Every now and then the apparel industry claims that Bangladesh is not just about cheap labour but is still not able to deny the advantage they have due to the comparatively lower minimum wages. What gives gravity to the industry’s claim of ‘not just being about cheap labour’, is the emergence of socks manufacturing in Bangladesh with as many as 20 companies investing in the product category in the last six years. Majorly dependent on automatic knitting machines for production, socks has been the mainstay of countries such as Pakistan, China and Turkey. A rather low profit business with margins only in few cents per pair, socks as a product category generated US $ 7 billion in the USA and US $ 2 billion in Germany last year, and even the domestic market has a lot of potential due to the fairly higher retail prices, compared to foreign markets. Looking to share a pie of this billion dollar product category, companies have invested in socks manufacturing with vision of a bright future.
Apparel Online spoke to the pioneer of socks exports from Bangladesh, Savar Textiles, besides many other investors, highlighting each one’s plan to succeed in the business of socks exports.
Till seven years ago, Savar group encompassing Supasox Ltd., Smartsox Ltd. and Socks & Tights Ltd. under its umbrella was the only manufacturer of socks in the country catering to the export market. Established by Towhid Samad in 1983, Savar group currently has 200 socks knitting machines and the socks division generates annual revenue of US $ 3 million. “most of the new factories are being run by production managers trained by us,” avers Towhid Samad, Chairman, Savar Group, who is called by many as the ‘father of socks industry’ in Bangladesh. “due to the boom that Bangladesh is witnessing in the garment industry, a lot of footwear companies have either started sourcing from the country or they have set up their own manufacturing units, because of the local availability of good quality leather. Every footwear buyer will also need socks and even the garment buyers will also need socks which they currently are sourcing from China,” highlights Zashim Uddin Khan, Managing Director, Zara Socks, who believes that the socks exports from Bangladesh will double in the coming two years and cross the mark of US $ 100 million. with a present turnover of US $ 2.5 million, Zara Socks plans to establish a new socks manufacturing unit with 500 knitting machines, for which land has been bought and it will come up by next year. Investment in socks manufacturing is his first venture into the apparel industry and he is presently exporting socks to germany, Italy, France, Sweden, Slovenia, Denmark, Japan, Canada and USA to buyers such as metro, boomerang International, Aydemir Textil, best Calze SRI and Dutexdor. “Although cotton socks are the biggest in volumes, we produce socks with all kinds of fibres such as cotton, woollen, acrylic, polyester, nylon and recycled cotton,” highlights Zashim Khan.
Fulfilling 70 per cent of its cotton consumption from Bangladesh, Zara Socks is completely dependent on China for raw materials such as elastic and spandex. “The average FOB per pair is 70 cents but it can go up to US $ 1 and can plunge to as low as 25 cents. but price is not a problem as long as there are orders. due to our setup we are working with small and mid-segment buyers because we cannot do huge quantities with our present setup. Our minimum order quantity is 10,000 pairs per style and monthly we can do 300,000 pairs,” asserts Zashim Khan. He claims that Japanese market is the most demanding in terms of value addition and surface embellishments. besides making socks with colourful yarns, Zara Socks has also done socks for kids with small bows sewn onto them. The company has also ventured into manufacturing of tights and leggings as no additional or different machines are required, only the diameter of the cylinder changes. Tights and leggings can fetch FOBS between US $ 1 to US $ 12.
Regenerated socks
Made from recycled cotton wastes, manufacturing of regenerated cotton socks is considered to be more beneficial compared to regular socks as there is no need to dye the sock yarns or the socks because colours are imparted to the recycled cotton without the use of dyes, hence saving on manufacturing cost by almost 35-40%. “what makes this segment even more lucrative is the exclusive 16% duty waiver from Canada on apparel products exported from Bangladesh, giving us a clear edge over our biggest competitors in regenerated socks – India and Pakistan,” maintained Sadruddin Hirji, Director, MAA Socks, a subsidiary of SIMCO Spinning mills and leading manufacturer of regenerated socks. He further goes on to add, “The quality of the waste is much better here than the ones found in China and India, because Bangladesh imports cotton from Afghanistan and USA, which produces higher quality cotton compared to what is grown in these two countries.” with a present turnover of around US $ 8 million, MAA Socks’ major markets are Canada and Germany.
Presently, there are anywhere between 15 to 20 new socks exporters in Bangladesh, among them are MAA Socks (with 170 machines), Anan Socks (Welltex Group – 150 machines), Zara Socks (100 machines), Delta Socks (50 machines), Total Socks (50 machines), Virtual Knitting (50 machines), Shenakolan Socks (50 machines), and a few months old A&A Socks (48 machines).
Talking about the demand of regenerated socks, Sadruddin Hirji maintained, “There is so much demand for such socks, that even if I grow at the rate of 100% for the next four years, there would still be a lot of scope for growth. but as per company’s growth strategy, right now we are pegging the growth at 30% year-on-year basis and looking to add 35-40 machines more in the next 6 months, besides a lot of investment has also been made in the sock industry in the last three years, and it is expected to grow by 250 per cent in the next five years,” Sadruddin Hirji avers.
A pair of socks made of normal cotton would usually fetch around 75 cents; but when made of regenerated cotton, it goes down to a mere 30 cents/pair. but since these socks are disposed after 3-4 wears, the volumes in this product are huge whereas the FOB rates for basic men’s socks start from 17 cents a pair and the manufacturing cost for this would be 16 to 16.5 cents. “The margin per pair is less but since we are exporting 3 million dozens per year, the overall margins are fine,” shares Zashim Khan.
China has a socks city Datang – northwest of Tie Town, east of Sweater Town. The buyers go to such cities and buy as much quantities as they want, with numerous options available. This city exports 8 billion pairs of socks, which is 65 per cent of the overall socks production in China and one-third of the socks production of the world.
Dress socks – The future
“We are not doing socks made of regenerated cotton as we cannot compete with Pakistan because we do not have much recycled yarn in the country. Hence we have an established setup specializing in dress socks and regular socks for buyers such as Inditex, IZOD, next, Primark and Carrefour,” shares Majedul Hoque Chisty, Managing Director, Welltex Group, who is among the few apparel manufacturers who have invested in socks manufacturing. A US $ 70 million company, Welltex Group established Anan Socks in 2009 and currently have 150 sock machines. “I ventured into socks manufacturing at my buyers’ insistence,” says Majedul Hoque, adding, “Even though I don’t foresee big growth in the near future, a mere 30% growth will be enough to make my capacity double.” 60 per cent of the machines installed at Anan Socks are double-cylinder machines, suitable for manufacturing rib socks. “Single cylinder machines can make any kind of design and double-cylinder machines can make any kinds of rib socks, but they cannot do any jacquard or intarsia, which single cylinder machines can do,” explains majedul. Rib socks give Weltex Group year round business and a pack of 5 pairs is sold in the US for US $ 10 while they get an average FOB of 40 to 50 cents per pair.
Even the pioneer, Savar Group, has a niche setup of 191 double-cylinder machines for producing rib socks for its buyers such as H&M, next, Joe Fresh, Celio and US Polo. “Rib socks are a profitable category in socks because China is not majorly into manufacturing of such socks. Although the buyers for rib socks are few, the prices are good,” explains Towhid Samad. The rib socks made by Savar group are made on machines with 144 and 132 needles, placing them in the category of fine dress socks for formal occasions. Having both double- and single-cylinder machines, MAA Socks has focused on the machines with 92, 108 and 132 needles for manufacturing fine dress socks. “If we talk about finer quality dress socks, in which China specializes, we as a country are not focusing on that premium segment because companies are specializing in a single type of socks, which offers them the volumes. but such focus is necessary for building a diverse product portfolio, essential for attracting more buyers,” asserts Sadruddin Hirji.
Only the end-product’s quality matters
Socks manufacturing is characterized by the use of three automatic equipments – knitting machines, toe closing or linking machines and steaming or boarding machines. In Bangladesh, the new entrants in socks manufacturing have invested in Italian machines while the relatively older manufacturers are working with machines of Chinese and Korean make.
MAA Socks has invested in socks knitting machines from Lonati and Sangiacomo, and plans to stick to Italian machines only for future expansions. “A brand new Lonati would cost US $ 35,000, whereas a Korean or Taiwanese machines would cost US $ 15,000 and a Chinese machine would cost US $ 5,000 but the output of Italian machines are 4-5 times more, the downtime is lower and they can last easily for 2025 years,” explains Sadruddin Hirji. not completely agreeing with him, Towhid Samad points out, “As per our experience, the breakage percentage of spare parts in Chinese machines is 0.3%, in Korean machines it is 0.2%, and in Italian machines 0.1%. Since we import all the spare parts from China, we keep a stock of spare parts sufficient for 6 months of factory operations.” Having installed a mix of Italian, Korean and Chinese socks knitting machines, Zashim Khan states, “The buyers pay the same price for socks and it does not matter whether they are made on Italian, Korean or Chinese machines.”Agreeing to a certain extent with Zashim Khan, Majedul Hoque states, “Right now we have Italian machines from Matec and Busi, but we do not see the ROI coming soon. The life of Chinese machines is less than 2 years, and the quality of socks produced is not good.”
Skilled technicians, the key to operational excellence
Even though using a wide variety of knitting machines, the industry unanimously agrees with the fact that if the machine technicians are not skilled then it does not matter which machine one buys. “I had two Chinese technicians, husband and wife and they would produce such fine intarsia socks from hand knitting machines. The moment they left, no one was able to produce such quality,” claims Towhid Samad. Agreeing with him, Zashim Khan adds, “They could read early signs of malfunctioning in a machine and correct it in time to ensure continuous production given that they would monitor the weather conditions to avoid breakages and rejections in yarns, irrespective of the machine one is using.” Further highlighting the need of a skilled knitting machine technician Towhid Samad states, “In my initial years of socks manufacturing, I started losing a lot of money because the manufacturing costs were too high due to the high yarn consumption. by hiring skilled technicians, we reduced the yarn count and hence the yarn consumption, reducing on an average 4 grams per sock, which is a huge difference, reducing the weight further can affect the quality. generally socks of females weigh around 38 to 42 grams per pair and that of males it is 48 grams per pair; but if these socks are made of heavy gauge yarns, then they can weigh up to 100 grams.
Socks knitting machines are available from manufacturers around the world, these include italian companies such as Lonati, Rumi, Matec, Busi and Sangiacomo; Japanese companies – Shima Seiki and Nagata Seiki; Taiwanese companies namely Da Kong, Tai HoShing and Danken; Korean companies like Taeho, Soosan and Dong Sung; Indian company such as Solomon; and Chinese company like Yexiao, to name a few.
On an average, it takes 5 minutes to knit men’s socks and 4.5 minutes to knit women’s socks, irrespective of the design. On an average, 4-5 machines can be handled by a single operator. However, at Savar group’s sock factories, an operator can handle 8 socks knitting machines. Operators are responsible for changing the yarns and checking the quality of socks’ core. The machines produce a Tubular, open from both the ends, which require toe closing as the heel is shaped and closed by the machine automatically. Although socks knitting machines are available with the capability of toe closing and producing finished socks, the price of the technology makes it less feasible. nonetheless, almost all socks manufacturers have invested in automatic toe closing machines from companies such as Rosso, Conti Complett, and the operators are required to mount the edges of the unfinished toe and the rest is taken care by the machine. On an average a toe closing machine can do 20 to 25 dozen socks per hour but it also depends on the skill level of the operator as he/she has to align the sock closing.
“In fully automated socks piece dyeing machines, you put socks through one end and dyed socks comes out from the other. The drying also happens within the machine. This machine used to cost uS $ 1.2 million but it can drastically reduce the entire process of dyeing and finish the department of yarn dyeing for socks. In 8 hours this machine can dye 20,000 dozens of socks and these socks are ready to ship,” concludes Towhid Samad.
The First Socks Exporter, Towhid Samad, Shares his Global Outlook and Why it is Hard to Make Money in Socks
Towhid Samad started socks manufacturing at a time when garment export had not started from Bangladesh and even the government had not put in place any system to import raw materials. “my first order of socks was delayed by 9 months because of numerous problems related to the supply chain,” recalls Samad, whose love for socks blossomed when he first visited Korea. back in the 1980s, there were more than 100 socks factories in Korea and the biggest among them had a turnover of US $ 140 million, only in socks. Hence Towhid Samad started socks manufacturing with the help of daewoo Corporation and went on to bag consistent business from german buyer for socks, when he went to Europe as a part of a trade delegation. back then, acrylic socks were a big business and buyers were willing to pay uS $ 3 to 3.5 per pair of basic socks.
Bangladesh’s lone socks exporter peaked in 1995 with a setup of 600 socks knitting machines and this was the same time when Turkey came into the business of socks manufacturing, thus taking away from Savar group the business of regenerated socks. “The price range offered by Turkey was quite low compared to us because the freight cost from Dhaka to Europe is very high and Turkey being in Europe, it helped their cause better,” maintained Samad, and soon added, “For us freight cost accounted for an additional 20 cents a pair, accounting for a lot of difference to cover in terms of pricing.” dwelling further on the Turkish socks industry, he observed, “Turkey being in Europe, it’s a completely different story for them. There’s no LCS or contracts signed in Turkey for making socks. To source socks, one has to just make a phone call or send an e-mail. It is called ‘a work order’ in Turkey and at times the e-mail is a contract in itself. If someone defaults, he cannot source anymore from Turkey,” Towhid observed.
However, it was the entry of China in socks manufacturing and exports that drove every other socks manufacturing country out of business because of the impossibly low prices offered by them. “The pricing is very simple in socks; major cost is of the yarns and its consumption is defined, so you just multiply it and get the CM per pair. If your raw material is of US $ 3, how in god’s name are you selling a pair at US $ 2.80, but they are doing it and without incurring any loss,” avers Samad. This is possible because of the infrastructural subsidies given to the manufacturers in terms of free land, ready to move in factory space and even free machinery, which means zero operating cost to the manufacturer.
Samad further claims, “In China, one can set up a socks factory in 24 hours and you just need the intent of exporting socks. The reason why China has focused on socks is because it’s a multi-billion dollar market which has led to a US trade deficit of US $ 10 trillion debt to be paid to China.” He endorses with the fact that China even has a socks city, Datang in the north-west of Tie Town, east of Sweater Town. Hence the buyers go to such cities and buy as much quantity as they want and that too with a plentiful of options. This city also exports 8 billion pairs of socks, which is 65 per cent of the overall socks production in China and one-third of the socks production of the world. but with China facing labour shortage resulting in the closure of companies such as Anli Sock group, one of the largest enterprises in Datang, making 60 million pairs of socks a year, opportunities linger for socks manufacturers based in other countries.
Pakistan’s dominance in socks made of regenerated cotton is known worldwide due to the availability of short staple cotton, but this is not the case with Bangladesh. “you can survive on tennis socks with a factory of 600 machines, there is a fixed international price for such socks, your turnover would be US $ 1-2 million per month, you would be able to ship a million dozens per month and make 10 cents per dozen,” avers Samad, but adds that small factories with 40 machines making the same products could not survive in Pakistan, because for generating a decent margin, scales are necessary.
Talking about his own company, which has downsized from 600 knitting machines in the late 1990s to just 200 knitting machines, Samad concludes, “I’m still saying it is possible to make socks profitable in Bangladesh and fight China, but for that I’d need the government subsidy of 25%, which is a cash incentive on the amount of goods that we would export. garment can survive without subsidy but socks cannot. with the subsidy, I can set up a factory right now and drive China out of the business by offering even lower prices. And once I have created my monopoly, I will raise the prices slowly. Subsidy is often misconstrued as free money but it is the only way this industry can survive.”
Domestic market – Opportunities galore
In the domestic market, companies such as Apex, Bata and the likes are sourcing socks from these manufacturers along with the Army, RAB and Police. Zara Socks has allocated 50% of its output to the domestic market. “we are biggest vendors for the domestic market, and the local market offers more than twice the price compared to the export market because the people are willing to spend a higher amount on socks,” shares Zashim Khan of Zara Socks. Although located in the Adamjee EPZ and hence not allowed to sell their merchandise in the domestic market, MAA Socks has done a consignment of 200,000 socks for the Bangladesh Army as well. Although having manufactured socks for the Bangladesh Army and Police, Towhid Samad has completely written off the domestic market because it works on credit basis and he states that the reason why India never made it big in socks exports was due to a vast domestic market. “I had a buyer and I tried to push him into India. but he completely refused to source socks from India. He said that because the Indian domestic market for socks is so large, the manufacturers take orders from me and when the festival of diwali comes they sell those socks in the local market, that too at better price,” he shares.
