11 July 2005
Perfect Partners(HKTDC Fashion - Leather Goods & Bags, Vol 03,2005)
Granda Industries Ltd
Hon already had a semiconductor factory in Shenzhen on the Chinese mainland, but found that the relentless pace of innovation in the industry was making it difficult to maintain a healthy cash flow.
"Leather goods are relatively low-tech compared with the semiconductor industry and the business is more stable by nature," Hon explains. He realised his company was already in a prime position to fully utilise the good workmanship and relatively low production costs available on the mainland.
"We had a very strong management team, and the combination would enable us to produce medium- to high-end quality leather goods," he recalls. "That in turn would give us useful cash flow for the hi-tech business, which is more volatile."
Hon also appreciated the fact that leather goods have a long lifespan, while electronics change day by day and manufacturers are constantly keeping pace with the market. "With leather goods you can steadily build a customer base," he adds.
Hon established Granda in 1990 and proceeded to do just that by establishing a new factory in Shenzhen in an area where leatherworking was a well-established speciality and skilled labour was plentiful.
Initially Granda undertook OEM and ODM work, but then started to produce classically-styled, durable products bearing its own brands - partly to show international customers what the company was capable of producing.
Today Granda's own brands account for about 20% of the company's business, with the remainder comprising OEM/ODM work. "Our major market at the moment is Europe rather than the US, because we are geared to high-end products," Hon observes.
He explains that the US market is large but demands low prices, while Europe wants quality and is prepared to pay for it. "We supply some of the top brands in the world, some of which we've been working with for more than 10 years, although I can't name them because of non-disclosure agreements," Hon adds.
Granda's own brands include the Mazzini Collection of classic leather goods and men's fashionable bags, the Imate Collection of pouches for personal digital assistants (PDAs) and cellular phones, the Joli Collection of knitted handbags and the Sofie Collection of soft leather handbags and accessories.
"We make briefcases, wallets and organisers - even shoe polishing kits," Hon observes. "The men's lines are very stable but there are more changes in ladies' leather goods, which means you have to be very fashionable and up-to-date."
The 15,000-square-foot Shenzhen factory, which Hon claims is one of the best equipped on the mainland, employs some 300 people with seasonal fluctuations of about 50 workers.
"This is still a labour-intensive business and not all the workers have to be skilled, but you need to keep the key technical people," Hon stresses.
"You have to follow instructions almost 100% for very high-end customers, so you need highly skilled and experienced workers to meet those kind of requirements."
Granda buys hides from India, Korea and the mainland, but uses leather sourced from Italy and Germany for its most demanding European customers.
FOB Hong Kong unit prices range from as little as US$1 up to about US$40, and Hon stresses that the company is used to rapid turnaround times. Most orders take only 30 days to complete, although some big European companies have been known to keep the factory busy for much longer.
"We don't set minimum orders, but obviously if an order is very small it costs more," he says, adding that some orders from big companies can keep Granda busy for more than six months.
Granda always has "at least two" quality controllers on the lines for a first and second check. "Quality control is very important and we keep a very clean environment," Hon states. "I believe that increases efficiency."
Although he emphasises the quality aspect of Granda's manufacturing, Hon adds that the company's next priority is to establish a stronger presence in North America.
He recognises that this will involve making cheaper goods, and also require almost doubling the workforce. "We'll also need a new marketing team, because it requires a different approach," he concludes. "We have to be able to offer the kinds of prices buyers want."
WRITTEN BY ROBERT PIERCE
Granda Industries Ltd