Written By DEBOJYOTI GHOSH
From leader to challenger, Rupa & Company is shifting gears to reclaim its disruptor tag in India’s innerwear market.
Around the time Kolkata-headquartered innerwear and outerwear clothing manufacturer Rupa & Company set up shop, in 1968, the Indian hosiery market was dominated by unorganised players, barring a few strong local brands such as Dora, Asli Hira and Asli Sona. So much so that “everyone in the hosiery business then was talking about hira (diamond) and sona (gold),” Prahlad Rai Agarwala, the company’s 80-year-old chair – man and executive director, tells Fortune India. “So we decided to go with chandi (silver).”
Which translates to rupo or rupa in Bengali. The name, as everything else, was driven by a need to differentiate and yet belong, because it was a tough market. Brand Dora dominated, he recalls. “No hosiery store would sell anything else but Dora,” he says. To break through, they relied on two principles. Innovation, for one. In the early ’70s, for instance, Rupa launched elastic strap under – wear for men, a shift from the cotton rope string variety widely sold till then. Discipline and an undeterred work ethic, for the other.
Rai believes it is their never-say-die attitude that has got the company, No. 221 on the Fortune India Next 500 list this year, this far. Consider the challenges he faced upfront. Rupa first started selling its men’s vests in Patna, Bihar, a densely populated market with high demand for vests (baniyans). Men’s briefs and women’s innerwear followed a few years later, in the mid-’70s. “I would travel in general class coaches to Patna and most of the time would sleep in the narrow passage next to the toilet,” says Rai. The response time from stores—to give a nod to Rupa—was long, but, “despite that I would convince shop owners. Slowly we got a grip of the market and moved to other states.”
The growth is indisputable. Today, Rupa & Co., with a total income of ₹1,222.27 crore for FY19, has a pan-India presence through a distribution network of 125,000 retailers, more than 1,200 wholesale dealers and over 300 sales and marketing professionals. Rupa remains a family-owned enterprise with promoters’ holdings at 73.28% as of December 2019. It manages a portfolio of about 18 brands and over 8,000 SKUs (stock keeping units) across ranges for men, women, and children; at the back end, it has manufacturing facilities in Bengaluru, Tirupur in Tamil Nadu, Ghaziabad in Uttar Pradesh, and Kolkata in West Bengal.
Leading by example is Rai, who hasn’t slowed down even five decades after founding the Kolkata-based knitwear company. Always well-briefed and punctual, he follows a structured schedule of about eight hours of work a day. This discipline, he says, he inherited from his father. “During our college days, we have seen our father [Baijnath Agarwala] opening his hosiery shop sharp at 9 a.m. without fail,” says Rai’s younger brother Kunj Bihari (K.B.) Agarwala, 70, managing director, Rupa & Co. “Once my elder brother (Rai) opened the shop at 9.15 a.m. and our father came to know about it… the next day, he [their father] reached the shop at 8.45 a.m. to open it on time. He didn’t say anything to my brother but conveyed the message that punctuality cannot be compromised on.”
This is the classic entrepreneurial spirit inherent in first-generation business owners like Baijnath Agarwala, who opened a hosiery store in the 1950s; called Prahlad Rai Ramavtar, it was located on Kolkata’s Harrison Road (now Mahatma Gandhi Road). Soon after, in 1957, Prahlad Rai, his eldest son, started Binod Hosiery, a small trading business, while still studying for his B.Com at the University of Calcutta. “I was running that business till Rupa was launched in 1968,” says Rai, whose siblings (Kunj Bihari and Ghanshyam Prasad) joined the business later. The middle brother, Ghanshyam Prasad Agarwala, 74, is the vice chairman of the company but currently devotes more time on corporate social responsibility (CSR) activities. The next generation of the family, which is now part of Rupa’s management, has absorbed the ethos of their elders. That is holding them in good stead as they try and navigate a more competitive, complicated market that does not allow for complacency.
Kolkata-based Agarwals who own Rupa & Co.
Rupa had a strong hold on the knitwear industry till the late 2000s. So much so that it was even named the country’s largest manufacturer of knitted undergarments for five years in a row till 2010 by Limca Book of Records. Its success led it to list on the Calcutta and Jaipur stock exchanges in 1995-96, followed by the NSE and BSE in 2010-11 (where it currently trades at ₹212.70 and ₹213.50, as of February 25, 2020, respectively).
During that time, Rupa wore the disruptor tag proudly, with new products and an emphasis on quality. For example, from the outset, German knitting and dyeing machines were used for manufacturing and hi-tech Swiss machines for finishing the products. “Before we launched Thermocot [Rupa’s thermal wear brand], similar woollen material thermals were available in the market. But we first launched a television commercial about two decades ago on thermal wear to create awareness about the category,” cites K.B. Agarwala as an example of the disruption, adding, “We first launched knitted bermudas [Bumchums] for men in the early ’90s. Prior to that, it was mostly knickers with a cotton loop.”
Between the mid-’90s and late 2000s, it launched successful economy- to premium brands such as Macroman, Frontline, Air, Softline, Jon, and Bumchums. This set the tone for an aggressive advertising and promotional push backed by celebrity endorsements. Among the first was Aishwarya Rai Bachchan in 1988-89, even before she became Miss World in 1994. Since then, it has built an A-list including actors Saif Ali Khan, Sanjay Dutt, and Hrithik Roshan, to begin with, and now Ranveer Singh, Ranbir Kapoor, Sidharth Malhotra, and Anushka Sharma. The end of the noughties, however, saw Rupa lose its mojo and leadership status in the process. Industry experts say that the structured and execution-centric work ethic attitude morphed into a glass ceiling for the Kolkata-headquartered company.
“Leaders become sceptical towards change when something has worked for many years in the past. That bias perpetually stops them from taking that risk. That’s when they start missing consumer trends and the underlying shifts in the market,” says Ankur Bisen, senior vice president, retail and consumer products, Technopak. This gave room to other players who started upping their market share aggressively. Prominent in that regard is its cross-town rival Lux Industries, No. 237 on this year’s Fortune India Next 500 list. Founded by Girdhari Lal Todi in 1957, Lux, much like Rupa, began as a fledgeling business riding the wave of the changing dynamics of the innerwear market in India.
The company has grown from strength to strength over the last two decades, offering a range of over 100 products across 15 brands for men, women, and children and over 5,000 SKUs across its existing range of products. With six manufacturing facilities including four in West Bengal, and one each in Tirupur and Ludhiana (Punjab), Lux exports its products to Iran, Iraq, Kuwait, Bahrain, Saudi Arabia, Singapore, Canada, Australia, and the U.S., among others. In FY19, the company’s exports jumped to ₹136 crore from ₹105 crore in FY18—this is expected to go up to ₹175 crore in FY20.
Though the mass and economy segments in the men’s innerwear space form a bulk of both Lux and Rupa’s market shares, the former has managed to realise the potential of celebrity brand ambassadors better, especially in a price-sensitive market with a large rural base, say experts. Devangshu Dutta, chief executive of retail consultancy Third Eyesight, feels to gain any sort of premium over comparable products, a company needs to substantially and consistently invest in branding. “Companies that do so are able to lead the market.”
Lux has invested ₹380.56 crore in brand building in the five years ending FY19, according to data from its annual report in the last fiscal; of this, ₹90.89 crore was on advertising alone. This is an imperative since India’s innerwear market—pegged at ₹27,931 crore last year, and expected to grow at a CAGR of 10% to an estimated ₹74,258 crore by 2027—has altered significantly since the mid-2000s. Driving that change is current leader Bengaluru-based Page Industries, the sole licensee for underwear maker Jockey in India. “Jockey lifted the entire average price of the innerwear segment. There was a fundamental shift in price point. And the market is ready to pay a higher price. Page Industries created new rules in the market [through] differentiation of products. Today companies can’t get away with selling basic products,” says Bisen of Technopak.
In 1994, Sunder Genomal, managing director, Page Industries, along with his two brothers, set up the company in India for manufacturing, distribution, and marketing of Jockey products. But they have been in the innerwear business since 1959 when Genomal’s father set up their first factory in The Philippines where they were also Jockey’s exclusive licensee. (Page Industries is also the exclusive licensee of swimwear brand Speedo in India.) Today Jockey has a presence in over 55,000 outlets across India. In FY19, the company through its authorised franchisees opened 161 exclusive brand outlets (EBOs) including nine Jockey Woman outlets taking the total number of EBOs to 620. At present, its installed capacity is spread over 2.40 million sq. ft. at 14 locations in Karnataka and one in Tamil Nadu.
THE PEOPLE IN CHARGE at Rupa are paying heed to the need to keep up. “Rupa and Lux were caught off guard and they have realised that they need to catch the bus that they missed earlier. That’s when they started launching more premium products,” says Bisen. Like in 2009, Rupa introduced the Macroman M Series, a premium fashion line of innerwear and sportswear for men. Hrithik Roshan was roped in as brand ambassador; the brand Euro was also added to the premium category. As another sign of staying with the times, the Agarwals started Oban Fashions Private Limited, a subsidiary of Rupa & Co. that operates the Indian business of international brands under a licensing model. In FY17, Oban Fashions acquired exclusive licences for brands FCUK from French Connection Limited, and Fruit of the Loom from New York-based Fruit of the Loom Inc. (a wholly-owned subsidiary of Berkshire Hathaway) to develop, manufacture, market, and sell innerwear and related products in India. Rai’s grandson Siddhant Agarwal currently looks after this business.
“In a bid to enhance the share in the growing premium menswear segment, the company undertook various licensing of international brands,” says ICICI Direct’s research report on Rupa from August 2019. But because of intense competition from brands such as Van Heusen (from Aditya Birla Fashion), and Calvin Klein (Arvind Fashions is the Indian licensee), the management has not been able to scale up its business according to expectations, the report says. “Higher incentives offered by competitors have negatively impacted the offtake from dealers.” If the company’s pace seems frenetic, the reason is as K.B. Agarwala puts it: “There is a lot of competition in the market. Hard work is very crucial to stay ahead.”
The second generation is on board too. “Offering good quality products at an affordable price is the most obvious [move] today. So we have been innovating on our product line constantly including shapes, patterns, fabric, and finish,” says Rajnish Agarwal, 42, president, Rupa & Co., who focusses on brands such as Euro and Bumchums.
These have been some “intelligent” moves by Rupa to ramp up its premium segment, say analysts. Especially, as Third Eyesight’s Dutta points out, since the market is still evolving with considerable headroom for growth. “Whether existing companies can successfully manage to straddle the mass-, middle-, and premium segments simultaneously remains to be seen… since the segments have quite distinct needs not just in terms of pricing but also product design, quality, and service levels,” he adds. Pricing, distribution, and on-shelf availability are key drivers for this category.
With that in mind, Rupa has aggressive plans for modern retail trade that includes EBOs, increasing presence across e-commerce platforms, and large-format stores such as DMart, multi-brand retail chain V-Mart Retail, and Metro Cash & Carry. It currently has four company-owned EBOs in the eastern region. It plans to open about 100 exclusive brand outlets across the country in the next two years, through the more economically-viable franchisee model. “In the past, we opened large-size EBOs (500- 600 sq. ft.) but we realised that economically it is not a viable model because the average ticket size (₹150-₹200) of the product sold is too small to support the maintenance of a large outlet. Now we are looking at a store size of 250-300 sq. ft.,” says Vikash Agarwal, 43, president, Rupa & Co.
Another positive sign is the increased potential in the premium- to mid-premium segments. For Rupa, a strong player in the mid- to economy category, wholesale has been about 70%-80% of its total business. But the margin for the economy segment in innerwear is about 11%-12%, while the premium category commands about 18%-20%. “Now with the shift towards the premium category we can expect better profit margins,” says Vikash.
Rupa also wants to improve its contribution from exports, which is currently a small percentage of its turnover unlike competitor Lux Industries. “We intend to make it about 10% of the turnover in the next three to four years. The response is good and hopefully we will achieve the target. Currently, we export to Myanmar, Algeria, Middle East, Nigeria, Ghana, Vietnam, and Indonesia,” adds Ramesh Agarwal, 50, whole-time director and CFO, Rupa & Co.
From market leaders to now challengers, Rupa—and Lux—seem to have slipped into their new roles with confidence. Because, says Bisen, “the last 15-20 years have seen enough of stiff learning curves for these brands to understand what works in the market now and how they need to be on guard and continuously improve to seize new opportunities.” More importantly for Prahlad Rai Agarwala, what Rupa has on its side is “the culture of family discipline”. No one knows what’ll happen next, he says, but “that [the ethos] is still going strong and is still intact to run the business”.
(This was originally published in the March 15 – June 14 special issue.)