Clothing

The prevailing Government policy of "internationalisation" presents the idea that New Zealand can develop a robust and growing economy, even if manufacturing companies send the "dirty bits" of their production process overseas. They promote the view that labour cost differences between New Zealand and low-cost countries make the relocation of the "dirty bits" (production) away from New Zealand inevitable, therefore we should focus on keeping the "shiny bits" (design, research and development, marketing and ownership) in New Zealand.

This message is clear in the Advancing Economic Transformation Cabinet paper released last year, which says: "The key challenges arising from international integration are for New Zealand to:

A. Position itself as an attractive location for investment and skills and for those parts of international supply chains that relate to high-value products and activities and that provide the greatest return (eg R&D and design). This includes an imperative to develop more and/or larger internationally successful New Zealand businesses, networks of businesses, and segments of the economy; and

B. Capture the best return through our businesses being part of international value chains offshore (return profits to New Zealand), through developing new business models of operating internationally (such as investing directly in offshore product and distribution chains), rather than transferring valuable activities offshore."

Few would have a problem with the document's objectives and the recommended actions appear deceptively rational. However, they are constructed around a fundamentally flawed concept that "valuable activities" can be separated without penalty. Internationalisation might work in theory, but the message from New Zealand's manufacturing sector is clear that at a practical level this will not work. For global businesses, the interaction between each of their "separate" components has a subtle and pervasive impact on their performance and effectiveness.

It is not only important to get all of the elements of the business system right, but also the interconnections between those elements. Much of the literature on internationalisation simply shows the different elements or activities of the business system. Diagrams show different components of the supply chain - customers, marketing research, development, production, etc - as different blocks. While it is obvious that a global business is not compelled to physically co-locate activities, a superficial analysis can form the view that individual blocks can be separated without penalty or risk. This view underestimates the importance of supporting interconnections between functions.

Good businesses will make decisions about the location of their activities based on suitability for the activity itself and the effectiveness of interconnections with other elements of the system. There will be tradeoffs. A firm may not seek lower labour costs because it is too important that they can produce new products rapidly, suggesting they should have all their functions in the same place. Alternatively, a company may locate R&D closer to its low-cost labour production site or locate product management closer to end markets.

This might compromise the quality of the R&D, but this affect can be outweighed by the importance of the low-cost production, the productive use of multiple time zones or some other component of the competitive landscape. The cost and reliability of the supply is also a critical factor of internationalisation. The disruption to supply chains may be a huge strategic risk, and the greater the international interdependence, the worse the effect of even short-term disruption.

In reality wage costs are a fairly minor component of the overall picture that controls the profitability of manufacturing. It is worth noting that a direct labour content of less than 5 per cent of sales is not unusual in high technology products, and exchange rate fluctuations could have five times the impact of the difference in labour rates. Many factors contribute to a country's international competitiveness so the priority for Government must be to maximise the advantages available in the policy framework. What does this mean for a country like New Zealand?

There is no one-size-fits-all solution regarding the location or value of business activities. What might suit garment manufacturing will not necessarily suit high technology electronics or other complex products. The strategy for each business will be different but there are some common themes for New Zealand, given the country's attributes of isolated geography and small population.

A number of our firms now compete globally at a micro level in small markets or in the post-processing of our "primary" outputs. Policies and assistance need to nurture the creation of entire businesses in these areas, rather than trying to prescribe which bits should be encouraged and which bits should be neglected. Even if some businesses do send production overseas, it would make sense for our policies to maintain a neutral or positive bias towards locally-based production.

Policy settings need to make it more attractive for innovative business to create wealth in New Zealand through personal incentives, company incentives and national infrastructure. Factors such as broadband, transportation networks and tax incentives for productive activity can encourage activity. This comprehensive approach to policy support will promote the retention of as many of the supply chain components as possible, rather than focusing on individual links of the supply chain. The Government must not seek to pick winners or favour particular supply chain activities, as businesses will determine the profitability of their activities themselves.

Effective policy must provide incentives, or at least no disadvantage, for winning behaviour. Investment in research, development, productive activity, skills and capability development and new ventures will all assist in increasing our international competitiveness. Incentives are best delivered through the tax code generally to encourage investment in productive activity rather than in static assets. The support of winning behaviours and monetary policy that secures a stable exchange rate will help mitigate disadvantages of the wage rates. Given such changes, perhaps more companies will keep more of their supply chain in New Zealand.

* John Walley is the chief executive of the Manufacturers and Exporters Association.

Six months in and the Government's $11.5 million Buy Kiwi Made campaign is being seen as a feelgood venture to appease the Green Party rather than an initiative providing direct economic benefits.

While the Government is claiming success in terms of growing membership of the Business New Zealand-owned Buy New Zealand Made scheme, and increased awareness, critics doubt the campaign is making Kiwis patriotically throw their buying power behind local enterprises.  The campaign, made up of advertising, research, and a $3 million grant scheme, was part of the Labour Government's post-election co-operation agreement with the Greens. It has been running for six months, with television adverts featuring a robotic Oliver Driver starting in September.

Green MP Sue Bradford, government spokeswoman for Buy Kiwi Made, said attitudes were moving in the right direction.

A Research International survey showed that the percentage of consumers who always or often considered whether a product was New Zealand made before buying had increased from 35 per cent before the campaign, to 41 per cent in December.

Fifteen per cent of retailers said New Zealand goods now made up 6-10 per cent of their stock, up from 10 per cent pre-campaign.

Buy New Zealand Made, the separate self-funding organisation which administers the triangular kiwi logo, has benefited from the publicity. Director Samantha Seath said since Buy Kiwi Made started, membership had risen from 650 to 950.  Hits on the Buy New Zealand made website had also increased from 5000 to 40,000 a month.

"People want to buy New Zealand made products, there's no doubt about it," she said. "It's just getting that message through to manufacturers and retailers that they need to make sure that they are stocking products that are showing they are New Zealand made."

But both Seath and Bradford concede there is no way of measuring the campaign's success in terms of dollars spent on New Zealand goods.  The Green MP said the value of Buy Kiwi Made was in enhancing the way New Zealanders saw manufacturing, and improving their understanding of its role in our economy.  Manufacturing needed to be looked after as much as possible, she said. "We just see this as one element of trying to nurture the New Zealand economy and prepare our economy for the impacts of climate change and peak oil."

Bruce Goldsworthy, advocacy manager for EMA Northern, said while it was pleasing a government had "finally" got behind a campaign to buy local products, it had missed its window. New Zealand consumers were now used to a wide range of choice, and were less likely to err on the side of patriotism.  "The extent to which it [the campaign] is good for the country I'm not sure. I believe it would have had a much greater impact if they'd started it 20 years ago."  Referring to the deal with the Greens, Goldsworthy said Buy Kiwi Made was a political move. "There'd have to be a question whether this money is well spent."

David Skilling, chief executive of think tank the New Zealand Institute, is similarly sceptical.  "I would be surprised if what they've done to date in terms of the initiative is going to generate significant changes in behaviour." He said consumers would say one thing in a survey, but behave differently. "The issue is whether people are prepared to pay a premium, or what sort of trade up they're prepared to make, to make good on that intent."  Skilling said New Zealand enterprises in search of profitability were adopting all sorts of business models, including manufacturing offshore. "Increasingly we should be supporting New Zealand companies that are going global, and not sending a message that somehow they're less than fully New Zealand."

One area of the campaign which has clearly not been a success is the $3 million Regional and Sector Initiatives Fund. It was designed to provide support on a 50/50 funding basis for sector and regional projects that are consistent with Buy Kiwi Made's aims.  Two out of three funding rounds have now been completed, and only $575,000 has been handed out to five initiatives.  Bradford said the fund hadn't worked out as well as she had hoped.  She said she and the Ministry of Economic Development were "well aware" of the situation, and an announcement about the fund would be made shortly.

Mixed views as new members sign up

Fine furniture maker Ashton Grove has recently joined the Buy New Zealand Made scheme.  General manager Emma Davies said with the Buy Kiwi Made campaign running, the company felt it was a good time to get on the bandwagon. "A lot of people when they come into our retail shops don't realise that the product is made in New Zealand."  But she said the campaign itself hadn't necessarily brought customers to Ashton Grove's door.  "It [being Kiwi made] always had been one of our selling tools, so to publicise that a bit more is a good thing."

Supermarket group Foodstuffs, which operates the Pak'nSave, New World and Four Square chains, is another new member of Buy New Zealand Made. General manager of strategy and new ventures Rob Chemaly said it fitted with the group's sense of "Kiwi-ness", in being 100 per cent New Zealand owned and operated.  He said there would be some benefit to store operators in being able to promote Kiwi-made products, but there was no way of measuring sales made as a result.  "Certainly we would have some difficulty in keeping accurate track of individual item sales because we don't always know which are which."

One organisation which has benefited from the Buy Kiwi Made campaign's Regional and Sector Initiatives Fund is DesignTex, a group of 21 Horowhenua and Kapiti clothing manufacturers.  The $252,000 grant it received helped it win a $500,000 job to make clothing for the New Zealand Olympic team. The work is also providing spin-off benefits.  Chief executive Andy Wynne cannot speak highly enough of the scheme. "The way in which they have managed the fund is exemplary."

However the Jewellery Manufacturers Federation of New Zealand did not have as happy an experience. It decided not to take up its $88,000 grant. Chairman Alan Priestley said the need to come up with the other 50 per cent of the funding was prohibitive for a small organisation. He also felt the scheme was aimed more at helping retailers than manufacturers.

Farmers' Markets New Zealand, representing 40 markets nationwide, received a $96,000 allocation in the last funding round but has yet to sign on the dotted line. Spokesman Chris Fortune said the Buy Kiwi Made concept fitted well into what farmers' markets were trying to do, but the fund wasn't for everyone. "The criteria's fairly strict, I wouldn't see it suiting a lot of other organisations."

Caption: Emma Davies, general manager of Ashton Grove Furniture. Photo / Paul Estcourt

The iconic New Zealand brand Swanndri has been bought by Christchurch apparel company Longbeach Holdings for an undisclosed sum. Longbeach, fully New Zealand owned, is an apparel supply specialist with operations in New Zealand, Australia, South Africa, UK and China.

It has been working with Swanndri for the past two years including developing new innovations in fabrications and styling.

Swanndri chairman Bryan Pearson, said the board and management of Swanndri had spent the past four years repositioning and growing the business. Two years ago Swanndri, which brands itself "a New Zealand legend,", decided to shut its Timaru factory and manufacture in China for economic reasons. "We all felt the time was right for a major company like Longbeach to come in and take Swanndri to the next level," Pearson said. "Longbeach has the expertise and infrastructure to support further growth of this great kiwi brand in New Zealand and international markets."

Longbeach chairman, Ken Sparrow, said it was a great deal for both companies and the Swanndri.

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CAPTION: NEW HOME: the Swanndri brand, which features designs by Karen Walker, has been bought by Christchurch firm Longbeach.

WHEN WE last featured Cambridge Clothing, back in 2001, it planned to keep manufacturing in New Zealand “as long as it makes sense”. Six years on, it makes less sense than it used to. Last year the company had 25% of its output manufactured in China and that figure is expected to rise to 50% this year, due to what Cambridge’s marketing manager Kim Macky calls “the changing shape of the marketplace”.

Outsourcing to China has resulted in its now 250-strong workforce being cut by about a fifth. The good news is the company continues to utilise its Auckland manufacturing plant for its own designs, and also contract manufactures on behalf of others, which now accounts for about a quarter of its output. “All the manufacturing plants in Australia have closed now so our manufacturing plant in Auckland has been very busy although it’s coming down from a high 12 months ago due to the high Kiwi dollar.”

So making some suits in China is a big change but the biggest transformation has come since the clothing company underwent a Better by Design audit in 2005. “That’s fundamentally changed the shape of our business,” Macky says. “Design and branding will play a more significant part in our goals and targets than just being a manufacturer and wholesaler.”

The company has spent the past two years reshaping its management structure, including setting up a head of design, Nicholas Blanchet, a Kiwi who heads the design team based in Australia. Some 65% of Cambridge Clothing’s production is exported to Australia. Although the company has dabbled with exports to other countries it views the Australian market as the most compatible with its Auckland-based business and one in which there is still plenty of room to grow.

Currently Cambridge has ten stores within Australian department stores and as part of its design-led makeover plans to open a number of its own standalone stores across the Tasman in the next year. It has no plans to follow suit in New Zealand, though, because of the smaller size of the market here.

Cambridge is still owned by the Macky and Goodfellow families who founded the Auckland company in 1934. Macky says the company will continue to be based in New Zealand, tailoring its business to premium-priced brands. “We foresee a New Zealand-based manufacturing operation being sustainable for the foreseeable future but what size it needs to be is the question.”

Children's clothing company Pumpkin Patch has reported its annual net profit after tax fell 3.2 per cent to $27.6 million.  That compares to $28.5 million last year and was made on total operating revenue up 17.9 per cent to $365.7 million for the year to the end of July.

A final fully imputed dividend of 4.5 cents per share was declared, taking the total dividend for the year to 9cps, from 8.5cps the year before, Pumpkin Patch said today.

An increase in the number of stores opened in the year, and a greater proportion of the more expensive United States and British stores in the mix, led to an increase in depreciation to $14.5m from $10.5m.  Increased bank borrowings to pay for the expansion of both existing and new markets, combined with increased interest rates led to interest costs increasing to $3.5m from $600,000, the company said. Quota costs in the US and European Union markets were $4.2m, up $800,000 on 2006. Before quota costs, net profit after tax was up 0.8 per cent to $31.8m.  After recognising the $4.2m in quota costs, earnings before interest, tax, depreciation and amortisation (ebitda) was up 9.4 per cent to $60.6m, while earnings before interest and tax (ebit) was up 2.6 per cent to $46m.

Despite facing a high New Zealand dollar for most of the year all segments generated sales growth both in NZ dollars and local currency terms, Pumpkin Patch said.  Strong sales performances in Australia and New Zealand reflected the strength of the Pumpkin Patch brand in those markets.  Sales growth also came from the developing United States and British retail markets and from the wholesale division.

During the year a total of 35 stores were opened – 13 in Australia, 11 in the US, seven in Britain and four in this country – taking total store numbers to 200.  This year the company expected to trade strongly in Australia and New Zealand, Pumpkin Patch said.  A continuation of store growth and margin retention would be the platform to drive earnings for reinvestment in new markets.

While interest, store opening costs and local market development costs would continue to have an impact on financial results in the short term the directors and management team were confident current strategies would the best long term financial outcomes, the company said.

In Australia, sales from retail stores rose 6.4 per cent in the latest year to $A156.9m ($NZ187.2m), while Australian retail ebit was up 9.2 per cent to $35.5m.  Trading conditions were solid throughout the year with a noticeable improvement in sales performances in the second half.  In this country, retail sales grew 7.8 per cent to $64.3m. Again sales performances improved in the second half despite fickle market conditions, the company said.  An ongoing focus on inventory and margin management ensured ebit grew 7.2 per cent to $12.7m.

British retail sales grew 29.5 per cent to £19.6m ($NZ55.9m).  Ebit including quota costs was $1.2m, down from $1.8m a year earlier, and continued to be affected by new store opening costs and investment in support infrastructure needed to manage a growing network of stores, Pumpkin Patch said.  In the US retail sales rose 236.8 per cent to $US12.8m ($NZ18.2m).  Ebit loss after quota was $1.5m compared to an ebit loss of $400,000 last year.  Wholesale and direct turnover was up 26.7 per cent to $50.4m.  Ebit including quota was up 20.7 per cent to $14m.

Research was under way on various European markets to identify future opportunities.

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.

Stefan Preston, it has to be said, has an office many men would kill for.  Above his desk is a large framed print of a woman in sexy pink lingerie that could have been lifted from a soft porn magazine. And there is plenty more where that came from.  The clean white walls of his spacious office feature quite a few framed images of gorgeous girls in gorgeous knickers that, in any other company, would probably land the occupant in trouble with HR.

In fact, it's hard to know quite where to look when visiting Bendon's flash new headquarters on the outskirts of the aerotropolis that now dominates Mangere. Almost every surface is decorated with an image of a naked or semi-naked woman - some larger than life-size.

"There were some moments early on that were interesting," Preston grins. Like the time one of the models in a lingerie show took exception to the chief executive slaving away on his laptop while she strutted her stuff. She grabbed Preston's computer, thrust her boobs in his face, and cooed: "What are you doing that's so important that you're not looking at me?"

Five-and-a-half years after taking on the top job at New Zealand's favourite lingerie company, pert breasts and firm buttocks no longer faze the 44-year-old. In fact, you get the impression the saucy side of the business is a bit wasted on Preston, who has done such a superb job of trying to understand his overwhelmingly female customers that he probably knows far more about women's complicated relationships with their bodies than his own wife.

He was originally a structural engineer who, after completing an MBA at Stanford, somehow ended up being Eric Watson's fix-it man for companies as various as U-Bix, Cogent Communications, Whitcoulls and Pacific Retail Group. And, ahem, the dotcom disaster that was online retailer Flying Pig.  A much more revealing insight into his psyche than his office art is the pile of management books stacked on his impeccably tidy desk. They include, of course, Jim Collins' Good to Great, as well as rather more dreary titles such as Customer Experience Management and The Experience Economy.

His children's masterpieces are also proudly displayed, and the kids - who are primary school age - are in fact one of the main reasons he announced to staff yesterday that he was leaving.  "I've given it a fair shake and I've achieved what I set out to do," he explains. "You have to sit there and say 'I've got to commit myself to the next five years and the sort of life that will represent'. I've got young kids and, realistically, it's going to be more of the same now. The back's been broken, we've built the infrastructure, we've broken into the markets we needed to, we've developed a profitable position in those markets, and now you have to take a deep breath and run a different game to get that benefit out.  "And it requires me to spend more and more time in the Northern Hemisphere and so on. There are probably people in the world who can do that job better than me because they've got more experience and more focus and more connections in those markets."

A global search is already under way for a new chief executive, who might even be based overseas. It's unclear whether it will happen in the short term, but it certainly looks as though yet another iconic Kiwi brand might eventually be headed offshore.  Could New Zealand really be about to lose Bendon? "It depends how you define New Zealand," Preston replies.  The turnaround in Bendon's fortunes in recent years is indeed a textbook example for other New Zealand companies of how to go global.

When Watson's Pacific Retail Group took over the company in 2002, by a somewhat messy manoeuvre, it was in a "reasonably parlous" state, says Preston.  Watson had originally invested in the company because he could see it had enormous potential. "Clearly it hadn't had anything spent on it. It had been through five pretty tough years of manufacturing and exporting and it had been one of those businesses where people had tried to rescue the profit margin by cutting costs, and of course the costs they cut were the very costs that support the revenue - things like training, and so on."

Its warehouse was old-fashioned, and management worked in an executive suite with big windows, while the rest of the staff toiled in a semi-air-conditioned space.  "We were based out in East Tamaki, and I don't know what vintage the building was, but it looked like it hadn't been touched since the 70s. The computer system was 12 years old and, if something went wrong with it, people would switch it off at the wall, and switch it back on and pray. There was only one person alive who knew anything about it."

What the company did have, however, was some strong brands, including a potentially huge partnership with Australian supermodel Elle Macpherson.  Preston fell into the top job after getting involved in doing due diligence for Watson. He took over temporarily when managing director Hugo Venter parted ways with the company, and after a few months decided he wouldn't mind staying. 

Unlike most other turnarounds Preston has overseen, Bendon was complex. It not only designed and made its own products, but also sold them through various channels in various countries, including wholesale, third-party retail, franchise stores, its own shops, and discount outlets.  On his first day, he got a letter from Bendon's largest customer, saying it would no longer be stocking the company's flagship brand, Elle Macpherson Intimates. And Macpherson herself was not happy that sales of the brand were declining, while private label products were growing.

It was clear what had to be done: he needed to stabilise and fix the domestic business, then build the infrastructure to support growth, then grow the business internationally.  First off, it was a matter of working on some fast-moving lines and sorting out delivery issues. This had a "surprisingly quick" effect, he says.

Working on Macpherson took a bit longer. The Aussie icon told the Australian Financial Review recently: "I explored other avenues before I decided to expand with Bendon. But I chose the company because it has a young attitude, it is interested and open to my ideas. It doesn't have brand image baggage."  One of the tricky issues was working out how to develop the Elle Macpherson brand without having her continue to be "The Body" who modelled the products.  "I guess what we thought is, if the brand is dependent on her being in the photography, then we're in trouble, because she's not going to be in the photography forever," says Preston. "But if Elizabeth Arden can be dead and her brand is alive, then it doesn't really matter."

The answer was a deliberately controversial ad campaign which, Preston admits, was "almost queasily voyeuristic". The campaign was spectacularly successful and won a swag of awards in Australia and Britain (where Bendon spent just £70,000 ($199,000). Even now, he says, there is strong demand for the Elle Macpherson brand in countries where Bendon does not yet sell.

Hiring the right people was also a crucial part of the strategy. Almost the entire senior team was replaced.  In order to turn the business from a manufacturing-led culture to a marketing culture, he hired marketers with a background in fast-moving consumer goods. An enormous amount of research was done to improve the company's retail experience, for example. Initially, its flagship store, Bendon on Broadway, existed just to build the brand, says Preston. But all its stores have now been revamped as separately themed, upmarket boutiques with excellent service and customer-friendly changing rooms. The stores won the fashion, apparel and footwear category in the Top Shop awards last year.

The next growth spurt required another change, to a more design and marketing-led approach. In other words, rather than asking consumers what they wanted and giving it to them, the company had to use its own knowledge of the industry and its customers to create products no one had yet thought of, like the Bendon sports bra. The latter approach has required a much more collaborative culture, and has meant the company has undergone two cultural transformations in just five years.  However, Preston is now very happy with the team that's in place.  "The core group of people here work together really well. We felt we were on a great adventure - this plucky, irreverent group of New Zealanders who just want to have a go, but with the brains and experience to make the right calls."

Bendon's determination to break into the hypercompetitive United States market is a case in point.  "You've got to start out with a bit of recklessness," he says. "You've got to be willing to get on the plane and give it a go. But you won't get anywhere unless you're fully committed to it. A lot of New Zealand exporters think they can develop their brand overseas through distributors, and not really fly anywhere and not really put any staff on the ground. They see some orders come in and think they can build a business, but all that is is a bunch of retailers looking for something new. Unless you're willing to be on the ground and commit, it's not really going to happen."

It also goes without saying that you need to have a unique selling point. In Bendon's case, he says, that is a surprisingly uncommon blend of comfort and creative design. Most lingerie, he insists, either looks good but doesn't fit, or fits but doesn't look good.  It took a year of listening, networking and radically transforming what it was doing in the US before the company's patience began to pay off. And again, clever and inexpensive marketing was crucial. One of Bendon's stunts was to clad a 16-storey building on the Long Island Expressway with a giant billboard during New York Fashion Week. The billboard gave the impression that the brand was much bigger than it was - it also helped that a planning violation was committed, which meant that it made the TV news.

Bendon now sells in several top department stores in the US, and has an office in New York that also services Canada. But its initial efforts did require bravery on the part of the board, he concedes.  "I think a lot of boards lack the vision ... You can't write a business plan that tells you exactly what's going to happen. You just know you've got to reach a break-even position in one of the world's largest markets. What you do with that later is going to be subject to what you learn, but you have to have the willingness to commit to get to that level."

That said, Preston admits he's deliberately kept a low profile during his tenure at Bendon because of some of the risks the company has had to take. Its biggest hiccup was when it introduced its global enterprise resource planning system, intended to integrate all its data and processes into a unified system. He's glad it wasn't a public company at that point.  Other infrastructural investments have included a $14 million state-of-the-art distribution facility at its new headquarters in Mangere. The 7000sq m facility, which opened a year ago, handles up to 1 million packages a month. The company also has a warehouse in Seattle, and China.

So far, all the company's growth has been funded from retained profits. "Since we've grown the business we've been able to lever it up as well, so it's been reasonably efficient."  Five years ago, Bendon's turnover was around $80 million, and the kiwi was hovering around US40c. Last year turnover was $154 million, and the kiwi was around US70c. More than two-thirds of its products are now exported, and that's all organic growth.  In the previous companies he's been asked to turn around, the task has been relatively straightforward, says Preston: "You replace most of the management team, fix up all the basic operating parameters, put a bit of leadership into it, think up some fairly basic ideas about how to market it, and off you go."

But Bendon has been much more interesting, he says, because the possibilities are almost endless. "The company is in an interesting position now because it's developed a global reputation, and it's done that on the back of successful retail, off the number one position on the floors of some of the top-level department stores in Europe and the US. There is no theoretical limit to how you want to grow it, because you can take on the whole world if you want to - the only limit being your creativity and ability to come up with products that are differentiated in a meaningful way."

But unlike some other local export success stories, such as Icebreaker clothing, there is actually nothing about Bendon that is intrinsically Kiwi, other than perhaps its design aesthetic and its attitude, he muses.  Its sales in Australasia are run from Melbourne, and its European sales are run from London. It also has a chain of retail stores in the Middle East, run by an Arab partner.  As a result of its latest licensing agreement, with top British fashion designer Stella McCartney, it will be exporting to 16 countries from the beginning of next year, including Italy, Germany, France and Russia. Only 200 of its 500 staff worldwide are based here.

Preston admits it has become increasingly difficult to find in New Zealand the skilled staff the company needs, simply because New Zealand no longer has any apparel industry of any note. "In New York I can hire the people I need just like that."

Which is ironic, given the company has been hailed as the future of manufacturing, whereby thousands of low-skilled workers would be replaced by high-skilled ones.  He insists that the country is still better off than when Bendon employed hundreds of machinists on low wages. "Now it's full of marketers and designers and product engineers, and the value per capita that we're generating is far greater."

But by the same token, he concedes he can already feel the centre of gravity in the company moving north, especially now that it is establishing a design team in New York.  Hence his desire to finally end his relationship with the London-based Watson, and find another local challenge in which to immerse himself.  "The one thing that would attract me to going overseas is a more interesting, more scalable, more remunerative business environment. But I love this country. I was born here and I just love living here. I love the outdoors, the sea and the fishing and the boating and the mountains and the hiking and skiing, and I think my children love it."

Between running Bendon, and keeping fit with various sporting activities, he is involved with New Zealand Trade and Enterprise's Beachheads programme, which helps exporters break into new markets, and also Better by Design, which is obviously design-focused. They are both fantastic programmes, he gushes, for companies wanting to grow.  While he has found the experience a little depressing, because of companies' conservatism and New Zealand's lack of commitment to exporting, he has also been encouraged by some "tremendously cool" examples of companies doing some "really amazing" things, like Icebreaker, Pumpkin Patch, and Phil and Ted's buggy company.

And it upsets him that New Zealand seems to lack role models for people who've been able to create intrinsic value and successfully export their wares.  "Our business heroes tend to be people who are just ripping off public assets, or rearranging the deckchairs on existing companies or whatever, and then taking the money and going overseas."

And he's even prepared to commit sacrilege and slag off 42Below.  "It's a good example of branding, but it doesn't make much money, and now it's gone so it doesn't help New Zealand any more.  "I think we need to have a bit more intellectual rigour about how we judge a business that's good for New Zealand or not."

What we need are more Icebreakers, he enthuses.  "I'm quite passionate about businesses like that and I think there are more businesses in New Zealand that could blaze that trail as well. But unfortunately many of them are stuck with owners who do not have the skills, experience, commitment or capital to take them any further than they have."

In the creative industries, in particular, there are many companies that hit $10-$15 million in revenue, then stop.  "I could name eight companies like that. Each one, I believe, could be turned into a $200 million business, but they've got the wrong owners, the wrong management ... "  At the risk of sounding a little like Linda Clark, he is keen for his next project to be working alongside people "who believe in the vision of New Zealand, of growing this country, and contributing to this country".

He is, after all, a cerebral fellow. While he was able to create the intellectual stimulation he needs through Bendon, "I don't see any reason why I couldn't create it through some other project, and I can afford to spend the time working on that - and who knows what will come of it?"  So far, he has nothing specific in mind. But he is also clearly ready for a new, uniquely New Zealand challenge.  "My passion is New Zealand and I look around and think, 'What if I had some spare time and I could go and look at solving some of those problems?'

"It's just so exciting to me to think I could learn how to take some New Zealand company and learn how to make it a global business. What about the other ones out there that I could work on? I have just no idea what form that would take, but I think that's just an interesting thing, and I need a new project and something to get excited about."  Because frankly, stars in their bras no longer cuts it, it seems.

Bendon - a brief history
1947: Ray Hurley, a demobilised naval officer, joins forces with his pattern cutter brother Des to found Hurley Bendon. The new company offers lingerie that can literally "bend on" to the body, freeing women from heavy wire, steel and bone foundation garments.
1963: Introduces stretch strap bras and stretch bodyfashions.
1964: Sales top $1 million.
1966: Becomes the market leader in intimate apparel in New Zealand.
1977: Bendon range introduced to Australia.
1982: Publicly floated on the New Zealand stock exchange.
1986: Begins manufacturing in China.
1987: Merges with Ceramco Corporation.
1989: Strikes licensing agreement with Australian supermodel Elle Macpherson.
1999: Announces nearly 400 staff will be laid off as manufacturing moves to Asia.
2000: Buys the insolvent retail chain Bennett & Bain, as well as the Fayreform brand.
2001: Breaks into the United Kingdom.
2002: Management buyout fails. Acquired by Pacific Retail Group for $59 million.
2004: Revamps its retail stores as upmarket themed boutiques.
2005: Breaks into the United States, Canada, Middle East, and Hong Kong. Turnover reported to be $113 million.
2006: Auckland headquarters moves from East Tamaki to Mangere.
2007: Buys chain of independent retail stores in Australia. Strikes licensing agreement with UK fashion designer Stella McCartney. Turnover reaches $154 million.

Christchurch's Lane Walker Rudkin Industries' offer for textile group Pod has experienced significant resistance from some shareholders.  Last week, LWR chairman Ken Anderson extended the offer from July 26 to August 9, by which date he expects a late flurry of acceptances.

But Christchurch sharebroker Grant Williamson, of Hamilton Hindin Greene, said he was telling smaller shareholders to hold on at least until closer to the closing date. The offer price of 50c was too low, given the company's assets and the potential to build value under strong management.  Williamson said he knew of shareholders who would not accept the offer "at this stage at that price".  "I'd imagine some of the other larger shareholders would feel exactly the same way."

While directors George Gould and Kevin Arscott had agreed to accepted the bid, which is conditional on 90% acceptance, that did not necessarily mean other shareholders would follow, Williamson said. He noted Gould had sold a large chunk of Mike Pero Mortgages, but with other shareholders holding on for a better takeover price.  Another big Pod shareholder said the offer was "not one I'm rushing to accept", a signal the person considers the bid is light.

Anderson said he expected to reach about 50% of Pod at the end of yesterday's trading. With another three key shareholders, ACC, Salvus Strategic Investments and Hemat Lal Patel, acceptance would rise to at least about 67%.  His representatives had spoken to these shareholders. They had not yet indicated whether they would accept.  But he "would expect them to" accept the offer given it had been recommended by the board with an independent appraisal report valuing the shares between 48c and 54c.

Anderson said Pod had a conditional agreement for the sale its Otara property for $9.5m, dependent on final due diligence. While a successful sale would be above book value of $1.15m, the price was less than an expected $12m, which would knock about 5c off Pod's share price, Anderson said.  "We were very careful when we put together our price."

Spokesmen for both ACC and Salvus said they did not want to comment yet. Patel was not available for comment.

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CAPTION:  Picture perfect: Lane Walker Rudkin Industries chairman Ken Anderson is confident of the takeover bid for Pod. Photo: Stacy Squires

Christchurch textile manufacturer LWR is inching towards control of fashion management company Pod, after a third major shareholder agreed to sell.

South Island businessman Allan Hubbard has accepted LWR's cash offer of 50c a share for his 3.3 per cent stake, held through Hubbard Churcher Trust Management.  Major shareholders George Gould and Kevin Arscott agreed to sell their 24.5 per cent and 5.7 per cent stakes in June. LWR now has just over 40 per cent of Pod shares, but needs to secure 90 per cent before its offer closes on July 26.

Pod independent directors, who include entrepreneur Sharon Hunter, have recommended shareholders accept LWR's offer, which values the company at $22 million.  Directors said the offer fell within the 48c to 54c a share value range assessed by Ferrier Hodgson, and that Pod's business model was not the best for the future.  Pod director Murray Clarke and chief executive Malcolm Walkinshaw have also agreed to sell their minor share interests.

LWR's June 25 offer was countered by an $8 million bid for Pod's biggest asset, Designer Textiles, from Australian firm The Merino Company.  LWR owner Ken Anderson, a Christchurch accountant, said the counter-offer was a "surprising change of direction" from the Australian wool firm.

Anderson said LWR, which he bought in 2001, could enhance Pod's business but he wouldn't go into detail.

Set up in 1904, LWR (formerly Lane Walker Rudkin) is Australasia's second biggest underwear and hosiery manufacturer behind Pacific Brands.  The company has more than 1000 staff and is licensed to make, distribute and sell adidas sportswear in New Zealand and Australia.  It owns the Stirling Sports clothing chain in conjunction with Anderson's son, Mark, and the Champions of the World, which sells rugby gear.

Pod has three main operations: Design Textiles International, which makes fabrics, Michele Ann, a clothes designer for retail chains including Farmers and Max Fashions, and Mollers Homewares.

Lane Walker Rudkin Industries says it is confident an offer for rival textile group Pod will reach 90 per cent acceptance by July 26 as investors realise the bid's real value.  Textile manufacturers were having to pay 30-40% more for wool than a year ago, just one factor that made the 50c a share offer for Pod look more attractive in hindsight, LWR chairman Ken Anderson said.

Textile and clothing exports were also being hit by a kiwi dollar hovering at US78c after hitting post-1985 float highs, a factor weighing on the value of Pod -- which has substantial Christchurch ownership. 

"We think there's no reason why people won't accept it. I'd be very surprised if they don't," Anderson said.  It was not his intention to increase the offer price, and he would be reluctant to extend the offer date. "As time drifts by, for those economic reasons ... it would have to be a bit of a worry if (the offer has to) sit on the shelf for too long."  Meanwhile, Anderson said LWR could yesterday confirm a new royalty-based licence agreement with Adidas, to produce branded sporting team wear for schools and clubs.

The three-year deal had been welcomed by Adidas New Zealand managing director Greig Bramwell who had noted LWR had high-profile customers including David Jones, Myer and Target in Australia.  That sporting arm was one of LWR's three business units with the others based around knitted textiles and hosiery and undergarments, including the Jockey brand, with the firm turning over hundreds of millions of dollars.

Anderson said LWR now had "towards" 50% of Pod, having gained around 3.6% of Pod through an acceptance by Timaru businessman Allan Hubbard.  He planned to this week talk to large shareholders, including ACC, TEA Custodians (Salvus Strategic Investments) and Hemat Lal Patel, which between them held about 17% of Pod. 

He added he was surprised the offer had not had immediate acceptance given that it was about a 50% premium on the 33c on Pod shares' price when the letter of intent was sent.  "Some people felt that it might have been too low, but to be honest it surprised me because previously it had been trading at 33c-34c and we came in at 50c which I felt was a substantial premium."

LWR gained initial traction for its offer by securing 30.5% from Christchurch-based Pod directors George Gould and Kevin Arscott. Neither had a "long-term focus" on Pod, whereas LWR had a history going back to 1904, Anderson said.

Anderson bought LWR from David Teece in 2001 after Brierley Investments delisted the company in 1989.

If successful with the Pod bid, LWR would look for cost savings through the scale of the combined trading, he said.
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CAPTION:
On the shopfloor: Lane Walker Rudkin Industries chairman Ken Anderson in the firm's Christchurch factory. Photo: Stacy Squires