CASE STUDY >
From their own kitchen all the way to China
Written by: Petr Vykoukal
Photo by: Luminum

Starting with home production of parkas and sleeping bags for friends, in 20 years Warmpeace has become a well-known maker of outdoor equipment.

Svatopluk Antoš

IN THE MID-1980s, Alice Pánková (today Habětínová) sewed a down parka for her friend Pavel Habětín (the two are partners and executives of the firm). The parka was a hit with his friends, so soon they were sewing more parkas in the kitchen of their country home, and added sleeping bags to their line. After 1990 Warmpeace was running as a small business, and the down products were quickly joined by other equipment for outdoor activities. Warmpeace's beginnings were similar to that of other Czech makers of outdoor equipment, but now they are substantially different. Warmpeace chose to focus on foreign markets - up to 80% of its production is exported - and instead of having its own chain of shops, it sells its wares through its customers' stores. Today a large part of its collection is made in Asia.
As unbelievable as it sounds, until 1991 all Warmpeace product sales were through individuals' orders. The breakthrough year of 1992-1993 brought the term "outdoor equipment" to Bohemia, accompanied by a boom of shops with equipment for mountain climbers and hikers. The rapidly growing firm moved from the kitchen to rented spaces in Prague, and a year later it added a large production hall in Červený Kostelec, about 150 km from Prague. From the beginning the owners focused on the highest possible quality, so they used imported materials. In 1994 Gore (the maker of Gore-Tex, Windstopper, etc.) became a supplier of the firm. Gore approached Warmpeace when it was looking for customers in eastern Europe.
Gore proceeded cautiously and proposed that Warmpeace choose some samples for testing - probably not expecting much from potential Czech partners. "We don't want to test anything. Just deliver one kilometer of fabric, we'll make something out of it, and then we'll see," was Habětínová's reaction, which brought relations with the supplier to a new level. Warmpeace then acquired a license to use Windstopper material, later adding Gore-Tex. The cooperation was a good reference for foreign partners. "Globetrotter, a large German vendor of outdoor equipment, added the Windstopper collection to its catalog, thanks to which we became known in Germany," says Svatopluk Antoš, a partner and executive in the firm.

Benchmark - building a distribution network instead of its own chain of shops - systematic penetration of foreign markets - emphasis on cutting fixed costs - competing with global brands vis-a-vis quality/price ratio

Outgrowing the local market
From the start Warmpeace didn't focus solely on the Czech market. "We saw all of Europe as our potential market, and we build up contacts abroad," Antoš relates. The key for these contacts was foreign trade fairs, mainly in Friedrichshafen, Germany. The first time they exhibited there was in 1996, but it took some time for large firms to take Warmpeace seriously. Today Warmpeace's outdoor equipment can be purchased in Germany, Denmark, Finland, and Slovakia, as well as the Czech Republic. The firm acquired its first German clients at the Friedrichshafen trade fair, and later they participated together with these clients in further trade fairs. But rather small volumes of sales were involved, with their partners' interest driven mainly by the low prices.
Warmpeace is currently represented in Germany by Heinz Haberger, a well-known German outdoorsman. "Our Danish and Finnish partners found us at trade fairs, too. Both operate outdoor shop chains and offered Warmpeace goods in their stores," Antoš says. The success of Warmpeace products is borne out by the fact that their Finnish partner discovered, based on precise sales analyses, that Warmpeace goods accounted for more sales than many global brands.

Optimizing manufacturing costs
The business successes in the mid-1990s brought additional financial resources that Warmpeace decided to invest in production. But although everything, including sales, proceeded well, it didn't show up in the firm's cash flow. The problem was that the production required purchasing materials and paying employees to make a product that didn't create any revenue until several months later. "We figured that each year we pay our seamstresses for one month in which they don't even pick up a needle," notes Antoš, referring to the unbalanced outlay-versus-income schedule. Further expenses connected with employees (insurance, etc.) and poor payment discipline on the part of Czech customers were additional problems. So the owners started to consider outsourcing their production.
A year later they tried manufacturing in China, and although their initial experiences weren't ideal, today most of their collection is made there (see sidebar, left). This resulted in considerable cost savings, mainly due to cuts in staff. While in 1997, 80 people worked in the Červený Kostelec facility, today there are only 12 designers developing new collections. Besides them the firm employs another 18 people in distribution and sales. Despite the notably lower number of employees, the firm's revenues are still growing - in 2004 sales reached CZK 46 million.

 

The China syndrome THE DECISION to move production to Asia was indirectly prompted by the case of a Norwegian maker of outdoor wear that long boasted its “Made in Norway” symbol of quality. “When we learned they had started production in China, we were curious as to the results,” recalls Svatopluk Antoš, a Warmpeace executive. “Nothing much changed, in terms of quality. This signaled us that it was possible.” In order not to risk any drop in quality with its own brand, Warmpeace created a new line for testing production in China. They founded the collection in cooperation with an American designer working in China, and a Chinese firm was delegated for the production. “The result was poor. The sewing was quite good, but there was a problem with the materials,” Antoš says. “It was costly, but we established contacts and discovered how important it is to monitor both production and preparation.” Today they work with another Chinese partner, and Pavel Habutín, a co-owner of the firm, and Dana Lásková, a designer, spend three months a year in China setting up and monitoring the production of the latest collections.

One shop suffices WARMPEACE has only one store in the entire Czech Republic, which also functions as a wholesale warehouse and a place for clearance sales after season’s end. It wasn’t always like this – in the mid 1990s the firm opened a store in Liberec. “The argument was that there were many foreign tourists who would buy outdoor equipment, but it didn’t work out and sales there weren't sufficient,” recalls Warmpeace executive Svatopluk Antoš. The owners then decided not to build their own chain of stores, with the final result being that all sales in the Czech Republic and Slovakia are done through partner shops. Additionally, building their own chain could have prevented the building of partnerships: “It would be nonsensical to look for vendors in a region and then make them competitors of our own shops,” explains Antoš.