Leather Industry Shows Encouraging Growth - Leaves Recession Back
Date : November 24, 2010
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Indian Leather exporters and industry are fast emerging out of recession. Overseas and domestic buyers are showing interest in leather products and orders have started arriving - be it tanner, manufacturer, or exporter of garment, footwear or accessory - all around improvement is now visible.
There is general agreement about growing opportunity for investment. Europe and the US are not only buying, but the international brands are looking for an alternative to China — the biggest source of finished products where the cost is on the increase. India, with its traditional strength in leather and leather products, is an obvious choice. For Indian entrepreneurs, the key is to meet the challenge of growing demand.
According to the Council for Leather Exports, in 2009-10, exports were about $3,400 million, with footwear being the largest segment of exports at 44 per cent, leather garments , 12 per cent, finished leather , 18 per cent, and leather goods, 22 per cent. South India accounts for nearly 37 per cent of the leather exports, with the lion's share from a cluster of units about 150 km west of Chennai, in Ranipet, Ambur and Vaniyambadi. More than three-fourths of the exports are by entrepreneur-driven, or family-owned companies.
Indian leather industry needs to think big. India's exports are just under $4 billion, China is ten times bigger. Even if one-tenth of the business shifts, which is very likely, it would double India's industry.
But as of now, there is a capacity constraint. The emerging opportunity can only be exploited with a quantum leap in size.
Entrepreneurs and families in the business have a huge bank of knowledge and expertise. India has carved a niche for itself in the high-fashion markets of Europe. Its competitors like China and Vietnam are volume players. But the US is a larger market which is also open to India, which needs to achieve economies of scale.
Companies typically restrict themselves to production capacities of about 3,000-4,000 pairs a day. Entrepreneurs will float a number of companies if they wish to expand, but that needs to change.
Companies with a business of about Rs 100 crore, are considered big in India, but in the next few years, these will have to more than double their business. But as of now, there are probably a dozen in the Rs 100-crore range in South India.
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