Socking the competition
- August 29, 2012
Published: 28/08/2012 at 01:56 AM
Bangkok Post / Newspaper section: Business
A sock maker adapts to increasing competition by turning to machines and focusing on the high-quality market.
You can easily find four or five pairs of socks for 100 baht on the street or at flea markets in Bangkok. But for 56-year-old Varodom Kornubrabhan, the managing director of Overseas Rayon Industrial Co, one of the top three sock manufacturers in Thailand, value addition is the key.
The company was established in 1973 by his father, which started as a garment factory in Pathum Thani province.
Previously socks were imported, mostly from Taiwan, so the company had to order machinery to manufacture socks for the domestic market. It started with school socks for the Look Kai (chick) brand, now dubbed Carson.
“In the past not so many people would wear socks, but now more people wear them,” he said.
Mr Varodom took charge of the company in 1979, and now it focuses on sports socks as an original-equipment manufacturer for Nike, Adidas and Reebok.
About 20% of the company’s finished products _ mainly sports socks _ are shipped abroad. Its factory covers an area of over 22,400 square metres, with two sales offices and more than 200 employees.
“They [the brands] taught us to produce good quality socks and our company has developed as a result,” said Mr Varodom.
But with increasing competition from China, Indonesia and Vietnam, Overseas Rayon is focusing on creating its own brand to survive.
Textiles was the biggest industry by revenue in Thailand until electronics overtook it last year.
Last year, Thailand shipped US$3.27 billion worth of garments, while textile exports totalled $4.89 billion. The exact contribution of socks was not available.
Sock manufacturers have existed in Thailand for more than 30 years. Increased competition has continued to drive down profits, he lamented.
Mr Varodom is optimistic the Asean Economic Community (AEC) in 2015 will provide more opportunities for exports, raw materials and human resources, despite the added competition. Thailand is already the best in the region for manufacturing of thread, he added.
But with opportunities come challenges, as workers from Thailand also have a chance to work in neighbouring countries.
“We’re afraid our market share might drop,” said Mr Varodom.
“Our industry developed faster locally in terms of production than other countries in the AEC, but we have higher labour costs, which could cause us to relocate to other countries for the lower wages.”
It is critical for Thailand sock makers to develop more efficient machinery, costing the plant less for operations, he added.
However, socks have a great opportunity to grow in the high-quality segment.
“Buyers themselves are now divided into various levels, and [low-quality socks] are easily damaged when worn. We’re going to make expensive ones that have a special function, such as focusing on the form and foot structure as well as making specific areas tighter or looser, which increases their value,” he said, adding the new brand will be fully set up this year.
The price of the new brand will be hundreds of baht per pair, compared with 50-60 baht per pair sold in the domestic market.
The flood last year damaged all of Overseas Rayon’s machinery, causing the factory to stop operations in October. It has over 200 machines producing around 600,000 pairs of socks per month.
Priced at an average of 250 baht per 12 pairs of socks, revenue is about 150 million baht per month, said Mr Varodom.
The company was visited by Industry Ministry officials, and it received basic recovery advice from the Department of Industrial Promotion.
Production resumed in January and return to normal in April.
The daily minimum wage hike to 300 baht has led the company to look next month into purchasing machinery from Japan that will shorten the production process.