Hugo Boss highlights “competitive advantage” of European sourcing

By

Olivier Guyot

Translated by
Nicola Mira

Published
Mar 14, 2022

Hugo Boss is keen to be transparent about its manufacturing organisation. The German group has provided a detailed picture of its current activities and future plans for the production of clothes, footwear and accessories, sharing information both in order to highlight its strengths vis-a-vis the competition, and to enhance the image consumers have of the brand.

On March 10, during the presentation of Hugo Boss’s annual results, the senior management emphasised the role played by the group’s sourcing and manufacturing operations - notably by cutting the products’ time-to-market - within the group’s ‘Claim 5’ plan, designed to enable Hugo Boss to reach a revenue of €4 billion by 2025, after topping the €3.1 billion mark in 2022, having reached €2.786 billion in 2021.

Sourcing is at the heart of the fashion industry’s concerns, between production plant closures, rising raw material prices, increased international shipping costs and the pressure consumers are putting on labels to be transparent about the sustainability of apparel production. Concerns that are shared by a group undergoing in-depth changes, as is Hugo Boss.

In recent months, the group’s ethical record has been closely scrutinised. Last September, Hugo Boss was rebuked by some NGOs for being among the German firms said to be collaborating with Chinese companies that rely on the forced labour of members of the Uighur minority in the Xinjiang region in western China. In early 2022, Hugo Boss took pains to detail the checks and audits its carries out to comply with its corporate code of conduct, though US media outlet BuzzFeedNews indicated that the Esquel group, which produces clothes in China with cotton sourced from the Xinjiang region, was one of the suppliers listed by Hugo Boss. According to BuzzFeedNews, Hugo Boss has since cut ties with Esquel.

It was hardly surprising that, on March 10, the issue of China sourcing and the use of Xinjiang cotton was on the agenda. Yves Müller, Hugo Boss’s group CFO, underlined that the group does not use cotton from the Xinjiang region, and has joined the Better Cotton Initiative.

The presentation by CEO Daniel Grieder featured the same emphasis on social and environmental responsibility. He stated that the group ranked second among textile and apparel companies in the Dow Jones Sustainability Index. He also underlined that Hugo Boss wants 60% of its designs to be “sustainable” by 2025, and 80% of its products to be circular by 2030. “We’re convinced that polyester must be replaced. Items made with oil-derived fabrics currently account for over 60% of clothes. We must put an end to this,” said Grieder, who also mentioned the group's recent investment in HeiQ Aeoniq, a Swiss company developing alternatives to polyester.

Hugo Boss currently generates 67% of its sales in Europe, and indicated that 49% of its products are made in Europe and its neighbouring regions. This is an asset environment-wise, in terms of CO2 emissions for product shipping. And more besides.

“Significant rises in production and transportation costs can have an impact but, since our output volumes are increasing, we can leverage their scale,” said Müller. “We have a competitive advantage thanks to our Europe-based production. China is one of our five main consumer markets, and this is why we have tweaked our sourcing share [in the country] to approximately 17%. We are genuinely less exposed than our competitors. Notably because half of our products are made in Turkey, Eastern Europe, Portugal and the Maghreb region.” Asia still accounts for a 49% share of the group's sourcing volumes, but Vietnam, with a 16% share, is becoming more of a factor.

Hugo Boss seems keen to rely increasingly on a strategy of sourcing products close to where they are consumed, although it still needs to ship some of the Asia-produced collections by air in order to meet delivery deadlines. Turkey is currently the group’s premier manufacturing country, with a 24% share of the total.

€10 million investment on factory in Izmir, Turkey

Hugo Boss also indicated that 17% of its collections are manufactured in the group’s own factories, the vast majority of the products coming from the facility in Izmir, Turkey. “The group has especially benefited from its well-balanced global sourcing, from the flexibility of its own production sites, its strategic long-term partnerships with suppliers and the successful integration of new business partners, in the context of a generalised economic recovery and of the strong revenue growth recorded in 2021,” stated Hugo Boss in its annual report. The group indicated it wants to cut its products’ time-to-market by 30% by 2025, and said it is investing in digitalising operations in order to increase flexibility in production and logistics.

With this in mind, the group has announced it will invest €10 million in the Izmir factory, and hire about 1,000 workers in the next few years. Boss is heading in a new direction, keen to add more casual items to its well-established formal wardrobe, and a clear sign of this is the fact that, last year, the Izmir factory, once specialised in suits, jackets, shirts and overcoats, began to produce trousers and casual clothes. The new investment is expected to enable the factory to introduce new jersey production lines.

Hugo Boss has a factory also in its German stronghold of Metzingen, where it manufactures high-end tailored items, as well as a German-made line for the Asian market. Boss Made to Measure shirts are made in Coldrerio, Switzerland, while shoes and sneakers are made at the factories in Radom, Poland, and Morrovalle, Italy. Hugo Boss intends to further boost its own manufacturing capabilities. The group owns a fabrics research centre in Portugal and is about to “test finishing operations for jeans and other denim items in a city factory in Los Angeles, California.” A way to draw closer to the booming US market.