Tata International to revisit footwear exports strategy on recession in Europe
February 03, 2016
Published by Business Standard
Tata International Ltd (TIL) is revisiting its export strategy by shifting a share of its footwear export business from Europe to the USA and other countries in order to de-risk its business from the recession in Europe.
While this year, the company would have 85% exports to Europe and 15% to the USA and Southern hemisphere markets, it is expected to shift it to 75% exports to Europe and 25% to the USA and countries like Australia and South Africa next year, said N Mohan, global business head — footwear and garments, TIL.
“For us, an ideal mix would be 60%, exports to Europe, around 30-35% to the USA and the rest to countries like Australia and South Africa and the shifting process will be happening over a period of time,” he said. He added that, it is expected to reach the ideal mix in the next two to three years.
It may be noted that at present, almost 98% of the company’s footwear business is exports.
The company has also revised its expansion plans following the European recession. While according to its earlier plans, the company was expected to produce 10 million pairs a year by 2017, owing to the recession, the plans were changed.
The company expects the exports to be 6.5 million pairs this year in March and to reach 10 million pairs by 2019. In the branded business in the domestic market, it is targeted to reach 5,00,000 pairs in three years.
It has launched its brand – Aerosole, a premium women’s brand in India almost 18 months ago and has had a presence in around 90 outlets through shop in shops in various retail chains.
Now, the company is also looking at the emerging market opportunity in India, and is planning to have a complete product basket under its footwear portfolio in another 12-18 months to address this market.
With a premium women’s footwear brand, Aerosole and a children’s footwear brand in its kitty now, the company is planning to launch Aerology, a women’s footwear brand to address a lower price segment along with two new men’s premium footwear brands to complete the footwear’s product basket.
While Aerosole is a brand priced around Rs 3,000 to Rs 3,500 per pair, Aerology, priced in the range of Rs 1,500 to Rs 2,500 a pair, or even at the price of Rs 1,200 a pair, will be launched in next six months. It is being test marketed in Tata’s apparel retail brand Westside. It will take 3-5 years to build a brand.
“The domestic market is very encouraging. The leather industry in India is currently at $12 billion, of which 50% is domestic and the rest is export market. Under the ‘Make in India’ scheme, it is poised to reach a turnover of $27 billion by 2020 of which around $15 billion would be from the domestic market, which is a big opportunity” said Mohan.
“It is also planning to launch two premium men’s wear brands in India in next 6-12 months, at a price range starting from Rs 3,000 a pair. While the existing Aerosole brand and new Aerology brand are from a tie up with Aerogroup International, the men’s brands will be the company’s own brands and details are not decided at present”, he said.
The company is expecting its turnover to be around Rs 800-850 crore this year and expect a 30% growth next year, he added.