In a highly competitive sock-eat-sock world, a once-ailing hosiery manufacturer overhauled its business model and supply chain to become the premier provider of quality legwear in North America.
Created as a family-owned business by the Simards in 1934, Richelieu Hosiery prided itself on successfully manufacturing high-quality socks, tights and legwear for decades. But by the early 2000s, like many North American apparel companies, Richelieu realized it could no longer compete toe-to-toe with low-wage manufacturers in Cambodia, Bangladesh and Asia. Led by Michael Penner, President and CEO, it was time for the Montreal manufacturer to pull up its socks and radically change its business model in order to survive.
“We were forced to close down one plant in Quebec and shift production overseas, becoming a source, distributor and marketer for companies such as Wal-Mart,” Penner explains. “It was painful, but if we hadn’t broadened our manufacturing base, all jobs at the company would have been lost.”
Richelieu, which was recently rebranded as Peds Legwear, offshored its production by contracting with manufacturers in China, Turkey, Korea, Taiwan, Cambodia, the United Arab Emirates and other markets.
At the same time, Penner decided to strategically reengineer the company’s marketing strategy to give it a leg up on its competition. “We needed to bring a unique selling proposition and value to our customers, and that was our innovation in design, style and technology,” Penner says.
How can sock technology be innovative? One example Penner provides is a patented technology that Peds Legwear originally licensed from a company in Australia, then later purchased.This technology, called Growing Socks, provides twice the wear. In another example, the company has worked with its yarn partners to develop a technology called Endur, to produce a sock that has six to seven times the durability of regular socks—so holes are less likely to develop.
“We try to be the Apple of the sock industry, to develop the innovation our customers want before they even know they want it,” Penner laughs.
Peds gets a foot in the door of the U.S. market
After the global recession hit in 2008, however, the manufacturing wage advantage between foreign markets and the U.S. began to narrow. Over five years, wages in China nearly doubled, while U.S. manufacturers saw an average of 2 per cent annually.
Penner saw this as an opportunity to onshore some of Peds Legwear’s production back onto North American soil. In 2011, the company acquired out of bankruptcy the assets of International Legwear Group (ILG) in Hildebran, North Carolina. Three years later, in December of 2014, they also opened an automated manufacturing plant that makes socks around the clock, seven days a week. The socks will be sold in Wal-Mart staring in the early spring of 2015.
Peds Legwear also realized other advantages of reshoring to the U.S. The American-made socks allow Peds to bypass import tariffs of nearly 15 per cent and decrease shipping costs, while increasing the agility of the company to respond to fluctuations in demand.
Getting the financing to grow
Growth always puts a strain on financing, says Penner, and getting the new U.S. plant up and running in 2014 was no different.
“From day one, EDC was very creative in working with our bank to find the best solutions for us,” Penner says. “After we acquired ILG in 2011, EDC very quickly insured all our receivables, which also helped us get more credit with our bank. They also worked with our bank through their Export Guarantee Program to insure a substantial percentage of our line of credit. And when we purchased the factory in 2014, they stepped up to help us finance it.”
If Penner could offer one piece of advice to Canadian companies, it’s to take advantage of resources sooner. “Work with your banker and make sure they know about EDC and have a relationship with them.”
Summing up, Penner is pleased that the 80-year-old Richelieu company started by the Simard family is thriving today. “It’s true what they say about keeping your roots here but being able to grow anywhere,” he says. “By making the necessary changes we kept the company going, and that provided jobs in Canada, the U.S. and other markets.”