Pulling their socks up

A family-run, award-winning business in Ashburton has withstood economic shocks and crises because resilience is its lifeblood, says the company chair.

The New Zealand Sock Company, which has been running since 1901 and now boasts “one of the most modern plants in the world”, has been able to fall back on its sound operating and financial decisions, says chair Gary Leech CFInstD.

“Resilience is part of the company’s DNA,” says Leech, as companies and businesses in New Zealand brace for a new crisis – recession – while still trying to recover from Covid-19.

The company’s board comprises two shareholder directors – one is company CEO Euan Sparrow, son of Cip Sparrow who bought the business in the 1980s – and two independent directors.

Siblings Paul and Gabrielle Sparrow often sit on the board as observers, giving them an insight into board-level thinking. “Even though it is a family business, they want to support the company’s growth and know this starts at the top,” says Leech.

CEO Euan Sparrow at the New Zealand Sock Company plant, described as one of the most modern in the world.

But there is change afoot. Two new directors and a new CEO will be appointed in the coming months – a shift in direction that is vital for succession planning, according to Leech.

“That intense focus on future strategic direction resulted in the adoption of a clearly targeted plan and its execution for growth,” Leech says of a strategy that will ensure the company’s position in the future.

“There is no doubt the Covid world has given the company a forced ‘hiatus’ in its planning over the past couple of years. The way the team has handled those issues has stood it in good stead to now accelerate the execution of the strategy,” he says.

The company’s manufacturing is all done at its Ashburton factory. While logistics haven’t necessarily been challenged by its rural location, being at the bottom of the world and away from their biggest markets has its drawbacks.

This has been especially the case in terms of sourcing and shipping raw materials, and exporting the final product.

With global supply chain issues, the company was impacted by freight delays and is facing a talent shortage. “Being rurally based, one of the challenges has been in recruiting skilled staff to relocate to a rural town. We lost a significant export order during that time because we could not run our plant to capacity,” Leech says of the impact of the worker shortage caused by immigration and border restrictions.

But to ensure the company is able to sustain itself the decision was made in late 2021 to invest significant funds to bring raw materials into New Zealand where they would sit in the company’s warehouse, thereby guaranteeing production and avoiding freight delays and pricing shocks.

While the costs were substantial, the decision proved farsighted. It provided the company with assured raw material supply, including a buffer which has seen them through the past 18 months. But it has also meant they have more control of their production, locally.

Gary Leech

“It was a very good operating and financial decision. Among the chaos of Covid we brought back most of our manufacturing from China to New Zealand and we’re now sitting at 95 per cent New Zealand-made, versus 70 per cent two years ago,” Leech says.

The company makes socks for a number of iconic Kiwi brands, and considerable energy and investment is poured into the export side, in markets in the UK, Europe, America and China.

“Anyone can make a sock, but we offer more than that. Over the years we have learnt that every market is different. Our clients in the US operate very differently to those in Europe, Japan and China,” Leech says.

Gabrielle and Euan Sparrow have been looking after the export business over the past 40 years, including attending industry trade shows and meeting customers. Their knowledge has given them an understanding of the consumer landscape, but also the diverse cultural value systems and beliefs that underpin each region.

Two of the key markets are outdoor and performance sports. “We are seeing more growth in the military, and health and wellbeing sectors, and have some exciting projects under way targeting military and medical markets,” Leech says.

But these market trends change rapidly and, in order to remain relevant, Leech says it requires not only having respect from suppliers and customers, but also having the same level of respect for the competition.

“As much as we all want to stay ahead of the competition, it’s also worthwhile knowing them and being able to work together when needed . . . to make money in the export market you need to offer something that is of high value and like nothing else, you must tell your why before you show them the what,” says Leech.

Last year, the company won a number of awards at the annual Ashburton District ANZ Awards. “A lot of time and effort was put into applying for the categories, so to walk away with two highly commended, one win, and then the Overall Business of the Year award, was sensational. I speak on behalf of the board and the family when I say we were all absolutely thrilled.”

The family also shared the success with staff. “Without them, the Sparrow family wouldn’t have been standing up on that stage,” Leech says.

He puts much of the company’s success down to knowing its value, which will help cement its survival. Ongoing investment in research and development; technology; identifying new weaknesses, including not stretching its resources; ensuring the strategy aligns with export activities and daily operations; and avoiding conflicts between domestic and international activities also add to its success.

Leech says New Zealand Socks is engaging in “promising research into the use of heavier micron wools”, which will give them a leading edge over their competitors.

“We have a machine replacement policy that every year we purchase a new plant, and not just sock machines, but includes testing equipment for our R&D Hub. This has given us the advantage of having one of the most modern plants in the world,” says Leech.