Penang is as famous for being the nation’s jeans centre as it is for its char kway teow; and Yen Global is believed to command about 10% of the Malaysian market share for jeans

Updated: Tuesday July 9, 2013 MYT 8:39:21 AM

Sky-high demand for denim

STORY AND PHOTOS BY GRACE CHEN

Dynamic team: (From left) Kok Beng, Yen Global group marketing director Goh Kok Peng and Yeoh. ]

It may not be common knowledge, but Penang is as famous for being the nation’s jeans centre as it is for its char kway teow,says Goh Kok Beng, group executive chairman of Yen Global Bhd. The company manufactures and distributes the Edwin, Mustang and GA Blue brands from the company’s factory headquarters in Bayan Lepas. The genesis of the island’s denim history can be traced back to the late 1960s when a large Hong Kong-based garment factory began manufacturing jeans under license for Levi’s. “They were not big, they were huge!” recalls Goh, who was still in school then. From Goh’s vivid recollections, they had close to 1,000 skilled workers earning a base salary of RM300 a month stationed in three areas – Rifle Range, Parit Buntar and Balik Pulau in the early 1970s. The production rate was believed to number 100,000 pairs a month.As a former student of Chung Ling High, Goh still remembers how he went nuts over Levi’s 501 jeans, then priced at the premium price of between RM160 and RM260.

The denim fever gradually spread when skilled workers from the factory started spreading out to seek better career prospects and sharing the skill of jeans making with other establishments.

Goh, also the co-founder of Body Glove Malaysia, readily admits to employing cutters, sewing girls and production floor managers who were former employees of the manufacturing giant.

True to the “Malaysia Boleh” spirit, Malaysian factories didn’t just stop at licensed manufacturing for US, German and Japanese brands. They came up with their own labels.

GA Blue, established in 1992 and owned by Yen Global, is an example.

Goh, who joined the public listed company in 2009, said the original founders had created the brand to cater to the working class.

“We were one of the first to come up with brand-name jeans in the price range of between RM49 to RM59. The timing coincided with the influx of foreign workers who loved to wear jeans, but did not find the existing labels affordable,” recalls Goh.

Back then, the company’s nearest competitors were selling jeans at RM99 each and the new price point naturally pushed the label to the forefront.

By the mid-1990s, GA Blue was recording annual revenue of RM50mil.

All this took place in a landscape where the local jeans market was seeing estimated revenue of RM500mil annually. It also coincided with the rise of the China’s manufacturers, which brough about a flood of Chinese jeans in stores.

“In terms of production, the Chinese factories were manufacturing close to one million pairs a month while we were only averaging about 20,000 to 30,000 pairs. What made the difference was we were the original makers of the brand and offered classic cuts while most of the imported versions were unlabelled and did not cater to current trends. This gave us an edge in the market,” Goh said.

Originality eventually pays off

Today, a pair of GA Blue is priced at RM99 and Yen Global is believed to command about 10% of the Malaysian market share for jeans.

“It is not easy to build your own brand. You need the backing of history and advertising. Just to give you an idea of how far we’ve come, our first advertisement featured an unknown model. Last year, we had Singaporean actor Aaron Aziz as our spokesman,” said Goh.

And how much did they pay Aaron Aziz?

It’s a rough yardstick that advertising budgets for any business should be about 5% of revenue.

Yen Global sells an estimated 600,000 pairs of jeans each year and reports annual revenue of RM60mil.

Some 400 outlets in the men’s departments of departmental stores carry their labels and some of the best sales are recorded in the rural areas of Sabah and Sarawak in towns like Lahad Datu, Bintulu and Sibu.

The towns’ close proximity to Indonesia is believed to be an influencing factor.

Another promising market is the east coast of Peninsular Malaysia, specifically Kota Baru and Kuantan.

In total, these areas contribute up to 30% of the company’s sales.

In the jeans business however, it is not wise to place all your eggs in one basket.

In addition to GA Blue, the company has also acquired other brands to increase its product portfolio.

Among their successful coups was the acquisition of Mustang jeans, a German brand dating back to 1932, from a competitor.

Rumour has it that the company had also wanted to acquire Lee Cooper as well, but then the principals were only interested in selling the global brand at a whopping price of £400mil (RM1.9bil).

There was also talk of opening a chain of Wrangler boutiques but this did not materialise due to conflicting philosophies between negotiating parties.

“In contrast, Mustang gave us a better deal. Their sales targets for us are set at reasonable levels and they will provide us with their latest finishes and designs and we get to choose those that suit the tastes of the local market,” said Yeoh Yeow Cheang, 56, executive director of Yen Global.

Letting go off Lee Cooper and Wrangler also gave the company room to focus on Edwin, a Japanese label acquired from Elba Holdings Bhd in 2006.

“Elba was undergoing a restructuring exercise then and they sold the brand to us at a reasonable price,” said Yeoh.

At that time, the brand was not doing well.

Up to 2004, Edwin sales easily hit the RM40mil mark, but by 2006, it had dropped to RM15mil.

“It is not enough to say that you want to have a jeans label. You must love it like a baby, and that was what we did. Today, we are able to offer Malaysian consumers a pair of Edwin jeans for only RM169. In comparison, the Japanese have to pay about RM600 for a similar pair,” said Yeoh.

So how great is the Malaysian demand for jeans?

At the Blue Valley Shoppe in Pertama Complex, Kuala Lumpur, no less than 10 jeans brands, including that of Yen Global’s home label BV, are being sold.

This Ramadhan, sales are expected to hit RM30,000 to RM40,000 a day, especially in the last two weeks of the fasting month.

According to store manager Jennifer Lai, 50, jeans have been an inherent part of her family business for some 30 years now.

The evidence of denim’s popularity is found in the Blue Valley Shoppe’s 20 branches nationwide, three of which are located in Pertama Complex.

“I won’t say that we are able to sell everything on our shelves, but the continuous supply from the factories in Penang is testament to the fact that jeans will remain an evergreen item in Malaysian wardrobes,” said Lai.

In 2007, the worldwide, the market for denim stood at at US$51.6bil (RM163.4bil).

Taking the biggest chunk of the pie is Asia, which produces some 50% of the world’s supply.

This year, the figures are expected to balloon, taking into consideration projected growth of 13% a year.