Vyacheslav Zykov: “Bris Bosphorus” produces shoes in the low price segment, we have decided for ourselves that we want to increase the average bill. The fact is that for us there is not much difference - to work with genuine leather or eco-leather. At the same time, we see that China is weaker in the production of genuine leather shoes, which means that we can compete with them in this direction. We can produce a good product at a very competitive price.
To do this, we will modernize the factory, introduce new technologies in production management, use many robots that were previously abandoned, we have many new additional nodes. For example, laser embroidery, photo printing, 3D printing - before we ordered these operations somewhere on the side, today we do them ourselves. Our factory was previously high-tech, but now we want to take another step forward.
Probably, the decline in the value of the ruble in 2014 also became a prerequisite for the development of domestic production - did Russian factories have the opportunity to compete with Chinese enterprises?
In fact, this is not so. When we are told from the stands about the advantage that Russian manufacturers have had in connection with the reduction in the value of the ruble, this is a hoax. I will explain why. We work in the global market, and as soon as the ruble collapsed in the 2014 year, Chinese manufacturers immediately lowered prices by at least 20-30%. Lowered prices and European brands. And our producers of raw materials on the contrary raised them so that today it has become more profitable to bring chemical raw materials from abroad. In general, when we talk about reducing the value of the ruble, do you mean the ruble exchange rate in 2014 year - 75 rubles per dollar, or today - 56 rubles per dollar?
Well, judging by the reviews of other manufacturers, for example, the owner of MakFine company Armen Valeryevich Avetisyan, it makes sense to produce shoes in Russia at the current rate. But the situation may change if the ruble continues to strengthen ...
I am ready to argue with him. I believe that at a rate of 56 rubles per dollar, it is unprofitable to produce.
But you are not doing this to your own detriment?
We are one of the few Russian shoe enterprises that has really developed dynamically all these years. If you look at the growth dynamics of Russian footwear production since the 2004 of the year, this growth is mainly due to the growth of Brice-Bosphorus production. Because we always introduced new technologies and scaled the process. Even in China, finding a factory that produces about 10 million pairs is not easy. It is a large volume of production that allows us to reduce costs. In addition, in our factory, we are engaged in very serious work to optimize costs. For example, if in the 2012 year we brought 80% of components from China, then now - only 25%. And next year we want to bring the share of imported components to 15%. The new factory includes, among other things, independent production of components, this reduces our dependence on China. Due to this, we stay afloat.
But speaking of the market as a whole, I can confidently say that the current exchange rate is killer for any industry. Not only is it unstable ..., in China, for example, they installed 6,3 and everyone knows that such a course will continue for a year. If we set the course for a year and revised, for example, 1 of January at 10%, the whole economy would be regulated, everyone would move to this course, we could plan something.
And now, to any of our price changes, the Chinese react instantly, they change the price tag in one day, drop the price, sell the goods and leave. They do not pay taxes, do not pay duties, smuggling as it was, and it remains. It is very difficult to compete in such conditions! That is why I am ready to argue, argue, give examples and prove that it is unprofitable to engage in production in our country in the existing conditions.
Will you continue to produce shoes in the low price segment?
We plan to produce shoes that everyone can wear, as well as large international European brands that offer excellent products at an affordable price. We want to produce a decent product, which at a price can compete with Chinese shoes.
Many such brands focus on design, quick response to trends. Do you still have trendy or casual shoes?
Traditionally, "Bris-Bosphorus" produces mass production. From the first day of its opening to this day, our company has produced more than 250 million pairs of shoes. Our shoes are in almost every family. Now, as before, we are focused on the production of folk, everyday shoes.
A sufficiently large volume of production involves the development of its own retail? How will the sales be organized?
We have a small retail network (editor's note: a network of shoe stores under the Fabbris and Our Shoes brands has 110 points), but we do not have a goal of developing our own shoe brands. Our own retail is one of the customers of our factory, it will also place orders for tailoring shoes at our production, as well as others.
Do I understand correctly that the factory primarily aims to work under the contract? Serve orders for tailoring shoes?
Yes, we work this way today, and the number of our customers who place orders with us is constantly growing. Today, our own brands cannot be called brands. We do not invest in advertising, do not do promotion. First of all, we trade in price. But when we offer some kind of product in the network, for example, in Auchan, with which we work, retailers often agree to take the product to the network for testing under our brand name. The first year they sell goods under our brand, and the next year, they are often asked to release the same products, but already under the brand name of the network.
What opportunities will your new production have, in addition to producing leather-topped shoes? What opportunities is the new factory ready to provide its customers?
We have polyurethane shoe machines on which we plan to produce injection shoes. We will have an automated line for painting soles on automatic molding, an automated tightening line. We tried to improve everything in order to reduce costs. We will be able to produce shoes at the level of Italian factories at the price of China, or even 10-15% cheaper than Chinese competitors. China in polyurethane is not very strong, although they are trying to develop this, while they still have this weak point.
What are the investments in modernizing production?
A total of about 750 million rubles. We received about 200 mln rubles from the Industrial Development Fund, another 200 mln - Bank Vostochny's investments, the rest - own funds.
When will the new factory be launched?
I think that by the first of May the first batch of shoes will be released.
You have probably heard that Zenden is building a factory in the Crimea, your production is in Novorossiysk. Zenden was faced with the problem of finding personnel to work in the factory, didn’t you experience such difficulties?
With staff - everyone has problems. And Andrei (editor's note: Andrei Pavlov, head of the Zenden Group) is absolutely right, the most difficult thing is not cars, but people. It’s very difficult to find specialists, we try to educate people, we’re not afraid to take young people. For example, now we have taken three design boys - first-year students. They work with us, and we are trying to grow from them professionals in their field. Of these three, the company is likely to have one. Creating a team in any production is years. Our team is over 20 years old, and we understand this and appreciate those who work with us.
In Novorossiysk, people are happy to go to work at the factory? Because, as I understand it, in the Crimea the problem is that no one wants to work in production.
We had a similar situation when we first started. We assembled the first brigade, on the first day ten people came - we taught them something, the next day they did not come. Gathered ten new people, the same story. Then one of our partners says: "They tortured us!" He took off his jacket, picked up a paintbrush, sat down on the stream, and sat us next to him. And so we began to release the first pairs together with him. And then one worker approached, the second, and a week later a permanent team of ten people was recruited, who then continued to work, and we began to lead.
I am sure that there are specialists in the Crimea, and this production may work, just not right away. I say, as an experienced production worker, I launched a lot of all sorts of directions, it is impossible to organize everything with one click. There will be mistakes, overlays ... It is necessary to complete what has been started to the end, have patience, see your mistakes, try to correct them.
It is also important to create conditions for people. In 2008, we were going to build a hostel for 1000 people, there weren’t enough people.
No, they didn’t build it; at that moment the crisis struck. Then we also expected that the crisis would provide new opportunities for growth. But, as in the recent crisis, the rate was first raised to 45 rubles per dollar, and then lowered to 32.
At the beginning, you asked the question “why didn’t this work?” - Do not forget that over the past two years, customs duties on the import of shoes have literally been reset to zero. Nobody talks about this, everyone has forgotten. Joining the WTO was a real disaster for our industry!
It seems from the very beginning it was clear that the WTO is not a boon to the development of domestic light industry, but perhaps the state has won in other sectors ...
I do not know where we won, but I know one thing - a country that does not produce added value dooms itself to defeat. This is written in the well-known book "Capital". To talk about globalism is to fool people again. We are ready to give our market to the mercy of all. For 25 years of smuggling, a huge amount of money was pumped out of the country, and China, Vietnam and Turkey benefited from this. These countries are rich, built factories, now they have all the infrastructure and now they get another advantage - zero duty. But I, as the owner of the factory, have nowhere to go, I will fight to the end!
And when did you come up with the idea of modernizing the factory?
The idea has ripened for a long time, we saw that the niche of leather shoes is promising. In addition, we want to differentiate the risks - it is impossible to produce shoes in only one segment. It all started in 2014, but a lot of time was spent on the design and implementation of the project.
What do you think of the shoe labeling initiative?
In the 2008 year, speaking in the Government at the White House, we raised this issue. Belarusians introduced marking in 2010, if I’m not mistaken. That is, it works. But with us, unfortunately, nobody needed this; smuggling suited everyone.
But the other day, Rospotrebnadzor published a report on large-scale audits of certification documents and product quality at shoe factories and retail ...
You know, we deliver products to large chain stores and have recently encountered the fact that Rospotrebnadzor, as a result of analyzing a product sample, has revealed an excess of the norm of one of the components, which in fact we did not even use in production. ... In general, all these checks often hurt only honest players. Let Rospotrebnadzor tell us the last time the inspections were conducted in the Lublin market, where there is a real dominance of smuggling and counterfeit clothes and shoes!
That is, all these checks are just dust in the eyes?
You yourself have given this process the right definition.
Can labeling somehow help solve the problem?
Honestly, I really hope so!
What are your plans for business development for the next five years?
We consider the last year to be quite difficult for ourselves, investment distractions could not but affect the business results - 2017 was even worse for us than 2016. The consolidated turnover of the company, together with the retail business, in 2017 amounted to 2,7 billion rubles. In 2018, we want to increase this figure by 30%, revenue plans for the wholesale channel are 3,3 billion rubles, and we plan to produce about 17 million pairs of shoes. Next year, we expect to increase the turnover to - 4,5 billion rubles and produce - 21 million pairs. Three years later, our goal in terms of turnover in the wholesale channel is 5 billion rubles, and in terms of production - 25 million pairs.
Group of companies "Bris-Bosphorus" founded in 1994 year. Shoe factories "Bris-Bosphorus", located in Moscow and the Krasnodar Territory, produce about 20 million pairs of shoes per year for men, women and children assortment for various functional purposes. Factories independently produce soles, insoles and accessories for shoes from various materials. Own network of shoe stores under the brands "Fabbris" and "Our Shoes" has 110 points. Revenues in 2017 year - 2,7 billion rubles.
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