Sunday, Aug 19, 2018
Industry & Trade | Asia-Pacific | Japan

Caitac Corp, Japan

‘Made in USA’ jeans, made by Japan


3 months ago

Masaji Kaihata, President of Caitac Corp.
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Masaji Kaihata

President of Caitac Corp.

The Worldfolio speaks with Masaji Kaihata, President of Caitac Corp., about his company’s operations in the U.S., where it has a number of jean manufacturing facilities, as well as real estate interests. Mr. Kaihata believes the changing demographics in America will present big opportunities for his company, saying, “I really want to take our business from the domestic market exclusively to the American one.”

 

What potential do you see in the Japanese brand and its potential to go abroad?

When it comes to lifestyle that mainly comprises of food, housing, and clothing. For clothing we find our roots in Europe. For food, you can procure and make it locally so it has a local value, but for clothing we get our inspiration from European countries. You see that in America as well, where the East coast has a large Anglo Saxon population so they look towards that direction too. Historically, men’s clothing has received knowledge and inspiration from Italy, and women’s from France. I don’t feel that Japanese clothing will be such a high seller in the USA. For example, at CAITAC, we utilize names formed by the Roman alphabet for certain brands, and we often put an emphasis on roman numerals for naming. In Asian countries, such as China or Korea, Western names are popular, so we use this naming to our advantage. Japanese brands that use Japanese-style letters, such as Kanji, predominantly sella product like Kimono within the local market.

 

What has been some of the main trends that you have experienced in the market? 

The general mood is casual clothing with a low price. In Japan, Uniqlo represents that strategy. Without the presence of Uniqlo, clothing prices would be much higher in Japan. We do not consider Uniqlo to be part of fashion. While they employ high-quality materials for high-quality clothing, they do not present themselves as a “fashion brand.” The president of Uniqlo himself argues that “Uniqlo does not offer fashion, but offers clothing parts for consumers to create their own fashion.”

In U.S. shopping malls, it is common to find H&M and Zara next to each other. Looking at the future, it will be interesting to analyze how these highly similar corporations will compete for success. Since more than 50% of American citizens are Anglo Saxon, the popularity of H&M and Zara will persist for the time being. In the near future however, as Hispanic and Chinese immigration increases, that’s when we will start to see the popularity of Uniqlo rise. As we can see in China right now, the popularity of Uniqlo is fast exceeding that of Zara and H&M. I believe that with the increase of Asian immigration, Uniqlo’s performance will improve.

 

Can you explain the history of Caitac Corp, from its humble beginnings to the diverse group it is today?

Caitac Corp. began as a fabric wholesaler in 1953. My father started this company after World War II. At the time, Western style clothing in Japan was order-made; pre-made clothing did not exist yet. Caitac therefore started as a fabric wholesaler, targeting tailors in the Okayama area. Later on, a famous adviser to our company insisted that as times were changing, the wholesaler was going to be out-of-date, so that we therefore had to change our market to reach all over Japan. A company we have had a strong business relationship with was making school uniforms. Out of obligation to them, we started making pyjamas, therefore filling-in a niche in the local market.

When we started making pajamas, there were no other big pajama makers in Japan. We set out and worked hard to become the number pajama maker, and as a result we achieved that within 20 years.

Simultaneously to our pajama-manufacturing activities, we began making jeans. We owned a sewing company whose factory was constantly in the red, financially speaking. When I took over, I made a strict selection of simple computer designs, which in return lowered the production cost and increased the value of our activities. After a while, our money-losing factory became profitable. At the time, we conducted 50% of the work in house, while subcontractors handled the rest of our activities. After 5 years, our pajamas and jeans became the cheapest such items in Japan. We replicated this model in China, but it did not work. We then repeated this model in the USA, and it did work. Building on that initial success, CAITAC may become the cheapest made in America jean-manufacturing organization.

 

What are your core activities in the American market?

We first went to America because it was my dream to manufacture “Made in USA” jeans. However, we experienced many ups and downs in America. First of all, we had 4.5 acres factory in Washington State which closed after 5 years of operating. After that we had a plan to build a factory in Mexico, with a group called ‘Cone Mills Denim’ which we originally partnered up with however, they suddenly withdrew their factory, which left us no choice but to withdraw too. At that time the ‘GUESS’ brand was becoming very popular in L.A. They asked us to develop a washing facility for their popular items. However, they suddenly moved to Mexico as well, and we therefore experienced the same problem as we did with Cone Mills.

For 10 years we struggled in America. Then a new brand called ‘7 For All Mankind’ started to make their clothes in our factory. Thanks to that partnership, we produced around 400,000 jeans per month and we were able to recuperate from our initial problems. After that, there were 3 new brands emerging called ‘J brand’, ‘MOTHER’ (Denim), and ‘RAG & BONE’ which are currently our main brands in the U.S.

In L.A. we have become the cheapest jeans manufacturing facility. Back when we started, we were too dedicated to quality, which inflated our production cost. Today, not only are we the most cost-effective jean-manufacturer, but we also enjoy the quickest delivery and the highest quality delivery rate of all jeans manufacturing facilities over the past 2 years.

Next door to the Washington factory, I was offered to buy a large piece of land near the Canadian border. I then turned this un-used terrain into a golf course. More recently, we are planning to construct a residential area around this complex, therefore enhancing the land’s value by up to ten-fold. Recently, Seattle has experienced a great housing boom due to the security of its neighborhoods. However, buying a decent house in Seattle costs around $1 million. In comparison, purchasing a similar asset in Birgam, Washington state, one hour from Seattle, would be half the price.

 

Have you been impacted by the election and national policies of Donald J. Trump?

The impact of Donald Trump differs according to the sector at hand. In the clothing industry, the basic workforce is mainly composed of immigrants, which significantly lowers the price of labor. Despite his stand on immigration, it is unlikely that Trump will be able to stop the influx of immigrants. For the clothing industry, immigration is a positive development for it brings customers and workforce. At CAITAC, we like to make our products in America and sell our products to America. Hopefully, by making jeans that have a value of over $200, we want to gain up to 30% share of that market.

 

What developments or objectives would you like to achieve over the next 10 years?

Ten years from now, I really want to take our business from the domestic market exclusively to the American one. The reason being that each Japanese citizen owns 0.5 pairs of jeans on average, while the American citizen owns 2 pairs of jeans. Because America is projected to have 500 million citizens in the years to come, business opportunities will arise. While politicians often disregard these demographic projections, we know that Hispanic immigrants will overtake the traditional U.S. population. We therefore feel that the American society will change. Furthermore, we would like to implement a way for our hotels in America to be more efficient and less wasteful with their large room size. Such as, if we take an overly sized expensive room and cut it in half, thereforereducing the price, we believe it will appeal to a larger customer base and create more profit for the company. With these changes we hope to add to the local culture and to preserve the environment.

 


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