MILLS: RADICAL CHANGES AHEAD
Byline: Stuart Chirls
NEW YORK — Package marketing, strategic alliances, integrated partnering, flexibility.
These are just some of the enormous changes roiling formerly staid U.S. textile mills. And they all are aimed at getting the fabric producers closer to the retailer.
It’s the key strategy as the domestic textile industry seeks to fortify its position in the apparel supply chain going into the next millennium.
A cross-section of mill executives convened at the offices of the Textile Distributors Association (TDA) to discuss these changes. They included: Ed Shogan, president of finished fabrics, Springs Industries, and Gerald Rubinfeld, president of Texfi Industries’ blends division, both vertical mills; James Walch, president of the marketing division of Jackson Mills, and John Cavanagh, vice president of sales, CMI Industries, two gray goods producers, and Ed Craven, vice president of gray goods, Greenwood Mills, which produces both finished and unfinished fabric. Bruce Roberts, executive director of the TDA, also sat in on the discussion.
WWD: How is business shaping up?
Rubinfeld: For us, ’96 was a pretty strong year, and it has so far been the same in ’97. Textured polyester was one of the product categories that seemed to experience growth overall as we diversified our collection to include bi-stretch, microfiber and polyfilament products. Our outlook is not without concern, but if we don’t hit a wall in the third to fourth quarters, this could be another strong year.
Shogan: Unfortunately, our women’s business wasn’t so good in 1996 and that trend continues in ’97. We are doing much better in other market segments. Whether the woman [consumer] is not shopping like she used to, or she’s buying more imports, whether she’s chosen another product such as textured polyester or knits, things that we don’t do, women’s wear has been difficult.
Cavanagh: Nineteen ninety-seven appears to be a lot better than ’96, which was probably the worst year we’ve had in recent history. We’ve had to make a lot of adjustments in product lines and what areas we’re in, both in home furnishings and specialty apparel areas, as opposed to just pure women’s wear. Although our returns have improved from last year, we’re having a difficult time getting back to decent returns, and we have to operate with a lot of caution.
Craven: For 1997, business started off well both in the lightweight and bottomweight areas. I’ve been in the business 31 years, and 1996 was a total disaster. We’re also into specialty-type products, more than we had been in the past, in corduroy, twills, products like that, and we expect it to be strong through the balance of ’97.
Walch: We look to ’97 to be substantially better than ’96, which was one of the most difficult in our history. Production has changed quite a bit and we’re constantly doing samples in new styles because we have found that the basic areas we used to run, whether it be the rayon challis or the polyrayon gabardine, has eroded substantially due primarily to imports. We have gone to niches, running rayon and wool, and we are working on stretch products on a continuing basis to stay out of the bread-and-butter “everyday” type of products.
Roberts: You seem to be optimistic. I talk to my converter constituents and there doesn’t seem to be a lot of optimism. What are you doing differently to market your goods?
Craven: The business has changed tremendously over the past few years. The converter business as we knew it is practically nonexistent today; they have lost the business to the manufacturers of imported garments. The bulk of our business is done with the verticals — the Galey & Lords, the Springs, the Granitevilles, rather than the converting trade.
Cavanagh: We have to make a distinction. We’re talking about the commodity, basic women’s wear converters. There is still a specialty converting business that does exist and that is fairly successful. We’re also selling to a lot more of the vertical mills, we’re selling to a lot more of the manufacturers, which we didn’t in the past. For that reason, I think the business is a lot more stable although it is difficult and will continue to be that way.
Walch: If you have a product that’s placed with a retailer, what happens is that that retailer shows the garment around the world trying to find someone who can make it cheaper. The next season they give you an opportunity to quote prices, but by that time, they know what lower price they can get on the imported garment, so you lose that business that you had in the past.
Rubinfeld: While we haven’t gone into the business of making garments, we have linked up with marketing-sourcing organizations that work with the major chains, companies whom we haven’t sold in the past. They are low overhead companies that work in the Caribbean Basin and Mexico through 807, and that has been a tremendous boon to us, expanded and diversified our distribution, gotten us into more retail end uses than we have ever been before.
Shogan: The converter as we know him probably hasn’t diversified as much as the five of us sitting around this table. We have found other market segments, where the converter has stayed in the women’s apparel business. We need to continue to diversify, whether it be the product mix we offer or marketing channels of distribution, that’s the key to the future.
WWD: In an industry with a deeply rooted way of doing things, how painful have these changes been?
Shogan: Change is difficult. Some of us look at it with distaste, others see it as a real opportunity. We like to think of ourselves as visionary, but of course it’s not that easy.
Walch: As a mill that services the converter and certain vertical mills, we continually have had to change our product mixes and go in new directions, both in home furnishings and apparel. New equipment, new blends and getting products to run that are technically difficult, for us it’s become a way of life.
Craven: You’re going to get shorter runs, quicker turnover, and you’ve got to change product and continually bring new product into the market.
Cavanagh: Every year we have to keep investing in equipment and it’s a very costly process because it doesn’t end anymore. Twenty-five years ago, the area of the mill industry that we are in was never-changing, everything was very, very simple. Equipment and people are how we are going to be able to compete with imports in the future, as the rest of the world buys new equipment and cuts down on the labor content of weaving.
Rubinfeld: Change is not without a lot of hardship in manufacturing; I think change is easier in marketing.
WWD: Will NAFTA be more important to you as time goes on?
Shogan: There’s an opportunity to ship fabric north and south, where there isn’t east and west. There’s a greater opportunity to ship goods into 807 and Mexican programs than there ever was of exporting to the Far East.
Rubinfeld: There is no Latin American market for us per se, and much of what we produce is coming back [in apparel for the U.S. market]. So NAFTA in that case has helped us to compete with the garments coming in from the Orient.
Cavanagh: From a pure gray mill point of view, it has more than likely helped our customer base. How much isn’t clear yet, but if our customers benefit from it, then we will.
Craven: The NAFTA situation has been very helpful to our business. I see that continuing over the next few years.
Walch: I believe NAFTA has been a positive situation although very substantial numbers of garment manufacturing jobs have been lost here in the United States as a result of it. But overall for the textile industry, it is a positive direction
WWD: How important is the export market to your business plans?
Shogan: In our Springfield apparel division we do very little exporting outside of NAFTA countries. We are looking to try and grow that. We have recently added an executive with international expertise, and our hope is to grow that business in ’97.
Rubinfeld: Our fiber company partners have a very strong presence in Europe and that has enhanced our ability to sell. We have 27 agents and subagents in place throughout Europe and Canada, and we expect a 10 percent increase in ’97. Our category of textured wovens is impacted greatly by the Orient, so we have to diversify more in Europe than we do in the United States. That’s critical. But one of the advantages of having global distribution is not only in selling Europe but in being there, seeing their trends, seeing their styles, so if we are involved selling a product in Europe, then more than likely it also has applications for selling in the United States. French Connection, for example, is a retailer that we sell in Europe and we also sell them in the U.S. — and Esprit as well. So you can’t look at the export business in a vacuum; you have to look at it on a broader scale.
Cavanagh: When you consider my business, it’s unlikely you’re going to be able to export commodity gray goods. We’d like to, but it’s unrealistic in the world market with the price of gray goods in the rest of the world, the cost of freight and shipping, etc. In the long run, with the Internet coming into play, there will be a lot more opportunities and a lot more simplistic ways of selling overseas.
Roberts: It’s difficult for the gray people to export, but are you looking at all? How do you get around a shrinking customer base?
Cavanagh: It’s a sad fact that we spent many years, time and money attempting to export. We don’t have a product that someone in Germany or France or South Africa is saying, ‘We need to buy from you.’ The only time when we did any meaningful export was when the weak dollar made it profitable for countries to buy from us. When the dollar strengthened, the export business went away.
Craven: Twenty years ago we got involved with Celanese setting up an export program in Hong Kong. I think the initial fee was $50,000. Recently, we had Texport [an export program set up by the American Textile Manufacturers Institute in 1995 but disbanded last year] and that cost another $25,000. I don’t think we had one inquiry out of either program. So, unless we come up with a fantastic idea, I just don’t see it happening for us.
WWD: What other strategies are you considering to expand your businesses?
Craven: The only way we are going to be competitive down the road is to get involved in supplying the finished product, eventually maybe calling on the retailer directly through the type of major manufacturers that have become marketing companies and put the burden of manufacturing the product on someone else. We might have to manufacture the entire product in order to survive. People do it in the denim area, and so has Galey & Lord.
Walch: If a gray mill did step out and put together a package of finished goods through the garment manufacturer and retailer, you might get it done, but you’d get a lot of your existing customers upset to the point that they might cease to buy from you.
Roberts: That’s something that continually hangs over the market, but the fact of the matter is that you take the major manufacturers who are going into the retail business, and the major retailers who are going into manufacturing, and no one has really stopped buying from anybody.
Cavanagh: A growing trend is that the vertical mills that have weaving capacity are getting rid of that capacity. They don’t want to spend money where there’s no additional return. And there is more relationship building between the gray mills, the manufacturers and the vertical mills. The manufacturer and the vertical mill are coming to the gray mill and saying, ‘We’d like you to manufacture this product for us, we’d like you to do something that you’ve never done before, that you never wanted to do.’ The difference now is that the gray mills are saying, ‘Good, let’s see what we have to do.’
Rubinfeld: I agree 100 percent with John. That is an absolute trend that we see going forward. Actually, there is no other way. We feel we are marketing driven and certainly we don’t have to add equipment for every issue we take to market. We’re beginning to outsource a great deal more. That may be the greatest change the gray mills will see, the partnerships with the vertical mills, and with the retailers.
Cavanagh: And that brings us closer to the retailer, the end seller.
Shogan: It’s naove to assume that the gray mill will stay in the gray mill business, and the finishing plant will stay in the finishing business, and everything will have its nice, neat cubicles. I don’t think that’s the way the business is going to develop over the next several years. I think people are going to integrate forward, they are going to integrate backward. The customer base that we all call on is shrinking, and we are going to have to serve a different purpose in the future, whether we’re going to outsource part of our product, whether we’re going to form alliances between us. The closer you are to the retailer, the better off you’re going to be. I think we will all be involved with the production of garments, to some degree. The roles are changing and in the next several years we are going to get involved in things we didn’t believe were possible.
WWD: So, the domestic industry is facing a brave new world?
Cavanagh: No matter how well you’re doing, no matter what your profit margins might be, you’re going to have to look ahead and say, ‘What are we going to do next year?’ Twenty years from now, we will not recognize the business we see now. We certainly don’t recognize anything from 20 years ago.
Rubinfeld: The margin mandates are what’s very, very difficult. If your capital investment is geared to the ability to produce proprietary products and to cut down the cost of manufacturing goods, you can compete. But I don’t see where retail prices are going to be accommodating to any of us in the future.
Shogan: The smart garment manufacturer has to take a look at his resource base and must to some degree work with people he wants in business in the future, or he’s going to turn around one day and find he doesn’t have anyone domestically from whom to buy goods.