Tuesday, November 17, 2009

Levi’s, UCB in Rs 500 cr club



BANGALORE: It’s not easy to live unbuttoned and succeed in India, but Levi Strauss & Co and United Colors of Benetton have done it. The fashion giants are set to notch Rs 500-crore sales this year, making them the first international apparel brands to successfully replicate their global brand appeal here.

Denim jeans maker Levi’s and casual wear brand Benetton, both of which have been around since the 1990s, will cross the Rs 500-crore mark in turnover this year, two industry executives close to the companies told ET. Spokespersons of both the companies declined to confirm the number or comment on the development.

The road to the $100-million mark has been tough for the two fashion majors that figure in most lists of top global brands due to tough competition and an extremely price-sensitive market.

The common thread between Levi’s and Benetton has been their long-term focus on India that has seen them keeping their ears close to the market through local sourcing and production.

As a result, they have been competitively priced—escaping import duties and freight costs—and are able to replenish stock in time to support aggressive store expansions. But breaking into the Indian market was tough for both the firms.

The 1994 entry of the inventor of jeans received a tepid response as Pepe Jeans and Arvind Brands’ Lee locked on to youth connect faster. It was only at the turn of the century that this age group embraced Levi’s as its ‘Low rise-Dangerously low’ campaign, coupled with an altered entry-level pricing and expanding distribution network, found a place in the consumer mind space. From then on, Levi’s made all the right noises, be it ‘Live unbuttoned’ or ‘Diva rules’.

It stirred up the market by spinning off Levi Strauss Signature as an entry-level brand through separate stores, creating a volume generator even in tier II and tier III cities. “We operate the Signature brand in select markets in the world. It is a key pillar on which the future plans of the company in India are built,” says Shumone Chatterjee, MD of Levi’s Strauss (India).

Levi’s has created a fine balancing act of being able to operate at more premium prices than competition at one end, while remaining aspirational to the mid-market segment without diluting the overall brand, says Baqar Naqvi, associate vice-president, retail and consumer goods, at Technopak, a retail an management consultancy.

Its focus on the women’s market backed by celebrity endorsements has helped it grab almost 40% share in the Rs 2, 000-crore Indian branded denim market. Levi’s also has a made-for-India non-denim street wear brand, Sykes.

Benetton, which entered the country through a joint venture with the DCM Group in 1991, too had a slow start. Setting up of a 100% subsidiary in 2004 changed the game for firm renowned for its ‘united colors’ campaigns. The Italian casuals brand has grown over 10 times from a turnover of around $9 million in 2004 as it crosses $100 million in 2009.

Benetton’s USP has also been its ability to cater to varied age groups and needs across its flagship brand Benetton, leisure-oriented Playlife as well as innerwear and childrenswear. It has tied up with Tata Group Company Trent Ltd to penetrate its high-end fashion brand Sisley in India.

“Benetton has fairly understood the Indian market, possibly because it is one of the first international apparel brands to enter the country. The Group has demonstrated this through sharp product pricing and marketing communication that is in tune with consumer perceptions and willingness to pay,” national leader, retail & consumer product practice at Ernst & Young India, Pinakiranjan Mishra said.

The Benetton Group has identified India as a priority growth market. According to the Benetton Group’s nine-month performance review in 2009, the emerging markets grew 13% particularly due to India and China.

In India, there was further acceleration in growth due to continued increase in comparable performance and department stores in prime locations, the review said. The company set up close to 80 stores in the country in the first half of 2009.

Both the global brands are now looking to step on the gas and increase their lead over key rivals — Pepe Jeans, Lee and Wrangler in the case of Levi’s and Madura Garment’s Allen Solly (menswear) and Mango (womenswear) for Benetton.

There’s enough room for growth in the country’s Rs 40,000-crore branded apparel market, growing at an annual rate of 12% over the last five years, according to Technopak estimates.

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