Sure footed Bata begins long trek towards former glory

GWERU,– For a long time, global beverage giant Coca Cola owned Christmas advertising. In Zimbabwe, however, Coke shared that space with a shoe company. Bata Shoe Company’s spirit-lifting Christmas ad, featuring bright, wide-eyed fresh faces, wishing Zimbabwe a toothy Christmas was every bit a part of yuletide. As was a Bata shoe cushioning virtually every school going foot as the new term began a few weeks later.

Sure footed Bata begins long trek towards former glory

Suddenly, the ads and the cheer disappeared, as almost did Bata shoes from the shelves during the height of Zimbabwe’s economic crisis as hyperinflation reached a stunning 500 billion percent.

At its peak, Bata Shoe Company made 10 million shoes annually in Zimbabwe. Now, as it begins to plot its recovery, Bata targets annual output of 2,9 million shoes by the end of 2015 following the renovation of its Gweru plant, with production having sagged below 1 million in recent years.

Bata’s revamped retail outlets, which offer much improved quality and a broader product range, show a turnaround is underway.

The shoe maker has bet its recovery on what management calls Associate Business Units (ABUs), local entities contracted to make shoe components – stitched uppers – which are then put together with other parts at Bata’s factory.

This approach has seen Bata haul its capacity utilisation from 30 percent to the current 85 percent.

The creation of the ABUs has helped raise capacity and create employment, according to Bata’s managing director Ronjoy Sengputa.

”We are currently operating on a single shift with a capacity utilisation of 85 percent. And the purpose of the ABUs is to optimise our capacity, “ Sengputa told the Zimbabwe Financial Mail.

“The purpose of this is to optimise capacity, generate employment and empower the community,” said Sengputa.

The ABUs produce stitched uppers for finishing at Bata before sale.

Sengputa said the company will invest over $1 million in the setting up of 5 AUBs following a capital injection of 200 shoe manufacturing machines and a further 80 in the two phases of the project which have already been completed.

An estimated $500,000 has been injected already in the project.

Through the ABUs, Bata has since employed 180 workers, with the remaining two plants set to increase the number to 300 employees.

“We have refined our business model and we are poised for steady growth in the coming years,” said Sengputa.

The idea for the turnaround strategy was first mooted in 2012.

“We took the idea and took part of our machinery to set up the ABUs where we employ more than 150 people in three locations. I am also glad to tell you that we are increasing the number of our plants from three to five by end of year,” Sengputa added.

Bata says the ABUs are part of its Indigenization and Empowerment plans which have already been approved by the government.

“We are in the process of finalising the two factories which will be handed over to indigenous partners so that Zimbabweans can be part of the production process of shoes,” Sengputa said.

To buttress the ABUs, Sengputa said the company will in the next two months rope in 100 women and youths to sell shoes in rural areas for a fee as the company seeks to counter the effects of cheap imported Chinese shoes.

Retail therapy

Sengputa has pinned Bata’s hopes on its ever growing local retail market, which consumes about 93 percent of its output, whilst exporting the remaining 7 percent.

“Our retail sector remains the mainstay of the company because we supply quality products and give our customers a memorable shopping experience. In our operation in Zimbabwe for the past 75 years, we are well known for quality products,” said Sengputa.

He however said changing customer buying habits and the influx of informal shoe traders shook the company to the core during at the start of the year, adding that the company never considered the street shoe traders as competition until recently.

“We were completely taken off guard and we have to adapt to the changing economic environment where shoes are being sold by peddlers on the streets for a cheap price and we knew we would have to adapt. We, however, also knew that our strength was in offering quality to our market.”

“There is a challenge. I have to be honest we are living in difficult times because the import duty is 40 percent, whilst the same shoe is priced differently in other countries,” Sengputa said.

“The borders are porous with cheap imported shoes and my plea is that government should readjust the import duty. It should allow companies like Bata to operate in a level playing field.”

Import duty in countries like Zambia, Malawi and Kenya is 20 percent.

Exports

Part of Bata’s success story has been the drastic improvement in its export earnings and its ability to venture into new markets like Latin America.

“This year for the first time in 15 years, we are supplying the Latin American market in countries like Chile, Bolivia and Peru. We have also increased our exports into South Africa where there is high demand for our products,” said Sengputa.

The Bata MD projected a 50 percent increase in export earnings this year, adding that the company’s presence in 90 countries gives it a comparative advantage over other manufactures due to the low costs of production and distribution.

The Tommy tennis shoes and Northstar brands shoes have also found a market in South Africa, Snegupta said.

“Exports have been increasing with about 15 to 20 percent and with the new markets we project a 50 percent increase in exports.”

Bata has 27 operating companies around the world and 34 factories, with Zimbabwe being the largest in Africa.

In the export market Bata has pinned its hopes on its canvas shoes which are in high demand in Latin America.

Future investments

Bata has set a four tier growth strategy which envisages mechanisation, human development, development of quality products and adaptation to the technological changes.

To this end the company has invested over $200,000 in training of managers and store personnel. “Bata believes in development and we need to develop locals through skills training,” said Sengputa.

The company is also investing in modernisation of its plant equipment, modifying the moulds for modern shoe styles.

“We have a vulcanising plant for leather shoes so it is our vision to improve the stuck on process and moulds for new designs,” said Sengputa.

“The company will make most of its investments into adaptation processes so as to remain relevant.

Bata’s canvass shoes production grew by 18 percent in 2014 from 8 percent in the previous year.

Production of leather shoes grew by 6 percent, resulting in a 14 percent growth in output.

The production of leather shoes tumbled in February due to a market shakeup; hence the projected growth is 85 percent from the targeted

105 percent.

Bata has realised an increase in production and sales over the past four years although the company accrued a negative balance at the start of 2010. It has also invested heavily into its production equipment to maintain the market leadership position.

“The investment has been in our manufacturing facility which is the core of the company. In 2013 we added new stitching machines and improving our vulcanisation plant,” said Sengputa.

“In 2014 we improved our tannery and upgrading our machines and we produced more as a result. The general trend has been on an increase, the company grew its production by 8 percent.”  – Originally published in the Zimbabwe Financial Mail Magazine

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