Pacific Brands

Christchurch businessman Ken Anderson looks set to expand his Lane Walker Rudkin clothing manufacturing empire.

His takeover of Auckland textile manufacturer Pod is almost home and hosed. Anderson had secured 87 per cent of Pod shares by yesterday with only 3% left to reach the 90% threshold at which he can compulsorily acquire the rest of the shares. A key shareholder with 6.4%, Aucklander Hemat Lal Patel, who had considered the bid too low, told the New Zealand Exchange (NZX) yesterday he had sold to Lane Walker Rudkin.

Anderson, an accountant by training and chairman and chief executive of Lane Walker Rudkin Industries, has a week more up his sleeve with the 50c-a-share Pod takeover offer deadline next Thursday.

Anderson owned LWR and there were no other shareholders, he confirmed. He bought LWR in 2001 except for the Canterbury brand. He keeps a low profile and will only say the LWR business has a turnover of several hundred million dollars. Pod will add about another $65 million in sales and about 250 staff.

LWR Manufacturing has more than 1000 staff in New Zealand and Australia. About 600 staff are in Christchurch at LWR's site in Sydenham where it has a textile manufacturing and hosiery and underwear making plants. LWR manufactures hosiery and underwear for other companies including Pacific Brands.

LWR has two sock factories, one in Timaru and one in Melbourne, and three smaller hosiery and underwear factories in the central North Island, one in Greytown (135 employees), Levin (130) and Pahiatua (25).

In Brisbane, LWR owns a sport apparel factory which makes sports team uniforms under licence for Adidas. It also owns the Stirling Sports and Champions of the World sports clothing retail chains. He said he was confident of reaching 90% in the next week, because of indications from other shareholders that they would sell.

Since buying LWR six years ago when it had about 400 staff, he had about doubled the business. About 60% of sales are in New Zealand, 30% in Australia and about 10% in the United States and other countries, Anderson said. In its heyday the company employed about 4000 staff, he said.

Pod would add more scale to the business. Savings existed in delisting Pod and in product rationalisation, he said. "There's a lot to be said for manufacturing close to the market," he said. About 90% of the firm's sales are from Australasia.

Big clothing company Pacific Brands has concentrated its New Zealand operations within Christchurch's "apparel hub" as it commits to a larger design team and keeping manufacturing onshore.

Pacific Brands Clothing New Zealand general manager, Mark Jordan ,said the company now had a stronger Canterbury focus and was looking to hire creative people.

New staff were being sought in the design and marketing areas to push brands such as Bonds and Jockey. Pacific Brands employed around 8000 staff globally.

Some of its best-known brands include Jockey, Bonds, Rio and Holeproof.

Two of Pacific Brands' most successful marketing campaigns – the Jockey campaign with All Black Dan Carter and the Liberty campaign had been Christchurch initiatives, using agency Harvey Cameron Advertising.

The New Zealand firm would look at both acquisitions and organic growth of existing clothing and home comfort brands, Jordan said.

Pacific Brands has four divisions: footwear, bedding, apparel and outer wear-sport.

"We're in the type of industry where new product development is important – putting new things in front of consumers."

Pacific Brands' share price closed untraded yesterday, and last traded at NZ357c near the top of a 12-month range of 245c to 365c.

Despite having gone through a period of expansion, the cashflow-based business was not at a point of needing extra capital, Jordan said.

In November 2006 Pacific Brands bought the bedware and merino business of Christchurch firm Arthur Ellis.

Last week it confirmed the purchase of Australasian workwear supplier Yakka Group, which has annual sales of around $300m and was bought for an estimated $A200m to $A250m ($NZ226m-$283.4m).

Within Christchurch the business was retaining its sock manufacturing base in Montreal Street, but had recently rebased its head office to Victoria Street, Jordan said.

Pacific Brands main head office was based in Melbourne, and other business units, including Bonds, based in Australia.

In New Zealand it also had a Palmerston North-based thermal underwear factory, and while most of its manufacturing was out of China "more than a quarter of the product is still locally made".

The company was always looking for acquisitions, Jordan said. "I think the good thing is they've been prepared to invest in the New Zealand market," he said.

Pacific Brands Clothing NZ has been manufacturing socks in Canterbury for more than 100 years.  Today, its impressive brand portfolio includes market leaders Jockey, Holeproof, Rio, Hanes, and Bonds.

The company has its origins in Lane Walker Rudkin Ltd and a strong commitment to Canterbury, and Christchurch in particular, has been a defining feature of Pacific Brands since the early days.  Always a significant local employer, it now has more than 100 staff at its manufacturing plant and head office in Montreal Street. 

"Our people are the company's greatest asset and we have invested in them accordingly," says New Zealand manufacturing manager Simon Hay of Pacific Brands Clothing.  He says the company's loyalty has been returned, and rewarded.  "The commitment of our experienced manufacturing staff -- whose average length of service is 20 years -- has enabled Pacific Brands to apply initiatives and strategies that have been vital to its survival, and local and global success.  "A willingness to scrutinise and reinvent our processes and our brands has been the key to our achievements. It has enabled Pacific Brands to innovate, specialise, and most importantly, differentiate its products in a fiercely competitive industry."

Pacific Brands' highly flexible manufacturing reflects this approach. Its factory specialises in short-run manufacturing, speed to market, the use of New Zealand fibres and its Christchurch- based design team is sensitive to the needs of New Zealand consumers.  "We consistently develop styles and ranges that play to the company's manufacturing abilities, while delivering a competitive advantage in-store."

Pacific Brands' enthusiasm for innovation has not just been confined to marketing, fabrics, products or styles. They have applied it with equal zeal when seeking to enhance and streamline business practices and management.  The company's quality differentiator programme came to the fore in focussing on the potential for specialising in natural New Zealand fibres, including merino and possum and adding value to local products.

"The Jockey Gold Top and ThermaTech high performance merino socks are prime examples of the successful application of this initiative," Hay says.

Pacific Brands maintains close partnerships with The New Zealand Merino Company and contract customers.  The company's successful management processes have also helped Pacific Brands become a competitive exporter with an international presence in Asia, Europe, South Africa and Canada.

Products such as Liberty's super fine merino, and ThermaTech's Nuyarn Merino performance range have gained good traction in recent years.  "We are extremely proud of the company's manufacturing success over the last 100 years, proof that New Zealand can compete and win on the global stage through building strong, consumer- focussed brands."

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Champion Producer/Manufacturer (medium/large): Nature's Flame, Pacific Brands Clothing Group (NZ), The New Zealand Merino Company Limited

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CAPTION:
Proactive approach: for more than 100 years, Pacific Brands Clothing has produced quality products and the company has made sure it has changed with the times. Photo: Carys Monteath

Canterbury manufacturers have vowed to survive an almost 50 per cent cut in clothing, footwear, and carpet tariffs over three years.  The Government announced yesterday that a freeze on tariff rates, introduced in 1999 to help protect jobs, would end in 2006.

Commerce Minister Lianne Dalziel said, while tariffs would again begin reducing, the Government had held off moving to a zero-tariff regime targeted by the previous National-led Government.

The highest tariff rates of 17 to 19 per cent, which applied largely to clothing, footwear, and carpet, would begin reducing from July 1, 2006. These rates would reduce gradually to 10 per cent by July 1, 2009. Tariff rates on all other goods would reduce to 5 per cent by July 2008.

Canterbury Manufacturers Association president Glen Keen said industries would have preferred a continuation of the freeze "until our trading partners' situations were clearer" but added the result was the best that could be expected.  "The gradual nature of the tariff cuts will give the industry time to grow its export capability," he said.

Manufacturers faced stiff competition from Chinese factories, for example, which paid workers only 50 cents an hour compared with $10 to $12 for a New Zealand worker, he said.  To survive, New Zealand firms would have to become more competitive and produce high-end, added-value products.

Mr Keen appealed to the Government for assistance to develop export markets for New Zealand manufacturers.  "The industry clearly won't be able to survive on the domestic market alone," he said.

Tariff reductions would have a bigger impact on manufacturers of specific items protected by special tariffs, Mr Keen said.  Underwear manufacturers, such as Christchurch company Lane, Walker, Rudkin (LWR), were protected by an additional tariff of $1 to $2 on each pair of imported briefs.

In 1991 there were about 5000 clothing industry workers in Christchurch.  In the 1950s, when tariffs were as high as 90 per cent and it was illegal to import many products, up to 80,000 people were involved in clothing manufacture.  Today there are still 18,000 people employed in the industry.

About 30 small cut, make, and trim (CMT) manufacturers in Christchurch, who make clothes on behalf of other companies, will be affected by the tariff changes, along with big local players such as LWR and sock manufacturer Pacific Brands.

Pacific Brands employs 70 manufacturing staff at its Christchurch factory, where it makes Gold Top, Canterbury, and Jockey socks.  Pacific's general manager, Mark Jordan, said the industry had lobbied to keep tariffs but planned for tariff reductions.

LWR general manager Albert Yee was pleased the tariffs were not being slashed too fast, too soon.  "The tariffs being set relative to our New Zealand trading partners (are) a better result than the previous extreme position," he said.

Consumers Institute chief executive David Russell said the tariff reductions would be good for shoppers.  "In terms of price we need to watch where this stuff comes from. The New Zealand industry shouldn't be forced to face unfair competition but by and large any reduction in tariffs is going to benefit the New Zealand consumer."

Progressive Party leader Jim Anderton, who campaigned against rapid tariff reduction, said the key objective of the Government's programme was to minimise adjustment pressures on firms and regions.  "What we rejected was a unilateral move to zero tariffs by 2010. What we will have is a further review in 2006 to determine appropriate tariff rates after 1 July, 2009," he said.

The Government would be working closely with the textile, clothing, footwear, and carpet industries, in particular, to ensure that existing industry and regional development policies were effective in helping those industries work through the adjustment process.

An unravelling hosiery market has forced the end of an era in Canterbury manufacturing.

Pacific Brands Clothing Group, a subsidiary of Pacific Dunlop, says it will consolidate hosiery production at its Melbourne plant by the end of next month. Thirty jobs will be axed at its Jockey factory in Christchurch, while 55 will go at Sara Lee Apparel in Porirua.

Pacific Brands general manager Bryan Pearson said hard-working Jockey staff had prolonged the life of the operation, but market forces had proved too strong. "They made some incredible gains in the face of some pressure, but the way things have worked, it may not be enough," he said.

Pacific Dunlop spent about $16 million to buy Jockey from Lane Walker Rudkin in March last year, sparking concerns the brand would leave Christchurch.

However, Pacific Dunlop agreed to keep at least 75 per cent of its manufacturing in the city for three years. Mr Pearson said the company would still make socks and thermal underwear at the factory, but that the hosiery line had to go. "It would be easy to say that this is a cost-cutting measure, but it was never taken this lightly," he said. "We've been trying to keep the business here for a long time, but the decline has made it too difficult." Mr Pearson said the world hosiery market had been receding for about six years. Sales had halved, and the purchase of Sara Lee Apparel in March made consolidation even more necessary.

Mr Pearson said Sara Lee's Melbourne plant was running at about 50 per cent of capacity. "This is the best proposal we can deliver," he said.

National Distribution Union textiles organiser Kaelene Churton said the company had promised staff counselling and help in finding new jobs. They were also invited to offer alternatives to the consolidation proposal. "No-one wants to leave any stone unturned," she said. "If we think we can get a better future, then we will look for it." Ms Churton said staff had expected some changes, but were still upset by the move. Many had been in the factory since "the old" Lane Walker Rudkin days. "For some members this is the end of an era," she said. "It'll mean the last links with a place they have known for a very long time." Ms Churton said the union and workers would spend the next week working through contract and work-seeking issues.

Jockey New Zealand merged with Holeproof, Berlei, and Bonds in July last year, to form Pacific Brands Clothing Group.

The axing of over 80 clothing workers' jobs in Christchurch and Porirua is a direct consequence of successive Governments' free trade policies, the Green Party said today.  The Pacific Brands clothing group has announced that it will close down both the former Lane Walker Rudkin Jockey Factory in Christchurch and the Sara Lee Apparel factory in Porirua, and shift hosiery production to Melbourne.

"It makes me angry when staff who are long-serving, dedicated and highly productive lose their jobs because of Government tariff reduction policies," said Green Party co-leader Rod Donald.

"Successive Governments have slashed tariffs on clothing imports in the full knowledge that their actions were destroying the clothing manufacturing sector in New Zealand.  Despite the Labour-led government freezing tariffs on clothing imports last year, it continues to undermine what is left of the industry by signing up to a free trade agreement with Singapore and is now proposing a similar but much more dangerous agreement with Hong Kong.

"We are meant to have a close economic relationship with Australia, but they froze their tariffs at 25% on clothing compared to 19% in New Zealand.  With both countries facing a massive increase in sweatshop imports from Asia it was inevitable that higher tariff levels in Australia would keep Australian based manufacturing plants viable for longer than those in New Zealand."

Mr Donald said he took the closure of the Jockey plant quite personally, not only as an avid wearer of Jockey Y fronts, but also because both his mother and father worked for Lane Walker Rudkin Industries before he was born.  "I know how important Mum's second income was for getting my parents on their feet, enabling them to put down a deposit on a section and build their first home. The deliberate destruction of New Zealand's clothing industry is denying today's school leavers the same opportunities my parents had.

"I'd like to offer my encouragement to the redundant clothing workers and urge them to consider setting up their own manufacturing business. They have the skills and experience to make a go of it and I am sure the public would respond to a call to buy New Zealand made.  I for one would buy their products," he said.
Ends

The country's largest clothing manufacturer says it remains committed to Christchurch, despite the sale of a major asset to an Australian company. LWR Industries yesterday reaffirmed its intention to stay in the city, concentrating on its successful Canterbury International range of clothing.

"I think the prospects are good," LWR executive director Peter Nicholas told The Press. "We are utterly committed to making it here, and we'll do anything we can to stay. It's part of the company's heritage."

The clothing industry has been battered by a raft of redundancies and closures, most recently Bendon's decision to relocate overseas. LWR, which once employed thousands in Christchurch, now employs 280 people in the city and was sold last year to a consortium led by New Zealand-born American David Teece.

The Commerce Commission has cleared the way for LWR to sell most of its hosiery and underwear business -- marketed as Jockey -- to Pacific Dunlop, although an agreement has been struck to keep at least 75 per cent of the manufacturing of the product in Christchurch for three years. The sale has raised fears that the city will lose its valuable role as a centre of clothing manufacture, placing jobs and exports at risk. Mr Nicholas said the jobs of the 77 people employed making Jockey garments were safe, although Pacific Dunlop had the option to look elsewhere for the manufacture of Jockey after the three-year clause expired.

Mr Nicholas said LWR would pump the proceeds from the sale -- believed to have topped $16 million -- into growing its Canterbury brand and retiring debt.

Although Asia was gaining prominence as a centre of clothing manufacture, New Zealand also had the advantages of quick turn-around, high-quality garments, a low dollar, and lower wage costs than Australia or Europe. LWR last year won the contract to make the Australian Wallaby rugby jersey.

It clothes the national teams of Scotland, Fiji, Tonga, Canada, Namibia, and Italy, plus a host of international provincial teams. It lost the All Black contract, however, which went to American company adidas. LWR also announced it will centralise its sourcing and buying operations in Christchurch. LWR's operations in Australia, South Africa, and Asia make their own decisions. Mr Nicholas said he hoped the centralisation would lead to more manufacturing being done in Christchurch rather than overseas.

Jockey New Zealand general manager Bryan Pearson said four or five management positions were at risk in Palmerston North. However, he hoped the Christchurch plant could expand. The challenge was to find new markets for New Zealand-made goods.

Pacific Dunlop was the best company the operation could have been sold to as it knew the industry and already held the Australian Jockey franchise, he said.

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CAPTION: PHOTO: RACHEL SIMPSON LWR executive director Peter Nicholas on the shop floor
at the Montreal Street factory.