Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023

Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.

One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.

“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”

One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.

Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.

The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.

The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.

The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.

Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.

As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.

“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.

As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.

As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.

Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.

“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.

Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.

As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.

With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).

The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.

(Published in Economic Times)

Over the past five years, legacy players have made a slew of investments in D2C startups. 

Marico has acquired men’s grooming brand Beardo, beauty brand Just Herbs and breakfast brand True Elements. Similarly, Emami acquired vegan cosmetics brand Brillare Science and grooming brand The Man Company. It recently picked up a minority stake in nutrition company TruNativ. Colgate-Palmolive and Reckitt both hold minority stakes in Bombay Shaving Company, whereas Wipro Consumer Care has invested in The Ayurveda Company. ITC has invested in baby and mother care brands Mother Sparsh and Mylo.

Devangshu Dutta explained the reasons behind the trend of larger FMCG companies acquiring D2C brands.

Devika Singh, Moneycontrol 

29 June 2021 

Post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers, suggest experts.

Every one in two urban households are now using sanitisers, as per data from Kantar.

The pandemic has triggered a gold rush in the health and hygiene sector, particularly sanitisers – even if temporarily.

A severely underpenetrated category in the pre-pandemic period, sanitisers have witnessed massive adoption amongst the consumers since March 2020.

According to data from Kantar, annually, before the pandemic struck (March 2019 – February 2020) hand sanitiser penetration was about 1.2 percent; on an average in a month only 0.1 percent of the urban households bought the product.

However, during the first 12 months of the pandemic, the category reached nearly 50 percent penetration, a quantum leap.

It means everyone in two urban households are now using sanitisers, as per data from Kantar, the world’s leading data, insights, and consulting company.

Overall, the hygiene category had witnessed a huge spike in sales as the first wave of the COVID-19 pandemic struck the country in March last year.

Although the sales declined as the cases subsided, the demand jumped up again with the second wave of the pandemic.

Several companies had made a beeline for the category and joined the sanitiser gold rush.

According to data from Kantar, as many as 350 brands of sanitisers were launched in the first three months of the pandemic.

Consumers are also buying more products in the hygiene category such as vegetable cleaners and surface disinfectants.

Data from Kantar shows that vegetable and fruit cleaners now have a penetration of 2 percent and surface disinfectants 1.5 percent.

“For a category that is driven by a limited number of brands and has not even been there for a year, it is a huge success,” said K Ramakrishnan, MD – South Asia, Worldpanel Division, Kantar.

Though the category overall has seen an increase in demand, industry and experts expect only a few big brands with a strong legacy in the hygiene segment to sustain in the long run.

Hence companies such as Marico have already started deprioritising the category.

“Of late, we have realised that it (sanitisers) is more of a tactical opportunity for us to provide consumers what they needed then,” Pawan Agrawal, CFO, Marico, said.

“These products do not fit into our scheme of things as we understood that consumers will go back to the legacy brands with strong equity in hygiene, and hence three-four brands will have a larger play in the segment,” he added.

Marico, hence, has decided to not make any fresh investments in the category going ahead.

Raymond Consumer Care, which sells sanitisers under its brand Park Avenue, too, has similar plans.

“We believe post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers. Given this context, we will maintain strategic presence in the chemist channel, but this segment will not be a priority,” admitted Sudhir Langer, CEO – Raymond Consumer Care.

Other companies such as CavinKare plan to focus on flagship products such as handwashes.

Said Raja Varatharaju, GM Marketing – Personal Care, CavinKare: “As the demand for sanitisers continues to slow down, our core focus will remain on offering a bouquet of products under the health and hygiene portfolio as we move forward. We will increase and strengthen our focus on hand wash, as it is a flagship product in our portfolio.”

Reckitt’s Dettol, ITCs’ Savlon and Hindustan Unilever Limited’s (HUL) Lifebuoy are some of the top brands in the health and hygiene space, which are likely to benefit from this trend in the long run, indicate experts.

Consumers associate certain products and categories with certain brands and are inclined to buy from them, said Devangshu Dutta, Chief Executive at retail consultancy, Third Eyesight.

Hence, companies, which saw in the pandemic the chance to tap the short-term opportunity, do not want to focus on it any longer.

Source: moneycontrol

T. Surendar, The Morning Context

25 March 2020

Standing on the porch of the Grand Hyatt Hotel in Mumbai suburbs, Diwakar Vaish, co-founder of Noida-based AgVa Healthcare, was trying to catch the attention of software industry executives. This is at the annual conference hosted by IT trade body Nasscom. Vaish’s stall was a side-show for startups to exhibit digital technologies in the healthcare sector.

On a cool, breezy February day, the atmosphere was nothing as grim you would expect in a hospital emergency ward. Vaish’s rig, comprising an iPad-like device on a short steel column mounted on wheels with dangling wires, was a cost-effective version of a ventilator used in critical care. There wasn’t much excitement about his solution, as few executives really understood the medical problem he aimed to solve.

Today, a robotic engineer by training, Vaish is super busy.

It is not easy to get him on the phone, as AgVa’s ventilator is suddenly in demand from all parts of the country. The company is running three shifts fulfilling orders, which have been pouring in since it became apparent that Indian hospitals did not have enough ventilators for patients rendered ill by the novel coronavirus.

Unwittingly, the need for ventilators has once again drawn attention to India’s medical devices industry or the lack of it. So much so that Anand Mahindra, chairman of the $17 billion Mahindra group, which has interests in automobiles, software and resorts, said that he was finding ways to manufacture ventilators in his factories. It isn’t easy putting together a ventilator, not when you are racing against time, but Mahindra is a hardy businessman with deep pockets, and maybe, just maybe, he will succeed.

In many ways, the Indian medical devices industry is an anomaly. India has a space programme, a nuclear programme, it is among the few countries that has developed patented medicines and a low cost version of anything from power turbines to trucks but when it comes to medical equipment, it fares poorly.

India is also the biggest supplier of FDA-approved drugs to the US, the biggest pharmaceutical market in the world. Even as the Indian market for medical equipment has grown at double-digit rates in the last five years to Rs 1 lakh crore, two-thirds of its needs are met by foreign companies such as Philips, GE Healthcare, Siemens and Abbott.

Import domination is all pervasive extending to even non-critical but common equipment like sonography machines, dentistry chairs and diagnostic equipment. Less than five Indian companies had revenue of more than Rs 500 crore a year and 90% were classified as small scale, with annual revenue less than Rs 10 crore. The biggest player in the domestic market is the Rs 1,300 crore Mumbai-based Transasia Bio-Medicals, which makes in vitro diagnostic solutions that are exported to Western markets too.

“For a long time, the government was the biggest buyer of medical equipment and they always preferred imported equipment. That meant that it was not lucrative for local entrepreneurs to invest their capital in the sector,” says G.S.K. Velu, managing director of Trivitron Healthcare, which makes and exports imaging equipment.

The proliferation of private hospitals in the last two decades also did not change things much. With well-entrenched foreign players and a liberal import duty structure to make available the best facilities in India, there were few local companies of scale who could invest big money to fend off competition. AgVa’s ventilators were priced at a fifth of the ones sold by the foreign competitors, yet it couldn’t make inroads into big hospitals. “It’s almost as if our cost was our barrier to sell. Being critical equipment, customers had a lot of inertia to even place test orders,” says Vaish.

Thanks to meagre domestic manufacturing. India also could not set standards of equipment specifications to suit the local needs. It had to tweak its own equipment standards to fall in line with those of foreign manufacturers. For example, in the US, defibrillators used to restore heartbeats by giving shock to patients had to last at least two shock cycles. But, in India, since access to hospitals and medical care was not as easy. patients arrive long after they have suffered heart attacks and Indian doctors use defibrillators for even 10 cycles at a time.

The local standards did not specify this need and as a result many imported defibrillators were not of much use in Indian conditions. “We still don’t have an act to regulate medical devices and it falls under the drugs category. Everything is still borrowed from the West,” says Aniruddha Atre, co-founder and director of Pune-based Jeevtronics Pvt. Ltd, which makes the world’s first hand-cranked defibrillator.

Trivitron’s Velu says that the share of locally produced medical equipment will increase within the next decade. This will be a combination of help from the government which will enforce more domestic manufacturing by overseas firms and increased entrepreneurship.

There is also a view that more global manufacturing will come to India, as firms de-risk their strategy of manufacturing everything in China. “In the past, when labour costs went up in the Chinese west coast, Indian garment companies were beneficiaries of increased orders even though other countries like Bangladesh and Vietnam too got a big share of it. The availability of labour and ability to scale up operations is something global players look for and to that extent India will always be an important outsourcing destination,” said Devangshu Dutta, managing partner at consultancy firm Third Eyesight.

The trend started even before the COVID-19 pandemic as companies in the US began to brace themselves for a trade war with China. For example, a US-based company has started sourcing Indian tyres at a 10-15% premium as it wants to diversify its risk from China. “India has witnessed a surge in mobile phone manufacturing. This is bound to increase the ecosystem in electronic manufacturing which in turn create ecosystems for industries like medical equipment,” says Sharad Verma, senior partner who oversees industrials at Boston Consulting Group.

The timing is also right for increase in local manufacturing, argues Verma. One of the important criteria for that is viable domestic consumption. It’s happened time and again in sectors like automobiles, mobile phones and more recently in manufacture of metro bogies after domestic consumption has reached a scale where it makes sense for companies to set up manufacturing facilities. “The industry is no longer small and the incidence of medical technology will only go up from here making it viable for even foreign companies to look at a manufacturing set up in India,” says Verma.

It will be interesting to see how it all plays out. The sector, so far, hasn’t seen much by way of private equity or venture investment. The most prominent one was an investment by a Morgan Stanley fund and Samara Capital in Surat-based Sahajanand Medical Technologies and Fidelity Growth Partners’s investment in Trivitron. But starting 2014, a government fund run by the Biotechnology Industry Research Assistance Council-incubated several companies who are slowly bringing their products to market. As some of these products hit home, especially in the wake of COVID-19, the action is definitely bound to pick up.

(published in The Morning Context)

The apparel retail sector worldwide thrives on change, on account of fashion as well as season.

In India, for most of the country, weather changes are less extreme, so seasonal change is not a major driver of changeover of wardrobe. Also, more modest incomes reduce the customer’s willingness to buy new clothes frequently.

We believe pricing remains a critical challenge and a barrier to growth. About 5 years ago, Third Eyesight had evaluated the pricing of various brands in the context of the average incomes of their stated target customer group. For a like-to-like comparison with average pricing in Europe, we came to the conclusion that branded merchandise in India should be priced 30-50% lower than it was currently. And this is true not just of international brands that are present in India, but Indian-based companies as well. (In fact, most international brands end up targeting a customer segment in India that is more premium than they would in their home markets.)

Of course, with growing incomes and increasing exposure to fashion trends promoted through various media, larger numbers of Indian consumers are opting to buy more, and more frequently as well. But one only has to look at the share of marked-down product, promotions and end-of-season sales to know that the Indian consumer, by and large, believes that the in-season product is overpriced.

Brands that overestimate the growth possibilities add to the problem by over-ordering – these unjustified expectations are littered across the stores at the end of each season, with big red “Sale” and “Discounted” signs. When it comes to a game of nerves, the Indian consumer has a far stronger ability to hold on to her wallet, than a brand’s ability to hold on to the price line. Most consumers are quite prepared to wait a few extra weeks, rather than buying the product as soon as it hits the shelf.

Part of the problem, at the brands’ end, could be some inflexible costs. The three big productivity issues, in my mind, are: real estate, people and advertising.

Indian retail real estate is definitely among the most expensive in the world, when viewed in the context of sales that can be expected per square foot. Similarly, sales per employee rupee could also be vastly better than they are currently. And lastly, many Indian apparel brands could possibly do better to reallocate at least part of their advertising budget to developing better product and training their sales staff; no amount of loud celebrity endorsement can compensate for disinterested automatons showing bad products at the store.

Technology can certainly be leveraged better at every step of the operation, from design through supply chain, from planogram and merchandise planning to post-sale analytics.

Also, some of the more “modern” operations are, unfortunately, modelled on business processes and merchandise calendars that are more suited to the western retail environment of the 1980s than on best-practice as needed in the Indian retail environment of 2011! The “organised” apparel brands are weighed down by too many reviews, too many batch processes, too little merchant entrepreneurship. There is far too much time and resource wasted at each stage. Decisions are deliberately bottle-necked, under the label of “organisation” and “process-orientation”. The excitement is taken out of fashion; products become “normalised”, safe, boring which the consumer doesn’t really want! Shipments get delayed, missing the peaks of the season. And added cost ends in a price which the customer doesn’t want to pay.

The Indian apparel industry certainly needs a transformation.

Whether this will happen through a rapid shakedown or a more gradual process over the next 10-15 years, whether it will be driven by large international multi-brand retailers when they are allowed to invest directly in the country or by domestic companies, I do believe the industry will see significant shifts in the coming years.