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1- FEDERAL BUDGET 2003-2004
2-
TURKMENISTAN GAS PIPELINE PROJECT
3-
ENERGY SECTOR
4-
BATA THE EXPANSION PLAN

 

BATA THE EXPANSION PLAN

 

An interview with MD, Bata

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By Syed M. Aslam
July 14 - 20 , 2003 

 

Bata Pakistan Limited, the leading footwear manufacturer and the top revenue contributor of the industry, is going to expand its base of operations to Afghanistan and Iraq, the Managing Director of the company J. D. Hearns told PAGE.

Talking to PAGE at the Dealers Meet held at a hotel in Karachi by Rashid Shoe Company, one of the two Bata distributors, Mr. Hearns disclosed that Bata has plans to open a total of 16 franchise stores in Afghanistan over next two years. "We are in the final phase of negotiations to open three franchised stores in Afghanistan, one each in Kabul, Jalalabad and Herat or Mazar-e-Sharif or Kandahar by end of this year and I would be flying to Kabul this week to finalise negotiations with an interested party. I will also be visiting Iraq in November to finalise deals to establish Bata franchises and appoint wholesale distributors in the Iraqi capital."

He said that Bata's expansion into Afghanistan and Iraq is driven by the similarities these markets have with its Pakistani counterpart. "Both these markets are primarily middle and upper-middle class markets."

Putting the volume of footwear market in Pakistan at around 125 million pairs a year, around 50 million or 40 per cent of which comprises simple thongs, he said that Bata's share of around 17.5-18 million pairs makes it the top shoe manufacturer and seller in the country. "We manufacture around 13 million pairs of footwear ourselves, buy another 3.5 million pairs from the vendors and import around one million pairs of footwear a year."

Asked if Bata would be able to fulfil the demand pushed by expansion Mr. Hearns said that the two production units are already working three shifts a day seven-days-a-week and works are underway to increase the productivity to meet the increased demand in the near future. "We have already made a capital investment of around Rs 4.5 million this year buying PU poring machine for the manufacture of sole and lightweight uppers and also Banberry, a huge piece of equipment to mix rubber compunds from Bata factory that was closed in Thailand."

While Bata is importing around a million pairs of footwear a year, it also expects to export a marginally more 1.2 million pairs of footwear this year and expects to better it to 2 million pairs in 2004. "Exports contribute around 6 per cent to our total revenue at present but we are hoping to push it to 8-9 per cent next year."

Asked what stops Bata, and for that matter the Pakistani footwear industry in general, to give a boost to exports of value-added leather footwear when Pakistan has abundance of raw hide and quality tanned leather, he said that it is "hard to buy good quality leather." "The entire quantity of quality leather is exported leaving nothing for the local footwear companies to workwith. Whatever is left is of lower quality good only for manufacture of footwear for the local market which is not good enough to meet the demand for quality in the foreign markets. Bata used to have two tanneries itself, which were closed due to two primary reasons. Number one, unlike the local tanners who have a field force to collect the best hides at the gross roots levels, Bata had no such contacts. And number two, our commitment to environment made us not to indulge in practices resorted to by others. We invested a million dollar in an affluent treatment plant at one of tanneries but realized that the cost of amortization pushed the costs of our footwear to a level where it hurts our sales. We, thus, choose to close our tanneries."

Asked what kind of impact the free trade between Pakistan and India would have on the footwear industry of Pakistan of which Bata is the most prominent player, Mr. Hearns said that it would offer certain benefits. "While we cannot sell as much footwear to India as it may sell to us, the local footwear industry can derive a number of benefits from the opening of the trade between the two countries. We can buy capital machines and petrochemicals used in the manufacture of PVC soles at a competitive prices from India for much less due to savings in shipment costs."

Mr. Abdul Jaleel of Rashid Shoe Company, a second generation Bata distributor for the last 70 years, told PAGE that he and another Bata distributor sells around 1.5 million pairs of footwear in Karachi every year. Rashid Shoe which has a network of some 150 dealers in the city sells around 800,000 to 1 million pairs of footwear while the another distributor sells another 500,000 pairs in Karachi which accounts for 9 per cent of the total pairs sold by the company across the country.

The back-to-school season is the top peak shoe sales event anywhere in the world and Pakistan is no exception, particularly Karachi where back-to-school season starts a month earlier not only anywhere in Pakistan but also in other countries of the world. Abdul Jaleel said that the back-to-school season accounts for 50 per cent of the entire children shoe sale in the year while the two Eids account for 30 per cent of all shoe sales both for adults and children.