Johnson Health Tech Looks for Growth in Commercial Fitness Equipment Market

The Johnson Health Tech Co. expects that its expansion in Europe and India will help it to replace Precor as the world's third-largest maker of commercial fitness equipment this year.

Johnson took a major step toward that goal on June 30, when it signed a contract with Talkwalkers, India's leading fitness-club chain, for the supply of all the equipment needed by the Indian company over the next three years. The deal is worth an estimated US$1 million a year. Talkwalkers now operates over 50 outlets and plans to add 20 annually for the next three years.

Before it signed the new contract Johnson was already chalking up sales of US$2 million a year in India, mainly to Snap and Goldgyms, the country's second and third biggest fitness-club chains.

The success in India follows Johnson's landing of orders from Fitness First and Virgin Active, Europe's top two fitness-club chains, with shipments beginning in July.

Johnson chairman Peter K.C. Lo believes that development in the European and Indian markets is critical for the further expansion of the company's profits and market share.

With the new orders and the start of the busy season, Johnson expects to achieve monthly shipments of US$35-40 million in the second half of 2010, up from US$22 million in the first half, boosting revenue for the whole year to US$396 million (around NT$12.73 billion). This would be a 30% improvement over 2009.

The expansion into the fitness-club market is a milestone in the development of the company, which in the past focused on home fitness equipment. In that market, it overtook Nautilus of the United States to become the world's second-largest manufacturer.

To pave its way into the commercial fitness market, Johnson spent NT$700 million (US$21.9 million at NT$32:US$1) over the past two years to develop its "Matrix" models. The company claims that Matrix equipment is 20% better (in terms of specifications) and 20% cheaper than products from the leading brands of Life, Technogym, and Precor.

The company's growth will get a farther boost from the signing of the cross-straits Economic Cooperation Framework Agreement (ECFA), which provides for the shipment of products to the vast Chinese market tariff-free. Fitness equipment shipped from Taiwan to the mainland is now subject to a 6% duty.

Thanks to ECFA, Johnson expects its sales to China to grow by more than 20% over the next year. Its shipments to that market (mainly of higher-value models for use by fitness clubs, hotels, and individuals) amounted to US$23 million last year, accounting for 7.5% of its total revenue; this year, the figures are expected to rise to US$30 million and 8.5%.

To accommodate the expanded demand, Johnson plans to build new production facilities on a 5,000-ping site (one ping equals 36 square feet) at its headquarters in Taichung, central Taiwan.