Sock-ccessful

Despite being the exclusive socks supplier to the 2008 Beijing Olympics Games, Zhejiang Mengna Knitting Co is still not as famous in China as its rival Langsha. So the nation's leading hosiery manufacturer is adjusting its strategy to build its branding.

Like most businessmen in Yiwu in central Zhejiang province who started their business form scratch, Mengna's founder Zong Guyin had hard days, such as the times he hid underneath train seats because he couldn't even afford the lowest price of a hard seat ticket.

Earlier, in 1978, Zong who was only 12 at the time, was one of many local urchins bartering brown sugar for other cheap goods and banging a small drum to attract attention.

After he graduated from a local middle school four years later, he started to sell socks on the wholesale market and earned his first substantial amount of yuan.

In 1994, he invested 550,000 yuan to set up a small workshop to make socks on his own because his previous suppliers wanted to raise the price.

A year later, Zong put up 100 million yuan to build a 13,000 sq m factory with 78 imported knitting machines and 132 employees.

Now Mengna's sales volume has reached 1 billion yuan and it has more than 12,000 employees working in 300,000 sq m.

But Zong would rather talk less about his success and beginnings than his new goal to be a publicly traded company and Mengna's Olympics' connection.

Zong says he expects Mengna to be listed on the Shenzhen Stock Exchange by the end of this year, but declined to provide further details.

He did add that the stock market is a logical step for Mengna's goal to be ranked among the top hosiery manufacturers in the world.

And he wants the Mengna name to be bigger.

Mengna's strategy was focused on exports. Its annual hosiery production capacity is 6 million pairs, among which about 60 percent are exported to countries including North and South America, Germany, Italy, Denmark, Spain and Russia.

Even facing trade barriers, Mengna has occupied the overseas market firmly and is the largest hosiery supplier for the American market.

To avoid trade barriers, Mengna established a factory in Hong Kong.

As OEM for foreign hosiery companies, Mengna's products are sold at $5 per dozen while the foreign hosiery companies sell them for $6 per pair. The huge gap reminded Zong of the importance of a brand.

"The quality of our products have improved and reached international standards," says Zong. "The important thing is what we can learn from the cooperation. We not only make money, but also learn from experience and different approaches."

In 2006, Mengna beat rival Langsha Knitting Co to become the sole socks supplier for the 2008 Summer Olympic Games.

Although Langsha is better known in China, thanks to its OEM background Mengna had several international certificates that sparked the International Olympic Committee's interest.

Mengna also paid $5 million for the privilege and with other promotional costs the overall total will be more than 100 million yuan.

Some people questioning whether it is worth doing because Mengna doesn't appear to have seen much, if any, rewards yet.

Zong didn't agree. "I feel very proud because I brought a new situation to the hosiery industry. This is the first time in history that a socks supplier is listed on the Olympics supplier list, " he says.

"And of course, it has raised our recognition. The direct benefit from being an Olympics supplier is that Mengna can get easy access to bank credit. As we know, this year is difficult for small- and medium-sized enterprises due to the tight monetary policy. Since Mengna won a reputation from the Olympics, most banks in Yiwu now give us priority which has eased the problem of fund-raising," he adds.

The benefits are not limited at that. Mengna is using the Olympics to change its marketing strategy.

Yiwu is well known as a city famed for its hosiery. Of every 10 socks on the world market, four come from Yiwu.

And Mengna is switching its export strategy to target domestic supermarkets and franchise stores. Zong's assistant Ding Wei says Mengna is now entering Chinese supermarkets with its Olympics supplier logo socks.

Ding says the company hopes the supermarket and franchise store distribution campaign will strengthen Mengna's domestic brand building.

(China Daily 06/23/2008 page7)