Silver is the new gold

MANILA, Philippines - As prices on the global market continue to reach new highs, gold has become almost inaccessible for manufacturers, retailers, and buyers of precious metals and jewelry. Mia Faustmann, president of the Guild of Philippine Jewellers and CEO of 7 Castles Inc., says, “It will be very cutthroat soon because gold is so expensive, the companies who don’t have a solid customer base will still offer fine jewelry design but using silver and cubic zirconia instead of gold and diamond. Silver is the new gold.”

At the biggest jewelry fair held annually in Hong Kong, Mia’s daughter, Sanya, noted interesting inquiries for the company this year. With the world as its market, Filipino-owned 7 Castles Inc. produces clean, wearable designs that are relatively timeless. “Some items still get asked about even if we haven’t put them out in a long time, so that’s quite good,” adds Mia. Fine jewelry collectibles like charms and bracelets are preferred by export buyers from Europe, while locally (through 7 Castles Inc.’s subsidiary Michelis), the fast-moving items are earrings, charms, and pendants. All are handcrafted with 95 percent silver, higher than the international standard of 92.5 percent for sterling silver items.

7 Castles Inc. was established in 1999 to manufacture and subcontract the export of sterling silver jewelry. While some analysts have predicted decreased expenditure for non-basic items in these financially-challenging times, the company is glad to report increased growth by almost 70 percent. “Fortunately, our export client has a record of doubling sales every time there’s a recession,” says Mia. “People still have to give gifts. Instead of spending so much, they buy something else just as nice but costs a little less. So they make their gift-giving money go around further.”

The growing global demand for silver jewelry bodes well for the export company, but this has quite an impact on working capital requirements. About three years ago, when its UK-based client started growing, 7 Castles Inc. decided to take out a loan from Plantersbank. Purchase orders have bulked up from approximately $1 million in the year 2000 to $7.2 million last year, and internally generated funds were getting to be inadequate in servicing the huge working capital requirements of silver. “There would be distinct bulges from around June to October when we’re preparing Christmas inventory. We really need assistance for that.”

According to Mia, Plantersbank was the only bank that took notice of the company and helped finance its working capital. For her, it meant that the bank believed in her company’s ideals, which is why 7 Castles Inc. has remained with Plantersbank. The Faustmanns report having very good experience in their almost four years under the Small and Medium Enterprises loan program of the bank. “This year, we set a target of $8.65 million.”

By the end of the third quarter, 7 Castles Inc. is already 95-percent booked. “In terms of shipment, we’ve already shipped 75.9 percent as of third week of September. We’re only 73.1 percent of the year so we’re well on time to achieve our budget,” Mia discloses.

Today, 7 Castles is a mother enterprise, having developed in-house brands like Michelis, which offers the high-end local market updated versions of classic selections, to balance the company’s export business. As they strive to meet purchase orders, the owners set out to reorganize the company to make operations more efficient. The company maintains a head office in Marikina, with some 60 people doing mainly backroom work, product development, and sampling; an office for local brands in Makati City; and subcontractors in Antipolo and Clark, which employs about 600 people: “We changed the system of production and split it up into line work to get more items out.”

Sterling Silver vs. Stainless Steel

Dealing with highly changeable exchange rates between currencies and escalating prices of precious metals are all in a day’s work for jewelry export enterprises like 7 Castles Inc. but recently, a curious (make that potentially deceitful) claim has been making the rounds of shops, homes, and offices, perhaps worldwide. It is the mistaken notion that stainless steel is more valuable than silver.

According to Mia, store clerks of Michelis have encountered people of means coming into the shop, insisting, even arguing, that stainless steel — the metal present in appliances, bathroom sinks, and cookware — is much more precious than it actually is. This news is exasperating for someone like her who has been an earnest manufacturer, exporter, and collector of sterling silver items for many years now: “Wala namang sterling silver na kaserola… except maybe in museums!”

Another issue is that silver-plated metals are being passed off as having the same worth as sterling silver (the term “sterling” connotes silver items of the highest quality). Sanya points out, “Consumers see the colors and they don’t know any better.” Mia agrees, “The consumer is cheated front-and-center!”

Honesty is a crucial ingredient to stay afloat and succeed in the bigger business arena. “Quality…service,” Mia thoughtfully considers her advice to other entrepreneurs. “Admit your mistakes and look for solutions instead of trying to hide away from the mistakes.” We’ve made mistakes, we’ve admitted them, made good, and we’ve been able to keep the client. At the end of the day, the customer is always right.” Weighing what one might lose in argument today against what one expects to gain in the long term, helps to put the matter into perspective.

There are many sectors that can still be improved on the domestic front, specifically in the areas of business registration, manufacturing, banking rates, and customs handling, to enable the business-driven Filipino to become more globally competitive. Apart from creating sterling silver things of lasting beauty, 7 Castles Inc.’s responsibilities and rewards in the course of doing jewelry export business are manifold: creating jobs for local workers, sourcing materials from within the country, and helping to bring the Philippines in line with the rest of the world. Mia enjoins other Filipinos, “We need more entrepreneurs!”