It is not well-known that Sri Lankan apparel firms are among the largest suppliers globally. The top three Sri Lankan suppliers—MAS, Brandix, and Hirdaramani—exceeded 1 billion USD in revenue in 2022, which surpassed some of the biggest transnational first tier supplier firms from Hong Kong, China, Taiwan, South Korea, and India and put them not far behind the global leaders. The largest firm globally by revenue in 2022 was Shenzhou from China with 3.88 billion USD, with Youngone (South Korea) at 2.92 billion and Crystal (Hong Kong, China) at 2.49 billion, according to Capital IQ database.
There is little research on these Sri Lankan global apparel firms, including their growth trajectories and globalization stories in the context of recurring political and economic crises in Sri Lanka that have stymied the country’s overall economic development.
The rise of the apparel export industry in Sri Lanka is unique because of the extent to which buyers played an important role, including joint ventures with local firms. The emergence of apparel exports in Mauritius, another island country in the Indian Ocean that was an unlikely candidate to be a major apparel supplier, followed a somewhat similar trajectory to Sri Lanka in the early development of its industry. In Mauritius, though, it was Hong Kong manufacturers that played the pivotal role of bringing buyers and entering joint ventures with local investors. In Sri Lanka, it was a particular group of apparel buyers—the newly emerging branded marketers and specialty retailers—that linked Sri Lankan local firms to the global supply chain in apparel through joint ventures in production as well as shaping product composition towards higher value products.
But why did branded marketers and specialty retailers play this pivotal role in Sri Lanka and engage in joint ventures and strategic partnerships? This is an important question, as these strategic partnerships set Sri Lanka apparel firms—and the broader apparel export industry in Sri Lanka—on a growth path that withstood the shocks from the end of Multi-Fiber Agreement (MFA) governing global trade in textile and apparels in 2005 and thus immense global competition under free trade.
In this blog post, we explain the drivers behind buyer involvement in Sri Lanka, and the personal transnational networks that they fostered. The role of quota under the MFA, combined with these transnational networks and firm-level initiatives, explain how a few Sri Lankan firms grew and entered the level of top suppliers globally. It also explains why these global Sri Lankan apparel firms also retain so many factories in Sri Lanka, as shown in Table 1. This post is based on interviews with top managers and executives at MAS, Brandix and Hirdaramani carried out in Colombo in June 2023 as well as online during 2023 and 2024.
Table 1. Sri Lankan Top Global Suppliers in 2022
Firm | Revenue (2022), million USD | Key buyers | Products | No. factories in Sri Lanka | Locations with subsidiary factories |
MAS
| 2.020 | VS, Nike, Lululemon | Intimates (ca. 40%); sportswear & athleisure (ca 50%) | 35 | Bangladesh, Vietnam, Indonesia, Jordan, Dominican Republic, Haiti, Kenya |
Brandix | 1.700
| VS, PVH, GAP, Amazon, Uniqlo, Lululemon | Activewear (new), intimates, sleepwear, casualwear | 21
| Bangladesh, India, Haiti, Cambodia |
Hirdaramani
| 1.300 | Patagonia, Lacoste, M&S, San Mar, PVH | Basic knits, denim, and intimates | 12 | Bangladesh, Vietnam, Ethiopia |
Note: Revenue statistics come from interviews conducted in Colombo, Sri Lanka in June 2023.
The role of quota and specific types of buyers in high growth segments
LBrands entered joint ventures with local firms, as emphasized in the literature, but so did LT Apparel, another US manufacturer, and the UK retailer Marks & Spencer encouraged its UK suppliers to move their production to Sri Lanka, and many of them established joint venture factories with the same local firms. The high prevalence of buyers and suppliers entering joint ventures with Sri Lankan local firms is explained by the specific way that the Sri Lankan government allocated its quota. LBrands had high growth brands in its portfolio in the 1990s, including Victoria’s Secret, The Limited, Express, and Abercrombie and Fitch. The combination of LBrands and M&S suppliers’ investments in Sri Lanka led to establishment of vertically integrated production in Sri Lanka for lingerie, which no other supplier countries had, leading to strategic partnerships with buyers sourcing lingerie, especially Victoria’s Secret. According to the Capital IQ Data base, LBrands was a 6.149 billion USD company in 1991, which was very big for the time, and its revenue grew to 9.080 billion by 2000.
LBrands started as The Limited Stores, a large women’s wear retailer in the US, and then began acquiring brands. LBrands acquired MAST Industries in the 1978 to be its sourcing arm. US retailers sought to source directly from East Asia, cutting out middlemen, but needed to develop or buy-in sourcing capabilities. MAST Industries had extensive experience in sourcing from East Asia. Martin Trust sourced sweaters from Hong Kong for a US firm and then set up his own business MAST Industries in 1970 with sourcing offices in Hong Kong, Taipei, and Seoul, as well as a joint venture with a Hong Kong knitting company with factories in Mauritius and China. MAST Industries was a key pioneer of apparel global supply chains in the 1970s and 1980s, working together with Limited Stories, which was one of the first US firms to adopt the strategy of creating mega-brands and focusing on the in-store shopping experience of consumers. MAST Industries played a significant role in the emergence and growth of the two largest Sri Lankan transnational apparel suppliers MAS and Brandix, but its role cannot be separated from its owner, who made the decisions in relations to sourcing and joint venture investments.
The main reason that MAST Industries, and other foreign buyers and suppliers, entered joint ventures with local firms in Sri Lanka was that these local firms held the quota, which could not be bought and sold. The Sri Lankan government allocated its quota to apparel export firms based on the previous year’s performance, and the additional 5 percent provided by the MFA scheme was allocated to firms with confirmed orders or orders for new products with a higher price. In contrast, the Hong Kong government gave out 50 percent of the quota to existing firms based on past performance and auctioned the other 50 percent to generate revenue. Hong Kong suppliers could also buy and sell quota, creating an important source of revenue for those holding quota.
Therefore, apparel brands and retailers had to work closely with existing local firms to secure quota, and this was typically done through joint investments. The result was the 'one buyer-one factory' model that persisted in Sri Lanka until the end of MFA.
Strategic partnerships with buyers and transnational relationships
Martin Trust went to Sri Lanka in the mid-1980s in search of a new location with unused quota, as the Sri Lankan government only liberalized the economy and trade in the late 1970s. At that time, the few local firms producing apparel for export were family-owned firms with twenty to thirty sewing machines, and they did not operate at international standards. The Hirdaramani family had established Ceylon Knit, the only apparel firm to survive economic liberalization in 1977 and then Hirdaramani Garments in 1978, which produced woven apparel for UK high street brands. Mahesh Amalean and his brothers established a small factory called Sigma Industries in 1984. Ashroff Omar started a factory manufacturing shirts, and Ajith Dias owned an apparel firm producing knitwear and exporting to some extent. Martin Trust entered many joint ventures with these local investors, totalling 26 by the end of the 1990s.
The first joint venture between MAST Industries and Sigma Industries was Unichella, established in 1986 to manufacture women’s dresses for The Limited. The Amalean brothers started MAS in 1987 as an umbrella company. When dresses came under quota, Martin Trust convinced the Amalean brothers to move into manufacturing bras, which did not have quota restrictions, and brought orders from Victoria’s Secret. At that time, Victoria’s Secret was being produced in China and Vietnam by factories owned by Triumph, which was a European brand manufacturer that also manufactured for other brands. There was no experience in Sri Lanka with manufacturing bras, so Martin Trust brokered a joint venture called Bodyline between MAS, MAST Industries and Triumph in 1993, where Triumph brought the machines and expertise. MAS also entered a joint venture called Slimline in 1993 with Courtaulds, a UK supplier of M&S, and set up two factories producing women’s and men’s underwear for M&S.
MAS entered a series of joint ventures in the 1990s brokered by Martin Trust to create a local supply chain in the main components for bras, in which MAS owned a minority share: Stretchline to produce elastics; Noyon to produce lace; Prym for customized lingerie accessories, and Silueta for foam moulding. Stretchline was first and its success not only encouraged other component firms to invest in Sri Lanka, but it became a global business, opening subsidiaries in Mexico after NAFTA was signed, Indonesia in the early 2000s, and then China and Honduras. In terms of fabric, MAS and the Omar Group (which later became Brandix) established the joint venture Textured Jersey with a UK textile firm supplying M&S to produce cotton knit fabric. Martin Trust convinced a Hong Kong textile firm Fountain Set to establish a textile mill called Ocean Lanka, in partnership with the Omar and Hirdaramani Groups, which produced synthetic stretch fabric. MAS also entered a joint venture called Trischell with European firms to produce synthetic stretch fabric for intimates. This local supply chain became a distinct advantage for MAS as well as for other firms producing intimates in Sri Lanka.
The Omar Group also entered several joint ventures with MAST Industries, the first of which was LM Apparel in the mid-1980s. The Omar Group’s apparel business grew not only through joint ventures with MAST Industries but also by acquiring factories. The Sri Lankan government had launched the 200 Garment Factory Plan in 1992, which gave tax incentives, access to credit and priority in quota allocation, to entice apparel factory investment in rural areas to stem labor migration to the export processing zones. However, many of the local investors that started factories under this program did not have buyers and struggled. The Omar Group acquired several of them and was able to find buyers through their collaboration with Martin Trust. It also set up ancillary facilities to meet the needs of its buyers such as a dyeing plant for Express and an advanced washing plant for Abercrombie & Fitch.
The Hirdaramani Group entered a joint venture in the 1980s with a M&S supplier to produce ladies’ woven products for M&S, but its main joint venture partner was LT Apparel from the US, a brand manufacturer that supplied big US retailers. LT Apparel and Hirdaramani established the joint venture company Comtex in Sri Lanka, and then opened Comtex factories in Bangladesh in 1984, where LT Apparel was already operating, and in Vietnam in 1992, in anticipation of a free trade agreement between the US and Vietnam. Although that agreement did not materialize until 2001, Comtex was one of the first apparel firms to export out of Vietnam. Thus, Hirdaramani was positioned strategically in Bangladesh and Vietnam, two of the highest growth supplier countries in the post-MFA period.
The foreign partners of Sri Lankan firms were important in providing expertise on improving production processes, contacts to buyers and orders, and building the reputation of Sri Lankan apparel firms which encouraged other buyers to place orders with them, all of which reduced the uncertainty of local factory owners when making big new investments. The Sri Lankan apparel industry outgrew its quota allocations by the late 1990s, leading the big Sri Lankan firms to invest in factories elsewhere. They were encouraged to do so by their buyers, to access quota and preferential market access to the US and Europe because of new trade agreements.
The end of MFA led to several changes. Many foreign partners in the joint ventures began leaving in 2002, and MAST Industries ceased to play a large role as its business strategy changed after the elimination of quota. Sri Lankan firms had to adjust their business strategies to the new reality that buyers were not coming to them with orders anymore, but rather they had to make efforts to attract buyers. LBrands was no longer a high growth buyer. Its revenue stagnated in the 2000s and 2010s, and it had no new brands and little product growth, offering few opportunities for Sri Lankan firms to provide innovative solutions. Thus, the Sri Lankan supplier firms had to create new strategic partnerships.
Divergence among Sri Lankan suppliers in the post-MFA period
With the end of the quota scheme, increased competition among suppliers led to the emergence of a global price for individual apparel categories at a much lower level. There is a standard allowed minute (SAM) price that buyers demand, which sounds technical but is derived from the most efficient factories globally. As a result of open costing, buyers know the production costs of their suppliers and set prices based on production costs of their suppliers, forcing all suppliers to achieve similar levels of productivity to remain profitable but at the same time capturing most of the productivity gains over time. Furthermore, global presence became a requirement of buyers, so that they can have different lead times and take advantage of different trade agreements. In this context, most transnational suppliers grow through increased orders but are not able to increase the profit margin on products, which hovers around 3-5 percent. However, some global apparel suppliers have been able to grow substantially, including MAS, by partnering with the top activewear buyers.
Figure 1 shows the annual revenue growth of top activewear buyers including Puma, Nike, Adidas, Under Armour and Lululemon, compared to the lingerie/denim category buyers including Levi’s, GAP, and LBrands/Victoria’s Secret.
Figure 1: Revenue growth of top activewear buyers (% year on year change), 1993-2019
Source: Capital IQ (2023).
Capabilities in seamless knit fabric production catapulted MAS into activewear in 2005 when Nike was looking to innovate in fabric and thus for manufacturers for with such capabilities to offer. The partnership with Nike had a significant change on the business strategy of MAS. It shifted some factories producing casualwear products to activewear, creating an activewear cluster, and exited some subsidiary factories that had been opened for quota bringing all activewear production back to Sri Lanka and focusing on the partnership with Nike. In return, Nike opened a training and innovation centre in Sri Lanka, and helped MAS to implement lean production processes in its factories. MAS and Nike engaged in co-development of products, including the knit part of Nike’s Flyknit shoes, with MAS opening a factory dedicated only to Nike.
MAS was also able to leverage its capabilities in seamless knitting to create a partnership with Lululemon in 2009-2010, when Lululemon was a small company and looking for a supplier firm that could solve its fabric problem. MAS was able to produce the type of seamless circular knit fabric that Lululemon needed and grew in tandem with Lululemon in the 2010s as the athleisure product segment took off and Lululemon grew into a major brand in this segment.
As a result, MAS grew year on year since 2000, with a doubling of its revenue between 2011 and 2018. It is larger than Brandix and Hirdaramani. Nike and the other big sportswear buyers such as Adidas and Under Armour do not source from Sri Lanka, based on their supplier lists, with Brandix supplying insignificant volumes to Puma.
In contrast, Hirdaramani produced activewear in a small amount but did not have a strategic partnership with any buyers. Brandix entered the activewear segment only in 2016 and by acquiring firms producing for big activewear buyers rather than building strategic partnerships with top activewear buyers based on its innovation capabilities. Thus, Hirdaramani and Brandix remain in relationships with buyers that have become more transactional than strategic, with low margins on products and profitability based on efficiency, volume, and global sourcing location portfolio. Brandix is trying to capture more value by moving into strategic partnerships but struggles due to low innovation capabilities and thus focuses more on ancillary services that it can offer its buyers.
Sri Lanka’s apparel export industry today
Despite the divergent business strategy trajectories and capabilities of the Big 3 Sri Lanka firms, they have driven the continued growth of the country’s apparel export industry (see figures below). According to the Joint Apparel Association Forum (JAAF) in Sri Lanka, the value of apparel exports increased from 2685 million USD in 2004 to 4535 million USD in 2023. JAAF has 73 members, but interviewees noted that that roughly 80 percent of apparel exports come from the top 20 apparel firms, with the remaining firms in Sri Lanka depending on these firms for sub-contracting. The industry’s export value was much higher in 2023 than 2004 despite fewer firms because the products have higher unit values even though the export volume is lower.
Note: Data for EU imports comes from Eurostat ComExt, and for US imports comes from USITC, aggregated for HS 61 and 62.
There are 8 textile mills in Sri Lanka, all of which are knit. Almost all of them were started as joint ventures with foreign firms or wholly owned by foreign firms. Hong Kong textile mills with expertise in knit synthetic stretchable fabric have been central to this local supply chain, making the specialization in intimates and sportswear possible, in addition to MAS’ seamless knitting factories.
Conclusion
It was not just that the buyers which went to Sri Lanka from the mid-1980s were brand marketeers and specialty retailers. Rather, it was that this group of buyers included high growth brands and product segments, such as intimates, in the 1990s and 2000s. The creation of a local supply chain for intimates production, largely led by MAS and Brandix, benefited other firms in Sri Lanka’s industry. The growth of the intimates market stagnated around the time of the end of the MFA, pushing firms to seek new business models. MAS entered a strategic partnership with Nike in the 2005 based on its (globally) unique capabilities in seamless knit production for intimates products. Brandix and Hirdaramani, in contrast, grew based on their global portfolio of sourcing locations, where they expanded buyers and volumes but in mid-range products with no innovation capabilities.
It would be hard, if not impossible, to replicate Sri Lanka’s trajectory today, in a country like Kenya or Ghana. It was shaped by historically specific trade policies and developments within the apparel industries in the US and EU markets which saw the emergence of new types of buyers and new product segments.
But we can identify a meta-trend within apparel global supply chains driven by product innovation cycles in the US and EU markets. Buyers are under pressure to respond to product innovation cycles and try to shape them, creating growth spurts and leading to the rise of new brand companies, such as Lululemon. The lesson for suppliers is that ‘not all buyers are the same’! Buyers have different growth potential, so suppliers need to link to those buyers that have the capability to exploit the current product innovation cycle. Doing this requires two things. It requires having market intelligence to know what the product innovation cycle is and to find buyers in this cycle. It also requires having the innovation capabilities to be able to offer complementary and strategic assets to these buyers—and if such assets are unique, globally, then suppliers will be able to capture more value and not just volume in orders.
Sri Lanka global apparel firms did not start out with this strategy, and buyers drove the creation of opportunities for their growth initially, alongside the imperative of quota. But the most successful of them have realized that the way to escape the ‘supplier squeeze’ in the post-MFA period is to ride the product innovation cycle closest to their capabilities. This will be difficult for younger apparel firms starting up in African countries, for example, but it can be easier by looking for transnational partnerships.
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