n early 2020, the top three executives at Hong Kong-based power tools maker Techtronic Industries (TTI)—chairman Horst Julius Pudwill, vice chairman Stephan Horst Pudwill (his son), and CEO Joseph Galli Jr.—were growing concerned.
As the pandemic unfolded, the news was grim from both TTI’s biggest customer, Home Depot, and its biggest factory in Dongguan, China. The factory was shut for ten days in February due to the pandemic. A month later, Home Depot had cut its stores’ operating hours and put a limit on customers allowed inside at one time—and the year before the U.S. DIY chain had contributed nearly half of TTI’s sales.
The pandemic has been one of the biggest challenges to TTI since Horst, 76, cofounded it in 1985 (Stephan, 44, joined the company in 2004, and Galli, 62, in 2006). On a Zoom call in early April, the trio huddled with the TTI executive team to take stock. Rather than pull back, they decided to stay committed to the company’s long-term growth plan, such as holding R&D spending at 3% of annual revenues. The company did make some adjustments to the pandemic, such as allowing inventories to pile up as clients cut back on orders.
When half-year results were announced in June, TTI’s strategy paid off, with profits rising 16% for the year to $332 million on the back of $4.2 billion revenues, up 13%. For the full-year, expected in early March this year, analysts estimate TTI’s revenue is on track to climb nearly 15% to $8.8 billion (the results will be released just after Forbes Asia went to press). “We made a lot of bold decisions [in 2020]; when our competitors were furloughing people, we made the decision to invest further in our business, to build up inventory to support our customers [and] to invest in R&D,” says Horst. “These were decisions we made together as a group, as a team.”
STOCK PRICE CHANGE IN % TO DEC. 31, 2020
To be sure, the lockdowns and restrictions in the U.S. and elsewhere had an unexpected benefit as well. Consumers, homebound for work or because they were unemployed, decided it was a good time to spruce up their homes with repairs and improvements, lifting demand for tools and supplies.
TTI’s outlook remains bright going into 2021. Once the underdog in the global power tools and homecare products industry, TTI has steadily risen over the years to become a serious challenger to its two global rivals, Stanley Black & Decker and Germany’s Bosch. As Bosch is private, numbers are hard to come by, but a comparison with the publicly traded Stanley is instructive. While Stanley still dwarfs TTI with $14.5 billion in annual revenues, the gap is closing.
In the last five years, TTI’s revenues have risen by a total of 60%, while Stanley has only seen a 23% gain. Investors have voted with their dollars, driving up TTI’s stock nearly fourfold to the end of last year, while Stanley has not quite doubled. Today TTI sports a larger market value on the Hong Kong exchange ($29 billion) than Henderson Land, one of Hong Kong’s largest property firms ($19 billion).
Horst with Stephan (right), who is holding a set of lithium-ion batteries. Its Milwaukee brand—on display in a company showroom—pioneered the use of lithium-ion batteries to power cordless tools.
he long-term goal of TTI is to disrupt the basic technology of power tools, with a brash goal to out-innovate its rivals. While many power tool companies offer cordless products, Horst made a major, and early, bet to be on the forefront of this technology. A good example is in TTI’s bestselling Milwaukee brand, sold at Home Depot. “[Milwaukee] is a name to be reckoned with in the cordless power tools segment. Milwaukee can be considered as a pioneer of the power tool industry as they were the first to incorporate lithium-ion technology in their product lines,” writes Aida Vasquez at Architecture Lab, a site for the architectural community.
It’s the lithium-ion that makes the difference. TTI embraced its use in power tool batteries rather than more conventional materials, such as nickel-cadmium. While lithium-ion batteries are more expensive than conventional ones, they are otherwise superior in almost every measure, such as being lighter, smaller, and holding power longer. As Horst puts it: “I am betting on batteries getting better and better. We are also thinking about how to diversify and expand our tools to other opportunities.”
TTI then adds further innovation to its batteries, such as testing and tweaking them in-house using proprietary software. “By contrast, its competitors rely on outside software providers and several of them purchase battery packs entirely from third parties,” says UBS in a recent report.
Another key differentiator, according to UBS, are TTI’s motors. The company uses high-performance, brushless motors—which are 20% to 25% more efficient than those of their peers, which translates into higher power, performance and durability. “For Milwaukee’s brushless drill, for example, we launch a new generation version—smaller, more powerful—every two years. There’s no limit. You are going to see more breakthroughs throughout the next ten years,” says Galli.
TTI, and the industry overall, still has plenty of room for growth. Chicago-based researcher Arizton Advisory and Intelligence says that cordless tools now account for 56% of the $24 billion global power tools market and that percentage is set to keep growing until at least 2025. Bosch, Stanley and TTI together controlled about 40% of the cordless power tools market in 2019, estimates the research firm.
“You are going to see more breakthroughs throughout the next ten years,” says Joseph Galli Jr.
uccess has been a long time coming for Horst. After deciding to use China as a low-cost manufacturing base, he struggled at first to get sales as China-made tools were perceived in overseas markets as lower quality than those made by rivals elsewhere.
Yet he worked hard to ensure the quality of his tools was world-class, slowly gaining respect and clients. “Manufacturing is one of the elements we are very good at. But our strength is relying on R&D,” says Stephan. “We are really a technology leader, a disruptor.”
Horst’s earliest bet on power tools’ cordless future was a 3.6-volt handheld screwdriver, launched in 1986, when the company was just a year old. It was an instant success: Sears’ Craftsman brand ordered 250,000 pieces in the first shipment. “I started with small tools. . . . You must be patient. Don’t give up your dream,” says Horst. He also realized his dream to bring cordless technology to larger tools for professional users, such as contractors and electricians. “Cordless in my mind was something new and had no competition,” says Horst. “People really did not believe that cordless was the future.”
By 1990, Horst was able to list TTI on the Hong Kong exchange, and in 2002, TTI earned a spot on Forbes Asia’s Best Under A Billion list. In 2014, Horst broke into the ranks of Hong Kong’s 50 Richest with a net worth of $1.14 billion, putting him No. 43 on the list. This year he is No. 12, and sports a net worth of $6.7 billion, up 81% from $3.7 billion on last year’s list. Nonexecutive director Roy Chung, who cofounded TTI with Horst, now has a TTI stake valued at over $900 million as Forbes Asia went to press.
Horst’s responsibility as chairman is long-term strategic planning, while Stephan and Galli share day-to-day operations, with Stephan overseeing internal operations, while Galli focuses on business operations, product development and sales.
“Manufacturing is one of the elements we are very good at. But our strength is relying on R&D. We are really a technology leader, a disruptor.”
Of special interest to the Pudwills about Galli, who is an American, was his 19 years at Black & Decker, before its merger with Stanley in 2010. His last post there was president of worldwide power tools and accessories, a $3.1 billion business at the time. In 1999, Galli moved to Amazon as its president, spending 13 months there reporting directly to Jeff Bezos. He joined TTI in 2006 to look after appliances, and became CEO in 2008. “When I was at Black & Decker, developing a new product took 20 to 28 months. At TTI, the time is nine months,” says Galli, “Horst is an entrepreneur. There’s no bureaucracy; The approval process doesn’t need nine signatures.”
Stephan, who is German as is his father, was raised with an eye to succession. As a child, Horst brought his son to corporate dinners and on business trips around the globe. “You learn a lot in university, but nothing is better than on-the-job training. My on-the-job started when I was a little kid,” says Stephan (who graduated from the University of British Columbia in Canada).
Stephan clearly relishes his role. During the interview for this article, Stephan reels off technical details about TTI’s battery technology, such as its chemistry, performance and characteristics. “[Stephan] is hands-on and engaged,” says Horst. “We need to be hands-on; we are the biggest stakeholder. We gain the most and would lose the most, if we lose.”
Stephan is literally hands-on in another way: he personally tests each of the company’s products—and last year TTI introduced 500 of them. In TTI’s headquarters, there is a showroom where shelves are arrayed with hundreds of power tools, from the bright red of the Milwaukee brand to the lime green of Ryobi, and ranging from pocket-sized to two meters in height. Stephan quickly points out the company’s more popular products, including a spray can and a heat gun. “Our showroom is like a toy shop for adults,” Stephan says.
At home, he also has plenty of TTI products: a lawnmower for the garden, tools to build a dog house, a pump to inflate bicycle tires—all cordless. Just as Horst raised Stephan in the business, Stephan is now doing the same with his children. He recently built a model airplane with his older son with a combination of TTI tools, such as a drill, saw, screwdriver and sander to polish the wood. It’s his way of introducing the third generation to the business. “I wanted to show my son how to use tools, and what to do with them,” he says, “I enjoy building things.” And it also looks like TTI will continue to have a deep bench of talent.
Correction: February 28, 2021
An earlier version of this story incorrectly stated that Home Depot rolled out its Covid response measures prior to the closure of TTI’s biggest factory in Dongguan. Home Depot’s measures were, in fact, introduced in mid-March, and the factory’s closure took place in February.
I cover regional corporates and entrepreneurs for Forbes Asia magazine as a contributing correspondent. Previously, I was a staff writer with Forbes, producing stories