Filanto inaugurated a few days ago a shoe manufacturing factory in Bangladesh, a country where the Adelchi Group has been making shoe uppers since 1992. Both companies, which are of similar size and based in the Apulia region of Italy, retain major operations in neighboring Albania (see story elsewhere in this issue), but the patriarchs of both companies are looking at Africa as a future major source of quality products with cheaper labor. Both are shunning China, Vietnam and other far-off locations where they cannot adequately control the production flow.
Africa is closer, as many French shoe manufacturers discovered long ago, contracting out big parts of their production and setting up plants in French-speaking former colonies such as Tunisia and Morocco, while many other European companies have been using factories in Romania, Slovakia and other parts of Eastern Europe. Adelchi, Filanto and at least another major Italian shoe company that doesn’t want to be mentioned are now looking at other African countries closer to their shores, such as Egypt and Ethiopia.
Adelchi (first name) Sergio (last name), the 62-year-old entrepreneur who runs the company that bears his first name, sees this as a win-win situation that can also help European companies to foster the economic development of one of the poorest regions of the world. His company began two years ago to contract out some of its production in Ethiopia, a former Italian colony where many still speak Italian, after looking at other African countries such as Kenya and Uganda. His 36-year-old son Luca is now coordinating the work of 1,500 workers at three Ethiopian factories that are manufacturing 120,000 pairs of finished shoes per month for Adelchi. The Italian company is reserving the option to acquire control of the operation at a later stage, if everything continues to work as smoothly as now.
Adelchi Sergio’s views about the new African frontier in shoemaking are largely echoed by Antonio Filograna, the founder of Filanto, who continues to attend the Expo Riva Schuh show at the venerable age of 84. The company began to explore new options both in Africa and in Asia about 3-4 years ago, shortly after a major reorganization and streamlining of its production in Apulia that was followed by the nomination five years ago of his sole heir, who bears his same name, as Filanto’s chief executive.
Filanto is now sourcing about 2,000 pairs of uppers per day from an Egyptian supplier and its work has been satisfactory so far. The new factory in Bangladesh is controlled by Filanto, and it is equipped with the latest technologies to make complete shoes for demanding markets such as the Japanese one. The partner in the new venture has proven that he has done a good job, with a daily production volume of less than 4,000 pairs.
Adelchi and Filanto continue to manufacture a lot of footwear in Albania, however, and this is likely to continue for a while, in spite of rising wages, because of the country’s proximity and the quality of some of their partners. Together, three Albanese factories, two of which are under Filanto’s control, still make 14-15,000 pairs of finished shoes per day for the company. Only two companies make shoes for Adelchi in Albania, and only one of them, GREN Shoe, is controlled by the Italian group. Together they manufacture about 15,000 pairs of uppers and 5,000 pairs of finished shoes for Adelchi.
Sergio was the first Italian shoemaker who had the idea and the courage back in 1985 to make uppers in Albania, whose mountains were visible from his home across the Adriatic Sea on a clear day. Although the country was politically and economically cut off from the rest of the world under the isolationist regime of Enver Hoxha., he took the initiative then to contact the Albanian government about an investment, realizing that the Italian labor force was being attracted by better paid jobs in the high-tech sector.
The decision was made by Adelchi to produce in the northern Albanian city of Shkodër because the town was more easily accessible then from across the mountains via Montenegro, using fishermen’s boats to bring over the raw materials from the Italian peninsula and to take back the stitched uppers. Adelchi, which controlled then the production there entirely, reached a daily production peak of 20,000 pairs at one point in Albania, but stayed out of the country completely for three years after rioters destroyed its factory completely in 1997. Filanto had been giving out contract work in Albania for many years but it, too, was a victim of these riots, mysteriously losing 700,000 pairs of uppers in one shot.
Adelchi returned to Albania three years later after finding a new partner in Donika Mici, who assumed full responsibility for its operations in the country, but in the meantime the company stepped up its search for alternative sources of production. Like many other Italian shoe companies, it began ten years ago to manufacture in Romania, but it got out of that country three years ago because of skyrocketing wage rates. It’s still doing some contract work in Bulgaria, but its biggest alternative hub is now in Bangladesh, a country where it was previously sourcing mainly leather.
Together with a Bengali tanner, it has a 70 percent stake in a publicly quoted firm, Apex Adelchi, that employs some 4,000 people and makes some 300,000 pairs of finished shoes per month, equivalent to one-third of Adelchi’s total requirements. While the Ethiopian factories specialize in footwear made with the local goatskin leather, the Bengali operation uses mostly the local leather made out of cow hide.
Run by a 32-year-old daughter of Sergio, Cinzia, the modern facilities of Apex Adelchi in Bangladesh are connected with the head office through a sophisticated videoconferencing system. Sergio’s six children rotate among the various factories in Europe, Asia and Africa, and their operations are constantly supervised by 35 skilled technicians. In a couple of months, Adelchi will inaugurate a modern new R&D center near its head office where technicians from the different factories will be given maximum training.
Adelchi still has some 700 employees in Italy, 500 less than five years ago. They are much more expensive than those employed at controlled and contract factories in other countries, who in turn tend to get higher wages than ordinary workers at other local factories. The average cost of a production employee who works for Adelchi in Albania varies between the equivalent of €280 a month in Tirana and €180 in Scutari, which is still competitive against €400-500 in Romania and €250-300 in Bulgaria. Workers in Bangladesh and Ethiopia get paid around €100 and €80 per month, respectively.
With total annual deliveries of around nine million pairs, mostly for major clients such as Bata Compar in Italy, Adelchi had stable sales of €130-140 million last year. The management would like to reach an annual turnover of around €200 million in ten years’ time, partly through the introduction soon of a patented new ventilation system. Tests conducted by TÜV have indicated that it can reduce by 60 percent the moisture around the foot.