Av. Magalhães Pinto 4000
Company Perspectives
The Brazilian Brand that is Conquering the World.
Companhia de Tecidos Norte de Minas - Coteminas is the parent company of a group that collectively forms Brazil's second largest manufacturer of textiles and ready-to-wear clothing. The company's 11 factories turn out such textile products as polyester threads and cotton-made fabrics, yarn, and knitwear, home products including towels and bed linens, and clothing including T-shirts, underwear, and bathrobes. Coteminas has merged with Springs Industries Inc. of Fort Mill, South Carolina, to form Springs Global S.A., a Brazil-based company, but both companies retain some independent operations.
José Alencar's Bootstrap Capitalism: 1945-92
Coteminas was founded by José Alencar Gomes da Silva, one of 15 children of a man who owned a small store. He went to work at the age of 14 as a clerk in a fabric shop. With his earnings he bought a food wagon that he operated in a hotel in Muriaé, the nearest city to his birthplace in the state of Minas Gerais, sleeping on a cot at the end of a corridor to save money. In 1949, at the age of 18, he borrowed money from his older brother Geraldo to open A Queimadeira, a fabric shop in Caratinga, Minas Gerais. Next, he manufactured and sold cheap cloths. After Geraldo died, he assumed control of A União dos Cometas, a textile wholesaler that Geraldo had founded with three friends. Gomes da Silva bought out these partners and, in 1965, founded Wembley S.A. (originally Wembley Roupas S.A.), a clothing firm that was to become the holding company for Coteminas (and that owned 24 percent of Coteminas's stock in 2005).
Gomes da Silva founded Coteminas in Montes Claros, Minas Gerais, in 1969, in partnership with Luiz de Paula Ferreira. The company's first mill, opened in 1976, was financed with funds from the state government. The same agency also financed the birth of other textile producers that would later become part of the Coteminas group, such as Coteminas do Nordeste S.A. (Cotene); Cotenor S.A. Indústria Têxtil; and Companhia Central Brasileira de Acabamentos Têxteis (Cebractex). Coteminas first made yarn and gray (unfinished) fabric. Although, in 1990, the Brazilian government liberalized its trade policies, allowing the entrance of cheap clothing and textiles from Far East firms, Coteminas remained competitive by modernizing its spinning, weaving, preparation, dyeing, and finishing operations, which enabled it to turn out consumer goods as well as yarn and gray fabric.
Adding Clothing to Textiles: 1992-97
Between 1985 and 1994, the net worth of Coteminas increased from $40 million to $492 million. The enterprise became a publicly owned company in 1992, when it collected $14 million for shares sold. Two years later, the company collected another $53 million from the sale of shares. In that year, 1994, Coteminas earned $46.6 million on sales of $164 million, and by mid-1995 the company's shares of stock had increased sevenfold in value since it first went public three years earlier. Coteminas also established a new woven-textile operation named Embratex from its own resources, building a plant in Campina Grande in the state of Paraíba.
Another new enterprise founded by Gomes da Silva in 1994 was Wentex Têxtil S.A., whose role was to manufacture T-shirts and sell them for as little as 75 cents each, cheaper even than the Chinese were charging on average. He took in $35 million from the sale of Wentex shares but kept total control of the voting capital. By this time, however, Gomes da Silva, usually referred to simply as José Alencar, was devoting himself chiefly to politics, having run unsuccessfully the previous year for governor of Minas Gerais. His 30-year-old son, Josué Christiano, was put in charge of Wentex, which, like Coteminas, was based in Montes Claros. Trained in Brazil as a civil engineer, Josué Christiano had next been an honor student at Vanderbilt University's graduate school of business.
Wentex had one advantage over the Chinese competition: the cost of energy in Brazil was less than half of that in China. Josué Christiano also kept costs down by purchasing the raw material, cotton, directly, without dealing through middlemen. Manufacturing expenses were reduced by totally mechanizing nine of the 14 steps to completion. Soon Wentex was turning out 62 million T-shirts a year, two a minute, or four times quicker than the national average. The cost of production to make this cotton-and-polyester-blend shirt was 11 cents cheaper than the average Chinese price.
Before the end of 1995 Josué Christiano obtained BRL 60 million (about $62 million) from investors for a new Wentex factory to be built in Campina Grande to produce more than 82 million T-shirts and 24,000 metric tons of knitwear per year. By late 1997 Josué Christiano was Brazil's leading T-shirt manufacturer, producing not only for Coteminas under the brand name Jamm but also for rival Companhia Hering under the latter's own brand name. During the year Cotene, Cotenor, Cebractex, Wentex, and Empresa Brasileira de Fiação e Tecidos S.A. (Embratex) were merged into Coteminas. Also that year, Coteminas acquired a number of brands, including Artex, Santista, Calfet, and Garcia, and formed a joint venture with Artex, principally to produce and distribute bed linen and terrycloth towels.
Up to this time Coteminas had been mainly producing private-label goods for big chains such as the Brazilian subsidiaries of Carrefour S.A. and Wal-Mart Stores Inc., but now it was beginning to market its own brands of socks, towels, handkerchiefs, and bed linens. Coteminas capped off an extremely busy 1997 by selling shares, both in Brazil and abroad. When the offering closed on December 3, the company had raised $96.6 million, of which some 35 percent came from international investors, including the pension funds of California teachers and General Motors Corp. workers.
To this point Coteminas's advantages were clear and well understood. All its factories and mills were located in regions that received government development aid. The factories in Paraíba benefited from the poverty of Brazil's northeast that permitted the enterprise to pay wages far below the average in the more prosperous south of the country. The cost of electricity in the northeast was also lower. Moreover, in partnership with other enterprises, Coteminas was constructing a thermoelectric power plant in Natal, Rio Grande do Norte, and a hydroelectric dam in Minas Gerais, to lower its costs even more. But the company's direction toward consumer products required a number of changes in its marketing and administration.
The Springs Connection: 2001-05
The devaluation of Brazil's unit of currency, the real, in early 1999 made Coteminas's products cheaper abroad and gave impetus to an effort to grow by exporting, although initially exports formed only a small part of its revenues. In 2001 Coteminas signed an agreement with Springs Industries Inc. of Fort Mill, South Carolina, to manufacture bedding and bath products for Springs. These products were to be marketed under the Springs name or as part of its private-label programs. Coteminas now had 11 plants in four states, including what it claimed to be the world's largest open-end yarn factory. The company was producing 88,000 metric tons of material a year, compared to only 8,000 in 1991. By taking Coteminas public instead of borrowing funds for expansion at high interest rates, the Gomes da Silva family had reduced its stake in the company to less than 50 percent, but it retained 70 percent ownership in terms of voting rights. Its debt-to-equity ratio was an enviably low 14 percent, with most of the debt linked to a long-term loan from the International Finance Corporation.
Now recognized throughout Brazil as a self-made rags-to-riches tycoon, José Alencar was elected vice-president of the nation in 2002, as the running mate of the new president, Luiz Inácio Lula da Silva. This had drawbacks as well as advantages. From Rio de Janeiro, Larry Rohter of the New York Times reported, "Mr. da Silva's running mate, Vice President-elect José Alencar, has acknowledged that his textile company, the country's second largest, is being investigated on charges of fraud in connection with cotton acquisitions at government-sponsored auctions. Mr. Alencar's son, who runs the company, has admitted manipulating cotton prices to qualify for government subsidies but denies that the action was illegal."
Coteminas bought out its partner, Artex, in the Toalia joint venture in 2001 and merged Toalia S.A. Indústria Têxtil into its own operations. In 2003 Coteminas's factories accounted for one-eighth of Brazil's consumption of natural fibers. The United States was its chief export market. Coteminas's bath-ensemble and bedsheet exports to the United States were being provided to Springs exclusively, but it was selling beach towels and bathrobes there directly. Its 2004 net sales of BRL 1.42 billion ($485.32 million, at the average currency rate for the year) was second to that of Vicunha Têxtil S.A. among Brazilian manufacturers of clothing and textiles, but Coteminas had the highest net profit, and the value of its real estate was also higher than its competitors. Of its output of 121,313 metric tons of material, threads, yarn, and woven fabric accounted for 53 percent; home products for 45 percent; and clothing (T-shirts, underwear, and socks) for the remaining 2 percent. Also in 2004, Coteminas acquired majority control of Companhia Tecidos Santanense, a textile company with $110 million in annual revenue, and opened a towel factory in La Banda, Santiago del Estero, Argentina.
Four of Coteminas's 11 factories were in Montes Claros. Two were in Natal and Campina Grande. The other three were in Macaba, Rio Grande do Norte; João Pessoa, Paraíba; and Blumenau, Santa Catarina. These plants were accounting for one-eighth of Brazil's consumption of cotton. Under the Artex brand, Coteminas was turning out bathrobes, bath towels, and bedspreads, both all-cotton and blends, bearing the Disney label and Disney figures. It was also producing cotton and cotton-polyester bedsheets and pillowcases and cotton tablecloths. Santista-brand goods were cotton and cotton-polyester bath towels, cotton and cotton-polyester sheets, pillowcases, and bedspreads, and cotton-polyester tablecloths. Cotton bath towels, cotton-polyester bedsheets and bedspreads, and cotton-polyester throw pillows were being produced and marketed under the Garcia label. Cotton bath towels and cotton-polyester bedsheets and pillowcases also bore the Calfat label.
Coteminas signed, in October 2005, a merger pact with Springs Industries to create what the two companies said would be the world's largest home-textiles producer. The new entity, Springs Global S.A., was to be based in Brazil, with Josué Christiano and his Springs counterpart serving as co-chief executive officers. Coteminas would receive a 50 percent stake in Springs Global, either directly or through a holding company of which it would be a wholly owned subsidiary. A portion of the business of both companies would remain outside the new entity, however, including Coteminas's denim- and twill-fabrics businesses. Coteminas would choose four of the eight members of the Springs Global board. Although Springs Industries had more than twice the number of plants as Coteminas, a wider range of products, and nearly four times the annual revenue, it was suffering from problems of productivity and was seeking to reduce its U.S. operations. Springs Industries had already moved most of its towel and bedding production to Coteminas.
Principal Subsidiaries
Companhia de Tecidos Norte de Minas - Coteminas (Argentina); Coteminas International Ltd.; Fiação Canada S.A.; Wentex International Ltd.
Principal Competitors
Grendene S.A.; Companhia Hering; São Paulo Alpargatas S.A.; Vicunha Têxtil S.A.
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