Small Firms Thrive as Customers Seek More Unique Clothing

Claudio Belotti knows he cut the denim that became the jeans Meghan Markle wore on one of her first outings as the fiancee of Britain’s Prince Harry.


That’s because he cuts all of the fabric for Hiut Denim Co., a 7-year-old company that makes jeans in Cardigan, Wales. Belotti is a craftsman with 50 years of experience that gives his work a personal touch — something that’s not quite couture but not exactly mass-produced either.


“There’s a story behind each one,” Belotti said. “You’re paying for the skill.”


Customer demand for something unique is helping small companies like Hiut buck the globalization trend and set up shop in developed countries that had long seen such work disappear. While international brands like H&M and Zara still dominate the clothing market, small manufacturers are finding a niche by using technology and skill to bring down costs and targeting well-heeled customers who are willing to pay a little more for clothes that aren’t churned out by the thousands half a world away.


Profits at smaller national clothing firms grew 2 percent over the last five years, compared with a 25 percent decline at the top 700 traditional multinationals, according to research by Kantar Consulting.


Their success comes from promoting their small size and individuality, said Jaideep Prabhu, a professor of enterprise at Cambridge University’s Judge Business School.


“It’s a different kind of manufacturing,” he said. “They are not the Satanic mills. These are very cool little boutiques.”


Hiut, which makes nothing but jeans, employs 16 people in Cardigan and makes 160 pairs a week. Women’s styles range from 145 pounds ($192) to 185 pounds ($244), men’s go for 150 pounds to 235 pounds. Each is signed by the person who sewed it, known in the company as a “Grand Master.” By contrast, Primark says it sources products from 1,071 factories in 31 countries and keeps costs down by “buying in vast quantities.” The most expensive pair of jeans on the company’s website sells for 20 pounds.


Many of these small manufacturers also try to stand out by embracing social issues, from reducing waste to paying a living wage.


Hiut, for example, highlights its efforts to put people back to work in a small town that was devastated when a factory that employed 400 people and made 35,000 pairs of jeans a week shut down. Underscoring the years of craftsmanship that go into each pair of jeans, the company offers “free repairs for life.”


This kind of customer service helps form a “personal relationship” between a brand and the shopper that is valuable, says Anusha Couttigane of Kantar Consulting.


Customers notice. Laura Lewis-Davies, a museum worker who from Wales, says she wants to support independent businesses when she can and bought a pair of Hiut jeans after seeing a story about Markle wearing the brand.


“Well-crafted things bring more joy,” she said. “I’d rather buy fewer things but know they’re good quality [and] made by people who are working in good conditions for a fair salary.”


The rise of small clothing makers reflects a broader shift in consumer preferences away from big brands — as evident, say, in the boom in craft beers. In fashion, technology is fueling the trend.


The internet provides a cheap way to reach customers, while off-the-shelf artificial intelligence programs allow companies to accurately forecast demand and order materials so they can make small batches and avoid unwanted stock. That makes it possible to produce clothes that are more customized.


“Data is the backbone for this and the trigger,” said Achim Berg, a senior partner at McKinsey & Co. in Frankfurt who advises fashion and luxury goods companies.  “It’s not custom-made, but it gives the consumer the opportunity to be more individual.”


A survey of 500 companies by McKinsey and The Business of Fashion, an influential industry news website, identified personalization as this year’s No. 1 trend. Consumers are willing to hand over personal information to get more customized products and services, according to a 2016 survey by, which provides online sales and marketing tools for businesses.


Established brands have recognized the trend and offering to customize products, too. Adidas, for example, offers the chance to mix and match colors and materials on things like the sole and laces on some of its shoes.


But making clothes on a smaller scale has also gained a moral tinge after scandals about sweatshops, child labor and unsafe working practices hit global brands in recent years. The 2013 collapse of the Rana Plaza building in Bangladesh, which killed 1,100 and injured 2,500 others, highlighted the grim conditions in factories that export to the United States and Europe.


Jenny Holloway, who employs 100 people at Fashion Enter in London, said she’s not interested in making as many garments as possible and selling them as fast as she can.


“I’d like to say we’ve done a massive business plan and we refer to it. We don’t,” Holloway said. “We sit down and have a cup of tea and we have a chat and we evaluate how things sit with us. How does that client fit our ethics? … It isn’t about money and making that big buck. It’s about sustainability.”


Prabhu sees this as part of a bigger shift away from the model of outsourcing production to low-cost countries like China. “You’re trying to constantly keep up with your customers. Your competitive advantage is to give them something closer to their needs.”


Hiut Denim is an example of this backlash.


The company is based in a town of some 4,000 people where 10 percent of the population once made jeans. Then, a decade ago, the factory shut down as the owners moved production to Morocco and later to China.


When David and Clare Hieatt decided to start making jeans again, they were determined to take advantage of the years of professional experience going to waste. They hoped that would give their products a “story” to market.


Markle’s decision to wear Hiut jeans in Wales boosted that effort. The company now has a waiting list of three months.


“For the town it’s been incredible because it gives people a confidence to go, ‘Wow. This town makes a world-class product,'” David Hieatt said. “We lost our mojo when we lost 400 jobs, but now we’re getting it back. That’s a very cool story.”



South Africa’s Land Bank: Land Expropriation Could Trigger Default

South Africa’s state-owned Land Bank said on Monday a plan to allow the state to seize land without compensation could trigger defaults that could cost the government 41 billion rand ($2.8 billion) if the bank’s rights as a creditor are not protected.

Land Bank is a specialist bank providing financial services to the commercial farming sector and other agricultural businesses.

President Cyril Ramaphosa announced on Aug. 1 that the ruling African National Congress (ANC) is forging ahead with plans to change the constitution to allow the expropriation of land without compensation, as whites still own most of South Africa’s land more than two decades after the end of apartheid.

Land Bank Chairman Arthur Moloto said in the company’s 2018 annual report that the bank has approximately 9 billion rand of debt, which includes a standard market clause on “expropriation” as an event of default.

Moloto said if expropriation without compensation were to materialize without protection of the bank’s rights as a creditor, it would be required to repay 9 billion rand immediately.

“A cross default clause would be triggered should we fail to pay when these debts fall due because of inadequate liquidity or lack of alternative sources of funding,” Moloto said.

“This would make our entire 41 billion rand funding portfolio due and payable immediately, which we would not be able to settle. Consequently, government intervention would be required to settle our lenders.”

Moloto said the bank was generally funded by the local debt and capital markets, and more recently international multilateral institutions such as the African Development Bank and World Bank.

“A poorly executed expropriation without compensation could result in the main sources of funding drying up as investors might not be willing to continue funding Land Bank in particular, or agriculture in general,” he said.

Some investors are concerned that the ANC’s reforms will result in white farmers being stripped of land to the detriment of the economy, as happened in Zimbabwe, although Ramaphosa has repeatedly said any changes will not compromise food security or economic growth.

Since the end of apartheid in 1994, the ANC has followed a “willing-seller, willing-buyer” model under which the government buys white-owned farms for redistribution to blacks. Progress has been slow.

($1 = 14.6363 rand)



Born Out of the Financial Crisis, Bull Market Nears Record

The bull market in U.S. stocks is about to become the longest in history.


If stocks don’t drop significantly by the close of trading Wednesday, the bull market that began in March 2009 will have lasted nine years, five months and 13 days, a record that few would have predicted when the market struggled to find its footing after a 50 percent plunge during the financial crisis.


The long rally has added trillions of dollars to household wealth, helping the economy, and stands as a testament to the ability of large U.S. companies to squeeze out profits in tough times and confidence among investors as they shrugged off repeated crises and kept buying.


“There was no manic trading, there was no panic buying or selling,” said Jack Ablin, chief investment officer of Cresset Wealth Advisors. “It’s been pretty steady.”


The question now is when the rally will end. The Federal Reserve is undoing many of the stimulative measures that supported the market, including keeping interest rates near zero. There are also mounting threats to global trade that have unsettled investors.


For such an enduring bull market, it shares little of the hallmarks of prior rallies.


Unlike earlier rallies, individual investors have largely sat out after getting burned by two crashes in less than a decade. Trading has been lackluster, with few shares exchanging hands each day. Private companies have shown little enthusiasm, too, with fewer selling stock in initial public offerings than in previous bull runs.


Yet this bull market has been remarkably resilient. After several blows that might have killed off a less robust rally — fears of a eurozone collapse, plunging oil prices, a U.S. credit downgrade, President Donald Trump’s trade fights — investors soon returned to buying, avoiding a 20 percent drop in stocks that by common definition marks the end of bull markets.


“I don’t think anyone could have predicted the length and strength of this bull market,” said David Lebovitz, a global market strategist at JPMorgan Asset Management.

One of the market’s biggest winners in recent years, Facebook, wasn’t even publicly traded when the bull market began. Facebook’s huge run-up of more than 350 percent since going public in 2012, Apple’s steady march to $1 trillion in value, and huge gains by other tech companies like Netflix have helped push the broader market higher.


Since the rally officially began on March 9, 2009, the Standard and Poor’s 500 has risen 321 percent. In the 1990s bull market, the current record holder for the longest, stocks rose 417 percent.


From the start, the Federal Reserve was a big force pushing markets higher. It slashed short-term borrowing rates to zero, then began buying trillions of dollars of bonds to push longer-term rates down, too. Investors frustrated with tiny interest payments on bonds felt they had no alternative but to pile into stocks.


Companies moved fast to adapt to the post-financial-crisis world of sluggish U.S. growth.


They slashed costs and kept wage growth low, squeezing profits out of barely growing sales. They bought back huge amounts of their own stock and expanded their sales overseas, particularly to China’s booming economy. Profit margins reached record levels, as wages sunk to record lows as measured against the size of economy.


“What people missed was how quickly U.S. corporations were restructuring and right-sizing themselves to regain profitability,” said money manager James Abate, who publicly urged investors to start buying stocks in early 2009 when most were dumping them. “It was really a catalyst for turning things around.”


China’s surging growth helped the market, too. Its boom drove up the price of oil and other commodities, helping to lift stocks of U.S. natural resource companies — for a while at least.


Then came a downgrade of the U.S. credit rating in August 2011, which caused stocks to swoon, and 2013 brought another fall as Fed Chairman Ben Bernanke talked of easing off stimulus policies. In the second half 2014, oil plunged 50 percent, which rattled investors again.


Profits started falling the next year, but investors kept their nerve and didn’t sell and waited for profits to rise again. In 2016, stocks gained 10 percent then jumped 19 percent the next year. Since the start of 2018, they have risen 6.6 percent, boosted by surging profits following the massive cut in corporate tax rates earlier this year.


Several dangers threaten the rally.


The Fed has hiked its benchmark lending rate twice since January, and is expected raise it twice more by the end of the year.


Stocks could suffer as higher interest on bonds convinces investors to start shifting money into this safer alternative. Higher rates also increase costs for business and make expanding operations more difficult.

More worrisome, rising rates can trigger recessions, which often kill bull markets. Three of the past five recessions were preceded by rate hikes by the Federal Reserve.


With stocks richly priced, there isn’t much room for things to go wrong.


The prices investors are paying per share for companies are 2.2 times revenue per share, near historic peaks. And prices compared to long-term earnings are much higher than in 2007 before the market crashed.


For all its longevity and gains, the final verdict on the bull market won’t be known until it ends.


The financial crisis of 2008 that ended the last bull market laid bare just how much debt and risk-taking had fueled gains in the previous seven years. The dot-com bust that ended the 90s rally showed how reckless investors had been.


This time, many of the unanswered questions concern the Fed’s monetary stimulus.


How much did it help boost stocks, and thus the broader economy? Will the gains it helped manufacture prove ephemeral? What are the long-term costs of its unprecedented economic rescue effort as it faces the tricky task of unwinding its stimulus program?


Another question is the wisdom of so many buybacks. Companies have spent trillions in recent years repurchasing their own stock, which has helped lift prices in the short term but does nothing to expand operations, train workers and generally improve their business. Many of the purchases were made with borrowed money, adding to already sizable debts.


Abate, the money manager who urged people to buy early in 2009, says stock prices are too high given the threat to profits from higher borrowing costs as rates climb, higher input costs from Trump’s tariffs and, possibly, bigger raises for workers in the future.


“Profits are peaking and valuations are extreme,” said Abate, chief investment officer of Centre Asset Management.


His prediction is that stocks will plunge by the end of the year and a bear market will begin.


Others are more optimistic.


JPMorgan’s Lebovitz takes comfort in the fact investors have been skeptical of the rally all along, which he says has allowed none of the excesses of prior bull markets to build up.


“This is a bull market that people love to hate,” he said. “Blind exuberance hasn’t been a characteristic.”


Asked how much longer the rally will last, he said: “At least another year, but two might be a bit of stretch.”



PepsiCo Buys Israel’s SodaStream for $3.2 Billion

Beverage giant PepsiCo on Monday purchased Israel’s fizzy drink maker SodaStream for $3.2 billion, a boon for a company that has enjoyed a resurgence after being targeted by anti-Israel boycotters in the past.

PepsiCo said it was acquiring all SodaStream’s outstanding shares at $144 per share, a 32 percent premium to the 30-day volume weighted average price.


Earlier this month, SodaStream reported its strongest results in company history, a 31 percent year-over-year jump in revenues to $172 million, an 89 percent leap in operating profit to $32 million and an 82 percent climb by net profit to $26 million.


PepsiCo Chairman and CEO Indra Nooyi called the companies “an inspired match” since both companies aim to reduce waste and limit their environmental footprint.


“Together, we can advance our shared vision of a healthier, more-sustainable planet,” she said.


SodaStream produces machines that allow people to make fizzy drinks in their own homes and has positioned itself as a provider of a healthy product in contrast to traditional sugary, carbonated drinks. SodaStream CEO Daniel Birnbaum said the move with PepsiCo marked a “validation of our mission to bring healthy, convenient and environmentally friendly beverage solutions to consumers around the world.”


Three years ago, SodaStream shut down its West Bank factory amid international boycott calls and opened a sprawling new factory deep in Israel’s Negev Desert instead. Actress Scarlett Johansson was previously a brand ambassador for the company. She parted ways with the international charity Oxfam because of a dispute over her work with SodaStream.


Monday’s sale looks to inject another big tax payout to Israel following previous the sales of Israeli companies such as the mobile navigation app Waze, which was acquired by Google for about $1 billion, and Mobileye, which produces technology for self-driving cars and was gobbled up by Intel last year for $15 billion.





Conoco Says Venezuela Will Pay $2 Billion Arbitration Award

U.S. oil giant ConocoPhillips says it has reached an agreement with Venezuela’s state-owned oil company to recover nearly $2 billion it was awarded as part of a decade-old expropriation dispute.

Monday’s statement from Houston-based Conoco says that PDVSA has agreed to recognize the judgement by an international arbitration panel and will make the first $500 million payment within 90 days and the rest over a period of some four years.

In exchange, Conoco will suspend legal actions to seize PDVSA’s facilities in the Dutch Antilles that had threatened to disrupt Venezuela’s already-depressed oil exports at a time of widespread shortages and hyperinflation.

PDVSA hasn’t commented comment.

The award is equivalent to more than 20 percent of cast-strapped Venezuela*s foreign currency reserves.



Amid Fiscal Woes, Malaysia PM Calls for China’s Understanding

Malaysian Prime Minister Mahathir Mohamad says he hopes China will understand his country’s “internal fiscal problems” as he seeks to renegotiate billions of dollars worth of Beijing-funded projects.

Mahathir spoke Monday in Beijing during a joint news conference with Chinese Premier Li Keqiang.

Before traveling to China last week, Mahathir suspended three major infrastructure projects that are funded with Chinese loans worth more than $20 billion, including an ambitious rail line and two energy pipelines. The prime minister said he halted the projects due to Malaysia’s massive national debt, which has ballooned to $250 billion.

The projects were initiated under Mahathir’s predecessor, Najib Razak, who has been charged with several counts of corruption in the embezzlement scandal involving the state-owned 1MDB sovereign wealth fund.

The scandal led to a stunning electoral loss in May of Najib’s National Front coalition, which had ruled Malaysia uninterrupted since gaining independence in 1957 – 22 of those years under 92-year-old Mahathir Mohamad, who led the coalition that ousted Najib and the National Front.



Euro Fund: Greece Has Officially Exited Bailout Program

“For the first time since early 2010, Greece can stand on its own feet,” the European Stability Mechanism (ESM) rescue fund said as Athens exited its final, three-year international bailout program on Monday.

The ESM allocated about $71 billion over the past three years, after an agreement was reached in August 2015 to help the country cope with fallout from an ongoing debt crisis.

“Today we can safely conclude the ESM program with no more follow-up rescue programs,” Mario Centeno, the chairman of the ESM’s board of governors, said in a statement. “This was possible thanks to the extraordinary effort of the Greek people, the good cooperation with the current Greek government and the support of European partners through loans and debt relief.”

In 2010, Greece was declared at risk of default after struggling with massive debt, loss of investment and huge unemployment. Overall, nearly $300 billion in emergency loans were provided in three consecutive bailout packages from a European Union bailout fund and the International Monetary Fund (IMF). In exchange, Athens was required to put in place severe austerity-based measures and reforms.

The completion of the loan program is a major accomplishment for Greece, but the country still faces an uphill battle to regain its economic stability.


The office of Prime Minister Alexis Tsipras described the final bailout loan last week as the “last act in the drama. Now a new page of progress, justice and growth can be turned.”

“Greece has managed to stand on her feet again,” his office said.


Economic growth in Greece is slowly growing again, tourism is up nearly 17 percent in Athens this year, and once-record levels of joblessness are finally receding.


However, the country still faces massive challenges, including weak banks, the highest debt load in the European Union at 180 percent of GDP, and the loss of about a half-million mostly younger Greeks to Europe’s wealthier neighbors. Greece will also need to continue to repay its international loans until 2060.

The country’s three international bailouts took Europe to the brink of crisis.


The financial troubles exposed dangers in the European Union’s common currency and threatened to break the bloc apart. The large debt that remains in Greece and an even larger debt in Italy continue to be a financial danger to the EU.

The bailouts also led to regular and sometimes violent demonstrations in Athens by citizens angry at the government’s budget measures required by international lenders in return for the bailouts.


While Greece has begun to make economic progress, economics say the bulk of the austerity measures will likely need to remain in place for many years for the country to tackle its massive debt.

Some international economists have called for part of Greece’s loans to be written off in order for Greece to keep its ballooning debt payments in check. However, any kind of loan forgiveness would be a tough sell in Germany where the initially bailouts were unpopular.

The austerity measures included massive tax hikes as high as 70 percent of earned income and pension cuts that pushed nearly half of Greece’s elderly population below the poverty line.

Pensioner Yorgos Vagelakos, 81, told Reuters that five years ago he would go to his local market with 20 euros in his pocket, while today, he has just 2 euros. He says for him, the bailout will never end.

“It’s very often that just like today, I struggle, because I see all the produce on display at the market and I want to buy things, but when I don’t have even a cent in my pocket, I get really sad,” Vagelakos said.