KIT: The lingerie market in India

Strategic tools for the practising manager Technopak Advisors / New Delhi December 13, 2010, 0:59 IST

The lingerie market in India is estimated to be Rs 7,440 crore. It is growing at approximately 14 to15 per cent a year.

The growth drivers for the category are increased awareness about better fits, quality, brands, colours and styling. Many international brands have successfully established themselves in the high-to-premium segment while the mid-to-low segment is characterised by the presence of domestic players.

Overview of Lingerie Market in India

Overview of the Indian Innerwear Industry

The overall innerwear market (excluding kids) in India was worth Rs. 1,191,300 lacs in CY 2009. It has grown at a Compounded Annual Growth Rate (CAGR) of 15.8 % over the last four years. The growth can be attributed to the rising disposable incomes, growing consumer class and advent of international brands in the Indian markets. In volume terms, the mens innerwear market constitutes 48 % of the total innerwear market in India. The share has remained range bound over the last four years. The women lingerie segment holds a 52 % share. In value terms, the women lingerie segment enjoys 66 % share of the total lingerie market. Larger value share and a smaller volume share depict higher Average Selling Price (ASP) as compared to the mens innerwear market. In value terms the lingerie industry in India was worth Rs 7, 89,700 Lacs in CY2009. It has grown at a robust 16.8 % over the last four years (2006-09). The growth can be attributed to the rising disposable income and growing preference for lifestyle products. Over the last decade lingerie has grown from an optional part of the wardrobe to essential clothing for women. It constituted 5.1 % of the total Indian apparel market and 15.8 % of the overall women apparel market during 2009. In volume terms the lingerie industry grew at a rate of 9.4 % over the last four years. The lingerie sales grew from 4,980 Lacs pieces in 2006 to 6,520 Lacs pieces in 2009. In volume terms it constitutes 9.4 % of the overall apparel market and 31.9 % of the women apparel market. The lingerie market grew at a faster pace in terms of value as compared to volumes during the 2006-2009 period. This signifies a jump in the average selling price which grew from ` 100 in 2006 to `121 in 2009. It grew at a Compounded Annual Growth Rate (CAGR) of 6.7 % during the same period. The lingerie industry in India is characterized by a high degree of fragmentation with almost two-third of the market controlled by the unbranded and unorganized regional players and the balance one-third share goes to the few big organized and branded players. The advent of some international brands in the Indian market place has brought about some realignment in the fragmented lingerie market. The companies have started advertising boldly through advertisements, fashion shows etc., to catch up with the consumers to understand their preferences. Segment-wise lingerie market - The lingerie market in India can be divided into five segments based on the price points at which they sell in the market. They are classified in super-premium, premium, mid-market and economy & low-market segment. Approximately, 75 % of the market share is held by the mid-market and economy segment, in both, value and volume terms. The super-premium and premium segments are relatively smaller but fast-growing segments. In volume terms, the economy segment accounts for the maximum share in the lingerie market. The volume-wise share of different segments has remained more or less stable over the last four years. All segments except the low market segment have grown in the volume terms over the last four years. The maximum growth in volume terms was experienced by the super-premium segment followed by the premium segment. This indicates the growing penetration level in these segments. The super-premium and premium segments grew at a CAGR of 18.9 and 16.6 % respectively. This can be attributed to the surge in international brands entering India, rising income levels, changing demographics, growing brand awareness and the

willingness amongst the people to spend on lifestyle products. The key brands in the premium and superpremium category are Marks & Spencer, Triumph, Enamor, Lovable and La Senza. The key brands in the economy and mid-segment are Groversons, Body, Bodyline, Daisy Dee and Teenager. In value terms, the mid-market segment is the largest followed by economy and super-premium and premium segments. Low market constitutes only 6.5 % of the total lingerie market. Approximately, 78 % of the market share is held by the mid-market and economy segments. This segment is majorly dominated by unbranded regional players. Therefore, there lies immense potential for the market participants to launch products in these categories to grab the market share and create a better brand recall. The average selling price (ASP) of lingerie in India varies from Rs. 37 per piece to Rs.1, 029 per piece. The ASP of the super-premium segment has grown at the fastest pace followed by the premium segment. The ASP in the super- premium and premium segment grew at a CAGR of 14.5 % and 8.9 %, respectively, over the last four years. This kind of a growth can be attributed to the entry of global brands in India, rising percentage of organised retail and the rising brand consciousness amongst the consumers. The growth in the ASP of the lower segment remained at a meager 2.9 %. This indicates that the lower segment is a price-sensitive market. The ASP in the mid-market and economy segment grew at 5.2 % and 4 % respectively. The brand loyalty factor is the highest amongst the premium and super-premium categories. It decreases as we move down the ladder. According to Images Business of Fashion Magazine, October 2009 issue, Lovable is amongst the top three preferred brands in womens innerwear in India. The lingerie industry in India is expected to grow at a CAGR of 18.3 % over the period 2009-2014. It is currently estimated at Rs. 7,89,800 Lacs and is expected to be worth Rs. 18,32,460 Lacs in 2014. This growth would be led by the super-premium, premium and mid-market segment. The super-premium and premium segment contributed 15.8 % to the total lingerie market in 2009. This share is expected to grow to approximately 28 % by 2014. This can primarily be attributed to the advent of international brands in India, growing brand awareness and brand loyalty amongst the Indian consumer. Mid-market segment is the largest segment of the lingerie market and is expected to remain the largest over the next five years. It currently contributes 43 % (2009) to the total lingerie market. This share is expected to increase to 46.3 % in 2014. This segment is expected to grow at a CAGR of approximately 20 % over the next five years. The growth in this segment can be attributed to the growing urbanization and increasing number of working women. On the other hand, the economy and low segments are expected to grow at a pace slower than the overall lingerie market, thereby, losing its share in the overall pie. The key factors influencing the choice of the consumers are comfort, price, brand and durability. Comfort plays a key role in the choice of the consumers followed by price and brand name. Consumer Preferences Size is the most crucial component in the lingerie market. The best selling size is 90 cm followed by 85 cm. In brassieres type, regular full cup are more in demand, followed by the seamless and strapless bra categories. Colour- wise, white seems to be in more demand followed by pink, black and peach. When it comes to fabric, sales are led by cotton brassieres followed by cotton lace and cotton Lycra.

Home Is The Indian Lingerie Market All Set To Sizzle? OTHER

July 12, 2011, 10:50 AM IST

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Is The Indian Lingerie Market All Set To Sizzle?

BY PRIYANKA BANERJEE

As local firms like Lovable scale up to enter super-premium markets, investors can sense new growth opportunities.

Consumer lifestyle is fast developing as the hottest-market-segment-to-be in India. And it doesnt take rocket science to figure out why. Rising income levels, flash flood of consumerism and increasing brand awareness are all pulling together to create a selfsustaining market for lifestyle product and services. The innerwear market is one such subsegment which is coming out of the shell. So when a private equity-backed firm Lovable Lingerie Ltd knocked on the doors of the capital market, there was a virtual stampede to get a piece of the pie. The small size public issue was subscribed over 35 times in March this year. Indeed, it was not just a flash in the pan. The stock has rocketed over the last four months and now trades at Rs 405 a share or just about twice the public issue price. Lovable Lingerie is now valued six times more than Maxwell Industries which is twice the size and boasts the legacy VIP brand of innerwear. So, whats clicked for the relatively new kid on the block? It appears that investors are sniffing the same opportunity that Sequoia Capital spotted early this year when it invested Rs 20 crore in a pre-IPO transaction. Lovable is an FMCG-type company in the apparel space, said VT Bharadwaj of Sequoia Capital. According to him Sequoia is excited about branded, consumer-facing business given the potential for growth and the ability to build a large business with a small amount of capital. Lovable Lingerie is a fantastic example of such a business where consumer pull and loyalty have been created to build a business that has many years of secular growth ahead of it, said Bharadwaj. To be fair, Lovable is not the only player in town which has caught the fancy of a private equity firm. Bigger rival Page Industries, which has the India licence for global brand Jockey, has landed Nalanda Capital as one of its shareholders. VCCircle dived deep to look at the growth opportunities in the domestic innerwear market, the competitive landscape, strategy of some top players and where Lovable Lingerie, in particular, fits in the bigger game. The Industry The overall innerwear market (excluding kids) in India was worth Rs 11,913 crore ($2.6 billion) in CY2009, according to a report by credit rating and research firm CARE. The market has grown at a CAGR of 15.8 per cent during 2006-09. But this market is highly fragmented with almost two-thirds of the business controlled by the unbranded and unorganised local players, which is more of a volume-led commoditised business. In volume terms, mens and womens innerwear markets are almost equal in size. But in value terms, the womens lingerie segment constitutes 66 per cent share of the total market. This is due to higher-average selling price, as compared to the mens innerwear market. Whats more, growth in womens lingerie market was also a notch higher. Over the last decade, lingerie has evolved from an optional part of the wardrobe to essential clothing. In value terms, it constituted 5.1 per cent of the total Indian apparel market and 15.8 per cent of the overall womens apparel market during 2009.

In volume terms, the lingerie industry grew at a rate of 9.4 per cent during 2006-09, constituting 9.4 per cent of the overall apparel market and 31.9 per cent of the womens apparel market. The lingerie market grew at a faster pace in terms of value, as compared to volumes, during 2006-2009 signifying a jump in the average selling price, according to CARE. It has added that the market will continue to grow at a robust rate of 18-19 per cent over the next five years.

The Competitive Landscape & Valuations Although the innerwear market in India is highly fragmented, key Indian brands and a bunch of international brands in partnerships with local players are fighting it out for a piece of action. The biggest of them all is Bangalore-based Page Industries Ltd, the licensee of Jockey International Inc. (USA) for manufacturing and distribution of the Jockey brand of innerwear/leisurewear for both men and women in India, Sri Lanka, Bangladesh and Nepal. The firm has recently struck another deal where it has entered into a licensing agreement with Speedo International Ltd for the manufacturing and distribution of Speedo brand swimwear, water shorts, apparel, equipment and footwear. It is, by far, the largest player, with revenues of around Rs 500 crore. Maxwell Industries largely concentrates on mens innerwear segment. The company markets brands like VIP Innerwear, Frenchie, Frenchie X and VIP Feelings, and all their sub-brands. But earnings has been an issue for the firm which reported revenues of Rs 229.32 crore for FY11, with net profit of 1.63 crore. Besides these two and Lovable that has a bunch of brands such as Lovable, Daisy Dee and College Style, there are a number of other international brands which are now available in India, thanks to the growing might of organised retail chains. So, there is tough competition ahead and this is especially true for Lovable, as many of the global brands operate in the

lingerie segment and that, too, in the premium segment. That poses a challenge for Lovable as it tries to scale up its presence in the higher value product segment. In terms of valuations, Lovable is now trading 34 times its trailing EBITDA, which looks expensive compared to Maxwell, which is trading six times while Page Industries is trading 21 times EBITDA. However, Lovable has relatively better net margins. The Lovable Strategy Lovable Lingerie has manufacturing facilities in Bengaluru and Roorkee (Uttarakhand). The firm will use the issue proceeds to set up another manufacturing unit to create additional capacity at Bangalore, besides spending on its joint venture Lovable Lifestyles Pvt Ltd that will market, manufacture, distribute and direct retail in the super premium lingerie segment. The company will also spend the monies on brand-building and setting up exclusive brand outlets. Lovable has also acquired quite a few premium brands from others, including Daisy Dee from Maxwell Industries and College Style from Levitus Trading Ltd, Hong Kong. While the Daisy Dee line caters to the semi-premium market in India, College Style meets the requirements of the young consumer segment. Also, the focus on womens innerwear gives the company higher margins and a better growth opportunity. And a multi-brand portfolio allows the firm to cater to different segments with segregated offerings. Lovable is now keen to diversify and enter other niche segments. Its new product range will feature mens innerwear, which will pitch it directly against Page Industries. However, its success will largely depend on how it is able to execute the diversification plan while retaining its existing market share in the womens innerwear segment. Its future strategy also revolves around strengthening the companys brand presence by launching womens innerwear in the super premium segment, extending the flagship Lovable brand into product segments like sleepwear and home wear, opening exclusive brand outlets and increasing product exports to countries like Sri Lanka, Bangladesh and the UAE. The firm has grown its topline three times over the past five years and the net profit has shot up almost five times. This is one of the reasons why investors are bullish on the firm and its management, led by L Vinay Reddy. Sequoias Bharadwaj believes that Lovable Lingerie is a possible category leader. Reddy and his team have organically grown a large sales & distribution network across the country. For example, the Daisy Dee product is available in more than 7,500 retail points (multi-brand outlets and department stores). And this network is sustainable and growing. The supply chain to support the operations ensures timely deliver, with very low inventories in the entire channel. These are wonderful strengths as new players cannot always afford to set up an efficient supply chain and thus enhance the market reach, added Bharadwaj. The lingerie industry in India has certainly created a niche for itself. But whether it can attract adequate funding from PE/VC firms and capital markets is still a matter of contention. The initial signs are quite encouraging though, and given the potentials galore, the lingerie market may soon sizzle in terms of investment, quality, growth and profitability.