Pan Brothers set for massive 3 year expansion plan with an investment of US$70mn

Pan Brothers, a publicly listed garment manufacturer of a number of world famous brands is all set for a massive three year expansion to help the company tap the potential of Southeast Asia’s emerging garment markets.

Pan Brothers manufactures brands like Nike, North Face, Lacoste and Emporio Armani and exports 99 percent of its sales. The company’s biggest export market is Asia, which gets 39 percent of total sales, followed by the United States and Europe with 30 percent each.

It has set its sights on expanding to other countries in the region, namely Vietnam, Cambodia and China, to further pave its way to the wider global market for which the company is prepared to investment to the tune of US$70 million.

Anne Patricia Sutanto, the company’s vice chief executive officer on Thursday stated that as part of the expansion program her company was partnering with Japan-based Mitsubishi — the company’s biggest customer — to establish seven factories together between 2014 and 2016.

The company’s factory-building partnership with Mitsubishi started last November, with Pan Brothers holding 85 percent of the stake.

The partnership would bring in four new factories this year all of which will be located in Boyolali, Central Java.

Two new factories will be built next year and another will be established in 2016, although their locations have yet to be disclosed.

The new factories will increase their production capacity by 48 million pieces a year, to around 90 million pieces by 2016.

The expansion was motivated by increasing demands for garments in Southeast Asia and was also driven by the government’s ambition to advance the country’s garment exports, now that the world’s largest garment exporter, China, is shifting its business from textiles to services and is facing an economic slowdown.

Buyers has also started looking elsewhere for new supplies outside of China to feed their markets as they are facing rising labor costs and declining labor supply.

Lower-wage South East Asian countries have become the main alternative to replace the Asian giant, with countries like Vietnam and Cambodia seeing mushrooming garment factories.

Pan Brothers is also looking to establish a factory in Vietnam and had secured a local partner to carry out the plan. Name of the partner or the total investment required for the regional expansion remain unrevealed. The company is currently on a business trial with the local partner to work on $20 million worth of orders from sporting goods company Adidas, to test the investment atmosphere in the country.

If the trial goes well, they plan to start investing there next year with PAN holding 51 percent of the stake. They will either build a new factory there or acquire an existing one.

Pan Brothers is also mulling over whether to acquire a factory in Cambodia and to set up a research and development office in China.

The government expects that Indonesia’s textile and garment exports will grow from $12.6 billion in 2012 to $75.36 billion in 2030, raising the country’s contribution to global textile exports from 1.8 percent to 5 percent within the aforementioned period.