Aurora Hats and Crafts

Who would think a small enterprise with a handful of weavers and a capital of PhP 6,000 could become a multi-million peso business in the export market in just ten years? Well, this is the success story of Aurora Hats and Crafts (AHC). It started with a production capacity of 400 hats per month as a supplier to a Manila-based exporter and now it produces an average of 10,000 hats per month.

The company owner and manager, Ms. Annaliza C. Tangson along with her brother Rosauro C. Tangson, started the idea of going into business when they attended the Business Management Course for Small and Medium Enterprises sponsored by the Department of Trade and Industry (DTI) Aurora Provincial Office in February 1991. Ms. Tangson at that time had just resigned her job in a bank in Manila.

Meanwhile in the same year, the DTI-Aurora, with the Department of Science and Technology (DOST) and the Product Development and Design Center of the Philippines (PDDCP), was doing a series of skills training on sabutan (a palm scientifically known as Pandanus sabutanus) fiber dyeing and color matching. Initial market tests showed promising results as the hats were attractive in colors, design and craftsmanship. The concern at that time though was that the participants consisted of out-of-school youths and housewives who do not have the financial resources and lack the business management know-how to make it on their own. Through an Investment Forum where sabutan processing was promoted as one of the investment areas, Ms. Tangson was identified as a potential investor. Subsequently, she was matched with the local weavers group and an initial dialogue was made on the possibility of establishing an enterprise with the weavers as workers. Only a few weavers then were willing to go along with the idea.

Aurora Hats and Crafts was registered in June 1991 as a single proprietorship. Ms. Tangson started marketing by personally bringing product samples to Manila-based department stores and hat exporters. She found out that department stores were interested and willing to buy hats but on a consignment basis. This market segment also wanted to place small orders only. The exporters, on the other hand, were willing to give her sample purchase orders but with 30-45 days payment terms. In the end, she opted for the latter, trusting that she has better chances with the exporters. (This is based on her observation that Filipinos do not generally wear hats except when on outings and picnics or when working on farms compared with other countries’ consumers where hat is a regular part of their wardrobe.)

Her instincts proved correct. The samples she submitted to an exporter were accepted by the latter’s foreign buyer. In less than two months, she received an initial order for 5,000 hats that she consequently produced and delivered. Within the year, several orders followed from the same buyer who subsequently referred Ms. Tangson to other buyers. As AHC generated more buyers, Ms. Tangson slowly hired more weavers, most of them previous participants in the skills training programs conducted by the DTI.

In 1995, then President Fidel Ramos launched the National Economic Enterprise Development Program under the Presidential Commission on Countryside Development (PCCD), with the view to helping uplift the economic conditions of the 20 poorest provinces of the country through enterprise development. Aurora province was one of these provinces.

The NEED Program provided a package of assistance, including product development and marketing and management courses like Visual Merchandising, Negotiating with Buyers, Pricing for Export, to small and medium enterprises like AHC. These courses were complemented with a Local Study Mission to Bacolod City where the entrepreneurs from the poor provinces were exposed to the operations of more successful entrepreneur-members of the Association of Negros Producers (ANP). The DTI assistance to these small and medium industries culminated in a Trade Fair in October 1995 at the Megamall in Mandaluyong City, which subsequently became an annual event in the period 1995-1997. It was in this trade fair that AHC attracted the attention of local and foreign buyers who encouraged the company to develop more hat designs and to participate in the April 1996 Center for International Trade Exposition and Mission (CITEM) Fair. AHC attended two more annual trade fairs (1996 and 1997) and six international trade fairs (April and October 1996-1998) dubbed CITEM’s Fashion Accessories Market Exposition (F.A.M.E.). Through these fairs, AHC met buyers and established local and international market contacts. Foreign buyers included agents and representatives from firms based in the U.S., Europe (Italy, Germany, France, Spain, Belgium), Asia (Japan, Taiwan, Guam, Saudi Arabia).

Participation in trade fairs was such a big success for the AHC that production became a problem when orders started to stream in. The number of weavers expanded to 300, producing an average of 10,000 hats a month. A bottleneck in the finishing stages of production proved to be the biggest challenge. To solve this, the company resorted to renting a blocking machine in Manila to form various shapes of hat as part of the finishing steps in hat production. The blocking machine, owned by a hat exporter, scheduled the job order from AHC. But then the volume of order became so huge the AHC requirements could no longer be accommodated. This led AHC to decide on getting its own equipment for production. With the blocking machine, finishing costs were also reduced considerably.

The need to put up its own blocking machine became more imperative after the successful first participation of AHC in CITEM’s F.A.M.E in April 1996. So convinced that the success of other entrepreneurs in the province is anchored on the success of AHC that DTI further increased its support to the company. There were hundreds of weavers, sabutan gatherers and processors in Aurora province who could access the market only by becoming suppliers for AHC.

Through DTI, AHC sought the assistance of the DTI in acquiring its own blocking machine. DTI coordinated with the Department of Science and Technology (DOST) for possible financing of the blocking machine. The DTI, in close coordination with AHC, then submitted to the DOST-IV a feasibility study for sabutan hat manufacturing. The DOST-IV approved the application for financing of the acquisition of the blocking machine. This was put in operation in May 1997.

All these government interventions enabled the AHC to strengthen its position in the hat weaving industry, resulting in improved export sales performance. The setting up of a Manila office boosted export orders, necessitating additional weavers, thus bringing the number of workers from 300 to 400.

AHC was not spared by the economic crisis that hit in the latter part of the 90s. For exporters like Aurora Hats and Crafts, the immediate result of the 1997 currency crisis was windfall profits. This was further complemented by the fact that the company uses 100% local materials almost all of which are resource-based and non-VAT. Thus, it did not have a problem sourcing or paying for imported raw materials. The long-term effect though was depressed foreign market since the countries where its foreign buyers are based were also affected. Orders for sabutan hats from foreign buyers declined and dwindled continuously.

The present local economic and political environment would have dampened the spirit of somebody weak and timid. But not Ms. Tangson. Amidst the regional and worldwide economic crisis, she stood tall and strong above the rest, leaning on her true entrepreneurial spirit.

Ms. Tangson is still optimistic that the current crisis will pass. At present, AHC supplies some local buyers and works with exporters in developing new products and new markets.

With the diminished demand for hats and 400 weavers relying on the company for livelihood, the company diversified into weaving mats. While the demand for hats in the export market is yet to rebound when the global condition improves, AHC is busy developing its new product line. Mats of different colors and designs now keeps AHC and its workers very much occupied.

With the dynamic leadership of Ms. Tangson, the resiliency of the company and the commitment of its workers, there is no doubt that the AHC will regain its place in the export market, not only for hats but for its mats and other product lines coming out from its research and development stage.

There is a saying that when the going gets tougher, the tough ones get going. And that best characterizes Ms. Tangson and the company she steers through the tough economic times today!