Brands of Moldova: a cut above

By Octavian Apostol, Director General, and Liliana Vieru, Head of the International Cooperation and European Integration Division,  the State Agency on Intellectual Property (AGEPI), Republic of Moldova

Fashion is perhaps not the first thing that comes to mind when one thinks of the Republic of Moldova. But for many years now, this small, landlocked European country has been working behind the scenes to produce the collections of some of the fashion world’s leading brands – Armani, Calvin Klein, Dolce&Gabbana and Prada, to name just a few.

In the post-war years, Moldova’s textile and apparel sectors emerged as a leading producer of light goods in the Soviet Union and one of the most important branches of the national economy, accounting for around 60 percent of GDP. Following the collapse of the Soviet Union and Moldova’s independence, the sector fell into decline but today it is at the forefront of the country’s private sector development and is thriving.

The challenge: transformation

For much of its history, Moldova’s light goods industry has been built around low-value “cut and make” services (Lohnarbeit), with companies working under contract for large fashion houses, often with modest returns. While this model remains widespread, the landscape for light goods in Moldova is rapidly evolving.

In recent years, faced with the need to create jobs, stimulate economic growth and boost exports, the Moldovan Government has identified the light goods industry as an important area for development. Indeed, the sector was a key element of the Government’s Industrial Strategy (2008-2014). A highly skilled workforce, a moderate need for investment, proximity to the European market and the existence of a professional training system made it an ideal candidate to help drive the country’s social and economic development program. The aim has been to rebrand Moldova’s light goods industry and transform it into an internationally recognized producer of high-quality fashion. The challenge has been to encourage the country’s textile and apparel companies to start adding value to their work by developing their own original-label products and thereby to expand their market share and increase profitability.

This was not without its difficulties. Helping companies to move away from “cut and make” services is a complex and risky process. Moving into the production of own-label goods raises a range of new challenges. Companies need to secure raw materials at competitive prices, strengthen their design and production capacities and invest in new technologies as well as strengthening their sales and marketing skills and building effective distribution and marketing networks. And of course they need to develop an effective branding strategy.

Driving the shift to high-value outputs

In line with Government policy, a public-private partnership “From the Heart – Brands of Moldova” was launched in 2012 to transform the sector into a high-value producer of competitively priced, quality fashion goods. The partnership included the Association of Light Industry Employers (APIUS) and the Government of Moldova (the Ministries of Economy and Culture) with the support of the United States Agency for International Development (USAID), which was the main donor-partner through its Competitiveness Enhancement and Enterprise Development (CEED II) Project.

The project used the umbrella brand “From the Heart – Brands of Moldova” to boost the prestige of Moldovan-made textiles and make them more easily recognizable. In so doing, it focused on three main areas. Entrepreneurs were trained to identify, protect and manage their intellectual property (IP) assets (designs, trademarks, etc.). They also learned how to develop, commercialize and promote their brands, and how to increase sales and investment and become more competitive. A second focus was on building awareness among Moldovan consumers about the desirability and value of homegrown brands. And the third, and perhaps most challenging, area involved encouraging manufacturers to adopt production schemes that enabled them to produce their own high-value brands. 

The project kicked off with a comprehensive communications campaign using traditional and online media. Local companies face tough competition from well-known foreign brands at home, so it was important to promote Moldovan-made products among consumers, to highlight their quality and value and change consumers’ perceptions. Twelve companies participated in the first campaign, which highlighted three key messages: “Brands of Moldova” can compete with imported brands on quality and price; buying local brands supports domestic producers and the national economy; and wearing them is a source of national pride.

And it worked. The campaign was a resounding success. Every dollar spent on promotion generated USD 65 in sales. Ten additional companies joined the next campaign, which soon turned into a biannual event with spring and fall fashion shows. 

The First Moldova Spring Fashion Walk in 2012, organized with the support of USAID, proved very popular, attracting leading personalities, entrepreneurs and politicians. It featured seven local brands. But just three years later, at the event’s seventh edition, 35 fashion brands presented their “Made in Moldova” collections.

Commercial platforms emerge

The enthusiasm generated by the project and its huge success has encouraged a growing number of apparel companies to develop their own brands and sell them on commercial platforms. The first such platform involving companies operating under the “From the Heart – Brands of Moldova” brand opened for business in December 2012 with 13 participating companies.

The platform’s aim was to bring Moldovan companies under one roof to create a common space for the sale of high-quality Moldovan goods, and to promote best practices in the areas of branding and merchandizing. Today, more than 65 shops are selling own-label goods under the “Brands of Moldova” umbrella brand, and customers can now benefit from a discount loyalty card to purchase these goods.

The “Brands of Moldova” campaign has helped to establish around 70 new domestic brands and is transforming consumer perceptions of Moldovan-made apparel. “From the Heart –Brands of Moldova” is now a registered trademark that may be used by all project partners seeking to strengthen recognition of their products.

Moldova’s State Agency on Intellectual Property (AGEPI) has been actively supporting the project, in particular by training participating companies in the use of the IP system to protect their brands, designs and other IP assets. Between 2012 and 2015, 31 new trademarks were registered. Up to 2015, around 140 products had been protected by some form of IP right by participating companies.

With the exception of the company Ponti, which owns 65 registered trademarks, most producers market their products under one or two trademarks. The tendency is for bigger companies with a high proportion of export sales to register their marks under WIPO’s Madrid System for the International Registration of Marks, while smaller companies tend to protect their rights domestically.

By the end of 2015, sales of assisted brands in Moldova had grown by 34 percent in three years, with orders worth USD 7.4 million in new domestic sales. Each company participating in the project was able to gain know-how in the areas of branding, design marketing, manufacture and technology. This has helped to increase their efficiency, product quality and profitability. More than 30 companies are now exporting branded Moldovan apparel to over 10 foreign markets; three of them are among Moldova’s top exporters.

The project has also attracted additional support from development partners in the form of access to credit facilities and advice on ways to improve business performance. For example, thanks to a loan from USAID’s Development Credit Authority Program, which supports small business development, in 2014 the small family company Zivazi Maxi was able to reposition its brand and triple its sales. 

Other side-benefits include greater consolidation within the sector, which for many years was highly fragmented and lacked a strategic vision. APIUS has emerged as a strong and respected industry voice and an important driver of the sector’s evolution. Since its establishment in 2006, its membership has quadrupled and its mandate has expanded significantly as it works to create concrete opportunities for commercial development at home and abroad.

In September 2015, APIUS, the Moldova Technical University and the Government of Moldova, with the financial support of USAID, opened the ZipHouse, the country’s first center of excellence for design and technology. ZipHouse gives young designers and fashion professionals access to the training, equipment and technology they need to get a foothold in the country’s rapidly evolving fashion industry. Its aim is to bridge skills gaps, foster innovation and cultivate entrepreneurship to safeguard the sector’s future growth and sustainability. 

Far-reaching benefits

The socioeconomic benefits of the “From the Heart – Brands of Moldova” project are far-reaching. It is opening up opportunities for women, especially those living in rural areas – over 90 percent of people employed in Moldova’s light industry sector are women. And in targeting small or micro-companies run by young entrepreneurs, it is creating new opportunities for employment and business development and nurturing the sector’s future growth. 

By 2014, the sector accounted for around 15 percent of the country’s GDP. While “cut and make” services are still common, their share of total output is declining, falling from 95 percent in 2005 to 80 percent in 2014. The sector now employs some 23,000 people and the value of manufactured textiles and apparel is rising, from EUR 33.8 million in 2010 to around EUR 197.8 million in 2014.

While much has been achieved – the sector can now compete on price, quality and lead times – there is still a great deal to do in terms of accessing new markets, increasing international competitiveness and building international brand recognition. Notwithstanding these challenges, Moldova’s light industry is vibrant and thriving. The sector is on track once again to become a central pillar of Moldova’s economic growth and development.

The aim going forward is to make the “From the Heart – Brands of Moldova” brand a global ambassador for Moldova’s light industry. In Moldova today, the brand is part of our everyday life. It is a source of national pride and the symbol and promise of what Moldova can achieve. Our hope is that tomorrow, people from across the globe will recognize Moldova as an international fashion hub in its own right.