“Made in…”, with Pride: Local Heritage Producers and Moving up the Value Chain
By Dr. Sudev Sheth, Nataliya Nedzhvetskaya, Alexander Hoppe
Check the collar of the t-shirt you are wearing and you will inevitably find a square cloth label with block text stamped “Made in …”. Textiles and garments sold in the U.S. are required to report their country of origin by the Federal Trade Commission.
Studies show that consumers ascribe significant value to country-of-origin, paying more for a cashmere sweater “Made in Italy” than a virtually identical product made in the Global South, East Asia, or Eastern Europe. Clothing brands further capitalize on their legacy of production in certain parts of the world, incorporating founding year and location prominently within their marketing. Prada, for instance, references its founding in Milan in 1913 on most products and advertisements.
Such consumer attitudes play a role in perpetuating global inequality. A recent New York Times exposé showed how high-end luxury brands depend on low-wage embroiderers in Southeast Asia for many of their most impressive creations.
Producers in the Global South and elsewhere have long recognized the disparity between their labor contribution and their portion of the profits. Our research on “Made in India” and “Made in the USA” production suggests that firms on both sides of the divide are aware of the role geography plays and use it to their advantage. Manufacturers in India are beginning to utilize the same strategies once deployed by “Made in the USA” brands to market associations of quality, history, and prestige to their customers, both domestic and international.
Arvind Mills, of the Lalbhai Group in Ahmedabad, is India’s largest denim manufacturer and one of Asia’s top exporters of jeans. Established in 1897, the firm led textile production during anti-colonial struggles of the 1930s and emerged as top-tier apparel manufacturer in the post-Independence period after 1947.
By the 1980s, the CEO and Managing Director Sanjay Lalbhai faced increasing competition from cheaper domestic manufacturing in India’s informal power loom sector. As a business strategy, he decided to pump resources into building a brand image.
In a recent Harvard Business School interview, Lalbhai explained the situation: “I started realizing in the ’90s that the most rewarding thing would be to make the final apparel and brand it…Branding differentiates and once you build a brand, you can command a different pricing vis-à-vis the commodity.”
Working towards brand-name recognition is not just a matter of greater profits, but also of opportunities to recognize the intellectual contributions of Indian employees. These employees do not just sew garments. Contrary to popular belief, they play an integral role in designing and developing products.
The story of Arvind Mills parallels that of the famous U.S. manufacturer, Woolrich Woolen Mills. Until 2018, Woolrich ran the oldest continuously operating vertically integrated wool mill in the U.S. The company, started in 1830 by English immigrant John Rich, is best known for its classic red-and-black buffalo check shirt and wool-based outdoor wear, including the classic Pennsylvania tuxedo.
Starting in the 1980s, and accelerating in the 1990s with the passage of the North American Free Trade Agreement (NAFTA), brands across the fashion industry were faced with the triple threat of discounting, outsourcing, and increased shareholder demands for profitability. By the nineties, the Woolrich mill lost profitability, and executives shifted the company’s focus from manufacturing to marketing. Manufacturing operations moved overseas and the company hedged all bets on promoting their brand rather than increasing in house manufacturing capacity.
Unexpectedly, WP Lavori, Woolrich’s European licensee, had even greater success than the original Woolrich company. They leveraged the distinctly American history aspect of the brand to appeal to European consumers.
“History is what WP Lavori sold when they introduced the brand to Europe…,” a former manager remarked, “they were selling heritage, American heritage…and that’s what made the brand standout.”
In 2016, WP Lavori acquired the American Woolrich and merged it with their European business. Just two years later, the brand was sold to L-GAM, a Luxembourg-based private equity firm for 140 million dollars. The marketing line shifted from “Made in the USA Since 1830” to “American Soul Since 1830,” creating a sense of continuity with the company’s history while leaving behind explicit claims to American production.
In the case of Woolrich, the company managed to move away from manufacturing and towards a brand impression that evoked its unique American heritage. The Woolrich brand received the greatest amount of recognition from abroad, especially from international consumers who associated product quality with its foreign origins.
While Arvind continues to produce fabrics, they are increasingly moving towards building a portfolio of brands, both international and homegrown. The strategy has been to divest themselves of manufacturing assets and mills, taking a distinctly asset light approach to maintain agility and move up the value chain. This is the case not only for Arvind, but for a number of other long-standing companies in India, including Raymond and Tata.
As the world moves through financial boom and bust cycles, brand image is key to long-term stability and to gaining increased autonomy over local operations. The success of this business strategy, however, ultimately depends on the willingness of consumers to recognize quality in the product, not just the “Made in…” label.
