by Nitish Varshney
15-December-2018 | 9 mins read
Acquisitions and mergers make for an integral parts of any corporate expansion. Today, acquisition has become one of the key business strategies employed by big business establishments. Earlier this year, when Chinese sewing technology pioneer Jack acquired 80 per cent stake in the capital of an Italian pioneer in jeans automation Vibemac for a total of EUR 23.2 million (US $ 28.6 million), it grabbed quite a few eyeballs in the industry. Few years back, not many would have thought of a Chinese company acquiring stakes in a European firm. However, the un-surpassable strides made by China in technology and innovation in recent times have made the nation a leader in technology today, and so it was no surprise to see this acquisition happen.
There is a massive opportunity in the 5 pocket jeans market within China. The collaboration between Vibemac and Jack, therefore, has been created keeping in view this potential. This alliance of the companies will result in securing a major market share for the parties involved. For either of them to do so, without the help of the other, would have been a goliath task.
Team Apparel Resources, in an exclusive tête-à-tête with Elena Guerreschi, CEO; Alberto Guerreschi, Business Developer; and Enrico Guerreschi, Global Sales Director of Vibemac, looked through the growth perspective of Vibemac after its collaboration with Jack.
AR: Vibemac is now a part of Jack. But, you also hold a strong control over the management of Vibemac. How do you see this as your growth perspective? How will this collaboration actually help Vibemac?
Elena: We are happy as well as positive about this collaboration and we are already working on developing new market strategies for our future growth. Vibemac will manage from the offices in Italy and China. The office in Vibemac China is still under development since we have just started this journey. We are strategising to determine the most accurate mode of approaching the Chinese market with Jack, while keeping in perspective the same logic and principles which have helped us maintain our position as the industry leader.
Alberto: We are positive and, since both of us think alike, we have associated with Jack. The right way to look at it is not as a company being sold but rather a promise which has been made. There is no concept of a change of command and this is why the alliance is visionary in terms of the potential which can be achieved. China presents infinite opportunities for our sector and, with Jack, we will be able to not only tap into this potential but also achieve and maintain the market leader position. Consider the example of European automotive manufacturers which are now producing for the Chinese market in China and this alone makes up a lion’s share of their total output. Our mantra is simple: ‘Let’s grow together and let’s do the best’.
AR: After this collaboration, are you going to shift your manufacturing base to China or it will still be in Italy only?
Alberto: People still think there is a big gap in terms of technology between these two countries but that’s not true anymore. Jack is making considerable investment to establish Vibemac in China. This investment is to ensure that the Vibemac standard is met with. Yes, we will shift manufacturing here but not entirely. We are going to produce our machines for the local market in China with our base of consistent quality, following the same Italian standards while maintaining a cost advantage which we will pass on to our customers. It is only a matter of time when customers will understand that it does not matter where the machines are produced. What should matter is how they are produced.
We have plans for our spare parts manufacturing too. We will continue producing the parts in Italy where we have already started working towards an expansion plan to double our production capacity in order to support the rising demand from the international market. However, as I said earlier, we will proceed in a phase by phase plan and not all of the products are going to be manufactured at once in China. This strategy is necessary to understand the precise potential of the Chinese market. There is already a considerable demand for Vibemac solutions in China since several companies from the country are already sourcing our solutions directly from Italy. We understand the fact that to enlarge our footprint in China, we have to be here and our partner, Jack can greatly support us in this endeavour through the vast coverage of the market which has already earned Jack the industry leader position in the country.
AR: You are right when you say that the process of manufacturing is more important than the place where it is manufactured. Although there is no doubt about Jack’s quality, the industry’s perception on Chinese manufacturing is still not that positive. Do you think it will affect your image in the overseas market?
Alberto: Yes, I understand. End customers were right almost one and half decade back when they kept complaining about quality issues in the Chinese products but it is a completely different story now. Jack believes in continuous improvement. Before us, it acquired MAICA and Bullmer which are doing exceptionally well under Jack’s management. Even Jack has achieved a very good quality in its products and the market is appreciating that. And, where it is manufacturing its products… in China only!
Moreover Jack has already surpassed the turnover of Juki because of low cost of manufacturing, high quality products and strong technical service, benefits which they ultimately pass on to the customers. Ruan (Founder of Jack Group) is focusing a lot on the quality of machines. So, industry perception has to change and I can see it is changing. Expert teams from Europe and China are working together to develop new technologies and the world is witnessing this positive change.
Enrico: The denim market is huge and everybody is trying to penetrate the market in any way they can. As far as Jack is concerned, they have more than 800 patents in their name. They have their R&D centre where they keep innovating their technology. Vibemac is already ahead of the industry learning curve and, with this new alliance, we have actually taken quantum leaps as we now have support from China’s leading sewing tech giant and this will help us in penetrating the Chinese market. The global 5 pocket jeans market is continuously growing with an aggressive CAGR. We will continue to focus on this sector and keep bringing in innovation to the market as is being requested by all of our customers, which is the need of the time. Everyday, we raise the bar in what we do, manufacturing machines to manufacture 5 pocket jeans.