Denim jeans are perhaps the biggest fashion connect between every section of society, from common workers on the street to elite celebrities we all love to copy. Denim remains an unfathomed enigma, which has kept designers, retailers and manufacturers on their toes for decades as trends fluctuate, while demand continues to increase. What is new is that while demand has stabilised in traditional markets, emerging markets like India are exploding many local labels and also making good headway. There are success stories both in the export and domestic markets, with each having their own niches and constraints…
There have been many debates on why India has not developed into an integrated denim chain for the international market despite having a very strong denim fabric base. Buyers are almost unanimous on the fact that the biggest constraint to manufacture jeans in India is ‘cost’, not ‘skill’ levels. In fact, most of the jeans exporters in India are working in the high value segment where competitive FOBs are not the deciding factor.
Buying extensively from India, brands like Tommy Hilfiger, Diesel, Levis, Lee and UCB are getting their value range manufactured in the country. The specialisation of most of the manufacturers is detailing in stitch and style, like piping on the waist bands, trimmings on edges, multiple stitches, five hole stitches, fabric lining on edge folds and embroidery, to name a few. Also, most of the units have sound washing facilities to support different washed looks in line with international trends.
“It is all about who your customer is and while Indian jean manufacturers are known for product development skills, flexibility of quantities and handling headachy orders, basic washed five pocket jeans is not India’s forte,” says Roopak Malik, Director-Textiles Sourcing Limited. Currently, buying his denim requirements out of Bangladesh and Africa, as his customers are very price competitive, Roopak argues that the whole pricing of a pair of jeans right from the fabric stage is not conducive to basic jeans production. “A standard washed denim from an Indian Mill costs around Rs 150 ($4-5) a metre in India; the same fabric is available in Bangladesh for $2.4. Add to that the CMT cost which is around $16-18 per dozen in Bangladesh and around $25-30 per dozen in India. On final costing, a pair of jeans which works out to $5-7 in Bangladesh would cost a buyer over $10 in India,” he argues.
What is interesting is that cost is higher due to many reasons… “While many feel that our CMs are higher primarily because of cheaper labour cost in other neighbouring countries, the fact is that we also have added cost in the washing stage as environment norms in India are very stringent.
ETPs have to be installed and run strictly within those parameters, which is an added cost not all buyers are willing to pay for, though ironically all of them promote clean environment,” says Neeraj Varma, VP, Global Sourcing, Gokaldas Images. Among the first companies to invest in jeans manufacturing, the company has 20 years of experience working with a state-of- the-art unit from cutting to washing.
Some experts feel that with environmental and social pressures being brought to bear on the jeans wear industry following reports of toxic pollution leaking from plants and contaminating water supplies in China, there is going to be a strong move to produce 100% organic cotton jeans or invest in new production technologies. “The movement towards safer and more environment-friendly production could be an advantage to India, but then we do not have the capacities to meet demands of most global denim manufacturers,” argues Neeraj. Gokaldas Images has an installed capacity of 150,000 jeans per month, which is among the largest in India.
In fact, it is very difficult to calculate the real capacities available in India for denim wear because only a few companies have dedicated lines for jean manufacturing, with most of the companies operating on flexible lines and using the same machines for other products when orders for jeans are not in hand. The few companies that do have dedicated lines include FFI, LT Karle, Gokaldas Images, Pearl Global, Arvind Exports, Raymond, Shahi Exports, Orient Craft, India United Mills, Alrkyan, Unitex and Prateek Apparel. And not all of them are completely dedicated to exports!
Arvind has a unit in Bangalore which is into export of denim jeans with an installed capacity of 600,000 garments per month. The division works with brands like Gap Inc., Kohls, Patagonia, American Eagle, H &M, Next, Energie, Pepe and Mustang to name a few. All these brands are looking at the value segment and even Gap, which has shifted most of its sourcing to Bangladesh, is still sourcing 15 percent of its total requirement, which is in high-value, from India.
Having the advantage of fabric base, producing 40 million metres a year of denim fabric, Suryalakshmi Cotton Mills, which entered the garmenting segment in 2006, is manufacturing 200,000 denim bottoms per month of which 55 percent is exported to buyers like Levi Strauss, Jones Apparel and Otto Germany, all of whom are catering to the mid-market segment. “India is not on the global denim wear manufacturing map mainly due to low interest by the garment industry in building large capacities of denim garments. Unless there are big producers of denim garments, we will have difficulty in making an integrated supply chain,” says Paritosh Agarwal, Managing Director, Suryalakshmi Cotton Mills Ltd.
In the interim, at the price that India is offering jeans, it is more into the fashion denim segment with the EU being a bigger market for the country, as Europe is working on smaller quantities with higher value differentiation. Yet, the GSP advantage that Bangladesh enjoys in the EU takes a lot of European business to Bangladesh, more so now as the EU struggles to retain shoppers in a tight economy. According to a market report, demand for jeans should rise quickly between 2012 and 2018. The report also predicts that premium jeans wear, the segment most severely hit by the downturn, should recover after four slow years as the US returns to economic growth with Western Europe remaining stable.
For India, the pending FTA with Europe is a major driver for growth in denim in the future. “When the FTA comes through, we will be cheaper than Turkey, which on cost is still more expensive than us, but enjoys duty free access into Europe and is known for high-value washes that India is now doing. This will create a whole new market segment for us,” says Kishan Kumar, MD Induro Lifestyle Resources, which is manufacturing 10,000 jeans per month for VF Jeans. Though the company was initially into the export market, it is now concentrating on the domestic market, as business has slowed down over the last few years in the international market.
Sensing huge opportunities ahead post FTA, Prateek Apparels is looking for growth in this segment and is exploring options for a JV with a Turkish Company for Jeans manufacturing. “We can expect a price advantage of 30% when the FTA goes through. Although today European buyers are looking at Turkey for products similar to what Indian are offering, as the price difference of around 3% in not enough to overlook the proximity advantage, post FTA the difference will be too much to ignore,” reasons Sanjay Dalmia, MD, Prateek Apparels. Known for product development capabilities, Prateek Apparels is looking to acquire techniques and design capabilities that the Italians and Japanese have, which make their jeans stand way above those of other destinations. “The real secret in denim is not the stitching, it is the styling, detailing and washing innovations and we are determined to invest in technology and learn to master the art. Today, Bangladesh is confident in jeans not only because of their CMs, but also because of the huge investments in processing denim. This is the direction we are looking at and we want to be the best in this category in the next few years so we can compete in the global market with brands looking at FOBs of over Euros 15,” says Sanjay.
Domestic Market an attractive option…
In the meanwhile, many companies have shifted gear from export to domestic, as the market segment is continuously on the growth path. One such company is Mumbai based Sweeton Silk Mills, which is producing 25,000 jeans per month and concentrating on varied washes to tap the domestic market. “We started with exports to Australia and South Africa, but now we are working exclusively for the domestic market and we find that it is much easier to handle local brands as discussions and changes can take place immediately, so there is no delay in work; also, with the international market seeing a slowdown, the expanding Indian market is a huge opportunity,” reasons Navin Jogani, MD, Sweeton Silk Mills.
Today, the Indian market is a large structured industry growing at about 15-20 percent a year, giving international brands like Levis, Pepe Jeans and Wrangler steady growth over the last few years. Now many global brands are increasing their footprint in India like Mustang, Calvin Klein, Guess, Mango, Zara and Marks & Spencer. Many have strategically introduced denim jeans at the entry level to attract first time consumers. Levis introduced its low-priced Signature brand in India a few years ago and has shown high growth in this segment. What is interesting is that the basic cost still works out the same for the domestic market but $10 (Rs 700) cost in India translates into a retail price of around Rs 2,000, which is a big draw.
Alrkayan Apparel and Exports, a Mumbai based jeans manufacturer, has recently invested Rs 32 crore to double capacity to 200,000 pieces per month to cater to both the international and Indian market. The 20-year old Alrkayan, which is known for its washing ability, is manufacturing for designer labels in Europe like Unnati Moda (Spain), Ganesh (Italy) and GS Good (UK); has its own domestic brand and is also manufacturing for Pepe Jeans, Parx, Killer, Spyker, Raymond and Westside. “The demand in the Indian market is very different from the international market and though we follow international trends, we change them according to the Indian fashion mindset,” says Prabhakar Shetty, MD, Alrkayan.
A leading name in the Indian domestic circuit, Numero Uno, manufacturing 50,000 jeans per month has invested heavily in technology and latest washing equipment to give even the best of international brands a run for their money. “This is the country which is growing and accepting newness, so we need to be innovative even if we are coming from a basic five pocket background. Of course, washes have played a big role, and our in-house product development team, comprising of designers, category managers and merchandisers are constantly looking to create new finishes and detailing,” avers Narinder Singh, MD, Numero Uno. In its commitment to be fashion forward, Numero Uno is in the process of importing a machine which is second in the world and first in India called the laser Nano, which will take laser into retail space for the experience of a customised laser treatment onto the jeans.
Indore-based Sandeep Jain, Director, Chandan Garments, is very upbeat re the potential of the local market. “Denim is not going out of fashion for at least the next five years and there are still many unexplored two tier three tier markets that will multiply the opportunities,” he says. The company is currently producing 25,000 jeans per month, but can do more if required as the company has recently gone in for expansion. Though Sandeep is sure of market growth, he does warn that as demand surges, more players are likely to enter the fray and pricing will be a differentiator going forward.
Some Indian manufacturers have already anticipated the direction and are looking at more emerging markets for growth. “We have a brand called John Noble, which is selling in India, Sri Lanka, UAE and Africa. The effort is to give good fit and quality stitching and though the traditional markets are difficult to enter, young markets for Jeans are our target markets for growth,” says Jatin Gala, Director, 1 Up Clothing Co. With a manufacturing set up in Daman, 1 Up Clothing Co, which produces over 50,000 jeans a month, has a flexible set up to offer minimums as low as 180 pieces per colour. With many more products in its portfolio, buyers find sourcing from the company a complete experience.
