DSI puts its best foot forward
The DSI Samson Group, owned and managed by six Rajapaksas – a Southern clan of the five sons and one nephew of D Samson Rajapaksa, its founder – celebrated 50 years in business this year. The home grown footwear company that moulded itself into a manufacturer during the closed economy and outran the rush of imports in the open economy, is now gearing for another phase of its growth – to transform itself into a global brand. Using the Indo-Sri Lanka Free Trade Agreement, DSI has already got a foothold in the slippery Indian market. The company is also slowly digging its heels inside European markets, and on the feet of Sri Lankan expats, the Australian market. Over the next five years DSI will continue to chase export markets across the globe, to fuel its growth, says Kulatunga Rajapaksa, the Group Managing Director of DSI.
What was Samson Rajapaksa’s vision for DSI?
He wanted to export DSI. He felt the local market was small and for real growth, we should go outside.
How far have you gone with the vision of taking DSI global?
Currently, about 15% of our total footwear output is exported. These go to Australia and countries in Europe, the Middle East and Africa. Out of our footwear exports, about 10% go to the EU, which is our largest export market. Out of our tyres and rubber products, about 50% go to Europe.
What is DSI’s present revenue composition?
Footwear is still the largest revenue generator and accounts for about 58% of group revenues. Rubber products are the next biggest, with about 27% of total revenues.
Would Samson Rajapaksa have approved of the company’s diversification away from footwear?
No. he was not in favour of diversification. But in 1977 we started the diversification when we invested in apparel manufacturing. That was my idea and my father he did not favour this. But the diversification continued. To compete with imports, we had import heavy machinery to manufacture rubber soles and the domestic shoe market capacity was inadequate. So we used the excess capacity to manufacture bicycle tyres. By the time my father died we had about seven companies.
What are your plans for expansion?
In the case of footwear, we have no choice but to go outside for growth, because the domestic footwear market is not growing. So our target is to increase footwear exports to 40% of total production, within the next five years, from the current 15%.
We are targeting India, through the FTA and other SAARC countries. We will also emphasise on exports to Australia because there is a large population of Sri Lankans in Australia and they are familiar with the DSI brand. We will also expand in the Middle East and Europe. We are also looking at countries like Tanzania and Kenya, in Africa for footwear and rubber products exports.
What is your position on the Comprehensive Economic Partnership Agreement(CEPA) with India?
We don’t support the CEPA because even with the existing FTA with India there are problems. All exports under the FTA had problems of non tariff barriers. Of course, we are slowly resolving these problems but I feel the CEPA is not required for Sri Lanka.
Can DSI compete against Chinese footwear in international markets?
China is at an advantage because of its domestic raw material base. Our local manufacturing costs can be almost equalled to China’s. But Chinese footwear has been subjected to anti dumping laws in many countries and this is an advantage for us. If not for these anti-dumping duties we will not be able to compete with China.
What does Sri Lanka need to improve to break into international footwear markets?
We have to focus on the two areas of design and innovation. Our lead times are now improving because time to import and turn-around time, are reducing. Our banking and communications infrastructure are also much better now. So we need to now tackle the design and innovation areas while ensuring quality standards.
What are your plans for the local market?
A lot of international brands are now entering the local market. So our competition continues to increase. To counter this we will continue to strengthen our retail network to get closer to customers and give more people better access to DSI products. The DSI name is noted for durability and this we will maintain. As footwear is a fashion item, we will also continue to quickly introduce the latest fashions to the local market.
Are the DSI Rajapaksa’s related to the ruling Rajapaksas?
Maybe not directly, but perhaps indirectly through intermarriage, because most Southern families have intermarried. But either way, this has never been a factor in our business activities.
Who is behind DSI today?
We are altogether five sons of Samson Rajapaksa and our cousin brother, who grew up with us after his mother passed away. So altogether, there are six male heirs of Samson Rajapaksa. The three girls are not in the business. Originally there were five of us in the business because our sixth brother, the eldest brother, was working as a gynaecologist in the government. But he took over as Chairman of company after the demise of our father, according to our father’s wishes. So right now the rest of the five are looking after different companies because we have about 18 companies by now.
How did DSI come about?
Our father was involved in retailing shoes textile and even top hats, and he was importing footwear, which was very lucrative prior to 1962. But in the early 60s import restrictions were gradually introduced. To get round this problem, my father made a business proposal to a Japanese manufacturer, for technology transfer, to manufacture PVC shoes, (what the Japanese called chemical shoes), in Sri Lanka, provided we bought all the raw materials from them. The Japanese technology was transferred painstakingly slowly via the snail mail postal system. No one physically visited to train us. They sent the specifications by post from Japan, we manufactured each part and posted them back to Japan and they sent feedback to Sri Lanka by post, and this went on until we got it right. That was the start of our shoe manufacturing.
What happened when the economy was liberalised?
During the closed economic period there was no competition and no imports. So whatever we made, was sold. There were two sides to the open economy, post 1977. During the closed economy there were import restrictions but when the economy was opened, we could access any type of raw material, in any quantity. So we were able to invest heavily on importing modern machinery. On the other hand, competition, in the open economy, became a serious threat because of imports of finished goods. While we imported raw materials that took time to be converted into finish goods, the imported goods beat us to market. This also caused cash flow problems because our capital was tied up in raw materials.
How did DSI deal with this challenge of competition?
We did two things. We started importing footwear and used our own retail network to beat our competition to the market. We also started import substitution. Whatever new designs, new types of shoes that were imported, we started making the identical product. This brought down overall costs and cut our lead times, because we did not have to wait for the next batch of imported shoes.