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The
export-furniture industry is perhaps the best example of
the Filipino’s entrepreneurial spirit and creativity that
can battle it out with the best of the world.
The Cebu
export-furniture industry—which accounts for almost half
of the country’s total output—is a prime example. With
scarce natural resources and without a domestic market to
speak of, furniture makers in Cebu had to look outward and
use their creativity and business savvy to build a
worldwide brand that has landed inside the homes of the
world’s rich, including Hollywood celebrities and
blockbuster movie sets.
But with
an ever-strengthening peso, competition from powerhouse
China, high cost of raw materials and almost no support
from the government, the industry is facing one of its
most challenging years ever.
Yet
industry people in Cebu these days are still smiling, as
they prepared for their biggest showcase event over the
weekend.
“When
everybody sees adversity, I see opportunity,” said Eric
Casas, president of the Cebu Furniture Industry Foundation
(CFIF).
For three
days, the Waterfront Cebu City Hotel and Casino was the de
facto center of the city, as Cebu’s finest creations
hogged the spotlight during the Cebu International
Furniture and Furnishing Expo (CebuX) 2008.
 More
than a thousand buyers from the US, the Middle East and
Europe and the new buyers from Russia flew over to see the
breakthrough creations of Cebu and, hopefully, strike
deals with local manufacturers.
“Despite
all our problems, the market is still out there. It is
just a matter of finding that market and getting it,”
Casas, also president of Kirsten International Phils.
Inc., said.
Glory days
It is not
easy to be as optimistic as Casas. The furniture industry
is at its lowest in terms of output in almost two decades,
with the peso predicted to get even stronger and the
US—
Cebu’s biggest customer—headed for an economic slowdown.
In 2006
total furniture output of the Philippines reached only
$275 million, close to half of it coming from
Cebu. That figure is well below the numbers the industry posted
during its glory days, which peaked in 2001 when it hit
$665 million.
But with
the September 11 terrorist attacks in the US, it went
downhill for the exporters. By 2003 the output was cut by
almost half to just $316 million. It has been downhill
ever since.
“Two years
ago $1 million in sales would be P56 million for us. Now
it’s only P41 million. How will you look for the missing
P16 million? That’s a really big challenge,” said Laurie
Boquiren, the marketing director of Castilex Industrial
Corp.
Castilex
is one of the pioneers in the industry when it started
some 35 years ago, when there was almost no
Cebu furniture
industry to speak of.
Though
already a major shipping power,
Cebu was initially a stopover point for rattan coming from
Mindanao
and Visayas on their way somewhere.
Unlike
their counterparts from
Manila,
which mostly deal with the domestic market—condominium
developers, hotels, etc.—Cebu furniture makers also
couldn’t rely on the local market to buy their goods, and
so must look at foreign markets for revenues.
But trust
the enterprising Cebuano to find a way. First, they
hatched the idea to turn rattan into furniture to be sold
at a higher price. With a natural talent for creativity,
Cebuano designers bent, twisted and mixed rattan with
other materials like iron, wood, shells and even stones to
come up with their creations.
And the
world noticed.
The US
market, in particular, got acquainted with the “Cebu
look”—simple chairs but with shells and stones on it.
“Cebu
furniture always gets attention because it looks like
mixed-media art,” CFIF executive director Ruby
Babao-Salutan said.
“There
were years when we were really dominant in the world.
Products from other Asian countries may have the same
materials as ours, but they lag behind in creativity,” she
said.
Several
world furniture giants like Dedon and Maitland-Smith, in
fact, have chosen to set up their bases in
Cebu and employed thousands of craftsmen.
The
industry itself created a new generation of rich families
in Cebu and employs some 20,000 at present.
It is this
success, however, that prodded other Asian countries to
put up a challenge against the
Philippines
in the world market to get a share of the pie.
China
Boquiren
looks over her one-hectare facility in Mandaue City as
hundreds of wooden chairs are readied for finishing
touches and packing.
“In China,
they can make thousands of the same chair at a fraction of
our cost. We just can’t compete with that,” she said.
China
and Vietnam are the biggest challengers to Cebu’s
dominance in the world furniture market. The two country’s
hectares of mechanized manufacturing plants churn out
thousands of furniture pieces a day while actively
pirating the best designers of the
Philippines.
They have
almost the same raw materials as the Philippines, but
cheap labor and financial subsidies from the
government have allowed Chinese manufacturers to invest in
equipment and pull down their costs very low.
“We
realized it’s is just impossible to compete with them,”
Boquiren said. “We just can’t pull down our price to the
floor or invest in equipment.”
Making
matters worse, the US, Cebu’s biggest client, went through
its housing-mortgage crisis in 2007 and is expected to
slow down in 2008.
The peso
is also expected to further strengthen, adding additional
woes on exporters who are already reeling from huge costs
in raw materials and labor.
In the
last two years more than 40 companies, or about 35 percent
of the total membership of CFIF, have folded, and some
5,000 people lost their jobs.
Cebu
exporters, in general, are bracing for a tough year in
2008.
“They say
when the
US
gets a cough, everybody else gets the flu. We are
expecting a tougher year, and so we are bracing for it,”
Philippine Export Confederation Cebu (Philexport)
president Jay Yuvallos said.
Hopeful
But the
industry, in general, is still hopeful. Instead of looking
to the West, it is now eyeing markets in the
Middle East, Europe and
Russia.
They are
also planning to bring in the battle to China’s own front
yard.
“There is
a growing number of new rich people in China who want to
get everything that would set them apart. Our furniture
can provide them with that exclusivity,” Casas said.
“Instead
of battling
China
head-on, we concentrated on our strengths, particularly
our design, which is something they do not have.”
Cebu is
also strengthening its hold on the high-end market,
banking on the creativity of its creations to outpace
competition and copycats from other countries.
“Their
machines can’t create our designs, so we are one step
ahead of them,” Casas said.
Cebu
exporters are also working hard to hold on to old clients,
especially from the large US retail stores.
“You have
to earn their trust and keep it,” Boquiren said. “These
days we just don’t show them our catalogue and hope that
they will buy. If they give us an idea of what they want,
our design staff immediately jumps into it and tries to
create something.”
In the
CebuX, the Russians, first-ever entrants to the expo, were
the biggest stars, with an expected 150 buyers coming over
to see Cebu’s creations.
Europeans
came in second, followed by those from the Middle East and
Asian buyers—far outnumbering clients from the
US.
In her
speech at the opening of the expo, Cebu Gov. Gwendolyn
Garcia called for resilience as she urged the exporters to
remain steadfast.
“It is
this invincibility of hope that has kept us going,” she
said.
There are
still challenges ahead: the Russian market is far in terms
of delivery logistics, while capturing the European taste
is something new for Cebuano designers.
But, at
the end of the day, industry players believe the Cebuanos
will emerge triumphant in adversity.
“Many
companies have weathered many storms in the past. This is
just one of them. It will be tough, but the Filipino is
used to challenges. We’ll get through this,” Boquiren
said.
“Companies
would surely need to tighten their belts. It’s survival of
the fittest out there,” Casas pointed.
“There is
business. It’s not just ‘as usual’ for us,” he added. |
