What does Vietnam’s Textile Factory Actually Look Like?

Vietnam attracts a lot of attention these days in the textile and apparel world. But what does Vietnam’s textile and apparel factory actually look like? 

This video features PPC (Phong Phu Corporation), one of the largest textile mills in Vietnam. It is said that PPC accounts for over 50% of Vietnam’s total textile exports.

  • Anything in the video interests you or surprises you?
  • How is PPC different from textile mills in the US?( You may think about the video we watched in class about the textile mills in NC. For example, are there any differences in working environment, the facility, what it is producing, required labor skills, efficiency and productivity?)
  • How should the US textile industry treat Vietnam? A competitor? A threat? A potential partner? or a great opportunity for investment?

Please feel free to share your thoughts.

[Please leave no more comment for this post unless you have NEW ideas to share]

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Unleashing Fashion Growth City by City

According to a recent study conducted by McKinsey, the global women’s apparel market growth rate is forecasted to increase by 50 percent over the next 12 years, largely driven by the increasing weight of emerging markets such as China and Russia. Historically, the global women’s apparel market has grown at just over 3 percent per year; However, by 2025 the growth rate is expected to approach 5 percent per year. By 2025, women’s apparel is expected to account for 55% of global apparel sales and 60% of sales growth.

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For fashion players, cities are mattering more than any other product category. Top 600 growth cities will account for 62% of women’s apparel market’s growth by 2025; and 16 out of top 20 growth cities are from the emerging markets, adding an additional $100 billion to the global women’s apparel market.

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However, when looking at total size, mature-market cities will still have half the women’s apparel market worldwide, according to McKinsey. Particularly, growth in the luxury markets is still heavily dependent on the mature market, where 70 percent of top growth cities are located.

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With the help of city level analysis, rather than discussing Europe or Asia as alternative destinations, or even the U.K. versus France, companies can now ask themselves, “in what 10 key cities should we next establish a strong presence?”

Exclusive Interview with William L. “Bill” Jasper, Chairman & Chief Executive Officer, Unifi Inc.

Bill Jasper

William L. “Bill” Jasper has been Unifi’s Chairman of the Board since February 2011 and has served as Unifi’s Chief Executive Officer (CEO) and member of Unifi’s Board of Directors and the Company’s Executive Committee since September 2007. Prior to his role as Chairman of the Board, he served as President and CEO, Vice President of Sales and General Manager of Unifi’s polyester division. He joined the company with the purchase of Kinston polyester POY assets from INVISTA in September 2004. Prior to joining Unifi, Mr. Jasper was the Director of INVISTA’s DACRON® polyester filament business. Before working at INVISTA, he held various management positions in operations, technology, sales and business for DuPont since 1980.

Bill Jasper is also a University of Rhode Island alumni! He graduated in 1977 with a Master of Science in Mechanical Engineering.

Founded in 1971 and Headquartered in Greensboro, NC, Unifi, Inc. is a leading producer and processor of multi-filament polyester and nylon textured yarns. Unifi provides innovative, global textile solutions and unique branded yarns for customers at every level of the supply chain. Unifi’s core business consists of the manufacturing of POY (partially-oriented yarn), the texturing, air-jet texturing, twisting, and beaming of polyester and the texturing and covering of nylon filament yarns. Branded products of Unifi include aio® — all-in-one performance yarns, SORBTEK® A.M.Y.®, MYNX® UV, REPREVE®, REFLEXX®, INHIBIT® and SATURA®, which can be found in many products manufactured by the world’s leading brands and retailers.

Interview Part

Sheng Lu: How would you describe the current status of the U.S. textile industry? What’s your outlook for the industry in the next 5 years? What are the top challenges the U.S. textile industry is facing?

Bill Jasper: The industry has undergone a revival after years of decline, so the current status is strong and I believe we’ll see that environment continue for several more years in this region. The industry is expanding in practically every key economic indicator, including output, employment, exports and investment.

  • U.S. textile shipments topped $56 billion in 2013, up more than 5% from 2012
  • U.S. textile exports were $17.9 billion in 2013, up nearly 5%
    • The U.S. has also enjoyed an investment surge in new plants and equipment. Over the past year, 8 foreign companies have made public announcements regarding their intention to invest more than $700 million in new U.S. textile facilities and equipment. These investments are projected to provide approximately 1,900 new jobs in North Carolina, South Carolina, Georgia and Louisiana.
    • This $700 million does not include the ongoing re-investment activities that domestic textile companies have made.

The U.S. industry is also benefitting from several domestic advantages, including reliable and relatively inexpensive energy supplies, infrastructure, access to raw materials, and proximity to markets. We are gaining competitive advantages due to conditions outside the U.S., including rising costs in Asia, high shipping costs, and port capacity restraints. In addition, you’ve probably seen Wal-Mart’s advertising and P.R. blitz that it is committing to buy hundreds of billions of additional dollars in American-made products over the next decade to help support and spur U.S. manufacturing and innovation. With Wal-Mart leading the way, there is definitely a movement afoot to “reshore” some U.S. manufacturing, including textiles and apparel.

Finally, I believe a major driver of recent investments and one of the biggest contributors to the renaissance described above is also one of the biggest challenges the industry is facing. Virtually all of our free trade agreements to date have been based on a yarn forward rule of origin. This means that all processes, including the yarn extrusion, spinning, texturing, fabric formation, and the dyeing, finishing and assembly of the finished garment must take place in a free trade agreement member country to receive duty-free benefits. This rule has benefited the U.S. industry especially in NAFTA and DR-CAFTA, as U.S. yarn and fabric producers have dramatically increased our exports to the region under this regime.

As the U.S. negotiates the Transpacific Partnership Agreement (TPP), if this same rule of origin is undermined by single transformation rules or other loopholes, it could erode the entire supply chain in this hemisphere. In addition, careful attention must be paid to market access for potential TPP members like Vietnam, who is already the second largest exporter of textiles and apparel to the U.S. The domestic industry has requested reasonable duty phase-out periods in market access for our most sensitive products under the TPP so that our partnerships in this region have an adequate adjustment period. The TPP is considered to be the model for all future trade agreements with the U.S., thus it is critically important that our negotiators consider the profound consequences it can have on U.S. jobs and the U.S. textile industry.

Sheng Lu:  “Made in USA” is a very hot topic these days, yet we also live in a globalized world today. From the textile business perspective, what is the relationship between “Made in USA” and “going global” in the 21st century? Do US textile companies today still have to make a choice between the two?

Bill Jasper: Most apparel brands and retailers utilize a balanced sourcing strategy that incorporates production in this hemisphere, as well as Asia, Africa, or other global manufacturing and/or assembly. I do not feel that U.S. textile producers today must necessarily make a choice between the two, but must have a business plan that addresses the realities of the global market. In fact, nearly 98 percent of the clothing purchased in the U.S. is imported from abroad. Only two percent of clothing bought in this country is manufactured here in the U.S., and I doubt there is a business plan in any U.S. textile company that doesn’t reflect that reality.

Unifi, for example, works with downstream customers who want research and development, innovation, speed to market, sustainability, etc., from yarn and fabric production in this hemisphere. It is important that we provide flexibility and these same innovative products anywhere in the world our customers choose to do business. Thus, we export yarn to more than 30 countries from our domestic plants (not counting the exports of fabric from domestic weavers and knitters that use our inputs). Unifi also operates a wholly-owned subsidiary in Suzhou, China, where we focus on the development, sales and service of Unifi’s premium value-added yarns for the Asian market. Our expanding network of manufacturing facilities, sales and sourcing initiatives enables us to drive and capture growth in every major textile and apparel region in the world.

Sheng Lu: We know many products of Unifi are textile intermediaries like fibers and yarns. So how is Unifi’s brand promoted? How much can consumers recognize your product as “made in USA”?

Bill Jasper: As an upstream producer, making that connection with the ultimate consumer can be a challenge. Unifi has succeeded on several fronts. We have differentiated our product offering with premium value-added products, like REPREVE®, which we supply to our global customers wherever they are producing. Our downstream sales and marketing teams work extensively with brands and retailers to help them promote the unique properties of Unifi fibers and yarns. Some ways we do this includes, on product-labeling, hangtags, point of sale, cobranding, advertising and various consumer promotions. The “Made in the USA” message is and can be part of this effort, and I think we’ll see more demand for that as the brands and retailers move more of their sourcing from Asia back to this hemisphere over the next few years.

We recently began marketing directly to the consumer through the launch of our REPREVE #TurnItGreen campaign, which focuses on raising awareness around the importance of recycling and the products that can be created from plastic bottles when they are recycled. The initial launch took place at ESPN’s X Games Aspen in January 2014, where we literally and figuratively helped turn the event green using REPREVE-based product and color. At X Games Aspen, we recycled more than 100,000 plastic bottles to make X Games signage, lanyards and other merchandise. As we grow the REPREVE brand at retail and in the consumer space, we will continue these efforts with various partners, including current partners who have joined the REPREVE #TurnItGreen initiative, including NFL team, the Detriot Lions, where we will recycle more than 200,000 plastic bottles to help turn their stadium green on December 7th, 2014. We’re also driving recycling education by helping turn the live action event, Marvel Universe Live!, green through apparel for the cast and crew, merchandise items and banners, all made with REPREVE recycled fiber.

Sheng Lu: Unifi has opened factories in Brazil and Colombia. Why did Unifi decide to invest in South America? What is the connection between Unifi’s US-based operation and your operations in South America?

Bill Jasper: Both of these manufacturing plants were established in the mid to late 90s as wholly owned subsidiaries of Unifi, Inc. We purchased the small Colombia plant to give us more spandex covering capacity for our yarns that come back to the U.S. for use in pantyhose and socks. The Brazil operation was set up when we saw an opportunity to capture a share of the growing synthetic apparel market in that country. The majority of the textured polyester we make in Brazil stays in Brazil. Over the past several years we have introduced our premium value-added yarns in that market and hope to see strong growth in those product lines as the economy picks up down there.

Unifi also opened a 120,000 square foot polyester yarn texturing facility in El Salvador in 2010 to take advantage of the duty benefits in the DR-CAFTA trade pact and to better serve our growing customer base in the region.

Sheng Lu: What is the market potential of Asia and particularly China for Unifi and the US textile industry in general?

Bill Jasper: The expected growth in China and other Asian markets is enormous, and Unifi’s strategic plan reflects that. By 2020, China’s consumer market is expected to reach 22 percent of total global consumption, second only to the U.S. at 35 percent. Our wholly owned subsidiary (UTSC) is located at the center of one of China’s most important textile regions, Suzhou. UTSC customers will have quick access to new product introductions with the quality and technical service they have come to expect with Unifi. UTSC was established to provide the domestic Chinese market with a full complement of our specialty branded products, not only for their growing appetite for branded apparel, but for growth in their automotive and home furnishing markets.

The U.S. textile industry in general has invested heavily to take advantage of the growth in Asia by adding to their manufacturing facilities here or putting plants in Asia or China. Countries like Vietnam also offer strong manufacturing platforms due to lower wages than China and the prospect of duty-free exports to the European Union, the U.S. and Japan when announced trade agreements like TPP are completed. The growth of the Asian textile market certainly ups the ante in regard to whether there will be a yarn forward rule under TPP. Failure to include a strong yarn forward rule in this key agreement will likely cede key Asian markets to textile suppliers that are not a party to the TPP. To the contrary, inclusion of a yarn forward provision in that agreement will drive investment to partner countries and provides opportunities for U.S. fabrics and yarns to supply production meeting those guidelines.

Sheng Lu: How do you see “sustainability” as a game changer for the textile industry?  What has Unifi done in response to the growing awareness of sustainability among consumers?

Bill Jasper: Reducing our environmental footprint through the entire supply chain has been an important focus of the industry for several years, driven by industry leaders like Unifi and our suppliers and customers.

Unifi has an on-site environmental team constantly reviewing everything we do to see how we can reduce, reuse, recycle and conserve. All of our U.S.-based plants are currently landfill-free; we recycle our shipping pallets, we have installed energy-efficient lighting and increased efficiency around our compressed air usage, for example.

In 2010, Unifi opened our state-of-the-art REPREVE Recycling Center, where we use our own industrial yarn waste, recycled water bottles and even fabric waste to make REPREVE® recycled polyester fibers and yarns which go back into high end consumer apparel, like fleeces made by Patagonia, shoes and apparel by Nike, The North Face jackets, and eco-friendly Haggar pants. You can also find REPREVE® in Ford vehicles, including the 2015 Ford F150. In 2013, REPREVE® turned more than 740 million recycled bottles into fiber, and since 2009, we have recycled more than two billion plastic bottles to make REPREVE. Unifi’s recycled process offsets the need to use newly refined crude oil, uses less energy and water, and produces fewer greenhouse gas emissions compared to making virgin synthetic fibers.

Moreover, for Unifi at least, this is much more than a marketing concept. Our focus on environmental sustainability is now an engrained part of our culture. We believe that sustainability must be an unwavering core value of responsible manufacturing in the 21st century.

Sheng Lu: Given the changing nature of the US textile industry, what kind of talents will be most in needs by the US textile industry in the years ahead? Do you have any advice for textile and apparel majors in terms of improving their employability in the job market?

Bill Jasper: The U.S. textile industry is a diverse, technology driven, capital intensive, innovator of high quality products that is able and ready to compete effectively in the 21st century global marketplace, and a prepared workforce is critical in meeting the needs of this competitive industry. Not only do we look for skills in textile technology, we look for workers with high math and science aptitudes, technical and chemical engineering skills, process improvement, and industrial engineering capabilities. The ability to think strategically and globally is a big advantage in driving sales and creating marketing programs that meet the needs of our customers world-wide.

–The End–

Five Key Trends in Luxury Goods

Five key trends in Luxury Goods

  • Luxury market remains optimistic with forecast sales set to reach $405 billion USD by 2019.
  • The United States remains the largest luxury goods market in the world, valued at $78 billion USD in 2014.
  • Designer apparel accounted for the most sales of all luxury categories in 2014.
  • Luxury jewelry and timepieces grew by 63% and 42% respectively in the last 5 years.
  • China dropped from 3rd to 4th place in the global rankings, due to the government clampdown on extravagant spending and slowing growth of the economy.

According to a featured story written by Just-Style on the Euromonitor report, global luxury goods sales in 2013 rose 3% year-on-year in value terms and most of this growth came from emerging markets such as China, India, Indonesia and Malaysia. Data shows that luxury spending in the BRIC countries experienced a massive increase of 104% over the last five years, compared to just 18% in developed markets. It is further suggested that BRIC countries will account for more than 35% of projected global sales of luxury goods from 2014-2018. Specifically, India is forecast to grow by a further 86% in constant value terms over the five years to 2018, followed by China at 72%, Brazil at 31% and Russia at 28%.

The outlook for the luxury goods industry over the short to medium term is positive. A rapidly expanding A and B class across sub-Saharan Africa, Latin America and emerging Asia, with incomes 150% to over 200% higher than the average gross incomes of individuals aged 15 and over, is fuelling a new culture of luxury aspiration, leading to an increase in luxury spend.

Source: Euromonitor International; Just-Style

US Fashion and Apparel Industry Releases Position Paper on the Transatlantic Trade and Investment Partnership (T-TIP)

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The American Apparel and Footwear Association (AAFA) and the US Fashion Industry Association (USFIA) , the two leading industry organizations representing the US fashion and apparel industry, jointly released a position paper this week on the Transatlantic Trade and Investment Partnership (T-TIP), which is currently under negotiation between the United States and the European Union.

The position paper spells out a few priorities deemed by the US fashion apparel industry for the T-TIP:

  • Full, immediate and reciprocal elimination of tariffs, meaning import duties on all apparel products shall be eliminated on day one without phrase-out periods.
  • Flexible rules of origin, meaning restrictive rules of origin such as “yarn-forward” which requires companies to use textile inputs from certain regions so as to enjoy the duty free market access shall be abandoned and replaced by simpler and more flexible ones.
  • Regulatory coherence, such as harmonization on labeling regulations, harmonization of product safety and test method regulations, and establishing of a harmonized list of prohibited substances.
  • Emphasis on facilitative customs provisions, meaning improving predictability, simplicity and uniformity in border procedures.  

The European Branded Clothing Alliance is also a party of the joint statement; however, the European Textile and Apparel Confederation (Euratex) is not involved.

On the other hand, in May 2014, the National Council of Textile Organizations (NCTO), which represents the interests of the US textile industry, announced its priorities for the T-TIP negation, including:

  • Adopt the “yarn-forward” rules of origin in T-TIP
  • Set phrase-out periods for sensitive textile and apparel products
  • Protect the Berry Amendment (which requires all US military uniforms have to be 100% made in USA)