Indian denim fabric industry is expected to grow at six percent CAGR over 2013-18 driven largely by volume growth. Images Business of Fashion analyses growth levels, latest trends and future of denim fabric in India.
Denim is a vital component in the world of fashion. There is no second opinion that it has today emerged as a staple in every wardrobe. It is a fabric of choice for the youth. The Indian denim industry which started cementing its roots in 1986 has today grown to a dynamic hub of over 32 denim mills producing a total 1,100 million meters per annum denim fabric collectively.
The domestic denim fabric industry is expected to grow at six percent CAGR over 2013-18 driven largely by volume growth (healthy demand for denim jeans and RMG). Domestic demand for RMG is also expected to grow at a CAGR of 5.5 percent to Rs. 1,705 billion over 2013-18 driven primarily by volume growth of four to five percent, while realisations are expected to grow one percent.
Rural demand is expected to outstrip urban demand for RMG, as the rural market remains signifi cantly under-penetrated.India’s exports of RMG are expected to grow faster than domestic market, and is estimated to register CAGR of six to seven percent over 2013-18. Growing demand for RMG, in both domestic and export markets, is expected to boost the domestic denim fabric industry.
Within the RMG market, the jeans segment is expected to witness steady growth. CRISIL Research expects the market size for denim jeans to reach Rs. 114 billion in 2018 from Rs. 89 billion in 2013, implying a five percent CAGR over the period. Growth is expected to be driven by volume growth of four percent, while realisation growth is likely to be muted at one percent. The domestic denim fabric market is expected to grow in line with the denim jeans market. Increase in demand for jeans is expected to be driven by three factors:
- Increasing preference for casual and semi-formal clothing
- Many corporate, led by Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) firms accepting casualwear as offi ce wear
- Changing demographic profile of consumers owing to higher disposable income
Currently, the jeans market in India is under penetrated – per capita consumption of jeans is 0.3 pairs per year, significantly lower than two to three pairs per year in developed nations such as the US and the EU. This represents a very significant growth potential for the industry.
DENIM MILLS WITH THEIR CAPACITIES
The denim fabric industry in India is fragmented – over 32 denim mills with capacities ranging from 10 MMPA to 110 MMPA manufacture denim in India. While some of these players (such as Arvind) focus on exports, most derive majority of their revenues from the domestic markets.
This makes the domestic denim industry highly competitive. With limited scope for product differentiation and moderate requirement of capital, the entry barriers are also moderate in this industry.
OVERSUPPLY VS. DEMAND
The denim fabric industry in India is currently facing an oversupply situation – overall installed capacity for manufacturing denim fabrics in India stands at 1,100 MMPA, while average utilisation rates are 80-85 percent amounting to a total supply of 850-900 MMPA. However, the total demand for denim fabric is estimated to be 700-750 MMPA, out of which 70-75 percent is consumed locally and the rest is exported.
This represents a demand-supply gap of 150-200 MMPA. With many leading players planning to expand, overall capacity is expected to reach 1,200 MMPA by 2015. The oversupply in the domestic market may impact the utilisation rate of Indian denim fabric manufacturers.
The Indian denim fabric industry is cyclical in nature and is characterised by periods of excess capacity followed by narrowing demand-supply gap. The incubation period for denim manufacturing units is small. Thus, post a period of growing demand, a number of denim fabric manufacturers put up additional capacity to meet future demand growth, which in turn leads to oversupply in the market. The domestic denim industry has witnessed this cyclicality twice in the past, fi rst major downturn between 1998 and 2001 owing to high capacity installation in China, followed by a period of rapid growth in demand over 2002-07. To cater to increasing demand, denim fabric producers added fresh capacity. However, post 2008, domestic and export demand for denim fabric in India declined owing to the global economic meltdown, which effected the utilisation rates of denim fabric manufacturers. With gradual recovery in global economy and declining cost competitiveness of China, demand for denim fabric picked up post 2011, which prompted players to again embark on capacity expansion.
Identifying the challenges Mayank Jain, VP, Malwa Industries says, “We are only followers. Only a few innovations like Indigo Wool (international patents with Malwa Industry) have come out of Indian mills. The mills in Japan and Turkey are quite ahead of us. India’s USP is definitely the large raw material base, the skill-expertise and experience availability at various levels of the production and business chain. In fact, labour isn’t that cheap anymore.”
PRICING OF DENIM FABRIC
Pricing depends on the term price of cotton, the type of fabrics and manufacturing unit and its brand value. Rajan Gupta, National Sales Head, KG Denim explains, “Good denim qualities in 100 percent rigid stuffs, fl at fi nish in 11.5-12.5oz, fall in the range of Rs. 140 to Rs. 160 in slubs/xhatch/fi ne slubs, if we cite the price to distributors, who in turn supply to the ultimate cutters by adding their mark ups based on credit terms settled. Stretch denim qualities prices for quality oriented products range from Rs. 185 to Rs. 225 in 11-12 oz in fine slubs, silky, etc. to distributors as cited for non-stretch they too are then marked up.”
Movements on the cotton price fronts is critical. The U.S. Department of Agriculture’s (USDA’s) fi rst world 2014-15 cotton projections anticipate that production will exceed consumption for the fifth consecutive season, with the potential for record global stocks to exceed 100 million bales. World stocks have more than doubled between 2009-10 and 2013-14, mainly due to the cotton policies of China, which have supported world prices above market-clearing levels. China’s government now intends to reduce support levels; however, world stocks are unlikely to fall in 2014-15 as the adoption of new policies will be gradual and world production and consumption responses will lag changes in policy and prices. China’s stock level is expected to stabilize, and stocks held outside of China are likely to grow. USDA projects that lower China domestic support levels, higher stocks outside of China, and falling grain and oilseed prices could reduce the world cotton price to a five-year low. Latest data as per Crisil Research says that the cotton prices are expected to decline in 2014-15, averaging 110 per kg. This will push India’s cotton inventory to a six-year high of about three months. Cotton inventory will increase despite an expected two percent decline in production, as cotton will decline by a higher three-five percent; exports will decline due to sharp fall in China’s import demand, which is India’s largest export market for cotton.
DENIM FABRIC PRODUCTION & CONSUMPTION RATIO
As per the data shared by KG Denim and LNJ, The total denim fabric capacity worldwide if we sum the produce of the main 300 manufacturing units will be approx. 7.5 billion yards which is expected to touch 10.5 billion yards by the year 2021. The leading country in denim fabric production and supplies is definitely China having a capacity of approximately 2-2.5 billion yards per annum. China is joined by India, Pakistan, Bangladesh, Turkey, and Brazil as other major manufacturers.
CHINA AND ITS COMPETITION WITH INDIA
Due to the increase in pricing of the local currency in China and in order to control pollution norms, the Chinese government has put a restriction on manufacturing on a lot of textile composite units which are suspected of adding to the increase in pollution in China. The country despite having a lot of good quality denim units remains infamous for its volume centric approach and offering basic qualities at competitive prices. Now since the Indian government has increased import duty in order to restrict imports so there is not much charm left for import of goods. Moreover, Indian mills have equipped themselves with suffi cient infrastructure and are actively participating in offering new developments keeping in view the latest trends. So Indians do not have to look for alternative/variety from other countries.
Mayank Jain from Malwa Industries opines “I do feel that after a few years Chinese mills are bringing back the competitiveness in their offerings. For quite a few years, lately, China was giving competition to India only in few product categories but now those categories are increasing. Their production is still huge and much larger than us.”
A REVIEW OF THE LATEST FABRIC TRENDS
The Indian denim fabric industry started with modern equipment by adopting state of the art technologies: rope dyeing and slasher dyeing. Today, Indian denim is available in wide range of fabric weight starting from 4.5 oz, 6.5 oz 8 oz 11 oz 13 oz 14.5 oz in 58/60 inch width. The popular count range used for different weight denims are 6s, 7s, 10s, 12s, 16s and 21s with yarn spun both on ring /open end spinning system. Weaving has shifted to Airjet looms and popular weaves are plain weave 1/1, twills 2/1 and 3/1, broken twills, 4/1, satins and herringbone twills.
R C Panwar, Joint President Marketing, Century Textiles and Industries explains “Latest trend in denim fabric is dobby structured peach overy dyed with different dark colours. Currently, rich look knitted denim with super stretch and diagonal twill structure is in trend.” Fabric construction continues to be heavy with warp weft combinations of OE x OE – Basic Denim, OE x Elasthane, Ring x OE, Ring x Ring, Ring x Elasthane, Crosshatch denims, Slub Denims, Structured (dobby) Denims, Polyester fi lament weft denims, Poly Stretch fabrics. Multi-count denim fabrics, over-dyed and tinted denims, silky denims, light weight (5 oz to 6.5 oz) denims, doubled yarn warp denims etc. Commenting on the international trends Panwar says “In the international market mainly it is stretch and non stretch 100 percent multi-ring with super coated/neo colour denim. Major brands are asking for unique varieties like khadi denim, tencel/modal/different fibres blend possibly by using T400 Lycra.”
According to Prabir Bandyopadhyay, CEO, LNJ Bhilwara Group, “The latest developments are coated denim. Denim is being made to look like leather, coloured on the inside. Then is the Jacquard denims that can be used as jeggings, women’s wear, shirts, kids wear and also can be used as furnishing fabric. Different structures are in trend which includes knit look and corduroy.” Talking on the trends internationally he further explains, “Colours, structures and patterns are becoming cleaner and subtle. Glossy surfaces are no more existing. Focus is on backing materials and making reverse side of the fabric attractive. There is a noticeable trend towards more robust with more durability and a nice feel to the fabric. Double cloths are making a comeback with a mid-layer material. New generation denims are differentiated with cooling and warming effects also.”
Jain, is of the opinion that “The denim fabric market in India is looking out for specialities like knit-indigos along with various kinds of fancy weaves and dobbies. Knit-Indigos are holding an important place in the trends circle. Alongside, more and more stretch ability in the fabrics paired with nice recovery is what the brands are on the constant look-out. New colours blended in indigo keep adding to the fun.”
P G Niyogi, CEO, Oswal Denims shares an example of his company, “We at Oswal Denims work on the defi nition of perception development where we fi rst show some samples of the new range to the prospective customer and if they like it then we proceed with the manufacturing. We welcome their feedback and suggestion to make the product stand out in the market.”
Denim is still most popular in indigo blue. Now the range has extended to dark indigo blue, to sulphur bottom indigo, indigo bottom sulphur, sandwich shades with combinations of indigo and sulphur layers of dyeing and various combination shades like tinting and over dyeing in different colours, yellow and brown to name a few.
Coloured skinny jeans is one of the most prominent trends that is becoming popular. Bright and bold hues across the spectrum were worn by both men and women. Today denim trends are moving away from this and it’s all about the true blue again; trade shows definitely have indicated a preference for traditional colours. Deep indigo, grey and black denim will take a center stage.
Colours, structures and patterns are becoming cleaner and more muted. Glossy surface have disappeared completely. Fabric manufacturers have become more enthusiastic about backing materials and focus on making the reverse side of fabric attractive. For instance, laminates, are being printed or embossed by applying the structures to the outer layers.
Explaining the latest trends Prabir Bandyopadhyay, LNJ says, “In men’s category the most popular colours are jet black and deep blue. Other popular shades are clay, espresso and hunter green. Preferred weight range for men is 10.5 to 13.5 ozs.
In women’s category too jet black and deep blue colours are making a rage, and other shades like sky, grey, burgundy, pink are also popular. Women like to wear light denims between 8.5 and 10.5 ozs.” Rajan Gupta, KG Denim explains, “The trend in men’s denim will witness different variants of blue like 16 dip, 24 dip, 27 dip pure indigos, carbon blue, super dark blue, sea blue etc. underweight group of 11.5-12.5ozs stretch in denser reed picks so as to give compact weaves.
Gupta adds “In women’s denim, high and super stretch fabrics under different blue variants like 16 dip, 24 dip, 27 dip pure indigo, carbon blue, dark blue, sea blue, etc. underweight group of 9.5-11ozs in denser reed picks to give compact look will be the latest hit.”
Denim is a fabric that is prone to stretching out inherently because of its weave. Jeans made of 100 percent cotton looses its shape. In fact even jeans with elastane/lycra do stretch out a bit but not as much as rigid basic denim. Jeans that have stretch back fi bers are increasingly the preferred choice.
And this fashion choice is emerging as the norm in India too. Mayank Jain of Malwa Industries has closely observed the trend as he is of the opinion that, “For women, the trends are very clear. They still have more and more stretch and lighter weights in the range of seven-eight oz. For men, stretch and stretch factor in the fabrics is also increasing.”He adds, “Out of 100 customers, 99 ask for stretch, it’s very rare now to come across a customer who is asking for non-stretch denim.”
Environmental and social awareness in society is on the rise. The implications for fashion to fall in line and stand accountable are clear. The fashion consumer is infact leading the change and votes in favour by purchase bills. Today the industry is looking towards positive environmental and social benefits through informed choices of materials and intelligent design. One emerging manifestation of responsible choice making is the surge in demand for organic denim. These organic denims are an eco-friendly range of classic pieces reinterpreted using ethical fabric choices. They are the tribute from the denim suppliers to care for the environment.Organic denim fabric is made with 100 percent organic cotton and free from chemical fertilizers, pesticides and insecticides. The entire production of the fabric adheres strictly to ecological standards: from spinning, dyeing to finishing of the denim. It involves non-toxic fiber processing, colouring agents and fabric treatments which ensures that the production of collection was environmental-friendly.
However, these days we can see the organic trend fluttering all over the denim world. Many leading suppliers take the green step adopting the idea and offering collections of organic denim.
FACING THE FUTURE
Today, a lot of mills in India are experimenting with denim fabric. There has been innovations with blends produced with Khadi, Wool, Silk, Linen, etc. Certain mills have even innovated to blend and produce polyester denim. Also, experimental innovations are happening with banana fibre, etc.
P G Niyogi, CEO, Oswal Denims says, “Creativity is driving the denim fabric market today. The companies have to work towards a collection which is exclusive and can make the company stand out with a difference. One needs to see a potential in his product range, our major concentration at Nahar is to work on the same idea.” Talking on the current situation and future of the denim fabric market Niyogi further adds, “From last a few years, even fabric development has been following a fast fashion route. The sample development is very fast in the industry. If we say it is survival of the fittest then the rule now applies even to the denim fabric industry where speed of innovation and development grants success to a company.”
Jain from Malwa Industries also shares, “Blends are adding new dimensions to denim fabric. The market is looking for something new at all times, and blends can bring that newness. We are working on jute, linens apart from the traditional blends. We do hope for great results, as soon the fabrics come out.” So, if innovation is the key then the denim fabric industry has to believe in the policy of produce less but produce exclusive. But we also have to be careful that we are not innovating for the sake of developing a new product. It has to rooted in the customer demand. Indian mills have to drive the market to consumption than oversupply. There is a strong demand for innovative products and in the global and Indian markets mills have a capability to serve that. Now is the time that the denim fabric industry in India has to speak as one voice about its future.