Zmicier Dzichkouski: In 5-7 years there will be classic European situation in Belarus

Why does “Milavitsa” relocate manufacture to the Vietnam and Sri-Lanka, how has the entrance to the Customs Union affected the factory and shall we fear the nationalization of the companies?

Within the framework of the AlterEdu project the General Manager of JSC Milavitsa Zmicier Dzichkouski, who occupies his post for ten years has already told about the specifics of the business policy in Belarus.

European market didn’t give in

“Up to the year 2008 I had an idea that we need marketing in the West. Today I’m convinced that we shouldn’t trade there: the market over there is overstocked with rivals. It will be basically impossible to enter it.

We tried to work with the West, and one of our directions consisted in that a heavy client, “Marks and Spencer”, came to us and suggested that we sell some of our models under his brand. The first order made up 1 million items when our annual workload was 20 million. We accepted it, went through enormous inspections, but at the last moment we saw how much the situation in Russia has changed. After the devaluation of the Russian ruble lots of importers left the country and differed demand remained. The population began spending incredible money on clothes. We had choice: either to take 1 million articles away from the Russian market and give it to Great Britain branded as “Marks and Spencer”, or to sell the produce to Russia, increasing loyalty to our brand. We have chosen the second variant, and, after all, started growing at such a great rate that we were simply unable to increase our volumes so that to provide the western market as well.

Talking about diversification, now we don’t speak about the West, we speak about the South and the East. Here we can find growing economics and growing population at the expense of the internal demand”.

“Milavitsa” will be sewed in Asia

“A quarter of our production is made at a factory in Minsk; the rest is sewed with our molds by our partners. But the clothing manufacture in Minsk will be very hard to maintain. Regional manufacture will exist for some more years. And then we will need to place it in the low-income countries, and even China is not the matter.  It is Vietnam, Sri-Lanka, Indonesia, where one earns 100 dollars and it is enough for a living. In 5-7 years half of the Milavitsa production will be produced there. If we don’t cope with it then it will be impossible for us to rival with them in price. By that time Belarus will have a typical European situation with dozens of shopping centers, actions and offers”.

Competition in Belarus

“What concerns competitiveness of the Belarusan light industry at the foreign markets, then “Serge” works well, but has small turnover and small number of shops, that is why not everyone knows about it. The same thing is with Elema and with Comintern. That is why they can’t develop their brand.

There is a Brest company “Nicole” that works really well, but there are hundreds of sewing enterprises in Brest.

By the way, Milavitsa holds 12% of Svitanak shares and it is in the supervisory board. We bought a share package from the Alvena Company by mere accident”.

The conditions of the Customs Union

“About 60% of our costs are made up by raw material and goods.  Unfortunately, Belarus, Russia and Kazakhstan produce nothing of what we need for corselets except basics like hooks, buttonholes. Embroidery, lace, knitted cloth – everything like that is delivered from European Union.

But with the creation of the Customs Union imported rates on raw material have changed, average rate increased from 4,5% up to 12%. It yielded a loss of 2 million euros a year. During two years we managed to achieve a review of the items and we expect reduction of rate in up to 6%”.

Nationalization of the companies

“I’m always morally prepared for the nationalization. If it will happen… I was asked whether it is possible to find interesting business in Belarus. 95% of the enterprises will increase their efficiency, sales and profit threefold if they make some basic things concerning structure, sale marketing, working methods, personal and atmosphere in the organization. So there is what to work on. We made a silk purse out of Milavitsa. Help yourself. We will make more”.