By Duruthu Edirimuni
The Sri Lankan company is focusing on sustainable supply chain solutions to meet the growing apparel demands
Sri Lankan apparel maker Hela Apparel Holdings, which recently traded 20% for LKR 4 billion public equity shares, is upbeat on striking international strategic partnerships to better manage their supply chains for future demand and growth. Hela Apparel Holdings, looking to take the maximum benefit from Egypt’s strategic location, commenced to set up its latest manufacturing facility in Alexandria Governorate, Egypt. The 30-year-old company expects the largest growth to come from Egypt outside of Sri Lanka having recently acquired a manufacturing facility in Egypt on a long-term lease basis.
With this facility, the company is eyeing to offer an additional value proposition to its customers. Specifically, the company plans to take the lead in Egypt’s near-shoring value proposition with shipping times running up to as little as three days to Europe and 12 days to the United States. Currently, the manufacturing plant employs 1,400 workers while the full capacity can go up to 4,000 employees and is slated to account for 10% of the group’s revenue by the end of the year. The company went through a complete rebranding putting to action an initiative to venture into Africa, particularly Kenya and Ethiopia which are countries gaining demand as manufacturing destinations.
Right Place, Right Time
Hela Apparel Holdings is responsible for 15% of Kenya’s apparel exports while in Ethiopia the company is the largest exporter. A leap of faith the company took in Africa has landed Hela Apparel Holdings in the perfect spot for the changing times, Viraj Fernando, CEO of Hela KinetiX, says. “This has armed the company with the ability and agility to give innovative solutions to leading apparel brands.” He adds that the first-mover advantage into Kenya, Ethiopia and Egypt by Hela Apparel Holdings has seen some bigger apparel manufacturing companies following them.
The presence in Egypt allows duty-free access to the EU and the UK through bilateral free trade agreements as well as the US through the Qualified Industrial Zones Scheme. The company currently manufactures 60% of all its orders from Africa, Fernando informs. “Reducing the dependency on synthetic raw materials from the Far East and turning to Egypt and Turkey for alternative sourcing is in the company’s agenda,” he adds. Tanzania is the world’s fifth-largest organic cotton grower and Hela Apparel Holdings is now in discussion with them to make the supply chain even more streamlined, Fernando reveals.
He further states that the company is focusing its efforts on a build, own and operate model in all their supply chains. As a precursor to this, the company is trying to acquire a fabric mill in Sri Lanka and one in Egypt or Tanzania, Fernando says. The idea is to build a supply chain closer to the needlepoint. With three main long-standing product categories, Hela intimates, Hela sleep and loungewear and Hela kids wear the company has now expanded into sportswear (Hela KinetiX) and safeguard work wear which is medical attire.
Additional Production Lines
“Post pandemic we focused on medical-related products. Especially being in Africa where medical products and attire are at a nascent stage, we partnered with IPS, an international development agency mostly involved in healthcare in the West African region,” Fernando informs. He said the company was not actively looking at safeguard work wear but the apparel operations in the USA and Europe stopped owing to the pandemic for about one month and the demand for basic products changed so that factories producing basic apparel saw a big demand for personal protective equipment. “We also wanted to convert whatever production capacity we had into personal protective equipment to meet the growing demand,” Fernando adds.
He further states that several issues stemming from the US apparel markets exiting Chinese cotton as of early last year amplified through logistics issues coupled with the bad hits off the pandemic seeing most brands exiting China. “When we depend on China for sourcing material there are so many interconnectivity points for travel and now all brands are trying to focus on near-shoring, thereby capitalising on speed. They look for manufacturing facilities close to the marketing destination. So far, Europe, Egypt, Turkey, Tunisia, Jordan and the northern parts of Africa are ideal locations,” Fernando states.
Creating a Global Footprint
Similarly, for the US market, it is countries like Haiti Honduras, Central America and countries in the South American region that are typical manufacturing locations. As it stands none of these countries have the capacity and the ability to supply for global demand which is where Hela Apparel Holdings comes in. Fernando says that coming out of the pandemic many international brands are trying to be less dependent on China and moving away from logistics nightmares and aiming to cater to Gen Z who is quite mercurial in their choices. “This new generation does not want to patronise brick and mortar shops. They prefer online shopping and the pandemic has also attributed to this trend. As such their needs, wants and choices change rapidly,” Fernando points out.
Therefore, the vendor base needs to be ready to meet this demand, and near-shoring is the first step. In FY21, the group generated 56% of its revenue from US-based customers with a further 38% from European customers and the remaining 6% from other regions, primarily Asia. The Hela Apparel Group caters to some of the world’s leading apparel brands, including luxury and lifestyle brands such as Calvin Klein, Tommy Hilfiger, Michael Kors and European supermarkets, including Tesco and ASDA. The company, with revenues generated exclusively in US dollars, is estimating revenue of USD 270 million for the current fiscal year. According to Fernando, the company will be expanding further in Egypt and exploring near-shoring opportunities in the USA.