Moiz H Rehmanjee
Group Chief Financial Officer Hela Clothing
Currently targeting entry into Egypt
Hela Clothing is a $200 million company that provides sustainability-focused apparel supply chain solutions. The company works closely with global brands, from design to delivery, in the intimate, sleepwear, and kid’s product ranges. Paulami Chatterjee spoke to Moiz H Rehmanjee, Group Chief Financial Officer, Hela Clothing, to get a detailed review about the Sri Lankan apparel market’s size and unique features, Hela’s background, and recent joint venture with Sumber Bintang Rejeki in Ethiopia to operate one of the largest bra manufacturing plants in the region.
How big is the apparel industry of Sri Lanka? Which are some of the unique features of the Sri Lankan apparel market?
The Sri Lankan apparel industry provided direct employment to over 400,000 people and 2019, the best year on record, accounted for $5.6 billion in exports. This amounted to over 40 per cent of Sri Lanka's exports. The industry has grown over three decades from one driven by cost competitiveness to a model based on value addition and innovative solutions. While the removal of the quota system in 2004 brought on many prophecies of demise for the industry, it continues to go from strength-to-strength today albeit in the face of different challenges.
One unique aspect that helped Sri Lanka achieve this level of success is the "Garments Without Guilt" initiative that promoted the need for positive and ethical work conditions among garment factory workers. The initiative involved factories signing on to an industrial charter that emphasised high environment and labour standards. These include, but were not limited to, high workplace safety guidance, the maintenance of positive environmental ethics and the recycling of industrial waste and water.
At Hela, we took the tenets of the "Garments Without Guilt" initiative to heart and implemented it across our manufacturing locations in Sri Lanka, Ethiopia and Kenya. Once implemented we continued to build on these principles to ensure we were best-in-class. This meant the implementation of HR policies - across hiring, promotions and retention - that help nurture a culture of inclusivity. In 2019 we were recognised for these policies by the Ethiopian Centre for Disability and Development when they bestowed on Hela 'The Most Inclusive Employer of the Year' award.
Many of our sustainability initiatives have won recognition as well, most recently by Tesco and ASDA at their respective global partner conferences.
What is the background of Hela Clothing like? How and when did the company get established?
The current iteration of Hela Clothing was born from the merger in 2015 of Hela Clothing and Foundation Garments. Following this, the newly formed Hela Clothing Group embarked on a series of rapid expansions by establishing a foothold in both Kenya and Ethiopia the following year. Today we are the largest apparel exporters in both countries accounting for approximately 20 percent of apparel exports. While we may not have been the first company to move into Africa, we were the first to make it successful. We formed strategic local partnerships, tailored our management style and operations to the reality on the ground, and leveraged our deep customer engagement to ensure growth in these geographies.
Not one to rest on our laurels, we built on these initial successes by doubling our footprint in both countries. Once again by practicing the principles that brought us this far. In the tail end of 2020, we formed a joint venture with Sumber Bintang Rejeki in Ethiopia to operate what will be one of the largest bra manufacturing plants in the region – Sumbiri Hela Intimates. And in Kenya we formed a joint venture with Industrial Promotion Services (IPS), the infrastructure and industrial development arm of the Aga Khan Fund for Economic Development (AKFED), to launch a new business vertical which will focus on manufacturing medical grade apparel. The new business is called Safeguard Workwear (SGW).
Did the pandemic bring about any hardships in your day-day to operations and sourcing?
The initial months of the pandemic caused significant disruption to our supply chains and manufacturing operations. All production facilities were closed for approximately three weeks from March to April 2020. And lockdowns in key export markets impacted global sales. There was an immediate need to know how an extended lockdown would impact brand strategies and how do we manage our workforce and help them through this crisis.
On the former, we had conversations with the leadership teams of all our customers and there was agreement on both sides that some channels would bounce back faster than others. Like the supermarkets, off-price, e-commerce would bounce back faster than department stores. Therefore, there was a decision that when it was safe to reopen, the orders to these channels would be prioritised. We also agreed on special terms to help our customers with their cash flow during this time – this could be extended credit terms, producing and stocking, etc.
Ultimately, the motivation to restart the factory was to help secure the livelihoods of our employees. Of course, there was also a need to ensure the future of the business. This meant we needed to look at how we could slowly and safely bring back our employees and ramp up our capacity in a staggered manner. This is where the partnership really came into play with our customers also agreeing on the strategy and giving us the go ahead when it came time to execute.
There was mutual agreement that while we would slowly grow capacity over a period of time, our priority would be the health and safety of the workers in these countries (Sri Lanka, Ethiopia, Kenya) who may be having a difficult time during the pandemic. That alignment of priorities and forward-looking thinking from customers like PVH really helped us manage this crisis a lot better.
It should also be mentioned that despite the initial uncertainty, the board of directors and the entire senior management team made the call to ensure that there would be no salary cuts. Team members were even given their April bonuses on time. Middle management and above took pay deferments for an unspecified time but were then reinstated to full salary after three months when our view of the path ahead became clearer. Their deferred salary was paid back in full over the next three months. These actions were taken to ensure that morale was high and that the wellbeing of our entire team was taken care of during an unprecedented crisis.
Also, like many apparel companies, we pivoted to making personal protective equipment during the pandemic. As it was the only segment where there was demand during the pandemic, it seemed only logical that we use our core competencies in manufacturing to meet the demand in the medical and the protective space. We leveraged existing strategic partnerships to form new ones and acquire the prerequisite knowledge for the segment in a short period of time. Partnerships like that with the Aga Khan Foundation were essential for this as they were quite helpful with the sharing of knowledge and providing access to hospitals and pharmaceutical companies.
Today we have spun off that business as a new independent vertical called Safeguard Workwear which will focus on creating medical grade apparel out of a new factory in Kenya. It will service the needs of government and non-government organisations on the African continent and elsewhere. The company will meet part of this goal through internal demand generated by the Aga Khan’s own hospitals and medical universities in the African and Indian Subcontinent region.
Is there any change in buying patterns of consumers now that we are in midst of the pandemic?
What we saw at the start of the pandemic was a massive migration to online platforms. What would have normally taken a decade virtually happened overnight. And a common thread you will see in the annual reports of many companies is that e-commerce helped buoy sales. Many of these consumers, who made online purchases for the first time during the pandemic, are expected to continue buying online once the pandemic is over and others will incorporate online into their regular pre-pandemic purchasing behavior. This means that both brick and mortar and online are equally important going forward. So, brands will likely utilize a hybrid strategy to create a rich and fulfilling shopping experience for their customers.
Another trend we saw accelerated during the pandemic was the shift towards sustainability. This was something that was already picking up significant steam even before the pandemic and the industry was making changes to how it operated. According to a recent survey by the US Cotton Trust Protocol--69 percent of brands and retailers believe that the pandemic has emphasized the importance of environmentally friendly products to customers while 61 percent say there has been an increased demand for sustainable products. It is clear that sustainability is the future of apparel and consumers are willing to pay to know that their clothes do not harm the environment. At Hela we understand that the circular economy is the only path forward for the apparel industry. This is why we strive for greater innovation in sustainability and incorporate practical methods to record impressive year-on-year improvements across key metrics. In 2020, we achieved a 35 percent reduction in water consumption across the group as well as a 51 percent reduction in electricity consumption while 104 percent of our electricity needs were met by solar power.
Which brands and retailers are you currently associated with?
PVH, Tesco, Asda, Sainsbury’s, Michael Kors, Torrid, Dickies, Fruit of the Loom, Ellesse, The Children’s Place, Warner’s, and some other brands.
Hela Clothing has recently acquired a 50 per cent stake in Sumbiri Intimates Apparel PLC from Indonesian owner Sumber Bintang Rejeki. What was the rationale behind choosing Sumbiri? What kind of prospects do you see from this acquisition?
We believe collaboration can be an important component of creating value for our customers and can be a major driver of innovation. And as Sumber Bintang Rejeki is an experienced bra manufacturer with deep knowledge of the segment this venture – the new company is called Sumbiri Hela Intimates (SHI) – gives us the opportunity to explore more product offerings and innovative solutions to help better serve our customers.
We expect the joint operation, which at full scale will employ over 3,000 people, will increase its capacity to produce close to 1,000,000 pieces a month from 250,000 units currently. This will make it one of the largest bra manufacturing facilities in the world with duty free access to the US, Canada, EU and most parts of developed Asia including China. At a time when global brands are re-evaluating their supply chains and looking to mitigate future risk through geographical diversification, we believe that SHI represents significant growth opportunities for both Hela and Sumber Bintang Rejeki.
What are your future expansion plans? Will you be moving into new product categories?
Hela has built a reputation as a trusted collaborator. We have built up the necessary skills and knowledge to make manufacturing in Africa a profitable venture. And as customers look to mitigate future supply chain risks, we believe Africa will be their next preferred sourcing destination hence we intend to capitalise on this by further expanding our presence in the region. We are currently targeting an entry into Egypt which is a market where much of the necessary infrastructure – such as fabric mills, lace suppliers, etc already exists. To fuel this growth in Africa, we plan to have an initial public offering on the Colombo Stock Exchange (CSE) at some point over the next 12 months. This will make us the first apparel company in Sri Lanka to go public.
Also, as previously mentioned we have entered the medical apparel and personal care segment with our new business vertical Safeguard Workwear which is a joint venture with IPS.
Published on: 27/07/2021
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
