Creating composites of the future and showing foreign partners the benefits Turkey has to offer, SunTekstil, one of the biggest fashion garment exporters in Turkey and part of Sun Holding, employs extensive R&D to create new materials and exemplify the entrepreneurial Turkish spirit. Sedat Sükrü Ünlütürk, Chairman of Sun Holding, Vice President of the Turkish Industry and Business Association (TUSİAD), and a leading voice of the private sector in Turkey, provides a fascinating insight into the country and the industry.
Being in competition with cheaper production centers, such as China and Bangladesh, what would you say are your globally competitive advantages in the textiles and garments manufacturing industry?
First of all, unlike Far Eastern competitors, we are not a cheap labor country. We are much more expensive than Far Eastern competitors, but we are still cheaper when compared to the European markets, except perhaps Portugal. If you look at our population and our GDP per capita, there is no way we could ever compete with Far Eastern countries like Bangladesh, China or India in terms of price.
So how do you positively differentiate your products and compete globally with these countries?
Since it wasn’t possible to compete at their pace while implementing their business model, we had to find a different way, a better and faster way for servicing our clients. Today all products are imitated much faster than they were 20 years ago. Everything becomes a commodity in a very short period of time. These days, you put something out there and the next day someone is making it and selling it for less. For us, this cannot be the area of competition.
What we have to do is to offer competitive advantages that the competitors can’t imitate. For example, Sun Tekstil is one of the biggest fashion garment exporters in Turkey and we offer a package that is no longer manufacturing only; it is a full package that includes services, fast delivery and manufacturing. Since we started to offer our design services to our customers, they can choose between our designs or they may ask for some changes in the designs, and even, sometimes, join us in the designing process. This way, you provide a service that could save the customer a lot of money and could reduce the delivery times drastically.
We are also very flexible with our clients; we can offer very small quantities of trial shipments, as small as 500 pieces. After that, they can place a larger order, which we can send within three to four weeks, thereby eliminating their overstock risk and this constitutes another service.
In general, it is extremely difficult to get this kind of service from the Far East, because companies in those countries are not organized to give such fast response and mostly they don’t accept small orders.
We offer design, flexibility and finally fast delivery for large quantities. This is why we now define ourselves not as a manufacturing company, but as a design and organization company. In 2000, our total sales were around $20 million and we were employing roughly 1,000 people. When we changed our business model and started offering this complete package concept, everything changed drastically. Fifteen years later, the company is exporting more than $100 million annually, and we work with 240 people in total. Out of those 240 people more than half are white-collar workers. We employ around 60 people in our four design offices: two offices in the UK, one in Spain, and one in our headquarters in Turkey. Everybody is connected to each other and finally, our design offices are also connected to our customers so that they can work together, since it is a continuous process.
We also have quite a big and highly sophisticated manufacturing power of knitted fabrics. Ekoten is one of the leading fabric manufacturers in Turkey, which is very well known for its high quality fashion fabrics. Ekoten is also constantly developing new fashion fabrics, thereby giving us a big advantage to create many different collections.
Now, we are exporting around 2 million pieces a month, in a very good cooperation and collaboration with our customers, which may also be called a kind of strategic partnership.
Is this the way you work with all our high street brand partners, such as Zara and M&S?
Exactly, yes. We have only five customers, and for the moment, we don’t need more. We work hard to make them happy and try to give them an advantage over their competition in the market. This is because we feel that we work as a team with our customers, and if they grow, we grow, and this is the way we have been growing organically over recent years.
Surely no company is ever satisfied with its current profitability, no matter how well it is doing. What is your plan for growth and expansion over the coming years?
Honestly, we don’t have many ambitious targets in the fashion side of our business, as a group of companies. In the past five years, we have enjoyed overall growth of 20% each year. This has become some sort of measure; we are not going to grow as fast as we did in the past but we are still growing. Right now we are focused on how to grow in a much better way, how to provide a better service and how to increase our competitiveness. Rather than volume, we are focused on increasing our abilities and giving more power to our customers. A steady growth rate of 5%-10% would be fine for us.
And you have no plans to start your own brand labels again?
No, not for the moment.
One of the subjects we discussed before the interview started was Turkey’s urgent need to shift towards more high-tech, value-added manufacturing. Can you tell us how you are leading the way in textiles through your R&D activities?
As you already know, we have around 150 R&D centers in the country, which are nominated by the government, and in our industry there are only eight R&D centers, and one of those eight belongs to our group, Sun Tekstil R&D Center. What we are trying to do is to grow in a different area, which is technical textiles because the company has a great potential to grow and has powerful human resources. We have entered into a partnership with a Dutch company in automotive textiles by establishing a joint venture company, Ames Textiles, in the Aegean free zone in Izmir. With this new strategy, we are also creating and producing new knitted fabrics and 3D fabrics that are being used for luxury car seats since the material provides a lot of ventilation.
Are most of your R&D activities focused on technical textiles?
Yes. We are also doing some research into the construction business from the technical textiles perspective to see what we can do there, because Turkey is an infrastructure giant, as you may already know.
As we are able to produce warp-knitted composite-base fabrics, we are also excited about composites because we believe this is the material of the future; they are much lighter, they have no corrosion problems and in many cases they are much stronger. BMW actually made its first 100% composite car and they’re selling it now. Probably in the next 5 to 10 years, most car parts will be made out of composites. This is another area that we are working on now and we are looking for partners in Europe.
The two main fibers used in composites – carbon fiber and glass fiber – are being produced in Turkey. Regarding producing the final product, the composite business is labor intensive and that also poses an advantage in comparison with other European countries. Hence, it looks like an interesting growth area for us.
Are you open to further partnerships with international companies to develop technology for their products?
We are very open to any kind of cooperation, and a good example of that, is our Dutch partnership. We started three years ago by establishing a new partnership in Izmir, and as our partners were happy, they recently moved their main factory in Holland to Izmir, and merged with the existing company.
Izmir, as home to many foreign investments, offers a very friendly European atmosphere, a wonderful climate, and the availability of highly skilled people (there are nine quality universities in Izmir, and four techno parks). Also the tax benefits in the Izmir free zone, and cheaper energy costs than most European countries, make it more attractive for business.
In all of our industrial businesses, we define ourselves as good engineers. This means we always have a special process development group that is always trying to improve business processes. For example, at Ekoten, I believe we are the most energy-efficient fabric factory in Europe as we are constantly reducing our water and energy consumption per kilogram of fabric. In the last five years, we have reduced water consumption per kilogram by one third and the energy consumption per kilogram has dropped 30%. It’s not only a green factory but it is also using process development software and tools like Six Sigma and SPSS –using high quality statistical processors and big data analysis – which are very powerful tools, because they also allowed us to evolve in knitting techniques and technical textiles as well.
We are very proud of this characteristic of Ekoten, as a family – you may know our company was founded by me, my brother and our wives. The reason for focusing so much on the development of manufacturing processes and operational excellence is maybe because all four of us have engineering roots.
I read that you own a boat and you have big dreams attached to it…
Together with my brother we crossed the Atlantic in November last year. We have participated in the ARC (Atlantic Rally for Cruisers), starting from Las Palmas and sailing to Saint Lucia. It was a 16-day passage and it was fantastic in many aspects. It was a 10-year-long dream. We feel very happy about realizing it.
I’m not dreaming of sailing around the world. The Atlantic was great but we want to sail in different paradises of the world. We will definitely go to the Pacific Islands. Probably chartering a boat in those places would be more practical and will save us more time and allow us to discover more.
Do you have any professional dreams remaining?
No, I’ve done many things in the last 40 years, and have worked very hard. So for the last five or six years I have been able to get out of the day-to-day business and that has given us a chance to also work in associations and in non-governmental organizations while still working in our group of companies. My brother is President of the Aegean Exporters Union and I’m also on board of the Turkish Family Business Association together with TUSIAD. We think that this is a period of giving back to our society: we believe this is also a duty that we must honor. But after the next couple of years, I am dreaming of spending more time on the boat, with my wife.
Your story is very interesting. You started this company with your brother from nothing, and now it’s a huge company exporting across Europe and working with world-famous brands. In these turbulent times for Turkey, to what extent do you consider yourself a role model or an example of the spirit of Turkish entrepreneurship that endures in this country?
Twenty years ago, we stated our company’s vision as: we must create successful companies and business models which excite other people to gain courage to do things or be inspired. The Turkish people are entrepreneurs, it’s in our blood, and we want to do things immediately. We take risks. Generally, we must be proud of the fact that we are very flexible and quick; that’s how we have survived the crisis, we adapt fast and change quickly according to the conditions. Doing something on a global scale has a meaning; saying that you are better than your neighbor has no meaning for the country. We think that, if we are going to do something, it should be on a global scale with a global vision.
We were successful in building a system and recruiting the right people and leading them to the same target. We have many people that have been working with us for the past 15 years, which is very rare to find in our industry; and they are now transferring our company culture to the newcomers. Today, all in all, we employ around 900 people – including more than 150 engineers, and university graduates – which is our main asset, and the real power of the group.
From the very beginning of our first company, we have been trying to establish a corporate governance system for our group of companies, to ensure its growth and sustainability. We do think that from the role model perspective, establishing a corporate governance system in our industry is also very important, since many of the others think that it’s not possible.
A few years ago Turkey set itself highly ambitious targets for 2023 that include $500 billion of exports, of which textiles and clothing are expected to contribute $60 billion. How do you assess the potential of the Turkish textiles and clothing sector to reach this ambitious target?
Well, when the targets were made public, they were really achievable. Even though they were ambitious targets, they were still within reach. Unfortunately, they don’t seem to be achievable for the time being.
We made a big effort after 2002 under the first AK Party government and in the first seven years – even during the financial crisis of 2008 – we performed really well. I think it was a good idea to launch such ambitious targets because you must get people excited in order to lead them. In that sense, it was achievable for our industry as well.
In 2014, the combined value of textile and garments exports was around $30 billion, which represented nearly a quarter of total employment. It’s a very important industry in Turkey, hence it shouldn’t come as a surprise that it is expected to generate $60 billion out of that $500 billion export figure.
Unfortunately, we lost a few years because we underwent many structural reforms and the growth rate dropped from 5% to around 3%. The government had a really good four-year plan, which recommended the 2023 targets had to be revised; but at the same time it proposed to try to achieve the old targets and revise those numbers only if necessary. It is very important to set ambitious targets; if we don’t achieve $500 billion but we make it to $450 billion, then that is still considered a success at the end of the day.
I certainly believe we could succeed – as a country and as an industry – at meeting our targets easily, but unfortunately due to many reasons, we were not able to do our homework properly; we couldn’t make all the structural changes needed to reach the objectives.
In fact the related ministries took it very seriously, it was not just a dream or illusions. And they made it their job to help with business plans by utilizing private sector perspectives and management styles, which is not very often seen in public administration. They set action plans and priorities, assigned responsibilities and timelines, etc. It was really good. But again, we needed many structural reforms to support all that.
Turkey is heading for its second election of 2015, scheduled to take place shortly before the G20 Summit in November. What are the key steps you would like to see the new government take to help Turkey recover its momentum and move forward towards it ambitious 2023 goals?
The first thing we need at this moment is political stability, along with economic stability. The polls show that the election results will be similar, but nobody knows this for sure because there are still several weeks to go and things change every day. If we have similar results like the 7th of June, I hope that a Grand Coalition can be formed between the two big parties, which may give Turkey a chance to stabilize, and allow the political parties to understand each other and create a better and more peaceful atmosphere in the country.
To sum up, the first thing we hope for is political stability, because once we get that it should be relatively easy to achieve and maintain economic stability. Our currency has devalued very rapidly during this time of political uncertainty and I don’t think it reflects the real fundamentals underlying the Turkish lira.