Almost all the big brands have moved their manufacturing to China, but a local leather manufacturer chooses to keep close to its roots—providing skills and influencing value reformation among Filipinos

 

MANILA, Philippines — In today’s global environment, whoever manufactures products better, cheaper and faster, wins. It’s a hard-hitting arena where every country in the world is competing, but it has become quite clear in recent years that the top spot is already occupied.

Fact of the matter is, everybody is moving to China. Anybody looking to grow a long-term business almost always looks to China as a sourcing option, primarily because of its very competitive labor costs, and the increasing number of new and innovative products coming out of that lower-cost labor market.

“A lot of people have told me that I would make better money if I manufactured in China,” shares Yoling Sevilla, chief executive officer of The Leather Collection, a company that manufactures and sells its own line of luxurious leather goods, from travel and business accessories to bags, organizers, portfolios, and briefcases. “But my husband [Federiko Sevilla Jr., the company’s chairman and product director] and I chose to stay because we thought, then we will be giving jobs to China. It’s not that we have anything against the Chinese, but there are a lot of Filipinos starving. More than just giving jobs, we want to use our enterprise as a vehicle to teach them skills—from apprenticeship to mastery—and to influence value reformation. It may be harder to make business here, but why would I bring it elsewhere? I’m Filipino.”

‘Hanging in there’

When the Sevillas put up The Leather Collection, now a third generation company, in 1991, the manufacturing industry was quite robust. “There was no China syndrome—this kind of merchandise was a new concept and people were excited about it,” recalls Sevilla. “We were experiencing double digit growth. But today, with all the competition and recent events, the goal is really to stay in business. It’s tough—we are in a luxury business in a country where a lot of people are going hungry. Sometimes you can’t help but ask, ‘am I in the right country?’”

Much of the company’s efforts are  now concentrated on reengineering its tanning processes, as there are quite the number of steps in making a fine leather good. “The thing is, our craft is really a transfer of technology from Europe, which is the home of leather, so there are many steps in making something you can use for a long time and one that will age well,” Sevilla shares. “What we’re particularly happy about is that we now promote leather that is tanned locally, and it’s a manufacturing process that has met global standards. We are actually qualified to export to Europe.” Sevilla admits to being hit by the recent European financial crisis, at least as far as the export component of their business is concerned. “We were given a five-year grant from the CBI (Center for the Promotion of Imports from developing countries) of Netherlands, which educated us on export marketing. The output from our end was to come up with an export management plan, which was validated when we went to exhibit at the Paperworld Show in Frankfurt,” shares Sevilla. “It’s unfortunate that the European recession happened last year, because it was my second year of exhibiting and we had already gained acceptance from several brands. Right now they’re on hold because of what’s happening, but we’re still in touch.”

A ChallengingDomestic Market

While prospects in the domestic market for corporate giveaways and gifts seem to be more promising, it has its fair share of setbacks. A lot of locally based foreign companies are saving up, with most shifting the budget from corporate giveaways to implementing CSR (corporate social responsibility) programs.

In addition, Sevilla jokes that it’s tough competing in a market that demands Louis Vuitton at Divisoria prices. “It’s The Leather Collection at 168 prices—that’s what they want. It’s not a joke because it rings true,” she says.

Even the rising green movement brings its own set of hitches. “It isn’t uncommon for the public to accuse leather manufacturers of killing animals for leather, advocating synthetic materials instead,” shares Sevilla. “My answer to that is our product is a by-product of the food you eat. So until people stop eating beef and hamburger and steaks…this is a byproduct and if it isn’t processed, it will only pollute the water table, whereas synthetic materials are made of BET (sodium aluminosilicate), which is not something that’s environmentally friendly.”

The China Syndrome, the disposable lifestyle, and the tiangge mentality—these are just among the challenges faced by The Leather Collection. “It really requires a lot of education to bring about change in the mindset of people,” Sevilla shares.

“The current cost consciousness and the patapon lifestyle—like it or not, save for a tiny one percent of the market, the price benchmark for many shoppers today is really the tiangge. They’ll say, ‘eh bakit sa tiangge ganito ang presyo?’. I want to tell them, most of the products in tiangges are smuggled goods. The reason our prices are above their rates is because we pay proper taxes—the chemicals imported for tanning, the raw materials, these are all paying proper taxes.”

Buy ‘Manufactured in the Philippines’

Among the things Sevilla is thinking of spearheading with the Women Business Council (WBC) Philippines is a reengineered “Buy Filipino” movement, which entails encouraging the public to buy brands that are manufactured in the Philippines.

“I’m not saying to just buy only Filipino brands, but buy those that have plenty of Filipino input,” Sevilla asserts. “Wacoal bras, for example, are made here. They’ve a factory here and they employ Filipinos, contribute to the Filipino value set, and they pay taxes here. It’s a product by Filipinos, and that’s what I like to advocate. It doesn’t necessarily have to be a Filipino brand because many Filipino brands are actually made in China. What I’d like to advocate is that people support our economy in the way they spend their money.”

The Filipino value set has a lot to do with its colonial history. “What is foreign is the nicer thing—it’s the glutathione effect, the California effect,” says Sevilla. “But there are now local brands that are comfortable. Even our leather goods are better, and I’m not just talking about our products. I see Fino and Aranaz, and it’s very different now in terms of design and craftsmanship. That’s what makes us different from China—they don’t have the eye for design that we do. I think when it comes to manufacturing, we just need to first, clean up our act; and second, get our act together. Because it’s just us shooting ourselves in the foot, it’s us killing our industries.The manufacturing industry may be hanging in there for dear life, but one thing about Filipino entrepreneurs is that we do not give up easily. Para naming anak ang negosyo. Just give it a little more time—and support— and it’ll rise again.”

Published in the April 11, 2011 issue of the Manila Bulletin’s Business Agenda section

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