Speaking with Style: Carlos Arias, president, Denimatrix
Last March, a group of savvy investors bought the remains of former struggling Guatemalan denim firm Koramsa - just as the jewel in the crown of the country's flagship textiles industry had begun to rust under the credit crisis. The move gave genesis to Denimatrix which, according to president and co-founder Carlos Arias, is now making headway in its efforts to become a global heavyweight in jeanswear design.
Denimatrix is a much smaller and more nimble player than Koramsa, focusing on the growing fashion jeans market.
"We are advancing on our original plans and exporting 140,000 denim fashion jeans a week," explains president and co-founder Carlos Arias, adding that the original plans had been for 100,000 jeans.
"The [global retail] market is back and we have been able to develop very fast and supply product to our clients in a shorter time."
In the deal that formed Denimatrix, Arias teamed with Texan cotton-making cooperative Plains Cotton Cooperative (PCCA) and other investors to snap up selective assets from Koramsa, which its Guatemalan family owner decided to sell shortly after the credit crisis reached a peak last autumn.
The investors bought $25m of assets in total, including key manufacturing and office real estate.
They also launched a major restructuring plan to transform Denimatrix into a minnow of an enterprise - at least when compared to its predecessor - employing just 4,800 people compared to 19,600 that sewed at Koramsa.
PCCA, which bought the majority stake, made a multi-million dollar investment to hire new and more specialised staff, upgrade IT systems and install new washing and laundering facilities to set up a vertically integrated supply chain to serve customers twice as fast as Koramsa.
The result has meant Denimatrix can deliver an order in 30-45 days compared to Koramsa's 60-90 days average.
Denimatrix is focused on making fashion products fast and with high flexibility.
More than 50% of orders are for less than 2,000 units per week compared to as many as 30,000 for Koramsa, which made more basic products though it pioneered fashion jeans-making in Central America.
Because it owns the cotton yarn used by its factories, Denimatrix can move product along the chain faster than many rivals, Arias says.
A more modern and transparent IT system also makes the customer-supplier integration more efficient and saves time in the garment concept-to-production process.
Growing the business
In three years, Denimatrix hopes to fulfil 30% of its customers' global fashion jean requirements, up from 10% now.
It hopes to gain a bigger slice of the $2.2bn global market for jeans over $50, which Arias expects will grow 15% a year, up from 8% in the past two of years when the global downturn depressed sales.
To achieve this, the firm hopes to continue investing in technology and human resources to move into higher price-point jeans.
It will also seek new clients and form strategic alliances to cut costs, Arias says.
Regarding its client stable, Arias says the firm recently began working with Guess and that older Koramsa clients such as Gap and Abercrombie & Fitch recently joined Denimatrix after taking a break after corporate restructuring.
Two recent alliances include strategic, non-equity partnerships with Grupo M in Dominican Republic and Colombian jeans maker CI Jeans.
Under the agreements, Denimatrix will supply both companies with fabric to produce its more basic jeans.
By sending them raw materials and cutting procurement costs, Denimatrix will enable its partners to focus on manufacturing, design and logistics.
"We met to figure out how we could work together, to find out how, instead of duplicating costs and infrastructures, we could combine capabilities to supply our customers more quickly and at better prices," Arias says of the reasons behind the alliance.
Arias hopes to strike similar partnerships in the future as he aims to develop Denimatrix.
With the current partners, he says the company will produce 150,000 pairs of jeans a week in three years while Denimatrix should be able to churn out 250,000.
But he stresses he wants Denimatrix to stay small, nimble and specialised. He is also keen to expand the firm in the luxury jeans market.
Denimatrix's average price point is $150, but Arias hopes to win customers to supply higher-end jeans in the $200 price range which he says the company is already capable of doing.
As it moves in that direction, Denimatrix recently invested in a more sophisticated, "g2" waterless washing technology, and will continue to spend in new technologies to take its design to new heights, Arias says.
Denimatrix also hopes to move into Europe where Koramsa had wanted to expand before the economic turmoil forced it to slash those plans.
According to Arias, the company is already speaking with luxury jean brands there.
"We are starting conversations with higher-end brands in the US and Europe," Arias notes, adding that Denimatrix can provide a high level of service to small premium firms that need growth and financial support, especially on the raw-material procurement side, to expand their business.
"We won't be focusing on industrial growth but rather in fashion-forward, premium brands. We hope to gain their trust by servicing parts of their business others can't," he adds.
Denimatrix already has luxury jean purveyors such as Rock & Republic as customers though only for its basics jeans line.
Arias hopes Denimatrix can develop the flexibility and know-how to serve super-luxury brands such as New York boutique-style firm Atrium, where jeans can go for as much as $600 a pair.
However, he says the company is very happy with where it is now. And with the kind of money it's making, that should come as no surprise.
Arias says sale margins have doubled compared to what they were at Koramsa, whose average jean retailed for $39.99. Denimatrix' average jean leaves Guatemala City for $79.99.
"We are back on the horse," Arias concludes. "We are back on the horse and we really like the horse we are riding on."
With thanks to Mike Todaro, managing director of the American Apparel Producers Network (APPN), for the photos which were taken during a visit to Denimatrix last year.
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