Somarest, the company Louis Vuitton uses for its manufacturing operations in Romania hired more than 200 people for a total of 800.
“Somarest has been hiring lately, looking for people in the area. It was an important move for us, considering they were among the few that hired during the crisis,” says Marinela Oprenea, a director with the Avrig town hall. The plants in Avrig and in Cisnadie are registered to Somarest, so their employee number and revenue are consolidated into one entity.
The Romanian employees make bag parts (inner pockets, straps etc) in the two plants.
Somarest was established in Sibiu in 2001, at a time when Romania was not even on the radar for Louis Vuitton stores or for other luxury giants. The local market was regarded at the time – as it is now, as a manufacturing market with cheap skilled labor.
Textile industry employees in Romania are usually paid less than 1,000 lei (EUR226) per month, most often minimum wage, especially if they work somewhere other than Bucharest.
Such plants are among the biggest employers because there is little choice of employment in the parts of the country they operate in. Romania’s competitive edge is not just the low manufacturing cost but the decades of experience in the textile business and its proximity to Western markets.
Many luxury companies, such as Dolce&Gabbana and Burberry, chose Romania to make their products, but preferred to resort to toll manufacturing. Louis Vuitton owner instead chose to invest in its own production facility, which grew to almost RON88 million revenue last year, 9% higher than in 2011, and a profit margin of 10%.
LVMH, the sole shareholder of Somarest’s plants is the owner of Louis Vuitton and of other luxury brands like Moet et Chandon, Dom Perignon (beverages), Dior, Fendi (fashion) and Tag Heuer (watches). It owns cosmetics and perfumery chain Sephora and luxury stores Louis Vuitton in Romania.
As with manufacturing, Louis Vuitton was the first to put Romania on its map and opened a store on its own instead of going through franchisees like rivals Gucci, Burberry and Valentino.
Louis Vuitton opened its 130 square meter store on the ground floor of the five-star JW Marriott Hotel in 2008, the last year of economic boom. Despite the crisis, the company’s revenue has stayed at RON19 million to RON20 million and profit margins of 15% to 17%.
The local luxury market has recently begun to feel the crisis, three years later than the mass market fashion. High income customers, though less affected by the difficult economy are buying fewer products and prefer to wait and buy them at a discount, which is making an impact on sales and especially on the profits of luxury companies. (EUR1=RON4.425)
(English version by Loredana Fratila-Cristescu)