A case study of a Bulgarian woolen textile firm "Wooltex AD".

University Degree Business and Administrative studies

BULGARIAN TEXTILE INDUSTRY

A CASE STUDY OF A BULGARIAN WOOLEN TEXTILE FIRM “WOOLTEX AD”,

Industry Background

Wooltex AD is the biggest joint stock company for the production of wool textile in the country. It has a full production cycle from the input of washed raw wool to the finished fabric, including a small tailoring workshop.

Wooltex AD is located in a relatively large town in the central-east part of Bulgaria. The town, with a high concentration of wool and cotton fabric production, is considered to be one of the three main textile centers (Sliven, Kazanlak, Gabrovo) in Bulgaria. It is also the town with the country’s earliest traditions in organized industrial wool textile production. The town’s first wool processing factory was established in 1834, and was the first modern industrial enterprise in Bulgaria. By the beginning of the twentieth century, seven such factories were in existence.

Wooltex' history started in 1891, with the establishment of "Antov & Mishkov", a private company. The company was nationalized in 1947; the communist government took over the company from its owners and ran it as a state-owned enterprise. At that time “Antov and Mishkov” was the biggest textile company in the country, and had modern (for its time) machinery and equipment, a full production cycle, and a developed wholesale network in Sofia. In the 1940s, it employed no fewer than 460 workers.

From its nationalization in 1947 until 1953, the company worked without any significant changes; it was managed by a managerial team, and was given a new name. It was considered to be owned and run by the workers (a statement which seems quite populist today, but is actually not far from the truth for that period). The years 1954 to 1959 saw a period of concentration of production, combined with an enlargement of existing companies into the so-called "combinats" (combined factories). Wooltex became the core of the established wool textile combinat, and another six companies were connected to it. The company was moved to a new site where it still resides. During the 1970's and the beginning of the 1980's, new machinery and equipment was installed to replace the already depreciated nationalized equipment. At that time, the "integration" of the socialist economies was proceeding, and the Bulgarian woolen textile industry oriented itself to the huge Soviet market indirectly, by selling its goods to tailoring companies that in turn exported the finished garments largely to Russia. By the beginning of the 1980's annual production had reached 9 million meters and production capacities were being fully utilized. In 1982 the company was producing 16% of the country's wool textile output and 25% of its wool fabrics. The production program covered a wide variety of woolen fabrics, including worsted-type and carded fabrics, blankets, worsted and carded yarns, as well as curtains, industrial nets, shoe fabrics and other industrial products. Wooltex also became one of the first companies to pioneer the use of wool in combination with cellulose and synthetic fibers. The number of employees at that time was 4,500 people.

The peak year (in terms of production) for the company, 1982, merits an analysis to determine what made the success of the company possible. Wooltex had been developing successfully for the previous 15 years for the following reasons:

The assets obtained by nationalization were in good shape and presented a basis for further growth. The development of light industry was still attracting some of the attention of central planners in the 1970s, and during this decade, the company’s old equipment was replaced with modern equipment imported mainly from Poland, the GDR (East Germany), and West Germany. Later, in the late 1970s and the early 80s, the communist regime began stressing the importance of heavy industry. Therefore, no investments were planned for the light/textile industry, which was considered to be less prestigious.
The eastern part of Bulgaria was formerly a big sheep-breeding region, and local and regional producers could satisfy all the company’s raw wool needs. In the 1970s the chemical industry started the production of synthetic fibers, which became another input used by Wooltex. Thus, the resource base was in place, and the command system provided for the stability of the supply relationships.
Traditions in woolen textile production were very strong near Wooltex’ home base. A number of special technical schools exist in the company’s hometown, and a relatively cheap and well-qualified labor force was not hard to find.
The power used by the factories was obtained at highly subsidized prices. They were fixed by a central authority and did not follow international prices. A large part of the oil and the gas used by the industry was bought from the USSR at preferential prices or through barter deals.
Investments were centrally planned and provided. There was no need for investment credits, and the need for working capital was limited because deliveries and sales often were centrally distributed.
Wholesale and retailing infrastructures were quite well developed, even though concentrated in the hands of one or two monopolistic state-owned structures. The greater part of production was assigned to garment producers through a strictly centralized organization, under which the so-called "economic unions" were the "hats" above the producers within one industry and were responsible for the placement of the output. Direct exports to West European and American clients went through another monopoly, Industrialimport, a state owned foreign trade organization. This distribution system shortened the chain, but completely shielded the textile producing factories from the final consumers of their products. The internal market for the industry remained small because orders for direct or indirect export were using the existing capacity almost completely. Nevertheless, at that time there were a good variety of wool fabrics available on the domestic retail market.
Demand was organized by trade intermediaries, and Bulgaria was given a major role in woolen textile production within the COMECON, so that Wooltex did not have to worry about placing its output even when producing at full capacity.

The 1990s for the Bulgarian Woolen Textile Industry

With the political transformations of 1989, Wooltex began to suffer together with the rest of the woolen textile industry. As a result of the country’s land reform and land restitution policies, many of the high-quality merino sheep herds were either exported or destroyed, due to the inability of the old socialist agricultural organizations and of the new private owners to support them. Thus the woolen textile industry lost its quality domestic raw material base.

Nearly at the same time, around 1992, the Russian market collapsed. The Russian market stopped relying on Bulgarian products and became the target of other competitors. Also, the monopolistic structures ensuring the placement of the output of the Bulgarian woolen textile firms were dismantled, leaving the companies to survive without any experience in the marketing of their products. Thus, within two or three years the Bulgarian woolen textile industry had lost much of its secure inputs as well as most of the forward elements of the value added chain.

At the same time, the deteriorating condition of the Bulgarian economy made credit very scarce, new investment became almost unthinkable, and the equipment’s condition and suitability began to decline, albeit slowly. The well-developed network of technical schools and universities also began to lose its ability to produce qualified professionals. At the same time many of the better young specialists opted to leave the country and seek employment abroad.

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At this particularly trying moment the Bulgarian woolen textile industry also lacked strategic vision and thinking. The firms were managed predominantly by production specialists who openly resorted to short-term, price-only strategies. This strategy, combined with excess capacity in the industry and the lack of development and attention towards the domestic market, made the industry’s firms ready victims of other more strategically acting players on the global scene.

In the second half of the 1990s the process of privatization reached the Bulgarian woolen textile industry, and several firms were privatized. One of the biggest firms was closed due to financial problems, which alleviated some of the excess capacity problem. The new private owners introduced a relatively more flexible management and started developing longer run strategies. Despite difficulties related to the continuing lack of a cluster, limited access to fresh funds, and few improvements in marketing, the situation in the industry was changed enough to attract the interest of some of the international textile produces.

The Mid-1990s for Wooltex

The response of Wooltex to the severely worsening business environment was to decrease production, and by the mid-1990s Wooltex was producing around 40% of its maximum output during the 1980s, or around 3.5-3.7 million meters of wool fabrics a year. Its production was nearly evenly split between worsted-type and carded fabrics consisting of 100 % wool, combined wool-polyester and wool-polyamid. Apart from this main production, Wooltex also produced small quantities of blankets, knits, and men’s trousers. The production cycle was 3 to 4 months, which is considered slow. At the same time, demand was highly seasonal, with all the major clients buying between December and June, and placing no orders during the other half of the year. The slow turnover coupled with the seasonality and fluctuations in demand accounted for much of the financial troubles of the firm.

Production was mostly geared towards export – around 70 % of the output was exported either as cloth or as clothing. The external markets were predominantly the USA and Canada, to a lesser extent Europe, and during the last year, Ukraine. During this period, Wooltex became the largest Bulgarian exporter of woolen textiles to the USA. These exports sales were obtained organized both through direct contacts with foreign clients, and through the services of intermediaries who had inherited the work of the old monopolist, Industrialimport. The remaining 30 % of output was sold on the domestic market, mainly through direct sales to retailers.

Wooltex owned about 30 % of the country’s woolen textile production capacities, and produced around 25 % of all finished woolen materials in Bulgaria. This made it the largest player in the Bulgarian woolen textile industry. Its main competitors were Katex AD from Kazanluk, which specialized in worsted fabrics and held a share of around 20 % of the finished woolen materials production; Fintex AD from Gabrovo, which produced worsted and carded fabrics as well as knitting yarns; and the smaller firms Nitex-50 AD from Sofia and Lanatex AD from Triavna, which jointly held about a 20 % share in the production of finished woolen materials.

Wooltex was included in Bulgaria’s mass privatization program, and as a result a privatization fund took control of 672 mln. lv. (57.5%) of its registered capital in 1996. The new owner introduced some changes in management, and attempted to develop a strategy for the firm. Between 1995 and 1997, Wooltex increased its profits despite a decrease in the US dollar value of sales. The major reason for this paradoxical result was the foreign currency crisis of 1996 and 1997, when net profits ballooned due to purely financial exchange rate adjustments. At the beginning of 1998, the book value of assets of the firms in Bulgaria was adjusted for inflation, and increased several times, which increased depreciation and decreased the profits of all firms, including Wooltex.

The production costs of the firm were approximately evenly split between wages and benefits, production materials, and energy and overhead. Wooltex employed 2,300 people, and the average wage was 140-145 leva (1 lev = 1 DM), which is close to the national average for this branch of the textile industry. The company also employed about 100 administrative staff. The company was considering plans to downsize on both the production and administration levels.

The Interview

On May 19, 1998, around 2 PM, Dipl. Eng. Ivan Petrov, of Wooltex, gave an interview to a team of experts. His previous position had been as Managing Director of Wooltex, but the new owner appointed him as a procurator, and appointed an economist as Managing Director.

While reviewing the recent history of the firm, Mr. Petrov expressed a strong feeling of nostalgia towards the 80s, when Wooltex was able to spend large amounts of hard currency annually for new equipment. Another strongly expressed feeling was his displeasure at being “in the hands” of suppliers (“The Russians are constantly raising the price” of raw wool"), and of wholesalers (“The whole market is run by a small group of Americans”).

Questioned about firm strategy, Mr. Petrov answered with a wry smile, “The strategy is to survive this year after the last one”. About the firm's price strategy: “None of the prices are good”. These two quotes reflected the overall strategic situation of the firm. The firm lacked market focus and had not formulated a pro-active approach to defining and marketing its product. When asked whether the firm was interested in devoting personnel and resources to developing a long-term market strategy, Mr. Petrov responded: “We don’t have the money, and we don’t need such people, because we can do what they would do ourselves

The Diamond as of 1997

An analysis of Wooltex AD, based on the company’s data through 1997, its performance, its history, and the interview with Mr. Petrov, provided a perspective of its competitive situation, based on the methodology of Michael Porter. Under this methodology, the competitive position of the firm, as well as that of the industry and the national economy as a whole, is evaluated through four aspects of the business environment: factors of production; strategy, structure and rivalry; domestic demand; and the cluster of related industries. The following summarizes these four elements and, through them, assesses the overall competitiveness of Wooltex AD.

Factors

Available workforce There are wool-processing traditions in the region, and a specialized school was opened which ensured an educated work force. Despite the low factory salaries, qualified workers were still available for employment in the region. The turnover rate of the workforce at Wooltex was relatively high, especially for young specialists, hurting the overall quality of the labor input. The situation of the labor force in the firm has had a neutral effect on its competitiveness: labor was well qualified, but not highly paid and not very productive (Wooltex produced lower output with more workers than one of its major competitors – Katex).
Management The former Executive Manager was an engineer. He was then named a procurator, and was replaced as Executive Manager by an economist, who needed some time to learn the business. During the mass privatization, a privatization fund, later transformed into a holding company, acquired 58% of the shares of the company. Representatives of the fund controlled the Board of Directors. There was high turnover of management, especially at the second tier specialist level. The top officers were good production specialists, but did not have a market focused approach towards the market.
Assets The company's physical assets still were in an acceptable shape. But no investments were made after 1987, the last year in which new equipment had been imported. The available equipment was suitable for the production of average quality fabrics, but there were bottlenecks in some operations. The process of adding new capacity was complicated by the lack of a clear business strategy and the ineffectiveness of government provided tax incentives. However, despite their age, and the need for new investments, the machines and equipment were in 1997 not a great impediment to the operations of the firm.
Raw materials The raw materials situation of Wooltex was unfavorable. The collapse of domestic raw wool production made the company change orientation towards imported Russian wool, which it bought in Bulgaria from specialized trading companies. The quality and produced quantities of Russian wool were decreasing, while their prices were going up. Generally, imported wool was available, but since it was not bought directly from the producer or from a big dealer, its prices were high. The limited negotiating experience of the company’s management, and the small orders requested due to limited availability of working capital, further contributed to high materials prices.
Climate The climate in Bulgaria, and specifically in the region where Wooltex is situated, is favorable for woolen textile production. It allows for the breeding of merino sheep, and the reasons merino wool is still not produced are not related to the climate. The moderate climatic conditions also decrease the costs of preserving a constant temperature within the workshops, which is technologically necessary for the production process. The climate, therefore, can have a potentially positive effect on the competitiveness of the firm
Transport and communications Wooltex benefited from adequate telephone and road communications, but the infrastructure and services were declining and were in need of improvement.
Power Internal energy prices in Bulgaria had reached world levels by 1997. The share of power in the company’s overall cost structure had increased, but remained lower than in other companies.
Capital Capital markets were not important in Bulgaria’s planned economy, and had to be developed rapidly after the collapse of socialism. In the mid-1990s, the company was using working capital credits from two banks - Raiffeisen and Biochim. It had well-established relations and easy access with these banks, because it was the biggest industrial company in the region and had fair financial indicators. Nevertheless, the high interest on credits in 1996 and 1997 increased the financial costs of Wooltex. In 1996, 11 percent of revenues went for interest payments (247 million leva on turnover of 2,243 million leva); in 1997 only 1% of revenues went for interest payments. It seemed the company was trying to limit the use of credits, although other instruments of financing were not used.

Summarizing the evaluations of the effects of all production factors, the conclusion was that, qualitatively, this side of the diamond had a negative to neutral effect on the competitiveness of Wooltex AD.

Clients Domestic demand played a limited role in the textile industry, including Wooltex. The company’s clients were garment producers who manufactured for centralized organizations or industry "hats”. The local market had never been a driving force for Wooltex, because it had always been export oriented.
Domestic Demand Domestic demand was weak and unsophisticated. Historically the Bulgarian public had demanded coarser woolen textiles, and its needs were satisfied with the leftovers from the exports. Demand for woolen textiles made up a very low share in consumer expenditures.

Demand from the government for garments and products for the army was low and diminishing as the government budget became less and less important as a share in GDP.

Loss of Russian markets The lack of markets was the main reason for low production in the mid-1990s. Small increases of sales in the USA and Canada could not offset the loss of the Russian market. The average quality fabrics that Wooltex produced were not attractive to the more sophisticated European market. The company had three or four stable (for more than 3 years) clients to whom it sold more than 90% of its production. Competition among all Bulgarian producers for virtually the same set of potential buyers decreased the prices they could ask.
Impact of overcapacity The company’s high potential capacity was a potential positive factor for more optimal capacity loading and lower production costs, if sales were sufficient to utilize the capacity. On the other hand, its huge capacity made Wooltex less flexible to rapid changes. Wooltex had the ability to produce a large variety of products in large volume.

Overall, the nature of the demand elements had a negative effect on the competitiveness of Wooltex AD.

Firm Strategy, Structure, and Rivalry

Short-term orientation The strategic thinking of Wooltex' management was dominated by a concern with short-term survival. Amongst other factors, the lack of finance discouraged the development of longer-term strategic programs. The company’s strategic time horizon was one to two years.
Focus on exports The domestic market was ignored as being of any importance for the firm. The competitive environment was perceived as global only, and survival was considered only in terms of selling abroad. In consequence, no efforts were made to discover potentially productive partnerships within Bulgaria.
Focus on low price The basic element of competitive strategy was low price. The importance of variety and quality was recognized, but not emphasized in practice. There was no consistent and purposeful tracking of trends in demand. The development of a mutually productive presence in a locally based cluster was not considered at all. The company's focus was towards immediate suppliers and clients.
Lack of control of strategic choices Wooltex management displayed an attitude that forces beyond the control of the company’s management govern the world market. Also, the belief was that a few international players were able to dictate the global conditions, and that Wooltex therefore lacked freedom of strategic choice. A pro-active approach was dismissed as desirable, but unrealistic and impossible.
Sense of despair There was a definite sense of despair. The statement that “none of the prices are good” for the company was possibly the best illustration of the pessimistic attitude of the senior management.

In summary, the quality of the strategy, structure and rivalry was poor.

Cluster

Wholesale and retail infrastructure Bulgaria’s wholesale and retailing infrastructure was one of the most important problems confronted by the company. The country’s infrastructure had a very limited and irregular ability to reach both internal and foreign markets.
Linkages with suppliers and clients The structure in which Wooltex operated before the 1990s had disappeared and almost nothing had replaced it. The indirect contacts with suppliers and clients were severed due to the disappearance of intermediaries. The management of the company was trying to develop contacts in an active manner, but no positive results could be reported in 1997.
Lack of other cluster linkages Aside from the lack of forward and backward contacts, the company was not in any active relationship with other members of the cluster, such as other textile firms, including producers of other textiles besides wool, service agencies, and knowledge institutions. The horizon of the management was very narrow not only in terms of time, but also in terms of partners.
The rest of the cluster was not well developed either, and links between potential partners were non-existent. The need for financing was dominant and everyone was trying to survive over the short term.
Underdeveloped financial sector The need for fresh financing could not be met by the underdeveloped financial sector, which was just emerging from a hyperinflationary crisis and had lost most of the confidence of the public.
Few partnerships with equipment suppliers The equipment, whose rehabilitation was of crucial importance for the long-term prospects of the company, could only be imported. The lack of connections and partnerships with producers of such equipment, especially local ones, decreased the competitiveness of the company.

Overall, the cluster elements had a negative impact on the competitiveness of Wooltex AD.

The general conclusion of the competitive analysis of Wooltex AD in 1997 was that the company was severely lacking in competitiveness and was not succeeding in using the relatively satisfactory basic production factors and in combining them with the other elements of the diamond. Possibly the most severe long-term problem of the company was the lack of strategic vision and the inability to develop marketing capacity and to discover and respond to demand.

Change - and the Diamond as of 2000

In December 1999 Wooltex AD underwent its third major change in a decade. After the demise of the socialist system, and the company’s privatization to a Bulgarian fund, Wooltex was acquired by a world leader in the textile industry from Italy. Thus it became one of the better examples of a privatized company that reaches a strategic investor after its formal sale by the government.

The Italian firm has a high reputation as a world leader in the industry (More in cotton than in woolen textiles. However, it tries to span the whole textile business.) It is a high-quality, differentiating company, which relies on variety and quality of products.

The Italian firm appears to have had several prominent reasons for its interest in Wooltex amongst which:

Workforce. When the Italians provided the capital necessary for renovation, the educated and experienced workforce became an important factor. This is a strong advantage of the firm.
Strong production system. Wooltex’ production needed fixing only at several “narrow” spots, which required a level of investment that was very considerable a Bulgaria company, but affordable for the Italians.
Production costs. Costs in Wooltex are generally lower in comparison to the other production facilities of the Italian firm; an important factor, especially combined with the quality of the work force.
VAT exemption. The Italian investors may have seen an opportunity to avoiding the imposition of VAT - completing the “cycle” as exporters-importers.
Diversification. Wooltex may have provided the Italian firm, which was not strong in woolen textiles, with an opportunity for diversification.

The new owner immediately launched a DM 50 million investment program – a sum greater than any that had been contemplated before by the Wooltex management. Divided into different steps and concentrated on different aspects of production, the program envisages both short-term improvements and long-term investments, including the construction of a new finishing plant, and the complete substitution of old equipment in several production processes.

The company has become visibly more pro-active in marketing terms, developing a website and broadening the product line significantly. A visit to the website makes clear that the company’s feeling for its history has changed, as one of the first things mentioned is Wooltex’s tradition as an heir of the first Bulgarian industrial enterprise. The new owner brought its clients with it, including more than 20 customers and good supply relations. Wooltex also started the process of adopting different international standards immediately after its acquisition by the Italian firm.

This change has contributed significantly to a marked improvement of the competitive potential of the company in less than a year, mainly by addressing its two fundamental problems: the lack of a long-term vision and the insufficiency of marketing abilities. These improvements can be observed from the changes in the competitiveness diamond of Wooltex AD, as described below:

Factors

Workforce The features of the workforce have not changed qualitatively after the acquisition.
Management The company has changed its management approach, with more attention to marketing and market research and better use of the available technical experience. Ownership is stable and new programs with clearly stated parameters and goals are being implemented.
Assets A much-needed rehabilitation of assets has begun. The 24-month rehabilitation project includes equipment replacements where bottlenecks used to occur, and the construction of a completely new finishing plant. The scale of the investment is quite large for the company’s size.
Raw materials Access to a stable and predictable supply of wool of appropriate quality has been achieved through the new owner’s contacts. However, no efforts have been announced for reestablishment of the domestic raw material base.
Transport and communications Domestic infrastructure is improving slowly in telecommunications and transport.
Power There are possible problems with power supply due to increases in prices and the lack of stability in the energy markets. These problems are due largely to delays in reforming the sector, where property rights are not yet established and significant turbulence may be predicted.
Capital Capital markets are developing very slowly. The stock market is almost nonexistent. The growth of the debt market is much more promising, after several firms have issued debt of relatively large scale (for Bulgaria) in 1999 and 2000, and the market accepted the issues favorably. The new owner has provided fresh access to capital.

In summary, the factor side of the diamond has improved significantly, but still exhibits weaknesses.

Demand

Continued export focus Wooltex' production is still dominated focused on exports, and domestic markets are only of secondary importance.

The company’s access to sophisticated world markets has improved rapidly after the acquisition by the foreign investor. The mother company has a well-established network of customers and mechanisms to penetrate different demand niches. Wooltex’ new clients includes 20 customers in the U.S.A., Europe (Belgium, Denmark, Italy, France, Germany, U.K) and Canada. These include several large and well-known customers.

Domestic demand Domestic demand remains weak and unsophisticated due to the low-income levels. Demand from the government for garments and products for the army remains low.
Customer information The quality of information available to the company about the needs and requirements of the final consumer has improved significantly.

With respect to the demand factors, there have been improvements in the ability of Wooltex to understand the market and to access international markets.

Firm Strategy, Structure, and Rivalry

Longer term focus The company’s strategic thinking has changed from a focus on short-term survival to a focus on investment and longer-term market presence. The company is carrying out a 24-month investment and rehabilitation program, which includes massive replacement of equipment and construction of a new plant.
Unclear strategy for the domestic market The company is still unclear about its domestic market strategy and intentions. The new owners are not obviously planning to move aggressively into the Bulgarian market.
No longer focused on low price The competitive strategy of the firm has shifted from a focus on low prices to a significant emphasis on quality and variety considerations. It is often stressed that the company can produce more than 300 different types of fabrics.
Market leadership There is active use of the new owner’s capacity as a market leader.

Overall, the strategic choices and situation of Wooltex has improved.

Cluster

Domestic wholesalers and retailers The wholesale and retail components of the cluster are improving, but are still of low quality. This remains one of the impediments to the development of a domestic presence by Wooltex.
Contracts with clients The company’s supply and placement contacts have improved, and can be considered as rich and stable for the international markets. Weaknesses continue to exist in the domestic market.
Initial cluster relationships beginning The company is only beginning to develop relationships with other members of the cluster, the most promising being garment firms. The rest of the cluster is still not well developed, and links between potential partners are just being established. The strategies of most firms in the cluster are still dominated by survival considerations.
Improved financial sector The financial sector is significantly more stable than before the crisis of 1996-1997, but is still developing and has many deficiencies.
Equipment supply Equipment can still only be imported

The strength of the cluster side of the competitiveness diamond has improved somewhat, but remains in overall poor shape.

The general conclusion of the competitive analysis of Wooltex AD as of 2000 is that the company has considerably improved its competitiveness, by addressing its major deficiencies in strategy and marketing ability after a change of ownership. There is also some improvement in the cluster and demand conditions. The rather bleak competitiveness of Wooltex AD in 1997 has changed dramatically, along with its prospects for future success.

This is not the real name of the firm.

This case was prepared by Georgy Ganev, Centre for Liberal Strategies, Sofia – a consultant to the Institute for Market Economics (IME) for the Bulgaria Competitiveness Exercise to be used for illustrative discussion only, and should not be used for any other purpose. It has been prepared from secondary information sources and interviews, and the author's own observation and opinion. The document therefore includes some subjectivity.

The name is fictitious.

Requests for the interview had been declined until a representative of the privatization fund, i.e. of the owner, could organize it and be present at the interview. Another interesting detail was the presence of a member of the board of directors of the firm, who was previously a member of the economic police. He did not take part in the interview, and did not present a business card. The beginning of the interview showed a certain lack of regard for tradition, as the information that one of the members of the interviewing team was a distant relative of the founder of the woolen textile industry in Wooltex’s home town was met with complete indifference.