While industry expands, lack of funds still pushing most domestic clothing maker to work as mere processors for Western brands
Last Novermber, Kashtan garment factory received an order to outfit Irish military, custom officials and postal workers with shirts.
The Kyiv-based plant signed the deal as a partner of Ireland’s Sable Outwear, which won the Irish government’s tender. Kashtan management wouldn’t disclose the cost of the contract but said it would account for 15 percent of the factory’s total annual output.
The deal with Sable Outwear is typical of Kashtan’s growing cooperation with Western clothing manufacturers and retailers. Over the last several years, foreign clothing retailers have been shipping textiles to Kyiv, where Kashtan’s employees have been sewing them into garments. The ready-made products are then sent back to the West for sale.
While such deals have often proved disadvantageous for Ukraine’s garment factories, the quality of Kashtan’s work has allowed it to thrive on contracts from Western partners.
Kashtan now exports nearly 60,000 garments each month, marked with the labels of Britain’s Burberry, Marks & Spencer and Matalan/Lee Cooper. In fact, contract deals with Western clothing companies now make up 70 percent of Kashtan’s total sales output.
“We would be happy to work only for Ukrainian consumers,” said Oleksandr Martynchuk, Kashtan’s commercial director. “But today’s local market is incapable of consuming all the garments we produce.”
Yury Cherny, head of the light industry department at the Industrial Policy Policy Ministry, said work with foreign clothing manufacturers helped increase production in the light industry sector by 12 percent last year.
While the industry is expanding, lack of funds is still pushing most domestic clothing makers to work as mere processors for Western brands. He said the low-profit work involves receiving a set fee for turning supplier’s textiles into garments.
“Those who criticize such production schemes are right,” said Martynchuk. “Many suppliers are interested only in paying as little money for the produced garments as possible.”
He said the practice has prevented some local manufacturers from developing their own production lines. For many, however, the contracts have only generated enough to cover payment of employees’ wages. As a result, imported clothing now totals 30 percent of the market.
Unlike many other local producers, Kashtan’s long history and reputation have enabled the company to net profitable contracts with Western suppliers.
Built in 1947, Soviet Kashtan produced up to 1.5 million garments a year. Though its production has halved since then, it remains the country’s largest manufacturer of blouses and shirts.
Privatized in the mid-90-s, 60 percent of the factory is now owned by two local companies and the remainder belongs to employees.
Martynchuk said partnerships with large Western brands have helped the company reequip the factory and increase wages.
“We upgrade equipment every year,” said Martynchuk. “Last year we changed the lighting system, a year before we totally replaced sewing machines.”
He said the company has spent Hr 2 million on modernization during the last two years. Average salary at the factory has risen to Hr 520, one of the largest in the industry, he said.
Kashtan’s own production received a boost in 2000 when the company’s managers focused on using higher-quality imported textiles.
“Thanks to our trade mark, reputation and fame we managed to close contracts with famous Western companies,” he said. “They gave us raw materials on credit.”
Kashtan’s textile suppliers today include the Netherlands’ TOOTAL fabrics, Sable Outwear, Germany’s PFAFF and more than 150 local companies.
In September, Kashtan began exporting shirts to the Netherlands and selling them under its own trademark.
“We sold a small amount there, and we plan to promote our shirts on Western markets in the future,” he said.
Kashtan and foreign partners have also initiated creation of an international consulting center to attract investors to the light industry. The center is responsible for helping local factories find partners in the West.
“When I received an order from the Irish government to provide its army with trousers and jackets, which we don’t produce, I proposed that the Kozak factory in Fastiv make the trousers and the Kyiv factory Yunost make the jackets,” Martynchuk said.
At home, Kashtan has three stores in Kyiv and plans to open several more in other parts of the country.
“Our shirts are selling well,” he said. “But the lack of a retail networks hinders our development.”
