Passage to India : Ilan Shavit, the chairman of Ryyty, previously Butonia India, in an interview with Sima Ella on the company’s history, its successes, failures and the vision behind reinventing itself in India
By Sima Ella
Ryyty means “fashion” in Sanskrit, but the word surprisingly exists in Finnish, where it means “spice”. The spice and colour of India is saffron – or zafran in the Middle East and Asia – evocative of Butonia’s original name in 1865, Z.A Frankel GmbH.
Ryyty chairman, Ilan Shavit: “We’re beginning to supply a market segment that didn’t exist when we first arrived in 1997 – supplying accessories to fashion manufacturers targeting the local Indian middle class, not only the major international brands who manufacture in India.” The middle class, he explains, only began developing in 2000, when software and outsourcing industries discovered the potential of the educated and skilled Indian labour force and began transferring significant portions of its activities to the sub-continent. Economic conditions have improved to the extent that, within a decade, this market segment has grown to 350 million people, and the trend is swiftly rising.
Butonia was a family enterprise established in Europe 146 years ago, which has survived through four generations of the fluctuating textile industry. During its heyday, it was considered a dominant factor among accessories suppliers in Europe. Indeed, most of the European Butonia companies are still functioning, despite the deterioration of the textile industry there, after extensive restructuring and cost-saving, although they are no longer owned by the original families. Butonia Asia, on the other hand, has now become Ryyty, and its zone of activity is the active and expanding garment industries of South and East Asia. The original manager of Butonia India in Bangalore, Ravishankar Seshan, is today the Ryyty Managing Director.
Established in 1865 in Frankfurt, Germany, in its heyday, Butonia was considered a dominant factor in the textile business throughout Europe. In spite of the gradual decline of the European textile business, the company survived throughout four generations. All this time the group was owned by the Frankel-Stiebel family and maintained a long-standing partnership with the Dutch-Jewish Guggenheim family.
The company’s rebranding was initiated in India by Ilan Shavit, an heir to the founding family who currently serves as chairman, concurrent with his day-job as the founding partner of an Israeli corporate-commercial law firm, Shavit Bar-On Gal-On Tzin Yagur, which occupies the 20th floor of the Sonol Tower in Tel Aviv.
How did Butonia begin?
“Butonia Europe was established in 1865 by my great grandfather, ” Shavit recounts, Zadik Alexander Frankel. It was then named Z.A. Frankel GmbH. The company’s mission was to provide all possible accessories to the fashion industry from under one roof – buttons, zippers, buckles, material and lace ribbons, laces, etc., a huge collection and variety of accessories and items that factory owners could not invest resources in obtaining independently.
Following the death of Z.A. Frankel, at a relatively young age, his wife Regine, a mother of six daughters, continued running the business by herself for decades. To begin with, the company provided accessories to German factories, but she was wise enough to understand the need to expand and export to neighboring countries – Austria, Switzerland, Belgium, the Netherlands and France. Forty years later, two of her sons-in-law entered the business – Salomon Stiebel and Max Frankel. Salomon and Max continued to expand the business and opened a subsidiary in Switzerland. They later opened another subsidiary in Holland in partnership with the Guggenheims, and in 1928 the British arm was inaugurated. The companies outside Germany went under the name Butonia – from the word “button”.
In the early 1930s, the entire Frankel-Stiebel family emigrated from Frankfurt to London and with the outbreak of World War II, Paul Guggenheim fled with his family from Holland to England with literally the clothes on his back. The German company was sold by coercion to a Nazi, under the Nuremburg Laws. After the war, the company returned to family hands following a lengthy court case against the Nazi, who refused to return the business to its rightful owners.”
Once in England, the family continued running Butonia from its offices in the heart of the City of London and – during the bombing Blitz over London in the 1940s – from a nearby village. Ernest, Max Frankel’s son, took his place in management swiftly becoming an influential and leading figure, and Richard, the son of Salomon Stiebel, also joined the company, serving as a search-and-rescue fireman throughout the war’s harsh bombardments of London. Richard went through a long ritual of dangerous firefighting and rescue at night and attempting to sell buttons during the day in the shrinking war economy. On the first night of the V2 missile bombardment of London, Richard’s first baby daughter was born and was immediately evacuated with his wife to the countryside. His second daughter was born a few days after Israel’s declaration of independence. Ilan, his third child, was born 10 years later.
After the war, there was a great desire to return to the routine of daily life as quickly as possible, and this included changing uniforms and grey garbs for fashionable and colourful civilian clothing. The fashion industry was on its way up. By the 1960s, the British Prime Minister said “you’ve never had it so good”. Western Europe underwent massive reconstruction and new garment factories were opened by the day. The 1950s and 1960s were golden years for Butonia.
At this point, after the war, the Stiebel-Frankels were operating four companies: in Germany, England, Switzerland and Holland. This soon expanded to Sweden, Belgium, Finland, with representations in other countries such as Israel, and Butonia entered a lengthy period of economic prosperity.
Paul Guggenheim died in the 1970s a relatively young man, and his son, Michael Guggenheim, took his father’s place at the helm of the Dutch operation at the age of 22. Alongside Ernest Frankel, who directed the European operations, Richard Stiebel handled extensive activity in the UK and Ireland.
Ernest’s sons, Jonathan and Rafi, emigrated to Israel, rather than continuing in the family business – Jonathan to become an esteemed professor at the Hebrew University and Rafi joining Kibbutz Beit Ha’Emek. Ernest mobilized his nephew David Frankel, the son of Prof. Herbert Frankel, a famous economist at Oxford, who had emigrated to England from South Africa; while Richard Stiebel’s son Ilan Shavit also opted for aliya as a youth rather than the family business in London – a choice echoed by most of the Stiebel family, which arrived in Israel during the sixties and early seventies. Ernest and Richard nursed the frustrations of unfulfilled Zionist ideals from their youth, and began commuting between their businesses in Europe and their offspring in Israel, and gradually retired.
RICHARD STIEBEL, ERNEST FRANKEL AND DAVID FRANKEL, circa 1970
Not a single textile factory left in Europe and England
The task of running the Butonia Group at a time, when the textile industry began abandoning costly Western Europe, fell to Michael Guggenheim and David Frankel. The process lasted several years but was hastened after the fall of the Berlin Wall and the opening of Eastern Europe to the West. Production began following cheap labour – first to Eastern Europe and then to Turkey and Morocco. Asian production in non-communist countries, such as the Philippines, where labor costs were still relatively low, commenced already in the 1980s. Once political constrictions were removed and China opened up, European and North American manufacturers raced to the east.
“By the end of the ’90s” Shavit explains, “not a single textile factory was left in continental Europe or Britain. Mass production moved to developing countries and the company had to change with the times. The challenge required re-organization and layoffs. It was a difficult period for the group’s management.”
Shavit joined the group’s international board in 1993 and pressed for radical reorganization. Uniform partnership rates were determined for all shareholding entities through a holding company. Michael Guggenheim was appointed group manager at the side of David Frankel. The group’s board was expanded and began meeting regularly. The resulting transparency enabled stockholders to comprehend the scope of change the company must undergo, if it were going to reinvent itself and survive in an era during which outsourcing of Western brand names to South-East Asia was making the company’s services more essential than ever. Shavit began pressuring for the establishment of subsidiaries in Asia, however board members were not yet united behind the idea, and it was put on hold.
Then, in 1997, Butonia India was finally launched.
Asian integration was neither easy nor smooth. “For many years, Butonia India was a black hole of expenditure” Shavit says. “Today’s huge Indian middle class did not yet exist. Our potential was still limited to export plants and we did not have economic sources of supply in Asia. During that period there weren’t too many factories manufacturing for top European brands, because European firms were still using production plants in Eastern Europe and the Philippines, while Americans were making their products in Central America and the Caribbean.
During the early 21st Century things began to fundamentally change: top Western brands began to be manufactured in India, for export, in massive quantities, as well as for the local Indian market, profound social changes were accelerating thanks to the development of a local software industry and outsourcing, employees began earning higher wages and a middle class began to form, adopting a consumer mentality akin to that of the West. Today, this emergent Indian middle class is estimated at 300 to 350 million, a number that is growing swiftly and at present is equal to the entire population of the USA or Western Europe. When we first arrived here, most men wore synthetic clothes one associates with clerks and all women wore traditional garb, bereft of buttons, buckles, patches, etc. The rich purchased abroad or had their clothes tailored by elite tailors in Mumbai or Hong Kong. There was virtually no internal market. This has changed entirely.”
Embarking on a new road
As early as the 1990s, Shavit realized the potential inherent in the awakening of the Chinese dragon and urged Butonia to open a subsidiary in Hong Kong. This finally took place in 2000, but all possible mistakes were made in the execution of the Hong Kong operation, including importing expensive Western manpower, focusing on the island’s financial district rather than the retail textile area in Kowloon, and more. Debts began accumulating rapidly.
At the same time, Butonia Europe, which was yet to undertake any significant recovery measures, was experiencing growing difficulties. “Amongst the wider group of founding families – about thirty people spread around the world – there was little involvement in the company, and I felt responsible towards them, ” Shavit remembers. “In July 2002, the entire stock of the holding company shares were sold to other Butonia partners. The company – under its new management – then immediately decided to appoint a liquidator for the Hong Kong company. This was difficult for me, because throughout our 140 year family tradition, it was unheard of not to pay our debts to the last penny. I waited two months for the dust to settle and organized a new group composed of the Asian company management and part of Butonia’s old holding company, and this new group created a new firm in Hong Kong that purchased Butonia Hong Kong’s assets from the liquidator – mainly stock and office supplies, and also the Butonia India shares. The new partners were Robert Kichingman, who had been the manager of Butonia Leeds for decades and then moved to Asia, Ravishankar (Ravi) Seshan, the manager of Butonia India, and Ruby David, a Philippine émigré to Hong Kong who had been discovered by Robert and appointed manager of the Hong Kong company. We named the new company after Ruby herself – Ruby Enterprises. The stockholders appointed me as chairman. The haemorrhaging stopped immediately, and within a few months the company began to see profits. Relations between us were excellent and we began to meet regularly in Hong Kong, India, Bangkok and Saigon, where Robert lived. The email and Skype revolution helped and enabled us to maintain a multi-national corporation, spread throughout Asia, very successfully. We soon expanded to Vietnam, sales-wise, and China, for procurement.”
In 2007, following five years of activity, Shavit began pressuring the company’s management to launch sales in China. Butonia’s by now well-established behaviour pattern repeated itself: Robert objected, an unsuccessful attempt was then made, costing the company severely and partner relations began to deteriorate. Shavit recounts: “Each time I received a mail from Robert, I knew it was going to ruin my mood. Each time I would carefully consider what time of the day it would be best to look at it. The mails also began affecting Ravi and I became scared of losing him.” Shavit decided to split the group and exchange shares between the stockholders in Hong Kong and India. Robert and Ruby went their way, a supply and marketing agreement was entered into between the two groups, and two years later, the original Butonia India – now fifteen years of age – launched its new Ryyty logo, following extensive brand research.
After many years of assembling sources of supply, both in India and China, and a varied customer base, Ryyty has acquired a market share that can serve as a stable platform for further growth. It currently supplies buttons and other fashion accessories, not only to international super-brand manufacturers (now available in India as well), but also to factories supplying the demands of the vast local middle class. Ryyty even supplies accessories to the handbag and backpack industry and is still seeking additional channels for expansion.
Ryyty has plenty of local and international competitors “but we aim to target and market more expensive and complex merchandise, ” Shavit explains. “Other US and EU brands have established companies in Hong Kong, China and India in order to reduce their sourcing costs, but they are managed from abroad and I don’t see them as authentic local Asian businesses such as ourselves.”
“The biggest paradox in this business, ” Shavit concludes, “is that the service of identifying, sourcing and supply established in the 19th Century, which was good and right for the fashion industry 146 years ago – the significance of which declined in the seventies, eighties and nineties – is now becoming more indispensable than ever. Recently, I found a letter from the 1940s written by my grandfather, Salomon Stiebel who died before I was born. His words are the essence of his business philosophy which I have taken closely to heart. He writes: ‘The most important thing is never to go into industrial production.’ After visiting the Chinese plants, I realize how true his words ring in 2013.”
Butonia India has become Ryyty, and it eagerly awaits the fifth generation of family founders – provided, of course, that any of the potential beneficiaries are interested!