Vicunha: "One has to be very big and work keenly to stand one's ground"

by Simone Preuss
18 Nov 2015

Denim production is one of the most labour- and material-intensive processes of the textile and apparel industry. Denim producers have to also work in a sustainable and environmentally conscious way to remain competitive as well as provide good conditions for their workers.

FashionUnited talked with Thomas Dislich, director for Europe and Asia since 1999 at Vicunha, the Brazilian denim specialist headquartered in São Paolo, about changes, challenges and trends that the industry is currently facing. With a production volume of 200 million meters of denim cloth (in 2013), the denim giant has propelled itself to the very top. In 2014, Vicunha's turnover reached 443 million euro (around half a billion US dollars) and a net profit of 38.5 million euro (around 43.5 million US dollars).

FashionUnited: Mr. Dislich, you just returned from B2B fair DenimsandJeans in Bangladesh. What was the atmosphere like?

Thomas Dislich: Bangladesh certainly is a very complicated country. Agitations happen time and again and doing business is not always easy. However, for the textile- and garment industry, Bangladesh is a force to reckon with that is impossible to dodge. Despite conditions and atmosphere having changed, it could be better; progress is happening slowly.

How important are Bangladesh and Asia for Vicunha?

We are a sole fabric producer and this fabric is sold to people who make pants. Looking at the jeans market in Europe, one quickly realises that business takes place in Asia. In 2014, 550 million pairs of pants (only jeans) were imported, of which China, Bangladesh and Pakistan alone bought two thirds. The bulk of pants is stitched in Asia and Vicunha adapts to the market accordingly; we have to be where people need the material.

We produce our denim fabric solely in Brazil or better Latin America: Compared to Bangladesh, Brazil is much, much, much more expensive - about as much as Turkey.

Which does not meant that we do not have partner factories in countries like India, China and Turkey when additional volume is needed. This was the case between 2004 and 2014 but at the moment, we do not need extra capacities. But when we use them, we are consistent in regards to standards.

What does that mean exactely?

Personal visits, screenings and more visits to ensure that everything is according to our specifications.

Vicunha uses BCI cotton, i.e. cotton by the Better Cotton Initiative, which is about better conditions for workers, the environment and the industry. What is the percentage of BCI cotton used and where is it grown?

Vicunha uses only BCI cotton, 100 percent, that is sourced in Brazil where 40-45 percent of the entire amount of BCI cotton is produced. There are very big and very modern farms, about 40 in total. That is a very different scenario compared to India or Pakistan for example where there are 20,000 farms but each one produces much less.

How much cotton does Vicunha use per year?

Vicunha needs 100 million kilos of cotton a year, that is more than 100,000 tons or 6 percent of the entire Brazilian cotton output or 4 percent of the entire BCI output worldwide.

That is remarkable. How do you ensure that the cotton is of the quality you need and is grown the way you want?

Our company culture is very strict and we are 100 percent vertical: spinning and weaving happens entirely in-house and we check the cotton that we use very carefully. Apart from technical aspects, we check very thoroughly under what human conditions it is grown. There a numerous social clauses and Brazilian laws are very strict.

And what about the production at factory level?

Vicunha operates five wholly-owned factories - three in Brazil and one each in Ecuador and Argentina. That enables us to monitor and define working conditions very closely. Worldwide, there are about 8,000 employees and on average, they earn about 1,000 US dollars per month, which is far above industry average. We invest in our workers - after all, it is in our interest that they stay longer.

Working conditions are approximately the way they are in the US and labour laws are in place and unions strong. In fact, Brazil is often mentioned as an example. Large quantities and the latest technology guarantee competitiveness.

Keyword competition - how much has the market changed in the last few years?

The market is becoming ever more concentrated and has been divided among a few big players. In Europe, about 600-700 million denim pants are sold; a large part of it only via a dozen channels. And big players have strong compliance guidelines. In addition, companies like H&M and Zara are vertical businesses.

What do you think of the fast fashion market?

The fast fashion market is incredibly dynamic and huge distances are a given - despite logistical difficulties, one has to be extremely flexible. Regardless of location, the same reaction rate is expected. And that means flexibility and delivering smaller orders more often rather than bigger orders only a few times.

Although quantities have increased a lot for the denim sector: jeans are more prominent but are becoming ever cheaper, part of the 'macdonaldisation' of the world - there is a lot of everything. It is like that in Brazil, in China - everything has become big. And it is part of the business model to push for consumption; that is part of the growth model. Accordingly, there is a lot of production and one has to be very big and work keenly to be able to stand one's ground.

What about environmental safety and protection and saving resources?

Our customers demand sustainable production processes and there are guidelines for chemicals. In addition, Brazil is leading the world when it comes to reduced water consumption. Techniques that save water are in demand as well as eco fabrics.

That is the keyword - what about trends? From eco fabrics to stretch and athletic denims to printed and metallic denims - what is popular at the moment?

Denim is like a broad river where one sometimes does not see the other side: jeans is not just one thing any more, it is many things. There are two currents at the moment: everything that has to do with technology, stretch levels for examples that one could only dream of three to four years ago. Then there are knitted weaves, knitting with denim for yoga jeans, perfect fit and athletic jeans. This trend is continuing. Then there is another, opposite direction that one could call "back to the roots". Maybe women will stop earlier than men to wear stretch: they are already wearing 'boyfriend jeans'. Basically, there is a trend back to age-old basic jeans. And the jeans world is divided into performance and activewear, with denim thrown in the mix.

Images: Vicunha