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For Buffalo businesses in South Korea, it's calm in 'the center of the storm'

Yoo Kang is proud of this place. When New Era Cap Co. hired him six years ago to oversee its South Korean business, he had nothing. No office, no employees; just a vision for opening retail stores across the country.

It took Yoo nearly two years to sell that plan to his bosses in New Era’s Buffalo headquarters. When they finally unleashed him, Yoo moved fast. He opened more than 40 stores in four years and hired the 19 people that now work in New Era’s Seoul office.

“This is our kitchen,” Yoo said while giving a Skype tour of New Era’s glass, gray-hued office. He was pointing to a wall that had no sink, microwave or fridge; just a rack of New Era baseball hats. He laughed. “This is where we cook our product.”

Yoo pointed out his teams of workers who handle marketing, merchandising and product development. A pair of fashionably dressed young men walk in from a smoke. They smile and wave dutifully. Yoo pointed out a pair of consoles loaded with video games from the ‘70s and ‘80s. This is New Era’s entertainment center. He showed off a wall his staff painted in a mosaic of blues and oranges. That is the product of a team-building activity last year.

Yoo stops at a floor-to-ceiling window. “Our office has a great view,” he said. The Han River cuts across the panoramic scene. Across the way is the island of Yeouido, Seoul’s financial district.

Yoo Kang runs New Era Cap's South Korea office in Seoul. (Photo courtesy of New Era)

He’s right. The view is great – from this window, and from this office. But then there’s the view on the map. And the window into the Korean peninsula that most people see only through the news. That story is this: The South Korean capital of Seoul is only 35 miles from the border of North Korea, a dangerous neighbor with a twitchy finger and a collection of missiles. North Korea’s capital, Pyongyang, is only 120 miles away.

From the outside, then, it would seem as if all of this success is threatened by the danger of North Korea and the intentions of its nuclear-minded dictator Kim Jong Un.

From the inside, in the glassy offices of New Era and other Buffalo-based businesses who have a significant presence in South Korea, the view is different. It’s long-held, too, that tensions between the south and north have existed for more than 60 years. For people like Yoo, a jovial and youthful 42, it’s all he’s known.

“We are right in the center of the storm,” Yoo said. “We don’t feel anything, it’s so calm here.”

Two Koreas: A bubble and a pop

The contrast between the two Koreas is stark. While North Korea tests missiles – seven so far this year – and makes nuclear threats, South Korea is pushing the pulse of popular culture. The country is famous for its K-pop (music) and K-dramas (soaps). It's one of the most technologically advanced places on the planet, particularly in Seoul.

South Korea has political issues of its own; the former president was impeached earlier this year and replaced last week in a special election. But it’s driven by democracy. Millions of Koreans protested the scandalized president, then voted in a new one. Whereas in North Korea, the leadership is a dynasty that commands the population in a highly controlled, mostly impenetrable bubble.

South Korea is a country of free expression and economic heft. It is the world’s 11th-largest economy, a step behind Canada and just ahead of Russia and Australia. All of which makes it attractive to western corporations doing business in Asia.

Moog, the East Aurora-based defense contractor, has an office in South Korea that does work in the areas of aircraft and energy. The engineering and fabrication company Hebeler LLC of Tonawanda makes large, million-dollar machines and ships them by boat to South Korean customers. The country is a top-five market for Conax Technologies of Cheektowaga, which sells thermocouples for semiconductors and sealing glands for a variety of industries.

“It’s a good, solid, mature market for us,” said Alex Siegel, a Conax executive who is based in the Philippines and visits South Korea two to three times a year. “It’s a good place for Americans to do business.”

South Korea plays a vital role in Asian operations for Rich Products. The Buffalo-based frozen food manufacturer has two locations and 100 employees in South Korea. That includes an office in Seoul and a plant in Daegu, a city in the southeastern part of South Korea. That plant produces icings and toppings that are sold in South Korea and throughout Asia.

“The plant plays an important strategic role in our manufacturing network given its central location in Asia and South Korea’s reputation for high quality and technological innovation,” said Dwight Gram, a Rich Products vice president and spokesman. “When you’re producing food, quality takes on an even greater meaning because of the critical importance we place on food safety.”

While Rich Products has built a $3.5 billion global business by working with large, lucrative customers like Walmart and Starbucks, the company also mentors small, startup bakeries and food companies, helping to expand the business and develop recipes (using Rich’s ingredients) that become trends. In Asia, where cakes are traditionally smaller and made with a dense, sticky rice flour, Rich Products has helped introduce fluffier, Western-style cakes to be used as a form of celebration for birthday and other occasions. The company also helped popularize the practice of adding cream to bubble tea, which started in Taiwan and has spread across the planet.

In South Korea, Rich executives and culinary experts worked with dessert cafe Sulbing to expand the business from two franchises in 2013 to 490 franchises today. They’ve also worked with Sulbing to develop the recipe for snowflake dessert, a shaved-ice concoction made with cream, sweetened with condensed milk and finished with fruit, chocolate and other toppings.

“We’re creating new trends,” said Jeff Kim, who runs the Asia-Pacific region for Rich Products. “Not just taking one that is existing, but creating new ones.”

Nearly one-third of New Era's South Korean sales come from apparel, including the space jacket in the window of the Itaewon store. (Photo courtesy of New Era)

A culture of innovation

That bent toward innovation permeates South Korean culture. The country has the highest internet speed on the planet. Car navigation systems are more advanced. Public toilets are often equipped with privacy buttons. Don’t want the person in the adjacent stall to hear, or detect, you? At the press of a button, you can play music, or even a faux flush, that gives a shroud of privacy. Another button will freshen the air.

Self-improvement is a cultural priority, both intellectually and aesthetically. South Koreans place a strong emphasis on higher education. They also want to look good. South Korean skin care regimens are famous for their intensity – and their effectiveness. Plastic surgery is a big business, too.

In his book "Seoul Man," Frank Ahrens wrote that, per capita, South Korea is the most surgically enhanced country is the world. He also noted that South Koreans include their headshots with job applications.

“If you have the means to improve yourself, whether it’s your appearance or whether it’s your academic standard, it’s considered foolhardy not to do it,” said Ahrens, a former Washington Post journalist who lived in Seoul for three years working as an executive for Hyundai Motor Co.

A strictly Western view may ascribe this to simple vanity. It’s not.

“In western culture, people give more weight on who you think you are,” said Yoo from New Era, who moved to Hawaii at age 14, attended college at SUNY Binghamton and worked in New York City before landing back in his home country. “But I think out here, people give more weight on how others perceive you.”

This deep difference impacted how Yoo positioned New Era in the Korean market. The company’s motto at the time was “Fly Your Own Flag.” That didn’t translate in Korean. Not literally (birds and planes fly; flags don’t), and not culturally.

“It was kind of difficult for us to send out our own message, like ‘Fly Your Own Flag,’ be who you are,” said Yoo, who knew he had to reinvent New Era’s sales approach to fit the South Korean market.

That strategy was shaped around a strong focus on retail. That was Yoo’s background – he came from the European retailer Intersport. But it was not the specialty of New Era, whose main business is driven by wholesale accounts and sports-league deals.

Yoo pitched the idea to his bosses, who said no. He kept trying for most of his first two years at New Era.

“Nope, didn’t work,” Yoo recalled.

But they weren’t shutting him down. They were just holding him off.

A story of hierarchy

The South Korean culture values hierarchy. In business, position and age accord a person deep respect.

“If you are the boss, you are treated like the boss,” said Anurag Kashyap, a Moog executive who was the boss of the company’s South Korean operation in 2014-15.

When Kashyap took the helm of Moog Korea, which does work in space and defense and power generation, he wanted to bring “a more Western style of working, without compromising on their social values.”

A small example: Kashyap wanted his staff of 30 to call him by his first name. “I call the CEO of Moog by his first name,” he said, recalling his time in Korea from his office in Moog’s East Aurora headquarters.

He eventually convinced the Korean staff to call him Anurag, but it took some doing. It helped that he was relatively young – only in his early 40s.

“My title might be general manager of Korea,” he said, “but my age helped me.”

Age was a factor for Yoo, too. When he joined New Era in 2012, he was in his late 30s. Jim Grundtisch, a New Era vice president who oversees international operations, remembers Yoo as “a young, aggressive kid.”

“He’s relatively a younger executive dealing with older Koreans – that was the first concern,” Grundtisch said. “The second concern was he was very aggressive and wanted to open a lot of stores, so it was hard to kind of talk the rest of the organization along into that.”

Ultimately, Yoo was given the green light to open three test locations, or what the company called “lab” stores. Sales were strong, and Yoo was allowed to open full stores.

Yoo tapped into New Era’s status as the longtime supplier of on-field caps for Major League Baseball players to create a legacy story.

“Our whole story around marketing is that we are the originator,” he said. “So basically, we invented baseball caps.”

Rather than push the individualistic “Fly Your Own Flag” sales message, he positioned New Era as a must-have fashion item. He developed merchandise with bright colors and loud, splashy patterns and put it in the windows to capture customers. They tend to buy more conservative colors like black, white and gray – “never a red Yankees cap,” Yoo said – but the “eye candy,” as he calls it, draws them in.

The strategy works. Today, New Era has 43 retail locations across South Korea; that’s more than the company has in any other country. They sell more than caps, however. In South Korea, 10 percent of New Era’s revenue comes from accessories such as backpacks and sunglasses, and 30 percent from apparel.

That clothing is “some of the best product we’re making anywhere,” said Grundtisch. For examples, he points to a Buffalo Bills jersey with an injection-mold microdot logo that “is like a 3-D pyramid coming off of the garment” and a fleece astronaut-style “space jacket” emblazoned with flags. That includes the United States flag; New Era has found that Americana sells well in South Korea.

This healthy South Korean consumer business has been worth tens of millions annually. New Era won’t release specific numbers, though for a company with overall revenues nearing $1 billion, that’s a helpful but not vital slice.

“As a bellwether for the brand, it’s been very important,” Grundtisch said.

New Era offices in Japan, Brazil, Mexico and Europe, among others, may be adopting some of the Korean designs. The company is also launching an expansive business in China, and drawing from Yoo’s retail strategy to help shape their strategy.

“It proved our model that we could tell the whole brand experience if we could show it at retail the right way,” Grundtisch said.

And it’s growing. New Era plans to have 80 stores in South Korea by 2020.

Northern concerns

On a recent afternoon, Grundtisch’s mother, who lives in Buffalo, sent him a text. He paraphrased it like this:

“So you’re going to China in two weeks. (Note: China also borders North Korea, and is the country’s closest ally.) Let me know when you’re leaving because you know the north would love to shoot down an American plane.”

“I just texted her back and said, ‘Mom, you have more things to worry about, like your spring garden,' ” he said.

Grundtisch’s point – and it’s one shared by every executive interviewed for this story – is that the danger of North Korea is more apparent through the lens of the media than when you’re actually there.

“If something happens, we are very much within the range,” said Moog’s Kashyap, who lived in Seoul with his wife, son and daughter before moving to Williamsville. “But to be fair, in one-and-a-half years of us living there, not even for a day I felt threatened or any risk ... The news would worry me more.”

Yoo has been getting calls from college friends and former colleagues in New York City asking, “Is everything OK?’” Yoo said. “ ‘What do you mean?’ I ask them. We don’t really feel anything.”

Executives from other companies said the same: Business in South Korea has continued as usual.

Patrick Scanlon, sales manager at the engineering and fabrication company Hebeler LLC in Tonawanda, visits South Korea two or three times a year and is in touch regularly with customers there.

“When I talk to them,” he said, “it’s not really stopping them from doing their day-to-day business.”

From the outside, that’s a jolting reality. With Kim – or as Scanlon said some of his customers call him, “the madman from the North” – making nuclear noise and marching missiles through Pyongyang, how could South Koreans not be paralyzed with fear?

The answer can be found in some admittedly loose parallels: Do Buffalonians fear deadly blizzards? Do Californians fear earthquakes? Do New Yorkers fear a second coming of 9/11?

Broadly speaking, and deeply buried in consciousness for many, yes. We all fear disaster. But on the whole, we don’t stop for it. We also don’t talk about it.

Gram, the spokesman for Rich Products, noted that business has continued as usual in South Korea. He also made clear that the company won’t comment on political issues. He noted that in all of Rich’s locations around the world, “Ensuring the safety of our associates, our neighbors, our products and the environment is central to all of our planning.”

Those plans, which he wouldn’t detail, address employee safety and business continuity “in the event we experience any disruption in our global supply chain.”

But it’s economic issues that trigger concern in South Korea. Last winter, China imposed unofficial trade sanctions on South Korea because it was frustrated the country was hosting an American missile defense system. And a drop in oil prices has deeply impacted South Korea, which has some of the world’s most advanced refineries.

“It’s had a greater impact on the economy than the saber-rattling up north,” said Alex Siegel of Conax. “It’s a tangible impact. People are losing their jobs. Oil rigs and platforms aren’t being built. Whereas, ‘OK, those guys up north are rattling their sabers once again. This isn’t the first time.’ ”

No, it isn’t. The Korean War halted with an armistice in 1953, which means Koreans even in their mid-60s can only remember conflict between the north and south.

“When you are exposed to certain things for so long, I guess you become sort of numb to it, right?” said New Era’s Yoo. “I would not say that there is no threat. There is a big threat. It’s just, we don’t think about it on a daily basis.”

He pointed out that the war itself never concluded, which is true. The armistice is essentially an agreement to stop fighting. It’s as if both sides have had a finger on a pause button for six decades, and everyone hopes the northern finger will stay on that button, and not move to another one.

“It’s just a ceasefire. The war didn’t end,” Yoo said. “I guess we’re still – ”

For the first time in this conversation, he stops. Yoo is a sharp talker who can sell what he’s thinking. It’s a skill that’s made him successful in the competitive retail field. But on this point, he’s not as smooth. Because you can’t be.

“I don’t know,” he said. “It’s a weird situation.”

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