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Lingo Media Inc.

ESL learning aids
Sales to China: $1 million a year (approx.)

Michael Kraft first noticed the promise of China in 1998. While his custom-publishing firm tackled a Chinese project for a major Canadian insurer, Kraft discovered the central government was ceding control of educational-material purchases to China’s regional authorities. Kraft soon turned his attention to creating English-as-a-second-language aids for Chinese schools, and he couldn’t be more pleased with the results. His Toronto-based firm, Lingo Media Inc., now sells books, flash-card sets, wall charts and other ESL items to China, which accounts for 97% of annual revenue.

However, notes Kraft, “It has been a painful experience.” After developing its product, Lingo targeted Beijing educators and partnered with a state-owned publisher that knew the market and was allowed to sell to schools. (Foreign companies can produce content for educational materials used in China, but can’t manufacture them.) But Beijing’s municipal government gave the sale to a publisher that it happened to own.

Lingo developed another product for Beijing and found a new partner, but again failed to win a contract — this time because the partner lacked a licence giving the buyer a tax rebate on the purchase. “By 1999,” says Kraft, “I was almost broke.”

Lingo’s turnaround started when Kraft joined the Canada China Business Council, through which he met an executive of People’s Education Publisher, another state-run textbook producer. An alliance developed, but this one worked.

Lingo has since sold 55 million units into China. Sales for the nine months ending Sept. 30, 2003, topped $710,000, but could have been higher had Lingo hedged against the loonie’s rapid rise. If Lingo were allowed to manufacture its products rather than collect content royalties alone, adds Kraft, “We’d be doing more than $20 million a year.”

Despite past struggles, Kraft stresses the value of alliances with Chinese companies. “You can move mountains in China,” he says. “But it’s difficult unless you’re a multinational with money to invest in sales and distribution. A partner knows the market and can help you build your brand.”

© 2004 Marion Raycheba