FALKE: Running With World’s Best

A very South African manufacturing operation, Cape Town’s FALKE Eurosocks is one of the country’s truly world-class organisations. Everything in this business is top quality – from the equipment in the factory to the design and creative ideas, to the knowledge and skill of its people – you cannot get better, anywhere in the world. And because of this superior set up, FALKE’s South African products can be found in international markets including the USA, Europe, Australia and New Zealand, the Far East and nations across the African continent.

Back in November 2016, Enterprise Africa spoke to FALKE’s CEO in South Africa, Martin Grobbelaar and asked what was making the company so successful and how it had become stitched into the local Cape Town fabric. He said that backing from Germany, a local understanding, and above all, a fantastic workforce is what was driving the business. Originally founded in Schmallenberg, Germany in 1895, FALKE began in South Africa in 1974 and since then the people within the business have become more and more valuable.

“Like in most businesses, people are the only asset that actually increase in value over time – all other assets depreciate,” says Grobbelaar.

His focus on sustainable people development has helped build the FALKE personnel base to more than 450 in Cape Town, and each employee is heavily invested in contributing to the success of the business.

“Most of our people do not travel to our export markets so we try and make the success we achieve real for them. Our managers and sales teams travel regularly, and we ask them to share their experiences with everyone in the factory so that they know they are the ones who are responsible for our success. Our people are proud of their products that keeps them driven, every single day,” says Grobbelaar.

SPORT & FASHION

In 2016, FALKE was going through something of a transformation, expanding its product range to incorporate more fashion lines to complement its already strong sports collection. Lots of research and development went into the expansion, and Grobbelaar says that it is paying off.

“It’s part of the long-term strategy for the business and it’s so far so good. We’ve grown our fashion market by around 25% in the past 12-months. That is primarily in the local market, but we have had some encouraging growth in some of our export markets as well, especially New Zealand,” he says.

Currently, FALKE manufactures fashion ranges under three main categories; elegant, smart casual and leisure.

How has the company managed to achieve such success over a relatively short period? The CEO puts it down to clever marketing combined with brilliant products.

“It is product driven, making sure we offer the right products for the consumer in a particular market,” he says, “but there is also a big drive in terms of brand exposure. Marketing and communicating exactly what the brand is about and what we stand for is very important and that is why we are trying to establish an emotional connection with the consumers from a brand point of view. Our marketing team have and still are doing an excellent job in achieving this”

But movement to incorporate fashion as well as sport will not be a precursor to a total diversification strategy. Grobbelaar reminds that FALKE is a sock brand and he says that it plans to focus on its core offering for the foreseeable.

“Our philosophy is that we should concentrate on what we know we are good at. With the whole FALKE international business over the past 120 years, we believe we are good at what we do and should stay focussed on being market leaders in this category. We feel we are the sock guys and, because there are experts in every other category, we have no plans to diversifying at this stage.”

BOOMING DEMAND

Currently, FALKE produces between seven and eight million pairs of socks each year. Both local and export markets are desperate for the products coming out of the company’s Belville plant. In South Africa, FALKE’s target market are those individuals that appreciate quality brands and products, aiming its efforts specifically at those with disposable income available.

“There is a huge disparity between the middle class and the man on the street in South Africa,” says Grobbelaar. “the lower segments of the market are dominated by cheap imported products therefore we aim our brand at the top 5% of income earners as that is where we feel we can make a difference.”

Growth in export volumes have been a real positive for FALKE through the past year. Previously, the company was active in the USA but had minimal exposure to other global markets. But now, FALKE’s socks reach an almost worldwide marketplace.

“The US market has been very good and has been growing exponentially for us over the past 10-months. We have grown in New Zealand by around 80% in that last 12-months. We launched into Australia in February and, like when attacking any new market, the first 12-18 months are tough as we build a retail footprint. Our guys have done a really good job and landed a number of retailers and so we are very excited about our opportunities there. We do export to Europe and that market is slow but there is major potential. We are also exporting into the Far East – that is a very small market for us now as we only recently started but we are excited about prospects there. We also remain very interested in growing opportunities on the African continent,” explains Grobbelaar.

WRITING ITS OWN FUTURE

Although FALKE is sitting pretty right now, with strong products demand, brilliant facilities and people, and a trusted and respected brand, Grobbelaar says business is not easy. The manufacturing industry in South Africa, especially textiles, has faced a sustained decline and only innovators and industry leaders are still able to operate effectively.

“Like with any manufacturing environment, you always have challenges,” he admits. “We are very fortunate that there is a huge growing demand for what we do. The challenges we do face are all within our own control and that is a nice problem to have. We can’t complain about demand; we are struggling to service that demand at this stage and that is not a bad place to be.”

Asked about the impact of a slow local economy with an unpredictable short-term future, Grobbelaar says that FALKE’s focus on the top end of the market allows it to somewhat hurdle challenges.

“Retail in South Africa is struggling but if you look at the higher tiers of the market, retail is doing extremely well. The lower-commodity end of the market has struggled but that is not our market,” he says.

One challenge that was partly out of the control of FALKE was the recent water crisis that enveloped the Western Cape. The widely-reported drought caused problems for so many different companies across a range of different industries, but in typical FALKE fashion, the challenge was faced head on.

“Water was very short in supply and not of good quality, so we installed our own water treatment plant where we use ground water and put it through a filtration plant so that we are less of a drain on the municipal water grid. At this stage, we are largely independent of that grid. It was a big investment and it took up some of the funds we had earmarked for a solar energy project,” explains Grobbelaar.

Infrastructurally, FALKE invests 5% of its revenue every year into new equipment. This has been a long-standing strategy and has helped the company to remain at the industry’s sharp end so will continue.

“Investment into equipment is never-ending,” confirms Grobbelaar. “Our brand is centred around quality and innovation so for us to be able to innovate we have to ensure we have the best skills, state-of-the-art equipment and state-of-the-art raw materials.”

But investment into new equipment and machinery does not automatically result in a production output increase. Rather, FALKE will look at adding value to its existing product range, continuing to bring the best of the best to its customers. 

“I don’t think overall volume will increase that much. What will increase will be the level of product we produce, meaning more high-tech products but at the same volumes. Currently, we are almost full on our site and it’s difficult to expand further. Our expansion involves us replacing old equipment with newer, more advanced equipment which is more energy efficient and more efficient in terms of output. Overall, volumes will remain in the same band for at least the next 12-months but we are focussing on a higher-level of product that can demand a higher price point.”

STILL ROOM TO IMPROVE

As a world class player in its market and an industry leader across all of the regions it serves, you might think that FALKE has achieved its vision and can afford to sit back and look at what has been a mighty successful 44 years in South Africa. But that is not the case; Grobbelaar suggests that new targets are always being sought and progress is constant.

“Our goals constantly shift,” he says. “As we get close to achieving one, we set another, so it is an exciting environment to come to every day. Personally, l look forward to arriving here each day and it is a business which is driven by its people. Without our people, we would not exist and seeing everyone’s commitment and passion is a big driver. Even through challenging economic times, that is what has kept us going and helped us to expand in the way we have.”

The company’s expansion has been so impressive, it seems as though there is not much more that can be achieved, but the ever-ambitious Grobbelaar states that the desire to be the leaders in every market it plays in will continue to drive the business.

“I don’t think we have achieved it yet, we still have a lot of work to do. In the South African market, we are the leaders but in our export markets, which are a lot bigger than South Africa, we lead the way in quality of product, but we have a lot of work to do with market share. However, we are very confident we can achieve our goals there,” he concludes.