TRALAC - Trade Law Centre

SA Clothing Industry can be Profitable - Levi Strauss

Wednesday, 26 April 2006

Source: Business Report (South Africa)

The strong performance of the Levi clothing factory in Cape Town, one of only five Levi-owned factories left in the world, over the past few years shows that the local clothing industry can be profitable while maintaining global best practice operationally.

Although tens of thousands of jobs have been lost in South Africa's clothing and textiles industry in the past three years as factories have closed their doors in the face of stiff competition from China and elsewhere in Asia, the Levi factory at Epping has gone from strength to strength, moving from being the 13th most profitable operation among Levi's businesses worldwide to the third most profitable in 2005.

Levis Strauss South Africa was named "Manufacturer of the Year" by Finance Minister Trevor Manuel at the Cape Town Fashion Awards last week.

Managing director Mike Joubert said Levi's South African operation had managed to persuade its US headquarters to retain the Cape Town factory three years ago when a strategic decision was made to move away from owning any factories at all. Instead, the company opted to invest further in the factory based on its potential growth in South Africa, and as a base for exporting to the rest of Africa and other markets.

Since 2003, the group has transformed its manufacturing operation to produce more high-quality clothing by improving efficiencies, doubling its stock turn and increasing productivity while driving down costs.

At the same time, it agreed to a new pay incentive scheme with the South African Clothing and Textile Workers' Union (Sactwu) for its workers, which allows them to boost their earnings 30 percent above industry norms.

Levi said it viewed the agreement with Sactwu as an innovative and commercially sustainable response to the challenges facing the local clothing industry.

In the past year, the business posted 25 percent turnover growth on that of the previous year, making South Africa one of the best performing markets for the Levi brand in the world. One in every four pairs of jeans sold in South Africa is Levi Strauss.

Levi Strauss' Asia-Pacific division, which includes South Africa, Australia, Malaysia and China, performed well overall in 2005 with total net sales of $604 million (R3.69 billion), 19 percent higher than 2004 levels.

Over the past two years, Levi, like other clothing retailers, has taken advantage of the consumer spending boom, more than doubling the number of its stores in the South African retail market to 16, and plans to have 30 open by the end of 2007.

It has also strengthened its partnerships with national retailers like Edgars Consolidated Stores (Edcon), Truworths, Markham and Stuttafords.

Sactwu Secretary General Ebrahim Patel said the union had been working closely with Levi's on Project Spear, which aimed to integrate Levi Strauss' global experience and its 153-year history and reputation for quality excellence into the South African business.

"We support the project's aims and commend them for their confidence and commitment to the South African consumer market and clothing manufacturing base.

"The company's success is particularly encouraging taking into account that they pay significantly above the industry norm, and continuously invest in technology, machinery and skills development," said Patel.

Joubert added that Project Spear also focused on responding much better to demand from its retailer base for certain styles of jeans.

"This has allowed us to get the product mix just right, with fewer ranges and a stronger focus on our core business and products that customers want. There are fewer over-runs and seconds, and we've managed to keep prices as low as possible," said Joubert. - I-Net Bridge

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