IMPRESSIONS from a Cross-section

At present, increasing costs, overcapacity, rising competition, and other factors combined with the worldwide economic crisis are affecting the denim wear producing exporters in general. The demand in the European market has been declining due to the ongoing financial crisis. Whilst the American market is picking up gradually now, we find sound business opportunities in Latin America, Russia, India where the markets grow at a steady pace. As a result, industry-wide capacity is reported to be between 70% - 80%.

Other than the mass producers, the other successful denim companies globally have recognized the need to strengthen their R&D to develop new varieties. China accounts for 60% of current global production. Its denim industry has a large capacity but they presently don’t seem to spend much on R&D as their focus seems to be on the mass market. We now spend more in our R&D efforts and process innovations as well. Recently we formed a strategic alliance with a mill to produce new fabric and we are looking at more such options in the region as the sailing time is only 3-4 days. As we are focusing on niches, our efforts are more in to growing our capabilities rather than volume.

A successful denim industry first of all must face market realities. The requirements in the market change rapidly. For instance, there were only blue, black and two other colors of denim wear but now that trend is changing. It is predicted that denim in a wide range of colors is emerging as the most promising route to a considerably improved denim business by the year 2013.

(Contd.)

Vividly colored denims are now seen in increasing volumes in the American, European and Japanese higher-fashion retail stores. Dealing with these new colors obviously involves a basic understanding of color science and the chemistry of dyeing. The smaller, more flexible and technically capable denim companies are now going for varying colors.

It is reported that China produces 2.4 billion yards of denim per year and in 2010 was ranked as the largest exporter of jeans and casual pants to the USA supplying 192 million jeans which is 31.3% of all jeans exported to the USA. However, effect of the rising costs in China is particularly being felt. Now the option of shifting bases to countries in Asia such as India, Sri Lanka, Bangladesh, Cambodia, and Vietnam remains for denim jeans.

On the other hand, Sri Lanka as a nation has no specific strategy for denim wear exports due to the non-availability of backward integration options. Speed to market challenge also exists for us. Product Development Centers with finishing capabilities such as what we have are rare in the island. As we don’t have a big denim industry, it is difficult to attract and develop finishing engineers.

Finally, it must be said that as the fashion trends keep changing, we now invest more in product intelligence. One example is the fact that business executives now wear formal jackets with denim jeans which was never in fashion before. With the kind of strategies I have mentioned here, we remain in business with a continuous focus on improving our capabilities to attract buyers who want a differentiated product. 

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