Luxury brands set to flaunt 'Made-in-India' tag; Indian suppliers see opportunities
Less than a month ago, the worldwide chief of the world's biggest luxury brand Louis Vuitton, Yves Carcelle, blasted India's policy of imposing a 30% local sourcing requirement for luxury groups such as his as 'nonsense'.
Unsaid but implicit in his blunt statement, made as part of an interview to ET, was the suggestion that in the world of luxury, history, geography and quality were hugely important, the first two attributes having a significant bearing on the third. Decoded further, it meant that India simply could not provide all what it takes for Louis Vuitton products to retain their luxury edge.
But Carcelle's one-time deputy and fellow frenchman, Regis Fournier, is determined to turn that long accepted wisdom, well, 'nonsense'. The former India chief of Louis Vuitton is setting up a manufacturing facility in this country that will supply the world's top luxury labels. "They will all come here," says Fournier, defiantly.
His firm La Compagnie (meaning 'The Company' in French) plans to invest Rs 350 crore in a facility in Puducherry, a former French colony, to make shoe uppers for unnamed luxury footwear brands starting December. It will subsequently produce 100% India-made high-end bags, clutches and clothes for the global market.
Fournier is not alone. Across India, in cities such as Delhi, Kanpur, Lucknow and Jaipur, a clutch of businessmen are retooling their businesses, hoping to supply to global luxury goods makers keen on setting up shop in India.
Already, suppliers to brands such as Armani, Polo Ralph Lauren, Hermes, Fendi and Bottega Veneta, among others, although in a small way, feel that that last month's policy changes will open up a window of opportunity for them.
The government last month allowed foreign retailers to set up majority-owned (with more than 51% shareholding) single-brand stores in India, but on the condition they would have to source 30% of their products from Indian vendors.
But foreign luxury brands, keen as they are to set up shop in India, are not as enthused by the sourcing conditions. One reason for this, say experts, could be a perception that countries such as India are not quite ready to supply or make a truly world-class luxury product.
But Indian entrepreneurs say that luxury brands will soon realize the inevitability of having to source locally. With sales slowing worldwide, it is not far away when luxury firms will have to tap markets such as India aggressively. "Local sourcing will be the natural way for them to become competitive," says Dilip Kapur, founder of HiDesign, one of India's biggest premium leather accessories retailers.
According to Kapur, India has the wherewithal to make luxury items. "There is handicraft skill in India which is exceptional," he says, adding that Tamil Nadu has some of the best tanneries, and leather products from the state are being supplied to most of the big brands outside India. "The 30% mandatory sourcing clause will help the industry grow."
India is one of the fastest growing markets for luxury products and, according to some industry estimates, it is the biggest luxury outsourcing destination today after China. It is also one of the biggest retail markets with sales expected to touch $15 billion by 2015, nearly double today's sales. The number of malls has grown from one in 1999 to nearly 500 today. Research by Fondanzione Altagamma, the Italian luxury goods industry trade association, shows Indians spend around $500 million every year outside the country on luxury goods.
"If brands are allowed to open shops here without any restrictions, that money will stay in India," says Saba Ali, India representative for Altagamma.
Several luxury goods makers owning brands with histories dating back decades, if not centuries, believe in original craftsmanship and so loathe diluting the geographical quotient in their products.
Shoemaker Salvatore Ferragamo, for instance, has never strayed out of Italy, a story several global names would consider familiar. And there is also the perception issue. Irrespective of high-quality products, experts in the luxury business say the 'Made-in-India' label is still to cut ice with global buyers.
Many of the local suppliers to big global brands have strict non-disclosure pacts, which forbid them from revealing names of clients as Western consumers are wary about buying products made in Asia due to poor perception about the quality of products, and labour - or environment-related issues.
But Fournier is hopeful this perception will change, noting that there is already global recognition that India has unmatched expertise in embroidery, jewellery, diamonds, leather, silk and pashmina wool, which luxury brands could tap.
"Indian craftsmen are more skilled than the Chinese, and there is a historical, spiritual and a rich cultural aspect to this country, which fits into the psyche of global consumers," he said. Some progress has already been made in accepting India as a sourcing destination.
British menswear brand Hackett said last week it is open to manufacturing in India. "Most of our production currently happens in Europe and Far East, but I am sure there is a possibility to develop India as a manufacturing hub if required," says Vicente Castellano, managing director of Hackett. The company, which has recently formed an equal joint venture with Aditya Birla-owned Madura Fashion and Lifestyle, plans to open some 10 stores in India soon.
"What is important is that foreign luxury brands are already sourcing some stuff from India for international markets. By now they have an idea of the capability and expertise of our craftsmen and the quality of the products we make. If they get a big market, they would like to have some kind of manufacturing closer to that market," says Tarun Oberoi, managing director of Crew B.O.S. Products, a rare public-listed firm in this space.
His company, which supplies clothes and leather accessories to premium and luxury labels, has grown manifold since it was set up in 1988. Revenues jumped from 185 crore in 2006-07 to 621 crore in 2010-11.
"The quality here is very high and the understanding of the global issues is far better than other countries where prices are competitive," says Delhi-based businesswoman designer Adarsh Gill, who supplies a pret-a-porter or ready-to-wear range to several luxury brands.
Some local entrepreneurs, who are suppliers to global luxury brands, say India is already a big supplier to big international names and that relationship will only increase when these overseas names decide to set up shop on their own in India.
Varanasi's Welkin Apex produces scarves and stoles that go to stores in the luxury shopping abodes of London's Regent Street and Champs Elysees in Paris while Gurgaon-based Cuir Inde has been designing and manufacturing home lifestyle products for Armani Casa, Polo Ralph Lauren, Kenzo and Fendi.
"We make handloom scarves for Armani which is not possible for them to do in Italy," says Ravi Agrawal, proprietor of Welkin Apex. The company started working for the Italian major about three years ago and has seen volumes multiply. "In the garment sector, India is very well equipped to handle requirements of any luxury brand," Agrawal points out.
Even in non-apparel segments like furniture and lifestyle products, Indian vendors have been working with international giants. "Polo could easily be sourcing around 60% of products in the home lifestyle category from India," says Parminder Pal Singh, owner of Cuir Inde, noting that from 2009 to 2013, his firm's business had grown 400%.
He says more international brands are looking to India for design intervention. Many Indian businessmen retooling their businesses, hoping to supply to global luxury goods makers keen on setting up shop in India.
Luxury brands set to flaunt 'Made-in-India' tag; Indian suppliers see opportunities - Page3 - The Economic Times
