From Price Takers To Price Setters

For a manufacturing company struggling to stay afloat, innovation does not have to mean big investments nor overhauling processes that cost an arm and a leg. Sometimes, a steady flow of ideas can go a long way.

DSC_7417After sustaining heavy losses fabric maker Hayleys MGT Knitting Mills PLC effected a turnaround, turning its bottomline from deep red to black, by changing its approach to making fabrics and redefining relationships with buyers who look for faster turn-around times in the fast changing fashion world.

Instead of waiting to be told what buyers wanted, the company set up a division called the ‘Innovation Centre’ to pre-empt buyer requirements and add value to fabrics.Setting up the Innovation Centre was one of the first things industry-stalwart Rohan Goonetilleke did when he was recruited as Managing Director/CEO to revive the company and by 2014 Hayleys MGT launched its own branded textile.

“This was the first time a Sri Lankan fabric maker launched its own brand,” he says. “International fashion labels would purchase sample fabrics from elsewhere and bring them to Sri Lanka to be copied and replicated. This was the norm for Sri Lanka’s fabric industry.”

“The industry was competing downwards on price and we realised that we had to take Hayleys MGT to the next level. We did not have to invest in new machinery either. Our aim was to pre-empt what labels would rollout in future seasons and the types of fabrics they would be looking for. We would then add value and enhance quality and functionality to the fabrics we produce,” Goonetilleke said.

Goonetilleke says this has impressed some buyers. “We help our customers add value to their customers. This has helped us set prices and not be price takers like the rest of the competition. This means we cannot compete in bulk form but we have secured some niche buyers.” Within a year Hayleys MGT was able to attract new customers, including top global intimate apparel labels Italy’s Intimissimi and US’s Victoria’s Secret. ddEarlier, Hayleys MGT had a development division to replicate fabric samples brought by buyers. This division has been absorbed into the Innovation Centre. The fabric technologist heading the Innovation Centre ,Thushara Wijekoon keeps an eye on fashion trends and works closely with designers of global fashion labels. Once he knows what they have planned for future seasons Thushara would then spend time developing and testing various fabrics. Experimenting with various combinations of polyester and cotton, dyes, washes and natural chemicals, Hayleys MGT laboratory technicians bring the Innovation Centre’s ideas to life.

“Instead of buyers giving us ideas and telling us what to produce, we are in a position to give them ideas”Thushara says. Thushara is particularly proud of Hybrid Magic, a fabric designed to mimic a lotus leaf on one side, repelling water, and a mushroom on the other, absorbing water. The other is Soaking Cool. A light-weight fabric with a minty fragrance, crush it and the fragrance intensifies. The Innovation Centre has also developed two fabrics with a natural aloe vera and avocado feel.

How much does it cost to develop a new fabric?

DSC_7470“We don’t want to cost operations at the Innovation Centre, otherwise ideas may be inhibited. We do spend to source various ingredients to experiment with, but this is almost insignificant compared to the revenues we generate,” Goonetilleke says.

The Innovation Centre’s work contributes 15% to the company’s profits and Goonetilleke expects it would reach 20% this financial year. The company reported a US$ 407,000 profit for the nine months ending December 2014, reversing a US$ 717,000 loss the previous year and a US$ 1.4 million loss the year before.

While the Innovation Centre has helped Hayleys MGT effect a turnaround without large capital outlays, the company has also invested US$ 1.8 million in 2014 and plans to invest US$ 2 million this year on machinery to boost its main line of business bulk-fabric making. The company is also turning towards renewable sources like wood-chips to contain high energy costs.