Domestic Denim Market Continues To Expand Amidst Strong Demand

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Domestic Denim Market Continues To Expand Amidst Strong Demand

The Indian denim sector is showing a great deal of momentum. In fact, denim is witnessing one of the fastest growth rates as an apparel fabric segment, growing at a CAGR of around 15% in the last five years. The domestic capacity of this fast-growing fabric is currently around 1200 million metres as against 500 million metres in 2010, thus registering an impressive growth of around 140%. This impetus is expected to be maintained in the next few years as well since all the driving factors will continue to consolidate its position further. Backed by changing demographics, the market is gaining the desired traction from factors such as rapid urbanisation, changing lifestyle and also emergence of denim as a fashion product. The expansion of organised retail has further added to the momentum. In fact, around 30% of domestic production is exported currently. India is a preferred supplier of denim fabrics to almost all global brands and retailers such as Levis, Wrangler, Polo RL, DKNY, JC Penny, Walmart, Jones, UFO, Lee, Next, Marks & Spencers and Zara.

This favourable market condition has forced not only traditional denim players to expand their capacity but also players from other segments of the textile value chain to enter the market. There are players which have gotten into denim making from non-textile areas as well. "The domestic denim market is doing exceptionally well for the last 2-3 years and the same is likely to continue for the next five-six years in the wake of favourable fundamentals. Keeping in mind the abysmally lower penetration level, the domestic consumption will continue to grow at a robust pace," says Govind Sharda, president of Nandan Denim Ltd which is adding 39 million metre of capacity, taking its total capacity to 110 million metres. "The entire ecosystem has changed. From being confined to a small segment of consumers few years ago, denim has become everybody's textile and everybody's garment in India and this has seen consumption of denim going up considerably. Looking at the low level of penetration at present, the growth potential is huge," says Paritosh Agarwal, managing director, Suryalakshmi Cotton Mills. A traditional cotton yarn player has increased its exposure to denim considerably with a present production capacity to produce 40 million metres of a wide range of denim fabrics. Integrating forward, the Hyderabad-based company is also ventured into the manufacture of denim garments (primarily bottomwear/ jeans) with a capacity to produce 6,000 pieces per day. It is also planning to expand it denim fabric (by 10-20 million metres) and garment (by 6000 pieces) in the next couple of years.

Bhilwara-based Sangam India Ltd, country's largest player in the polyester-viscose (PV) dyed yarn segment, also ventured into the denim market in 2009 with an 8-million metre capacity. Ever since, it has increased its capacity to 32 million capacity with a total of four lines. It is adding one more line at present. "Our foray into the denim market has proved to be a major boon for our overall growth strategy. Last couple of years, we have witnessed a big traction in the domestic market and the impetus is likely to be maintained in coming years as well on account of changing dynamics of the Indian consumer base. Sangam India as a company would actively like to be part of this growth story," says R P Soni, chairman, Sangam India who views that denim which currently, contributes around 21% of company's revenue, will increase its share to over 25% by the end of next fiscal. "Denim as a product has come a long way ever since it came into being as a tough fabric. Over the decades, it has evolved as a product and now with multiple variants, it has emerged a fashion fabric from mere a performance fabric. The domestic market for denim is currently booming and moreover with China reducing its exposure to cotton textiles, the Indian industry with abundance of cotton will drive the export markets. Things will continue to be favourable for Indian players in coming years," says PR Roy, renowned textile consultant and former advisors to Arvind Ltd.

Considering the low base at present, India holds huge potential. The Indian denim market is still under transition both on supply side as well as on the demand side where the value share of the market is still skewed in favour of mega metros and metros which account for 49%, almost half of the total denim market. On the other hand, the urban and rural Indian markets contribute about 51% to the overall share. As the penetration of denim category and the awareness of denim quality increases in those cities and rural India, their share in market value will start increasing. The average number of denim items owned by Indian consumer is much lower in comparison to other consuming market like the US, Europe, China and others. This difference in the number demonstrates the huge potential that exists for denim in the domestic market. Per capita denim jeans consumption in India is only 0.3 as compared to US's 9, UK's 8, Brazil' 7, Thailand 7, Japan 6 and Chinas 3.