Good management pushes factories forward

  • 1999-10-14
  • By Brooke Donald
TARTU - When management at the Sangar sewing factory discovered that employees weren't taking their midday lunch breaks because they were trying to save money, the executives introduced "Sangar money" to encourage workers to eat.

"The women wanted to save for their families, so they would sacrifice. They were tired and lacking energy. We had to keep up efficiency," Triin Kaasik, sales director, said.

The coupon, which is handed out every morning, is worth five kroons ($0.35), good for a bowl of soup and a glass of milk in the factory's basement cafeteria. The buffet line also serves fresh fruit, espresso and full meals, such as pork chops and potatoes.

Now, at around noon each day, the production lines are bare while the women take their "forced" nourishment.

Policies like this have kept the employee turnover rate at Sangar low - Kaasik estimates 10 percent to 12 percent - and morale high. Bonuses are given to employees who produce more than their monthly quota and health insurance is afforded to all workers. Plants decorate the window sills on each floor of the factory.

The Sangar factory is a far cry from the 'sweatshops' described in the London newspaper, The Sunday Times, two weeks ago, which said Eastern European - namely Latvian, Rumanian and Bulgarian - clothing factories had terrible conditions. (The Baltic Times investigated those accusations last week.)

Sangar employs 730 people - mainly women - in two factories, one here and the other in Valga on the Estonian-Latvian border.

The progressive management practices have taken Sangar from operating as a state-owned facility during Soviet times that produced men's business shirts to a productive and successful privately-owned one that has three trademarks and fills orders for well-known designers abroad.

Sangar had a 36.4 percent boost in turnover in the first half of this year with 38.8 million kroons and a profit of 1.14 million kroons. Its 1998 turnover was 60 million kroons, with a 3 million kroon profit. Kaasik predicts this year's profit will be slightly less than 4 million kroons.

Kaasik attributes the high turnover rate to an increased export volume to Scandinavian countries.

Each year the company produces about 700,000 items, including business shirts and women's wear. About two-thirds of the items are shipped abroad to companies such as Eton Fashion, Harrods, Austin Reed and Helly Hansen. While 78 percent of the company's output will end up in department stores overseas, 65 percent of the turnover is from Sangar trademarks.

Recently, Sangar added women's wear to its production line under the trademarks Casual Glam and My Way. Kaasik said the latest business strategy is to produce more clothing for the Sangar trademark labels.

One reason to focus on the new labels is because of growing competition from China, Kaasik said. Imports from China to Estonia grew 40 percent in the first six months of this year, thus pressuring companies like Sangar to find new ways to compete on the global market.

Clothing designers and manufacturers in Britain and Scandinavia who rely on the cheap costs of doing business with Estonian companies may turn to Asia as the economic market becomes more secure there and labor costs remain low.

Kaasik said Sangar's biggest competitors come from Asia, but, she added, Sangar's established position in the European market and its favorable trade relationships with its neighbors are advantages that will likely keep Sangar one step ahead of Asian companies just entering the market.

Baltika, another Estonian garment company, expanded its market to Poland in the beginning of September to increase sales of its own trademarked clothing: Baltman, Everman, PlusB, Christine Collection and Respect. Like Sangar, Baltika exports almost two-thirds of its total production. But, the move to sell more under its own label indicates the direction Estonian clothing companies are taking for the future.

"The main competitors in subcontracting come from China," Lea Kroonmann, director of the Estonian Export Agency said. "In the long term, Estonia can't compete with China. We will be more expensive and there are not as many people."

Kroonmann said the trend for clothing manufacturers has been to start selling their own trademarks and open up retail stores both in Estonia and abroad.

Currently, Sangar has two retail clothing stores in Tartu, one in Tallinn and one in Riga. Kaasik said Sangar is planning to look at the market in Scandinavia. She said the toughest obstacle to being successful abroad is obtaining customer loyalty.

"The brand name, Nike, sells just because of the name. People associate it with good quality," Kaasik said. "Customers in Scandinavia are very brand loyal."

To introduce Estonian labels to foreigners, the Estonian Export Agency has helped clothing companies, such as Baltika, participate in fashion shows abroad.

"The Estonian production has a good quality and design, but the trademark is unknown abroad," Aali Lilleorg, of the Estonian Export Agency, told TBT last month.

Kaasik hopes that once Estonia joins the European Union, perceptions of Estonian brand names will be more positive, as the labels will be seen as European.

Maia Palsi, Sangar's financial director, predicted that in the next 10 years Sangar will produce less to be sold under different trademarks and the Sangar name will be better known.

"We have management who knows how to get ahead. We did it before when we changed from Soviet times and we will do it again," she said.