon equipment. Sales roughly doubled in the first ten years after the change in direction and doubled again in the next ten. Profits increased, too, since gross margins in the balloon equipment manufacturing side of the business can be as much as 40% greater than they were in the dry ice business. “We enjoy better margins as a manufacturer and distributor than we did as a processor/distributor, which was our role in the dry ice business,” Michael explains.

By 1988, Conwin was a major distributor of balloons as well as a manufacturer of the equipment used to inflate them and produce special effects. The company moved into a new facility devoted almost entirely to what by then had become its principal business, balloons. Michael’s wife, Delianne, a visual merchandiser by trade, designed a store-like space featuring a big display window. “It’s a wholesale store with aisles and shopping carts,” Michael says. “It’s visually pleasing.” Big bins hold the merchandise, and colorful displays encourage decorators to touch and see the product. “When a balloon is flat, it’s nothing,” Michael observes. “When you blow it up, it takes on a whole new dimension and life. You’ve got to have a lot of products on display.” The entire facility is 40,000 square feet, with 6,000 devoted to the cash-and-carry side.

There is some retail trade, Michael says, but Conwin is not geared to it because its products are sold in large lots, although the company offers some rental equipment for schools and groups. The store caters to buyers in a 15-mile radius in the Los Angeles area, where Conwin has more than 5,000 customers. The company works through a network of 40 distributors in the U.S., most of whom are in the party goods business, and sells an ever-increasing amount of merchandise over the Internet through two websites, http://www.conwinonline.com and http://www.laballoons.com. The domestic sales staff consists of four people who handle in-house support for distributors.

Conwin dominates the small but growing balloon industry. The market includes paper and party retailers, entertainment and corporate event coordinators, rental outlets, florists and entrepreneurial balloon designers. Balloons are used for event décor, gift bouquets, sculptures and installations, and in spectacular special effects using confetti, synchronized explosions and mass releases. There is even a niche in the fashion industry devoted to apparel made from balloons. According to Party and Paper Magazine, balloons and balloon accessories are the top two product categories in the $8.5 billion party and paper industry. “;It’s a small, niche market,” Michael explains. “From a competitive standpoint, we estimate we have over a 70% share of the market worldwide.”

The domestic market is growing at a rate of about 5% annually, Michael says, but the international market is just developing. Since Conwin sells products that will help the growth of the balloon industry in other countries as it did in the U.S., it’s well positioned to profit from that expansion. To develop the international business, Michael hired full-time employees who live and work overseas. The international accounts manager and her staff are based in London and cover all European sales. Michael worked out a warehousing deal with a partnering manufacturer in England to serve as a fulfillment center. The company also has a sales manager in Kuala Lumpur for Asia and another in Guadalajara who handles Latin America. A third of Conwin’s revenue comes from international customers now. “I foresee within the next five years, it will be 40[%] to 50% of our business,” Michael says. “The potential overseas is tremendous.”

Other efficiencies for both Conwin and its customers are found online. “The Internet is playing a huge role in our business,” Michael says. “In January [2006], we launched a DVD in six languages and put it on the web as well as packing hard copies with key products. People can go right there and watch the product in action.”The Internet has also cut down on the need for staffing.“You can download instruction sheets, warranty information, service and support,” Michael notes. “It’s streamlined so many things.” Outstanding balloon artists are showcased on the website, too.

Another customer-centric innovation is the Conwin Balloon Design Academy, which offers seminars covering topics like “Wedding Décor Wonders” and “The Business of Bar/Bat Mitzvahs.” The three-hour classes draw about 30 students who pay $35 to $50 to attend. “Students get promotional coupons for the equipment we use in the classes,” Michael says. “They go right from the classroom down to the store, which is in the same location.” Conwin partners with a major balloon manufacturer, Qualitex, which certifies balloon designers when they complete an extensive training program. Similar to florists’ FTD designation, the certification enables customers to order balloon designs from coast to coast.

Over a period of just 20 years, the Wing family transformed their business from a solid, stable concern to a company that helps bring happiness to the world. Their change in direction brought a positive change to the bottom line, too. As Alberta says, “If you’re going to spend your life in a business, you should have a little fun.”

Dave Donelson is a business writer based in West Harrison, N.Y.

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