An in-depth look at how Vlisco Group is using brand identity to accelerate growth.
What surprised me most when I first started working for Vlisco,” says CEO Hans Ouwendijk, “was that the African consumers really feel like they own our brand, not the other way around.” It’s something of a paradox that one of Africa’s biggest cloth companies is based in a small town in the Netherlands. Founded in 1846 in the old textile town of Helmond in North Brabant, Vlisco originally sold hand-printed fabrics along the Dutch East India Company’s trade routes. These fabrics, which used European industrial know-how to speed up labor-intensive Indonesian wax batik processes, were bartered during stopovers in western Africa and became highly sought after.
“African consumers really feel like they own our brand“.- Hans Ouwendijk, CEO Vlisco Group
Over the years, Vlisco’s compelling mix of Far Eastern inspiration, European adaptation to African demand for bolder colors and patterns, and high-quality ‘Dutch wax’ fabric helped it become a central part of commerce and culture in West and Central Africa. Designs acquired different names and symbolic meanings in different countries. In Togo the market women who sold Dutch wax were known locally as ‘Mama Benz’ because they became wealthy enough to own the first Mercedes-Benz cars there – and became influential politically and socially.
Fast-forward to the present day, and the continued popularity of fabric that is turned into made-to-measure, bespoke garments by local tailors in Africa – where 95% of Vlisco Group’s sales are generated – has helped the company flourish. In 2013, turnover reached a record US$378.4m, a 61% increase on 2009’s sales of US$234.2m. Volumes are up too, from 52.4m yards of fabric in 2009 to 65.7m in 2012.
“We are growing fast in our markets because we are listening to consumers,” says Ouwendijk, who has radically changed the company’s strategy since arriving in 2010, when it was acquired by London-based private equity company Actis. “That is not a unique strategy, but we are one of the few companies doing this specifically for Africa.”
Ouwendijk joined Vlisco Group from Fashion Fund One BV, a private equity firm he founded in 2006. Under his leadership, Vlisco has repositioned itself as a brand-driven fashion company, helping it counter cheap counterfeits that threatened profits. “The company I inherited was very focused around design and manufacturing,” he says. “Now we focus more on the consumer: on marketing, brand development, innovations and customer loyalty. Being close to our consumer is critical.”
The company owns four distinct brands. Vlisco is the luxury, aspirational brand, still produced in the Netherlands. Uniwax and GTP, which are made in Ivory Coast and Ghana respectively, target the growing middle-class. Woodin, the firm’s smallest and fastest-growing product, is made in Ghana and targeted at younger, pan-African consumers.
All four brands offer fabrics for consumers to create their own clothes, which accounts for most of the group’s sales. Top-of-the-line Vlisco also produces scarves and luxury handbags, while Woodin’s ready-to-wear range includes men’s shirts and ladieswear.
The fact that one of the most successful fashion brands in Africa is a fabric maker is driven by cost – it’s much cheaper to have the fabric tailored in Africa – and customer taste. Rather than signifying their allegiance to a trend or community, the consumer wants to stand out with their own designs.
With traditional bricks and mortar retail still under-developed, most of the company’s fabrics are sold via wholesalers and open air markets. Vlisco Group has 30 stores of its own and may double or triple that network in the next four or five years.
E-commerce is less developed than bricks and mortar. “Because of logistical limitations, African consumers are not ordering so much from the web yet,” says Ouwendijk. “That is likely to change in the next few years. We believe there will be a massive opportunity for online sales in Africa when the logistical challenges are resolved.”
Having a product for every price point is key to success. “Each brand serves a different consumer. This is an ideal position: multiple brands in different parts of this fast-growing consumer brand. For Uniwax and Woodin, we produce about 400 or 500 designs for each brand every year. We bring new designs to market in a few months,” Ouwendijk says.
Customer tastes vary as widely in Africa as in Europe. Ghanaian consumers, for instance, like traditional green hues. Certain designs are popular in particular regions, often influenced by local sayings or landmark events. In Togo the Love Bomb (or Wounded Heart) design symbolizes the mood of a woman heart-broken by her husband’s adultery. Vlisco’s customer focus helps it understand such nuances and react accordingly.
“We get a lot of feedback from our wholesale customers and our stores in West Africa,” says Ouwendijk. “We also spend a lot of time and money on research: looking at trends in the market, what is happening to particular consumers – different cultural groups, for example – and the key decision-making points for individual consumers.”
Vlisco Group is sourcing more of its raw materials in Africa: in 2010, all cotton was sourced in the Far East. Now, more than 30% is grown in the continent. “We are becoming more relevant in the societies where we operate,” says Ouwendijk. “That really helps in a continent where governments are looking at the added value of businesses that enter the market, or who are looking to expand.”
With seven of the world’s ten fastest-growing economies in Africa, Vlisco has cause to be confident about the future. “Consumer spending is moving more into products like fashion,” says Ouwendijk. “The continent’s economy is growing and our product offering is in the right spot to accelerate growth.”
Vlisco’s recent internal research indicates that the fabric segment will grow by 100% in the next five years. “I was expecting lower growth of sales and more focus on ready-to-wear,” Ouwendijk admits. “In certain countries, consumers prefer to have ready-to-wear in African prints because they don’t have time to go to the tailor or prefer the creativity of the company, but our growth will remain in our core products – our fabrics – for now.”
Technology is bringing the brands closer to the people who wear them. “New forms of media are crucial for us,” says Ouwendijk. “The number of Facebook subscribers to our brand pages are far beyond our expectations: we have more than a million ‘fans’. This is building consumer loyalty.”
For other brands and retailers contemplating Africa’s market, Vlisco’s story shows the need to be realistic about timescales – and that success starts with a lot of listening.
Africa is different
Dramatic headline figures about the continent’s growing middle class don’t tell the whole story. There is no guarantee that their consumer behavior will replicate what happened in other markets where the size of the middle class reached critical mass.
Know the infrastructure
Unreliable power grids and a dearth of consumer data can make doing business in Africa a challenge. One of the most attractive markets is Rwanda. Good transport systems, a government drive to win foreign investment – and the use of English as a business language – have helped its economy grow 8% a year.
Choose your markets
New entrants may want to minimize risk and start small. With a population of 2.2m, Gabon has a high GDP per capita (US$14,500) and a retail sector growing by 13% a year. For some brands, size is king. Nigeria’s consumer market is estimated to be worth US$400bn.
Listen to the customers
African consumers are much studied but little understood. Local knowledge is essential to avoid seeing them through the lens of Western consumer behavior.
Remember the opportunity
Africa will enjoy a demographic dividend (70% of the population in sub-Saharan Africa is under 30). With urbanization making a growing number of the continent’s affluent consumers easier to reach, brands may want to start their learning curve soon.
HQ: Helmond, The Netherlands
CEO: Hans Ouwendijk