31 May 2016
Filipino Handicraft Industry Looks to Move Up the Value Chain
Unable to compete on price with vast numbers of mass-market, machine-made Chinese imports, many manufacturers in the Philippines' handicraft and design sector are looking to woo buyers with premium quality goods and bespoke finishing.
How to win new customers in the face of the all-conquering Chinese juggernaut was the primary concern of many of the exhibitors at the recent Manila FAME tradeshow. This twice-yearly, government-backed gathering is now firmly established as the preeminent showcase of Philippine design and lifestyle products.
Although the Philippines has a long tradition of innovative design and local handicrafts, recent years have seen its products losing ground to cheaper, mass-produced items from China. For many in the sector, this has driven them to seek out new and niche markets – sectors where customers are prepared to pay a premium for quality and original design and are not just buying on price alone.
One company that has successfully negotiated this reinvention process is Art24Inc, a Parañaque-based manufacturer of resin animal statuettes. Describing the transformation process, Junry Manjares, the company's President, says: "When we started out – nearly 30 years ago – we were making metal lamps and model aircraft. About four years ago, though, we started to struggle. We then decided to switch to using resin as our base material. We now produce happy-looking animal figures that inevitably seem to make people smile.
"This has worked well for us and our market is now international. We sell a lot into Eastern Europe. Our business model is that we work with foreign designers who know what their market wants and then we produce to their specifications."
Manjares also believes his company has found a way of warding off competition from China, saying: "At times, our prices may be higher than those of other suppliers. One thing I am sure of, though, is that China cannot produce the small quantities that our clients want at the prices we can offer. China's advantages always come down to scale. Our products are also handmade whereas everything from China is machine-made. Each of our products is unique and this is important to our customers."
A similar strategy was adopted by Ferangeli Guitars. Based on the island of Lapu Lapu – a part of the Philippines synonymous with the production of good quality acoustic guitars at competitive prices – it was not so long ago that the company was struggling to survive.
Explaining the situation it found itself in, Fernando Dagoc, the company's Sales and Marketing Manager, says: "The problem with our local market is that too many customers have a fixed idea as to just what a guitar should cost and, regardless of quality, they are reluctant to pay more.
"At the same time, it is difficult to keep prices low when we have to compete with local furniture makers when it comes to purchasing old wood, something that sees prices for the material vary wildly."
In a bid to overcome these problems, the company started making higher quality guitars, products for which it could charge a premium price and enjoy far better margins. Dagoc says: "There are a few local buyers who are prepared to pay more for better sound quality and build, and they find us cheaper than buying products manufactured abroad.
"It is the export market, though, that is really taking off for us right now. This has been mainly driven by client referrals, satisfied customers recommending us to others who are also looking for good quality guitars at competitive prices. Now our sales message is: ‘If you want a good guitar at a cheap price, we can provide that. If you want a really good guitar and are prepared to pay a higher price, we can provide that as well.'"
In terms of the export markets above and beyond acoustic guitars, Shigeki Suzuki, President of the Kyoto-based Kanan Trading Corporation, sees demand for Philippine handicrafts growing substantially in Japan. He says: "I have been coming to the Philippines for more than 13 years and the range and quality of goods is definitely getting better.
"The Japanese like natural products, handmade from shell and wood. Such items are very expensive if they are produced domestically, though. As a result we source from elsewhere in Asia, including Thailand, Vietnam, Taiwan and Hong Kong. In the case of the Philippines, such products are attractively priced, although you have to negotiate hard."
For those more focussed on the domestic market, the Philippines booming economy and the increased levels of personal wealth have all made the future look considerably brighter. SEA Olympus Marketing – a distributor of polycarbonates for construction, solid surfaces for hotels and restaurants and wood coatings for the furniture industry – is just one of many local businesses to see a positive few years on the horizon.
Explaining her optimism, Joanne Labrador, a Sales Associate with the company, says: "Our market is domestic and our products are more expensive than many of our competitors. Even so, our customers seem to appreciate that the higher quality of our products is worth paying for.
"We guarantee that our products will last longer, while some of our brands also come with internationally recognised quality certificates. Given the boom in high quality real estate projects, we feel confident that our business will only grow."
This strong local economy and the emergence of an increasingly affluent middle class has inevitably attracted a number of foreign companies, with a number of them opting to exhibit at this year's show. Wita Budiani and Patricia Tuhumury are the Founders of CV. Wita Hara Kirana, an Indonesian firm specialising in pearl necklaces and jewellery. It is now looking to introduce its products to the Philippines' market under a supportive initiative launched by the Indonesian government.
Confident of finding success in this new market, Budiani says: "Our jewellery is handmade and differs markedly from local Philippine designs. We are also flexible with our prices, ensuring that we can compete with locally produced jewellery. Although it is still early days, we are pleased with the way things are going."
Not every company, though, is confident that it has found the right strategy for ensuring future growth. In fact, a number of them are distinctly worried. A prime example here is Shell Arts. Based in the southern coastal province of Cavite, the company was established in 1928 as a manufacturer of high quality mother-of-pearl products, including lamps, tables and ornaments. As an export-focussed business serving a number of leading US and European retailers, the impact of cheaper Chinese-made products has been huge.
Lamenting the current state of affairs, Virginia Chan, the company's President says: "Our factory used to have about 1,000 workers, now we are down to around 300. Up until a few years ago, our US and European buyers were prepared to pay a premium for quality. More recently, they have been under considerable cost pressures. Many of them have moved to cheaper sources, even though they prefer our products."
While the company has had some success in targetting a new local market of high-end hotels, restaurants and real estate developers, Chan sees this as only a temporary fix. She says: "What we need is to find new export markets, ones that are prepared to pay a premium for innovative design and high quality production. If our industry fails to do that soon, it will struggle to survive."
Manila FAME was held at the World Trade Center, Metro Manila, The Philippines, on 21-24 April 2016.
Geoff de Freitas, Special Correspondent, Manila