Outsourcing Jeans Production

English | industry | jeans

Jeans: the fashion staple in every closet. The uniform of the human race. The identity of new generations and the nostalgia of generations past. The world’s obsession with denim and its products promises that demand will remain robust for years to come. In fact, denim fabric exports grew at a rate of 5% annually for the years of 01-05, topping out at a whopping $4.3 billion in world denim exports in 2005. The US denim fabric industry once dominated world production, but in recent years competition from lower cost countries has reduced profitability. Even Cone Mills (now known as Cone Denim) and Swift Galey, the two leading producers of denim in the United States, have felt the pinch of local production costs. Major financial problems have forced companies to either drastically cut production or enter into manufacturing joint ventures in order to move production offshore into more profitable territories.¹

A major opportunity presents itself for Brazil to capitalize on the world’s demand for denim products. As of 2006, Brazil was the world's second largest denim fabric producer, and fifth largest apparel producer.² There is considerable opportunity on a global level, but still much of Brazil’s denim production focuses on the domestic market. The Brazilian denim industry is growing strong, and making way for some much needed economic development. In Toritama, a small town located at the northeastern state of Pernambuco, almost the entire active population is employed by a thriving jeans industry. A town that would have otherwise gone economically stagnant in the rocky and dry space 173 kilometres from the ocean has overcome huge obstacles to become its current-day success. Toritama frequently experiences shortages of water, a necessary resource in the production of denim, during periods of draught. The community has even endured an entire year with no running water and still managed to grow production levels. The town produces nearly 2 million items monthly, which are feverishly consumed on the domestic market. Some exporting has taken place, but only through a secondary distributer residing in Rio. Brazil is a vibrant country that receives worldwide recognition for its beautiful models and sexy jeans. Production costs are competitive. So what is preventing major production hubs like the one in Toritama from connecting to the international market?

It seems that many manufacturers are small-to-medium sized enterprises, making international dealings more difficult.

According to Edilson Tavares of Mamute Confecções, “What we now need is professionalism. It is necessary to join forces so as to export, and our production must also be adapted to the consumer demands. If we are isolated, we cannot compete, and what has always favoured the performance of Toritama was healthy competition, which is the trade mark of the region."

Cooperation is already underway. SEBRAE, a small business support service (Brazilian equivalent to SBA), knows that in order to promote the development and distribution of goods it is crucial to unite the forces of everyone involved. Individuals, organizations and businesses must work together to transform the socioeconomic and educational climate of the community. Bound together under this common goal, the cooperative boasts a competitive force that would be impossible otherwise. This “strength in numbers” approach hopes to bring even greater success to this hardworking entrepreneurial town. Efforts like this are becoming commonplace in the Brazilian denim industry.

More and more, international denim companies are not only interested in producing a specific product, but also benefiting the countries in which they produce. U2’s Bono, along with his wife Ali and fellow bandmate, Rogan, have created a highly-hyped brand of denim whose innovative business model seeks out and produces in developing markets. The idea is to shift away from developed countries, and create sustainable employment in the countries in which they operate.³

Along with this humanitarian movement, there is also a new push for organic and natural cotton products. This is a win-win for Brazil. A new boom in the premium denim market (often described as organic, eco-friendly, or “green” jeans which retail at prices upwards of $100) promises even further opportunity for Brazil. It seems that “after wine and food, environmental awareness has now arrived at the world of fashion”.⁴ In the southern Brazilian state of Paraná, several farmers have already found this “niche”, and have begun producing organic cotton which is then made into clothes by the NGO Onda Solidária before being exported to France. This production initiative is made possible through the involvement of several organizations, including SEBRAE. This does not only make sense on an environmental level, but on a financial level as well. The cultivation of organic cotton is more profitable than that of regularly treated cotton. Treated cotton (15 kilograms) typically costs R$ 14 (US $6.60), but organic cotton can be sold at a much higher rate of R$ 20 (US $9.50).⁵ This is equally beneficial to the international market. A production survey performed in 2004 indicates that prices on the US domestic market ranged from $22.70 to $52.80 for 15 kilograms of organically grown cotton.⁶ It is no surprise, then, that Brazilian producers of organic cotton products are being sought out on the international market.

Brazil has it all: The denim the world wants and the knock-out style that makes the country famous… all at a price that the market is begging to pay. So why aren’t Brazilian manufacturers focusing more on the global market when there is so much money to be made? It seems that Juan Quiros, President of the Brazilian Export Promotion Agency (APEX/Brasil), said it best. “The biggest difficulty is not to export, it is to consolidate the market…”⁷ Perhaps SEBRAE and other organizations like it have the right idea. Bringing groups of smaller enterprises together to gain both exposure and a competitive edge is what it will take to bring more of the wonderful products Brazil has to offer to the global market.