Cactus needles to compact discs - profile of Madrigal Audio Laboratories

Nation's Business, June, 1993 by Kristi Vaughan

Sanford Berlin received an early introduction to the sophisticated world of audio equipment. As a child in the early '30s--he is now 66--he kept his grandfather's record player in top condition. "My grandfather was a high-tech person," Berlin says. "He used cactus needles, said that they had a better quality than metal. It was my job when the needless got dull to resharpen them."

Cactus needles have long since given way to compact-disc players and digital components, but Berlin's inherited passion for high-quality sound hasn't changed.

And now Madrigal Audio Laboratories, the high-end audio-equipment manufacturer that he started in Middletown, Conn., eight years ago, is successfully challenging Japanese and European competitors in their home markets.

"For us to be successful," says Berlin, Madrigal's chief executive officer, "we have to design a product that is better than the best local product."

Despite price tags that rival those of luxury cars (a state-of-the-art system can easily run $50,000 in the U.S., double that in Japan), Madridal is selling thousands of compact-disc players, digital processors, amplifiers, and preamplifiers in 46 countries. Only 30 percent of the company's sales comes from the United States.

"We reasoned that there wasn't any country in the world that could support a very high-end company all by itself," Berlin says. "So we wrote a plan to do business all over the world."

Madrigal first went after distributorships in Japan, Germany, Canada, and other high-income countries. The company has recently expanded into South America and Egypt; the United Arab Emirates are next in line.

Although their high cost makes it unlikely the average consumer will ever own any Madrigal products, that's just fine with Berlin and his key officers. "A lot of companies have lost their focus putting out mediocre things," says Mark Glazier, the company's president. "Enlightened consumers want there to be a focus and a dedication that is clear."

Berlin actually retired from the audio industry 17 years ago, when he stepped down as president of Harman Industries. He spent a couple of years as a visiting fellow at Yale University and was generally at loose ends when the mayor of New Haven, Conn., got in touch with him about an ailing audio firm, Mark Levinson Audio Systems, that wanted to locate in the city.

Berlin, along with friends, invested about $1 million in the company, thereby acquiring 60 percent ownership but assuming no responsibility for the firm's past debts.

Within a few years, though, the Levinson company went bankrupt anyway, and Berlin and his friends lost their investment. That was the end of it--or so Berlin thought.

He was building a house on the seventh fairway of a golf course in 1985 when he learned that the Levinson company's assets were to be sold at auction. He put a couple of blank checks in his pocket ("in case there was anything I wanted to buy," he says) and went to the auction. By day's end he owned everything--the equipment, blueprints, and the right to use the Mark Levinson trademark. All for $160,000.

In Madrigal's first year, revenues were $1.3 million; by last year, they had grown to $14 million.

Berlin hopes that within the next five years--depending on how fast the global economy improves--revenues will grow to $30 million.

Last year, though, cash-flow problems temporarily threatened Madrigal's ability to pay its bills. Berlin invited his top 20 suppliers to a catered lunch and asked their indulgence. When one supplier wanted to know why he should further extend credit, Berlin replied: "Every time I take an order, you get a hunk of business. I'm not a local manufacturer, I'm your sales manager."

At monthly meetings, Berlin opens the books and his management decisions to employee scrutiny and criticism. Last July, at the close of the 1991-92 fiscal year, he stood proudly before Madrigal's 150 employees to say: "We've just had the first solidly profitable year of this young company, in the worst of times."

The company is still growing, although the worldwide recession is taking its toll. Sales in Japan are down, for instance--but market share there and elsewhere is up, and Berlin thinks that bodes well for the future. "In a shrinking market," he says, "the best product continues to sell, and the others disappear."