Eight prominent textile executives comment on opportunities and challenges faced by the US textile industry.
By Jim Phillips, Contributing Editor
History books are full of lessons of people who succeeded just because they refused to quit. For example, in 1878, Thomas Edison announced to the world that he would invent an electric light to replace the gas light that was the standard of the day. Of course, everyone knows that is exactly what Edison did. What many people may not know is that he endured more than 10,000 failures before, pardon the pun, the light came on. Napoleon Hill, one of the pioneers of personal success literature, said: "Before success comes in any man's life, he's sure to meet with much temporary defeat and, perhaps, some failures. When defeat overtakes a man, the easiest and the most logical thing to do is to quit. That's exactly what the majority of men do." And from Lisa M. Amos: "Entrepreneurs average 3.8 failures before final success. What sets the successful ones apart is their amazing persistence. There are a lot of people out there with good and marketable ideas, but pure entrepreneurial types almost never accept defeat."
At some point, US textile executives began to realize that the old way of business - the one that had been successful for the better part of a century - would no longer work. The Edisonian perseverance kicked in, and the industry decided the role of whipping boy no longer suited. From the husk of once-dominant giants - the Burlingtons, the Stevenses, the Cones - a leaner, more responsive and more realistic industry began to emerge.
Textile World recently interviewed a number of key executives to get their takes on the current opportunities and challenges facing the US textile industry. Some executives were ebullient in their excitement about the direction and prognosis for their companies and the industry as a whole, while others were more cautiously optimistic. But the one attitude that resonated in virtually every interview was a fierce determination to succeed - regardless of the odds, the level of competition or the fairness of the playing field.
Companies are changing the way they operate, the way they go to market and, even, the way they perceive the market.
At the same time, these bullish executives also recognize that real threats are out there, whether in the form of a nation that consumes 45 percent or so of the world's raw cotton and has millions of eager, productive and low-wage workers - or in the form of trade agreements that continue, as one executive says, "to give the house away."
Executives interviewed spanned the range of the industry, from research and marketing operations to fiber producers, yarn spinners and large vertical operations. CEOs or senior executives who generously took time to speak with TW included Ken Kunberger, president, Burlington Worldwide Apparel; John Bakane, president and CEO, Cone Denim; Mark Messura, executive vice president, Cotton Incorporated; Jim Chesnutt, president and CEO, National Spinning Co. Inc.; Harding Stowe, president and CEO, R.L. Stowe Mills Inc., and current National Council of Textile Organizations (NCTO) chairman; Andy Warlick, CEO, Parkdale; Werner Bieri, president and CEO, Buhler Quality Yarns Corp.; and Greg Rogowski, president and CEO, Performance Fibers Inc.
TW posed questions to each of these executives about both the opportunities and threats they perceive for the industry as a whole and for their individual companies. Key issues relating to the growth of their individual industry segments, as well as background company information, were discussed. Some enterprises are looking at product diversification, while others are exploring product innovation. Some are expanding manufacturing and production on a global basis, while others are looking at optimizing their existing supply chains to provide quick, efficient services. They know that the road to continued prosperity is a difficult one, but just like Edison and those imbued with the entrepreneurial spirit, they just don't seem to have any "quit" in them.
Shift forward, and you find the Burlington of today to be a much, much smaller company. It is part of Wilbur Ross's International Textile Group Inc. (ITG), Greensboro, N.C., and focuses on product innovation and research, as well as on expanding operations globally to be in close proximity to the company's varied customer base.
"Our business is broken down into three primary categories of product: worsted wool; man-mades - 100-percent polyester and polyester blends; and, then, cotton," said Kenneth T. Kunberger, president. "We have a strategy for business within each one of those areas."
Burlington Worldwide Apparel
In the worsted wool business segment, Burlington has a three-pronged strategy to garner market share and compete with imported products. "For the United States facility, we focus on a niche business," he said. "We have a plant in Mexico that gives us speed to market. And we have a new facility in India that provides us with a low-cost platform.
"In the United States, our Raeford facility has been combined for yarn and finishing. We are the largest producer of worsted wool for the US government in this hemisphere. The good thing about this is that, because of the Berry Amendment, all worsted wool sold to the US government has to be manufactured in the United States. So, obviously, we feel very good about the longevity of this business going forward.
"We have done a lot of restructuring, particularly on the domestic front," he continued. "It has become a lot more difficult for some US businesses to survive because of the global competition out there. But, because of the way our worsted business is structured, we feel very confident that it will stay on and be a long-term contributor."
Burlington also operates a vertical worsted wool facility in Mexico, he said. "That services our non-government uniform business in the United States. It is also targeted for quick response in the branded apparel worsted wool business. So we really feel like that plant, which is state-of-the-art and totally vertical, has longevity in the fact that we have speed to market and innovation built into it.
"To round out our worsted wool strategy," Kunberger continued, "Mr. Ross has just purchased an Indian worsted wool company. With that, Burlington Worldwide will manage the export business for the company, which would be anything coming back into the United States or going into Europe."
In its man-mades and cotton business, Burlington has looked to Asia to enhance productivity and expand distribution, while it has consolidated operations in the United States to focus on niche businesses, enhance speed to market and provide longevity, Kunberger said. "We're no longer running the low-cost, commodity business. We have recently consolidated our synthetic operation into the Burlington Finishing Plant in North Carolina, which is a smaller box. We have closed the big synthetics facility in Hurt, Va., which Burlington had for many years."
In China, Burlington is in the process of launching its JBT facility, a brand-new, state-of-the-art dyeing and finishing plant for man-mades. "The reason there is no weaving there," Kunberger said, "is that there is tremendous capacity for greige fabrics in the area, but the dyeing and finishing space is more limited. That's where we can provide the most value-add. We'll do some men's and women's synthetics there - some commodity products, but will also expand barrier fabrics into China and into Europe - and we will target uniform synthetics and activewear. Volume for the new China operation is about 25 million yards."
In its cotton business, Burlington is also looking to Asia. It has recently invested in a joint venture for a plant in Da Nang, Vietnam, with Vietnamese company Phong Phu Corp. "We feel there is a tremendous opportunity in Vietnam. Vietnam is what China was 10 or 15 years ago. They have great cut-and-sew operations throughout. The one thing the country lacks is textile operations. Thus, there was a great opportunity for a venture with Burlington, whose core competency is in textiles, and Phong Phu, whose core competency is really in cut-and-sew. We are under construction now with a totally vertical facility in Da Nang. We have in Da Nang what we call our 'Supply Chain City Concept,' which includes weaving, dyeing and finishing, cut-and-sew and laundering for total garment package with a focus on cotton and cotton blends. The facility should be totally operational by April of next year. It will have the potential for 60 million yards of cotton and cotton-blended products and 20 million garments. It will be a state-of-the-art facility in a low-cost area. Our core philosophy is to take our quality standards, processes and procedures and put them into those areas of the world where our customers are doing business. It allows us to add value and bring the level of consistency in product above and beyond where it is today."
and CEO, Cone Denim
"In the fall of 2003, our strategy was to continue our global expansion. We had a site down in Mexico, but no funding. We had planned to go into the Caribbean, and at some point expand into India and China. The big problem we had at the end of 2003 was that we had a lot of debt and no cash to execute these strategies."
At that time, Wilbur Ross acquired Cone and put it together with Burlington Industries to create ITG. "One of the good things he did on the front end was to consolidate and rationalize some of the operations," Bakane said. "In doing that, Mr. Ross transferred the Burlington Mexican operation to work under Cone, which consolidated all of the company's denim factories under Cone's leadership. That gave us a second operation in Mexico, which Cone had been wanting for a number of years. Secondly, very shortly thereafter, Mr. Ross sent me to China to assess the market and come back with recommendations. Our assessment at that time was to put a plant in China. We decided on a site south of Shanghai. Our plant just began start-up production in July, with full production capacity to come in September. Like many other US companies, Cone has a local minority partner in its Asian ventures."
Additionally, after Cone began planning for its China site, it began a new search for a facility in Central America. After evaluating a number of locations, the company chose Nicaragua. "It is our belief that Nicaragua will become the low-cost producer in Central America," Bakane said. "We began working with the Nicaraguan government and recruiting office to put a plant outside of Managua. We will begin start-up at the end of this year, with full production to come around March 2008.
"If you look at our strategy, we want to be a leader in this hemisphere and in the eastern supply countries," Bakane continued. "We believe, given the situation with the dollar, that our facilities in Mexico, the United States and Central America will have a fairly long life ahead of them, and we will be able to opportunistically take advantage of low-cost production in China."
Cone has repositioned its remaining US plant to be a supplier of premium denim products, Bakane said. "What we've done with the White Oak Plant is to position it as a premium denim fabric producer in this hemisphere. We've migrated away from the popular-priced and mid-tier markets and plan to be in the premium markets exclusively."
Despite Cone's resurgence, Bakane notes there are challenges ahead, both for his company and the industry as a whole. He urges caution for the US industry, particularly at this point in time. "Everyone in the textile and apparel pipeline needs to pay very close attention to the US macro economy. We are in the late part of this expansion. We need to be careful about growth rates, as we have seen some slowing. And we need to be careful about inventory management. While we're keeping an eye on that from the standpoint of both Cone and other producers, we still need to be moving toward a global model - with a certain percentage of production in this hemisphere and a certain amount outside. And we need to be able to simultaneously balance the short-term macro with a longer-term strategy."
Another issue Cone is facing is a need for first-class talent. "Fewer people are entering the industry," he said. "While we've managed to secure some younger talent, we're relying upon a lot of people who have been around a while to remain in operations so that we can rely upon their experience."
"One opportunity for cotton, in particular, is in the developing markets like China and India," he said. "These are markets that have tremendous opportunity at the consumer level for increased growth in the demand for textiles. So the growth in the consumer markets in these developing nations, along with the emergence of national brands and retail private-label brands in these nations, provides significant opportunity. And this is not just a short-term opportunity, but is one that will be prevalent 12 months, 18 months, five years, even 10 years down the road."
Overall, Messura said, there continues to be a strong increase - about 3 to 4 percent per year - in the total worldwide demand for cotton.
Among the challenges he sees is a new focus at the trade level on environmentally responsible manufacturing. "This is something that's going to be a challenge for cotton. We need to be able to communicate all of the good things - that cotton is a natural, renewable and sustainable fiber."
Perhaps the biggest challenge on the long-term horizon for producers of cotton goods is the lack of return on investment, he said. "Margins are tight. We have to go back and examine how we market products. A lot of clothing has all kinds of performance features - antimicrobial, stain resistance, all sorts of things - that we tend to lump into one garment and market it that way. When we do that, the consumer doesn't see the value of these attributes in the same way they would if we would debundle them. As the industry continues to develop innovations, we tend not to get the value of these innovations back. How these innovations are presented to the consumer will determine the premium consumers are willing to pay for these value-adds."
On the performance side, Messura said cotton continues to make strides in product innovation. "One development in performance apparel is a moisture-management technology for 100-percent cotton that is among the best out there for any type of fabric. Consumers can get the comfort of cotton, moisture management and less clinging in performance fabrics. Another development is in a product known as Storm Denim(tm), which is weatherproof, breathable denim."
Down the road, Messura said sustainability will surface as a big issue for the textile industry. "It's going to be an issue of how you continue to meet demand five or 10 years from now as consumers are demanding more and more fabric. And cotton is an answer. It is sustainable and renewable."
National Spinning Co. Inc.
Additionally, National Spinning has been able to capitalize on several specific niche markets. "With three distinct spinning systems in place, a dyehouse and increased capacity to run a multitude of fibers and products and blend those, we've been able to get into a number of specialty markets - and it has been paying dividends for us. As well, many retailers are intent on quick turnaround, and we are able to provide that."
However, Chesnutt is concerned about the potential impact of the US-Korea Free Trade Agreement (FTA) on the Central American sweater business. "If sweaters are excluded from duty - if the Korean deal is done - it very well may be the kiss of death for sweaters in Central America because we're duty-advantaged. Acrylic sweaters are the highest-duty product in the textile line item at 32 percent."
Despite the potential impact of the Korean agreement, the biggest challenge Chesnutt and his company face is the escalating price for fiber. "There is no doubt that it is the biggest challenge at the moment. The cost of fiber is escalating, and there is an inability on the part of our customers to pass along anything to their customers. Frankly, we don't understand why there hasn't been the same kind of change in costs from goods that come in from other parts of the world. Those companies have to pay for fiber, too.
"Another issue is free-trade agreements - not just any one free-trade agreement, but the cumulative effect of the portion of our market that has been given away by this administration in the last three to four years."
CEO, R.L. Stowe Mills Inc.
"The shift in power from the Republicans to the Democrats has created a lot of congressional leadership changes. It's always a challenge to keep textile issues in front of the leadership. We are spending a whole lot of time informing members of Congress and their staffs about the issues that face our industry."
Among the issues at the forefront are FTAs with Panama, Peru, Colombia and Korea, he said.
NCTO also is working on exploring the consequences of the expiration in 2008 of safeguards regarding Chinese products, and is carefully monitoring reports of transshipped products from the CAFTA-DR region, Stowe said.
"Overall, market conditions are pretty good," said Andy Warlick, CEO. "The T-shirt market is strong. Denim, what we have left in this hemisphere, is doing exceptionally well."
With plants in Honduras, Colombia and Mexico - in addition to those in the United States - Warlick sees quick response as a key issue in continuing to develop business. "With our quick response program, we can take a week off of the shipping time that it takes to get product to market. Quick response is going to continue to be a major issue. One of the things a lot of people don't realize is that our ports system is going to be clogged by 2010. On-time deliveries will continue to erode. For a retail store, the biggest expense is not being able to make a sale. And second to that is the product it has to discount because it doesn't sell. So being proactive around quick response in this hemisphere - with plants that support our production capacity in the States - is critical."
Buhler Quality Yarns Corp.
As a ring spinner, Buhler has experienced a softer-than-expected market this year. "This time last year, everyone was bullish, but this year hasn't been what has been expected. What I have seen is that most of the biggest suppliers to US retailers expect business to be down compared to last year. If you look at the sales reports, retail growth over the past two quarters has been mixed. This plays in the demand. The general uncertainty about economic growth is now reflected in the order situation.
"If you focus on commodity items, you just can't compete here anymore," he continued. "Look at the recent plant closings, and you will see that there is a further restructuring going on in the market in response to market conditions. Look at cotton consumption last month, for example. It was down to 4.9 million bales, down from 5.3 or 5.5 million a year ago.
"In my travels, people are telling me they are having a hard time making sales right now. The important thing is to focus on quick turnaround and being able to provide the quality and response your customer needs to be competitive."
The company recently conducted an independent survey of more than 100 of its key customers in Europe, Asia and the Americas to better understand issues affecting the fiber marketplace, according to Greg Rogowski, president and CEO.
Performance Fibers Inc.
"The results showed that the majority of industrial fiber customers are growing faster than the industry average, particularly in the Americas and Asia," he said. "Economic factors and globalization are driving the growth in the industry. Customers surveyed say the double-digit growth rates of recent years will continue into the next four years.
"Future growth opportunities in the fibers marketplace will depend on three important factors: differentiation - bringing uniqueness to the industry; discover- finding new opportunities, geographically or in niche applications; and development - introducing innovative new products and technologies," Rogowski continued.
"In the same survey by Performance Fibers, globalization and increasing performance requirements were the two trends that customers said are and will continue to be their greatest challenges," he added. "More than half of the customers in the Americas said they are concerned with price pressures and sourcing from offshore competition. At the same time, half of the total respondents from Europe expressed concerns about the increasing technology and product specifications coming from their customers, as well as complying with regulations. Asian-based customers of Performance Fibers said they are primarily concerned with finding more growth opportunities in the future."
In the end, it is innovation and response that are the keys to the continued success of the industry. As Rogowski says: "There's no question that customers want a quality product at a competitive price. Customers want material suppliers to catalyze big change that will contribute to major growth. They are looking for fresh solutions that will provide them with increased performance at a lower price, and innovations that will enable their entry into new markets."