Despite becoming a world leader in denim, Ahmedabad-based textile conglomerate Arvind Ltd. has been burning the midnight oil to innovate in the fabric. Even amidst over-capacity and demand slowing down, Aamir Akhtar, CEO - Lifestyle Fabrics (Denim), Arvind Ltd. tells Vinay Umarji how the company's increased focus on R&D and launch of a slew of innovative products in denim have been reaping benefits this year. Excerpts:
In recent times, Arvind Ltd has been launching innovative products in denim including denim chinos (2010), excel denim (2011) and now khadi denim (2011). Was it well thought out strategy to know look at other innovative ways of promoting denim? Please elaborate.
At Arvind Denims strategically we are targeting 'creating value for our customers through design and innovation'. We invest a lot of time and money in this area. This gives a 'sustainable competitive edge' over our competition.
With such innovative products in denim being launched back-to-back, has the company increased its focus on R&D lately for the product? How much investment has been pumped in or is likely to be pumped in for R&D in denim?
Though design and innovation are a part of our DNA, we have upped the ante in the last few years. We have invested heavily in capex as well as skills to become the leaders in denim innovation.
Since late 1990s and early 2000s, Arvind has been consolidating on denim and now it's a world leader. What are the company's long term views/plans for the vertical vis-a-vis other verticals like organic cotton, apparels, etc.?
In the denim fabric SBU we will continue to grow at the rate of 10-15 per cent. This growth will come from Indian as well as international markets.
The second quarter this year has also been good for denim players in the country. How is the market shaping up in terms of supply and demand for denim?
There is a major focus on controlling inflation and as a consequence GDP growth has slowed. Therefore, on a generic level, there is a slowdown of demand. This is impacting consumption of all goods including textiles. As long as this approach of tightening monetary policy continues, demand is expected to remain sluggish.
Any new innovation expected in denim? Any new products likely to be announced?
We have a pipeline of innovations. Continuous R&D is on. We have recently launched 'Digital Denim' - a very exciting range of denims that respond to the movements of wearer's body. It has been very well received by the market. There are many more in the offing.
Has denim grown in terms of revenue contribution to Arvind's overall turnover? By how much? And by how much is it expected to grow in the coming years?
Denim fabric business' topline as well as bottomline have been consistently growing year-on-year. It is a major contributor to Arvind's overall revenue and EBIDTA. In absolute terms, this contribution is growing. At the same time with Arvind's other businesses growing, denim's contribution is going down in percentage terms. We are targeting a growth of 10-15 per cent.
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The denim industry has been expanding the capacity lately. Is that likely to result in a glut sometime soon? If so, why?
We already see over-capacity. Annual Indian demand is approximately 380-400 million metres. Exports are around 200 million metres. The overall capacity is about 750 million metres. With both international and Indian markets slowing down, manufacturers who do not have robust business models (in terms of differentiated products; a de-risked customer and country portfolio;, verticalisation wider distribution network, etc.) will find the environment challenging.
In the current financial scenario that is getting gloomier with each passing day as well as current rupee situation, how are denim exports shaping up for Arvind as well as industry overall?
We have tremendous faith in our business model. We continuously bring value to our customers through innovation, design and sustainability. We realised we are in fashion business. Customers need something new everyday to help them differentiate. As long as we continue to excite our customers we will gain market share.