Factory Girl: A Visit to Snow Lotus Chinese Cashmere Co., Ltd.

We had our second company visit on Monday, this time to a state-owned company. Snow Lotus cashmere was the old communist brand back in the day, and was used as gifts for visiting dignitaries (including Ronald Regan!). Now it's still a state-owned enterprise, but it's one of the profitable ones (according to their chairman) and is a surprisingly clean and well run factory that even has a green water recycling system.

The factory was about an hour and a half bus ride from Beijing, so we were all asleep when we arrived. We were first given a tour, which was fascinating. Far from the structured, sheep-herd event I imagined, the tour was very informal, and we were able to wander around the factory floor and poke around into bins, stand close to moving machinery and interact with the workers.

The raw wool is sourced from Inner Mongolia, and comes from a special breed of goat that has soft, long, fuzzy neck and stomach hair. Apparently China produces 10,000 metric tonnes of cashmere per year, but their production is capped because one cashmere goat requires as much food as five sheep. Snow Lotus owns their own wool processing plants that source the wool from sheep farming cooperatives. The processed wool arrives in its natural color state, ready to be dyed. It is placed in a big oven and then dyed whatever color of the rainbow is being produced that day. The large masses of fluffy, dyed wool are then taken to the spinning area to be spun into cloth. The dyed wool is the softest thing I have ever felt. We were able to sink our hands into a big bin of wool and I seriously wanted to climb inside and make a large nest. I took a small piece and put it in my purse because it was just too soft to leave behind.

The wool is spun by these huge machines that are made in England. They are spun onto huge 2 ft. long spools and put onto another machine that strengthens the yarn and makes it multiple ply. The ply machine puts the wool onto more recognizable industrial sized spools. Once the spools are spun they are sent to the production area where they are knit by machine into pieces of sweaters.

The knitting machines are fascinating, they are large and look like they are from the 1950's. They have little codes on the side that determine the number of rows, stitches, etc. They output little pattern pieces of sweaters that are then sewn together with sergers. Some pattern pieces cannot be produced on the machine, so hand operated knitting machines are used for these. The machines have little teeth that must be adjusted by hand, and then a kind of loom thing is passed back and forth by hand.

The workers are all sourced from far away provinces, like Anhui and Sichuan. The local governments send the workers to the factory where they live in dormitories and eat at the local cafeteria. The factory employs 1000 people. The workers weren't exactly energetic at their jobs, but did not seem particularly unhappy or lazy. I'm sure that they were putting on a good show for us foreigners, however.

After the tour we had about an hour to hear from the chairman of Snow Lotus and ask questions. He said that Snow Lotus has a 6% ROA and he restructured the company to make it profitable. However, since it's a state-owned enterprise, it seems like they have less incentive than a normal company to achieve profitability. The chairman also emphasized that their plant is very green; they have a state of the art water treatment facility that recycles the water used for dying, after several cycles it is used for watering plants and for toilets. He also said that approximately 45% of their product goes for export, and 55% is sold in the Chinese market. They export their cashmere to Europe, the US and Japan.

After the meeting we had a chance to browse the company store, which was delightful, albeit depressing because the prices were still pretty high. I tried on a FABULOUS cashmere winter jacket, but the sleeves were built for Asians, so they were like 3/4 length sleeves on me. The styles were not very fashionable either, more like basics. I did not buy anything.

Overall it was a fun visit, it was fascinating to see the inside of the factory and have a chance to talk directly to the chairman of a state-owned enterprise.