Philippine factories focus on niches
By Thomas Russell -- Furniture Today, February 27, 2006
Cebu, Philippines — As China continues to grow as a furniture manufacturing powerhouse, companies like Locsin International are in somewhat of a fix.
The Manila, Philippines-based outfit isn't a big-volume producer like Chinese majors Lacquer Craft Mfg. or Shing Mark Enterprise. Nor does Locsin specialize in wood bedroom sets, a mainstay of China's furniture industry.
That puts it at a big disadvantage in price and in its ability to ship high-demand goods to the U.S. market.
But that doesn't worry General Manager Roberto Locsin much. In recent years, his business has grown 50%. How? The company has a distinctive product line that includes contemporary beds and seating made from woven abaca and rattan, and has such a wealth of natural resources and worker talent in its backyard that it's difficult for the Chinese to produce similar goods.
"I try not to compete head on with China," Locsin said. "You are just banging your head against the wall if you compete (directly) with China. They are a formidable competitor. The best way to compete is through design and the use of materials, presentation of the items and customization of orders."
Locsin, like many Philippine manufacturers, is a relatively small shop with about $4 million in annual sales (about 30% of which goes to the United States).
In 2004, the Philippine industry shipped $202.7 million in furniture to the United States, up 11% from 2003. Despite the gain, the volume looks tiny next to the $8.6 billion in furniture China exported to the United States in 2004. The Philippines also dropped out of the top 10 U.S. source countries to No. 11, replaced by Vietnam.
Today, Philippines-based manufacturers, many of which do OEM work for U.S. manufacturers and importers, are working to improve or at least maintain their standing.
That includes case goods manufacturer Nicey Export, which has a 34,000-square-foot plant in Cebu City that employs about 100 workers and produces 12 to 16 containers a month. Joey Enario, general manager, said Nicey will never compete head on with China but thinks it can thrive anyway.
"We can compete in terms of quality and design," Enario said. "That is what we are looking at."
Case goods manufacturer Casa Cebuana employs about 600 at an 800,000-square-foot factory just outside Cebu City, one of the larger plants in the area. Using woods such as Philippine mahogany and imported alder, it produces roughly 50 to 60 containers a month.
With a client list that has included Ethan Allen, Sligh and Marge Carson, the company sees its finishes and construction as key strengths. For that reason, it doesn't view China as a threat.
"U.S. business is strong, despite the competition from China," said company President and Chairperson Angela Figuer-oa-Paulin, noting that 60 to 70% of its sales are to the U.S. market. "Our business in the U.S. will grow. I feel very confident about that."
With clients such as Magnussen and Bernhardt, Peba Trading & Mfg. Corp. does about 80% of its business in the United States, said General Manager Ricardo Cagasan. He also believes his company can compete because of its strengths in design and use of indigenous materials.
But he is concerned about a recent exodus of Cebu-based designers to Chinese factories. In addition, he said, there has been a trend of late to export indigenous materials such as fossil stone to Chinese furniture producers.
"It's like supplying a competitor," said Cagasan.
Despite this trend, some Philippines companies are planning to expand.
Bruce Fossil Stone International, a producer of occasional furniture made from wood, stone and metal, was planning to add about 120,000 square feet to its Cebu plant, bringing it to 300,000 total, boosting capacity from 60 containers a month to 80. Company officials say this will facilitate its growth into outdoor furniture and improve efficiencies in other products, namely occasional, to help it offer more competitive prices.
Roland Masecampo, operations manager of case goods producer Five Star Export International, said he eventually hopes to expand the capacity of his Cebu City plant, which totals 40,000 square feet and employs 150 full-time.
"We are looking to grow as much as we can, depending on orders," he said.
Charles Streegan, president of Cebu-based case goods producer Pacific Traders & Mfg. Corp., is confident about his country's future in furniture making.
"Companies like Ethan Allen, Thomasville, Henredon and Century buy from all over the region," he said. "And the reason they continue to purchase from Cebu is that we are still able to offer them a certain value, quality level, and fill a certain niche in their line."
He also believes companies will need to continue investing in human resources, new equipment and technologies for their manufacturing plants.
"We can no longer be considered the design leader if we cannot manufacture and get the products to the marketplace in a timely manner," he said.
