In 2018, the Paulo de Oliveira group recorded an 80-million-euro sales volume. Based in Covilhã with a commercial division in Biella (Italy), the group encompasses three industrial companies – Paulo de Oliveira, Penteadora and Tessimax –, with an industrial area of 130 thousand m2, where roughly 1,200 workers make 12 million metres of fabric each year.
hat was Paulo de Oliveira’s secret for surviving the hecatomb that took its toll on the overwhelming majority of wool making companies?
Dedication is the first word that comes to mind. It was that dedication that led us to never back down and never stop investing on keeping the company up-to-date. The will to always do better, of never conforming to what we have achieved, is the watermark that my father imprinted in this company.
That was how you resisted the resulting crisis of China’s admission to the WTO…
It was a very tough period. Of our five largest clients, three vanished – they went to Asia. We understood that structural changes to our business model were required.
In which sense?
We were middle range and produced tremendous volumes. We felt that, in order to stay competitive, we would have to change the type of product and diversify our client portfolio.
Was the change painful?
In times of great turbulence, such as that, there is an enormous pressure to keep the structure working. On the commercial front, the main concern was to replace the clients that had left and to progressively reduce the quota of the ones we had no interest in, from a strategic point of view.
Did you have a significant exposure to a reduced number of clients?
We have never been a single-client company. The largest one, which was Marks&Spencer, represented 20% of our sales. They were one of those who left…
Was there ever panic, or just an alarm?
Paulo de Oliveira has always been a very solid company. In its 83 years of history it seldom presented negative results. All of our investments are financed by our own means.
Were you ever caught off-guard?
Every year we run a strategic analysis and now, in retrospect, we see we did well in the essential points.
The importance of doing your homework…
The predictions that came out of our strategic considerations were very bold. We were ready for the change, to invest in innovation and new products. What we sold back in 2005 pales in comparison to our sales nowadays…
The change started in 2005, but the grand investment programme only began in 2013. In those eight years, were you measuring up the terrain?
In a context marked by the failure of Lehman, the sovereign debt crises, the intervention of Troika, the “announced death of textiles” and of internal transformations, we were conservative and invested less. Although, as a matter of fact, our shift started before 2005. Change is not only about purchasing new machines.
In the past five years, you invested 20 million euro. What was the strategic direction intended with that investment?
Adapting the group to the new business model. The investment policy stood on three essential pillars – quality, flexibility and sustainability. However, we’re already redefining concepts. We invest in equipment that allows us to become more flexible, to produce smaller collections, to customize the product, to provide a better service and, most of all, to be more sustainable.
When is the investment on solar panels due?
It’s a project split in several phases. At Paulo de Oliveira we’re on the fourth and last stage and, by the end of this month, we will be generating enough clean energy to become self-sufficient at the solar peak, thus reaching the legal limit for self-consumption. As we work 24 hours a day, this means that 1/3 of our energy will be photovoltaic. At Penteadora and Tessimax we’re replicating the process. The current stage will take a couple more months, and we will end up with 16 thousand solar panels. However, our effort in this domain isn’t limited to solar energy. We have improved immensely our energy efficiency and water savings.
How do you save water?
All the water we consume is used twice. We collect it cold and firstly we use it in the cooling, and then reuse it in our producing line. Furthermore, we are programming an even more efficient reuse. We want to be able to say we’re the greenest wool makers in the world.
Which is this year’s investment plan?
When it rains, one must drive carefully. The conjuncture, internal and external, associated with structural adjustments, recommends caution.
A year to consolidate the investments made over the past five years?
Even so, we intend to invest between one and two million euro on renovating the dyeing section and probably on the finishing section as well, in order to achieve a few of our new ideas.
In 2018, you hired 120 people. What led to this impressive 10% staff renovation?
It was imposed on us. The staff rotation in our company had always been low. People started working very young and kept that same job. What happened was, we had several people over 60 with 40 years of work that availed of the new legislation for early retirements. Now, the average age has dropped, but we lost excellent associates to whom we said farewell with sadness and gratitude.
Was it owning to the fact that men’s suits were on the brink of extinction that you started a women’s collection?
The reports of the death of men’s suits were greatly exaggerated 🙂 There is a drop in consumption, but it’s still our main product, weighing-in at 60% of our sales at Paulo de Oliveira, and a little below when it comes to the entire company.
The Women line is an alternative?
It’s more of a complement, just like the Informal collection that we presented a few years ago. We already sold women’s fabrics. Last year, we created a specific concept and the brand Pink, and we presented Pink’s first collection at the Première Vision in September. There are structural transformations to our way of dressing, and we adapt to them, with new mixtures, such as wool and linen, and more casual proposals like fabric for sports jackets or more modern suits.
How do context costs affect your competitiveness?
Fiscal burden, training, energy, fees… although energy represents almost 20% of our transformation cost, it’s extremely important! I usually say that we are in the Champions League, because we compete among the best, but then we play with lead shoes… We try to mitigate the impact of the energy price with solar and continuous investments on improving energetic efficiency.
To be located in the country’s inland isn’t much of a help…
We bear the cost of distance, measured in gas, time and tolls. It makes no sense that tolls on the A23 are more expensive than on the A1. Public policies should fix asymmetries, but all the signs say otherwise. Public spending is directed towards subsidizing monthly bus tickets in Lisbon and Porto, and I don’t question the fairness of that judgment. However, why not do the same with the tolls on the highways of inland Portugal? It would be a small step, but a step nevertheless.
How do you fight the exodus of the inland?
People aren’t dumb. They’re not heading to Lisbon or Porto because they want to – but because it pays off. There are no more delegations of anything, here. Everything’s concentrated in the coastland. People leave for the cities where life is better and where they subsidize public transport passes… This affect us directly and indirectly.
Are you pleased with the geography of your exports?
Directly and indirectly we export over 95%. About 75% of our production goes to Europe, a matured market where growing doesn’t come easy. We have been improving our sales in Asia, our second largest market, representing 15% of our sales, which is where the biggest consumption growth lies as well. We are also going to work on improving our stance in America, North and South, where our presence is weak.
Is the price of wool still rising?
After a three-year period in which it almost doubled, the price of wool has become more stable, at a level close to the historical record. Yet, production has been dropping, and demand has been led by China, which controls about 76% of the market.
Does the alternative to reducing raw material entail using recycled wool fibres?
Last year, at Penteadora, we launched Re.born, a concept of recycled wool fabrics, made from the whole group’s waste. For now, it is still a relatively thick yarn. We also released fabrics made from recycled polyester, and we’ve many more news coming.
How does the price of raw material impact the final price of the product?
It’s a very heavy component that might even reach 40%. When the price of wool rises 30% in a year, reflecting it on the final price isn’t easy…
Does the price still count?
The price counts in all things business. We don’t compete in price. However, our negotiating skills can’t take us past what the client is willing to pay :-).
Has your average price been increasing?
Yes, for two reasons: the rising prices of raw material and the growing sophistication of our product lines.
You usually say that looking back is nice, but the real challenge is to look straight ahead. How do you see the future?
The exponential growth of online sales is forcing a paradigm shift from top to bottom. Digital will demand objectivity, transparency, and immediate reviews, and this requires a deep revision, even in more peaceful topics such as the company’s work culture. We focus on investing in technology, yet paradoxically that is not our biggest challenge.
How do you see the current conjuncture?
Since the end of last year that the general atmosphere has been negative. There is a big uncertainty that demands prudence. Surprisingly, Paulo de Oliveira’s grew in the first semester at a rate of 7%, contrary to our competitors and our estimations, which means either we were well-prepared or we were wrong – at least for the time being…
Born 55 years ago, was raised in Covilhã, where he still lives. He’s the eldest of Maria Hermínia and Paulo Nina de Oliveira’s four children. Graduate in Corporate Management from the Universidade Católica, in 1986 he started working in the commercial department of the company founded by his grandfather José Paulo and that his father turned into one of the largest wool factories in Europe. Married with three children: Miguel, 24 years old, completing a master’s degree in Finance at Universidade Católica; Joana, 21, studying Architecture at Universidade de Lisboa; and Francisca, 16, who is “the joy in our home”
What is the future of our Textile and clothing industry?
We have to adapt to sudden changes and that means paying attention and being more flexible. The textile industry managed to consolidate skills in areas like innovation and sustainability, that boosted its competitiveness, but there is room for improvement. For example, change requires agility: if the demand isn’t stable then it’s vital for structures to be elastic. I wonder: if this is a determining factor, are public policies aligned with this goal of greater flexibility? I wonder still: if we want a stronger industry, isn’t it basic to debate the context costs, such as energy, fiscal burden, abusive fees or training deficiencies?
In the future, natural fibres such as wool, will become premium and destined to increasingly exclusive market niches?
Wool is a natural, renewable, recyclable, carbon-friendly and easily biodegraded. It holds properties that make it special, its resilience enables a quick recovery of the original look, it has a natural elasticity, it’s breathable and absorbs humidity, making it a thermoregulating fibre, able to keep us warm when it’s cold and to keep us fresh when it’s hot. In practice, wool is already a niche product since it represents less than 2% of the global market of textile fibres, and dropping.