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Arafa of Egypt to Triple Luxury-Suit Production on China Demand, CEO Says

By Mahmoud Kassem and Alaa Shahine - 2010-08-05T09:07:12Z

Al Arafa Investments and Consulting, Egypt’s oldest publicly traded textile company, plans to triple production of high-end suits because it sees growing demand for such products as Chinese shoppers buy more luxury products.

“I was in Hong Kong last week and I found that Hong Kong opened 3,000 square meters of Louis Vuitton,” Alaa Arafa, 52, chairman and chief executive of Cairo-based Arafa said in an interview on Aug. 3. “In spite of the 3,000 square meter shop, the Chinese are in queues outside the door, still waiting. This is a very important signal.”

China overtook the U.S. as the second-biggest luxury market last year, after Japan, with sales of $9.4 billion, or 27.5 percent of the global share, according to the Chinese Academy of Social Sciences. Sales in China, the world’s most populous nation, will reach $14.6 billion by 2015, it said.

Al Arafa, which provides suits to stores such as Debenhams, Banana Republic, Zara and Massimo Dutti, is reorganizing to focus more on the luxury suit market. It plans to boost its production of high-end suits from 250 suits per day to 750 per day in three years, Arafa, who was trained as a doctor before taking over the family business, said.

Egypt’s proximity to Europe, and especially Italy, will allow Arafa to produce luxury suits at more competitive prices because of cheaper labour in the Arab world’s most populous country. An Italian entrepreneur has teamed up with Egypt to start a 60 hour ferry service between Alexandria and Venice, which will allow access to the Italian market, Arafa said.

“In our business, when you want to target luxury goods, you target Italy, because you distribute from Italy,” he said.

The company is planning to start a shirt factory next year with a capacity of 1 million shirts per year. It will contribute $50 million to the business annually when it reaches capacity of 3 million per year, Arafa said.

“It will add value because there are no marketing costs,” he said. “We are selling to the same existing clients. It’s very logical to sell fine cotton shirts from Egypt because of Egyptian cotton.”

To contact the reporter responsible for this story: Mahmoud Kassem at mkassem1@bloomberg.net Alaa Shahine in Cairo at asalha@bloomberg.net