GLODINA – The South African Manufacturing Phoenix

It’s about time South Africa had a positive business turnaround strategy story to tell. Thanks to long-lasting economic and political woe, the business and investment picture in the country has not been pretty.

This was highlighted in sharp focus in 2017 when the Glodina towel manufacturing business, located in Hammarsdale KZN, closed its doors leaving more than 500 people out of work.

Manufacturing output around the country had slowed and businesses had started looking to cheap imports to fulfil their needs.

This situation was and is unsustainable.

Unfortunately, not all that have struggled in manufacturing have found a way out. But for Glodina, investment from the IDC saw the company thrown a lifeline. In 2018, after a year in the wilderness, Glodina resumed operations at the bottom of the ladder – the challenge was on; could this once famous South African brand win back market share and create a sustainable operation once again?

According to CEO Mark Goliath, the turnaround strategy put in place following the company’s re-establishment has been successful and, already, Glodina is rebuilding its presence.

“We are on track to meet our targets for the financial year which ends at the end of March,” he says. “Our sales are slightly behind – around 5-6% – but that is not bad at all considering the circumstances. We grew employment and we are now at 211. We’ve gained traction in the retail space – we are now supplying Makro. That started in September last year and is still growing. At the end of April, we will also supply Game, also part of the Massmart group, and then we will start to have a big retail presence. The brand is growing slowly but surely.”

Last year, Glodina was only operating at 30% while it utilised its R150 million IDC investment to bring onboard world-leading automation equipment, returning the business to efficient production. The other towel manufacturer under the IDC umbrella, Colibri, has officially merged with Glodina and, a year on, and the company is soon to be at 50% capacity with an appetite to keep pushing.

Demand driving the capacity increase comes from the addition of business with Game, and also a growth in the hospitality sector – traditionally a stronghold for Glodina.

“We have managed to bring onboard one of the country’s bigger hospitality groups, Tsogo Sun. We are also supplying Sun International and the Sun City Resort with towels. We have grown nicely and we are getting the brand back in there,” Goliath highlights.

In the past, most hotels in the country would have stacked Glodina towels but that demand was allowed to dwindle. This is certainly an area where the company can regain share, and also grow through export. In 2020, Glodina is targeting Indian Ocean island resorts – Mauritius, Madagascar and Reunion – areas with heavy tourist traffic in a bid to build its pipeline.

“We are also looking at Mozambique, Kenya, Nigeria, Gabon and areas in East Africa where tourism is growing,” admits Goliath. “We want to get in with the hotel chains, some of which we already supply in South Africa.

“We are also working with a UK company which is looking to move our hospitality towels into a big global hotel chain in the USA. In the next four months, we will have an idea about whether or not that chain wants to switch to our towel. That is a big project that we have in the pipeline.”

MARKET LEADING AUTOMATION

Right now, one of the main focusses for Glodina is the installation of new machinery that will improve efficiency, capacity, and quality. Last year, Glodina sent people to some of the world’s finest manufacturing facilities to research best practice processes. Facilities in Europe, Turkey and India were studied, and Glodina is now adopting those learnings.

“Technicians from Belgium are assisting with the installation of new weaving equipment in the Cape Town plant. We expect that to be fully commissioned before the end of March,” Goliath explains. “In the C&T and make up area, the equipment has been delivered and the installation will be done by March – all of the plans that we had are now coming to fruition. We are expecting by the end of 2019’s Q1 that the bulk of the new equipment will be installed for the start of the new financial year – that is excellent news from our perspective. With technology upgrades, everything is going to plan.

“Nobody manufacturers weaving looms in South Africa and we had to look to Europe. It gives us credibility – we have gone for the leading equipment suppliers globally and this is cutting edge technology. There is no point going for technology that has already matured, we’ve gone for the very best we could find,” he adds.

“We have partnered with the KwaZulu-Natal clothing and textile cluster and the job of the cluster is to do benchmarking for its members. Those benchmarking exercises are transposed against what global trends are and in terms of best practice benchmarking, we have made progress,” he adds.

Without this capital investment into new plant, Glodina would not have been able to win the major national clients that it has. Its capacity would not have increased, and the positivity that has been realised since reopening would not be as impressive. Makro and Game form part of the Massmart group, a major African retailer, and gaining the trust of these organisations is a real coup.

“We expect those two clients to make up 20% of our business across the group. For the first four months, it will only be Glodina in Game, but we are actively looking at additional products that Colibri could supply.

“We are working hard to get business with Woolworths and we are busy sampling and trialling with them. 25% of our business is probably on the hospitality side of things. We do a lot of business in the independent market, supplying to a lot of wholesalers and our towels for this market make up about a quarter of our turnover. We have two factory shops – one at Glodina and one at Colibri – and that is possibly another 25% turnover. The retail clients make up another 25% and what we are driving this year is that hospitality will grow for both companies,” details Goliath.

LOCALISATION

Manufacturing supports millions of jobs in South Africa and is a key drier of multiplier economics, where value addition, job creation and export earnings all come as a result of investment. But when investment slows, imports from China and other expert manufacturers increase as basement pricing becomes attractive. Unfortunately, importing heavily is not good for an already fragile economy and Glodina is keen to localise as much as possible.

“We cannot compete on price with imported products,” admits Goliath. His solution? Offer first-class, comprehensive and speedy service that competitors from the East could never replicate.

“Products are still coming into the country way under cost so we must continue to diversify and gain competitive advantage with service and quality. That is the reason we have been able to get some of these bigger retailers online.

“If you run a full programme with a retailer but not all colours sell well, we could offer turnaround in under 10 days where we will up the order of popular colours and reduce those that are not selling. The retailers are happy with this and they can take advantage of what is trending instead of being left with dead stock.”

Importing on mass, in large containers, from China means that orders cannot be tweaked and retailers are stuck with product that has no demand – this is not flexible in a world of fast fashion.

Currently, the business is managing to take share in the local market and bring some manufacturing back to South Africa. The investments into new equipment and the relentless marketing push to make potential clients aware of the strengths of the brand are starting to pay off.

“It has been very rewarding seeing the traction we have been able to gain from a sales point of view,” says Goliath. “The South African economy is still very sluggish with GDP growth at 0.5% – where it will stay for the whole year – there is not a lot of disposable income around and all of the retailers results have been down year-on-year; that makes for a tough environment for manufacturing. We have been cautious and we have formed selective partnerships with specific retailers and overall the experience has been a good one so far.”

YEAR 2: RESULTS TIME

Following Glodina’s relaunch, the IDC facilitated something of a grace period as the company began its rise from the ashes. Market share has been recaptured, the brand is being rebuilt, and the factory is pumping out quality product at a more efficient rate – but now is the time that Glodina proves its worth.

“The first financial year was meant for us to re-establish the brand and get market traction. Next financial year will be the critical one because we are no longer a start-up and we are in the second year of a plan. Because year one has gone to plan, it places expectation on year two, and that will be interesting,” says Goliath.

A new board has been appointed to lead Glodina and Colibri as one organisation and, when Goliath’s secondment from the IDC comes to an end in May, a new CEO will likely take the reins to continue the story.

“The official merger was completed in November 2019 and we have a single board and single management team to oversee operations. There has been a natural migration of skills and ideas between the two and it is an ongoing process as it is fairly new,” he says.

“We are recruiting for a permanent CEO and it will be a wide search. I am seconded until the end of May and I will ensure of a successful handover if I am not the successful candidate.

“We are also revising our organogram to ensure we streamline operations. That doesn’t mean we are going to retrench people – that is the furthest thing from our minds. We just want to make sure we are using the people we have optimally. Both operations are running fairly lean at the moment. There has been a nice reduction in staff complement at Colibri due to natural attrition through the year. We purposefully did not replace those people in anticipation of the automation that is going live in the next two months. Less people can help to provide a more robust, cost-effective business. Integration is underway and we are happy to have it in full swing.”

As capability and capacity grows across the group, and customer start to notice the benefits of working alongside a proud South African manufacturer, Glodina will also look to expand its offering for clients through partnerships within the IDC portfolio.

“The IDC also owns a company called Sheraton Textiles which is a bedding and bed linen manufacturer,” says Goliath. “We have been working together on a project where we can design products for the bedroom and bathroom. It will be marketed as one design portfolio to offer to the retail and independent markets because there is an appetite for it and globally that is a common strategy. We will not manufacture those products we will definitely partner with our sister company to extract the value that is on offer. That will happen in the next financial year.”

The IDC exists to promote economic growth and industrial development in South Africa, and the turnaround that it has helped to implement at Glodina is a shining example of what is possible. Localisation is vital, and nowhere is that more obvious than in the community surrounding the Glodina plant.

“90% of our employees come from Hammarsdale. The closure had a direct impact on the economy there and when we reopened, it was great to re-establish some pride. We have been working closely with CSI projects in the Hammarsdale area and we are supporting creches and old age homes so that we can implement targeted initiatives that help build credibility in the community and show people that we are up and running again and we are here to stay – that has been rewarding,” explains Goliath.

Now, further hard work begins. The company must build capacity to ensure ROI and increased market share. With capital expenditure in place, Goliath sees no reason why Glodina cannot go on to achieve great things, bringing back the Black Label reputation for the highest quality.

“We will not rest until we can call ourselves a global supplier, on par with the best in the world,” he concludes.