Green Cross keeps the name, cuts the work­ers

Lo­cal shoe­maker to shed lo­cal fac­tory jobs, import from Asia

Sunday Times - - Business Consumer - By JACKIE MAY

● This fes­tive sea­son, 336 peo­ple are join­ing the ranks of those anx­ious about what lies ahead for them next year. In what has been de­scribed as a body blow to footwear man­u­fac­tur­ing in Cape Town, Green Cross staff were in­formed last month that the lo­cal man­u­fac­tur­ing op­er­a­tion will be closed.

Green Cross MD Roger Cop­pin an­nounced in an e-mail to staff that the footwear com­pany had made an in-prin­ci­ple de­ci­sion “to import all prod­ucts for re-sale through its re­tail op­er­a­tions and to whole­sale cus­tomers”.

The shoes will be im­ported from the East and Europe for Green Cross out­lets.

Ber­nadette Brown, who has worked for Green Cross for eight years and is a shop stew­ard of the South­ern African Cloth­ing and Tex­tile Work­ers Union (Sactwu), said: “This news was a shock. Peo­ple are trau­ma­tised and very upset. Our liveli­hoods are go­ing down the drain.”

Of the 336 jobs set to be lost, 249 are those of fac­tory work­ers, some of whom have worked there for more than 20 years. The com­pany em­ploys 643 peo­ple, which in­cludes those in the re­tail di­vi­sion. The Ep­ping fa­cil­ity can pro­duce about 2,500 pairs of shoes a day. Al­though ma­chines are used, mak­ing each pair still re­quires 50 pairs of hu­man hands.

Green Cross, founded by Karl and Hilde­gard Zep­pel in 1975 in Cape Town, be­came a sub­sidiary of AVI when it bought the com­pany in 2012 for R382.5m. AVI owns con­sumer brands such as Wil­lards, Five Roses and frozen foods busi­ness I&J, as well as up­mar­ket shoe re­tailer Spitz. Green Cross fo­cuses on com­fort­able, clas­sic shoes.

Poor per­for­mance

Sactwu se­nior re­searcher Eti­enne Vlok said the de­ci­sion to close the fac­tory was a slap in labour’s face. At the re­cent job sum­mit hosted by the pres­i­dency and the Na­tional Eco­nomic Devel­op­ment & Labour Coun­cil, busi­ness committed to stop cur­rent re­trench­ments and to cre­ate jobs.

“Here you have a busi­ness, a sub­sidiary of a suc­cess­ful com­pany, re­trench­ing staff, which calls into ques­tion busi­ness’s com­mit­ment. They are act­ing as if the South African con­text doesn’t mat­ter to them. Ei­ther they are un­aware or they are choos­ing to ig­nore it,” said Vlok.

Cop­pin said in the Novem­ber let­ter to staff that when AVI ac­quired the com­pany, per­for­mance was en­cour­ag­ing. But, he said, de­spite sub­stan­tial in­vest­ment, the com­pany has per­formed poorly in the past five years, with de­te­ri­o­rat­ing sales vol­umes and prof­itabil­ity.

He said R125m had been in­vested to sup­port fac­tory mod­erni­sa­tion and ef­fi­ciency, store growth and im­prove­ments to work­ing con­di­tions. Over R60m was also in­vested in net work­ing cap­i­tal. Among the fac­tors con­tribut­ing to “sus­tained” poor per­for­mance, Cop­pin said, are “rapid ex­pan­sion of com­pet­i­tive re­tail of­fer­ings”, “sus­tained dis­count­ing by big-box re­tail com­peti­tors” and “sub­stan­tial weak­en­ing of the econ­omy”.

A for­mer em­ployee, who wanted to re­main anony­mous, said “the fac­tory is a noose around AVI’s neck”. The em­ployee said Green Cross man­age­ment ap­pointed by AVI was not ex­pe­ri­enced in shoe­mak­ing. Since 2012 there have been four MDs of Green Cross: Robert Lunt, Greg Smith, Tracey Chi­ap­pini-Young, and Cop­pin.

Vlok said AVI recog­nised it had a strong brand in Green Cross. “They are keep­ing the brand and the re­tail busi­ness, but clos­ing the man­u­fac­tur­ing. They are go­ing to ex­tract ev­ery­thing they can from a lo­cal brand, but import the prod­uct.”

Asked for com­ment, AVI said in a state­ment is­sued on be­half of Green Cross that the com­pany’s de­ci­sion fol­lowed a de­tailed re­view of op­tions avail­able to re­store the busi­ness to sus­tain­able prof­itabil­ity. The re­view, it said, con­cluded it is not pos­si­ble for Green Cross to suc­cess­fully compete and grow in the highly com­pet­i­tive com­fort footwear mar­ket by con­tin­u­ing with the cur­rent op­er­at­ing model, which re­lies on a sig­nif­i­cant vol­ume of lo­cal man­u­fac­ture.

“Not­with­stand­ing ma­te­rial in­vest­ment in its man­u­fac­tur­ing fa­cil­ity, pro­duc­tion vol­umes have de­clined to sub-eco­nomic lev­els re­sult­ing in sig­nif­i­cant un­der-re­cov­ery of costs that make it im­pos­si­ble for Green Cross to achieve a sus­tain­able level of prof­itabil­ity. Green Cross trades in a highly com­pet­i­tive seg­ment of the footwear mar­ket that is sup­plied mostly by im­ported prod­uct, and man­age­ment be­lieve that it is nec­es­sary to mi­grate to a full-import op­er­at­ing model as soon as pos­si­ble to pro­tect the whole­sale and re­tail busi­nesses.”

In the year to end June 30 AVI re­ported a 2% rise in rev­enue to R13.44bn and an 8% in­crease in net profit to R1.67bn. The fash­ion brands di­vi­sion’s op­er­at­ing profit rose 6.2%.

When it re­leased its re­sults in Septem­ber, AVI said Green Cross had a dis­ap­point­ing year but the busi­ness re­mained prof­itable and cash gen­er­a­tive and the op­er­a­tional changes made dur­ing the year would sig­nif­i­cantly im­prove core op­er­at­ing per­for­mance and work­ing cap­i­tal lev­els. But in the Novem­ber let­ter to staff about the de­ci­sion to stop man­u­fac­tur­ing, Cop­pin writes: “The com­pany has now started trading at a loss and is cur­rently show­ing a loss of R5m for the first quar­ter from July to Septem­ber.”

When AVI bought the busi­ness, Sactwu raised con­cerns at the Com­pe­ti­tion Tri­bunal that AVI was not committed to lo­cal man­u­fac­tur­ing in SA and would cur­tail lo­cal man­u­fac­tur­ing of Green Cross in favour of im­ports. AVI, at the time, de­nied that it would re­trench employees as a re­sult of the merger, and the tri­bunal “found no ev­i­dence from the fil­ings which con­tain AVI’s busi­ness plans for Green Cross that it will”.

The Com­pe­ti­tion Tri­bunal con­firmed this week that the merger had been ap­proved with­out any con­di­tions.

A Com­mis­sion for Con­cil­i­a­tion, Me­di­a­tion and Ar­bi­tra­tion process be­tween Green Cross and two unions, the Na­tional Union of Leather & Al­lied Work­ers and Sactwu, be­gins this week and may be com­pleted by the end of April next year.

‘Sad in­dict­ment’

In­de­pen­dent busi­ness an­a­lyst Chris Gil­mour said aware­ness of the Green Cross brand among the emerg­ing mid­dle class was prob­a­bly an is­sue. AVI’s Spitz, with its Carvela and Kurt Geiger brands, has “huge res­o­nance with this de­mo­graphic”, he said, but Green Cross con­jures up im­ages of com­fort­able footwear, bor­der­ing on semi-orthopaedic.

Gil­mour said: “It is a sad in­dict­ment of SA man­u­fac­tur­ing that Green Cross shoes will no longer be made lo­cally but will be im­ported.” Vol­umes are not large enough to ob­tain the economies of scale re­quired to con­tinue lo­cal man­u­fac­ture, he said.

‘They are act­ing as if the South African con­text doesn’t mat­ter to them’

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