Over the last \n couple of years India has been highlighted as the next hot retail \n destination and one of the most promising markets of the future. \n <\/p>\n
<\/p>\n
With many battle-scars earned over many brands and several \n years, and around $40m in annual sales, American apparel giant \n VF Corporation seems like a veteran in the Indian market. Its \n story so far – including a newly announced joint venture with \n Arvind_brands – gives credence to the Indian philosophy of reincarnation. \n <\/p>\n
VF\u2019s first step into India came when it granted the \n license for Wrangler denimwear to DuPont Sportswear (no relation \n to DuPont, the chemicals to fibres company) in the late-1980s. \n At that time, VF took an aggressive approach to the market, \n and initiated several other dialogues with Indian companies \n of all shapes and sizes. Within a short time it also appointed \n Arvind_Mills, the world\u2019s third largest denim fabric manufacturer, \n as a licensee for Lee. <\/p>\n
Arvind had its own mid-market brand, Flying Machine, and was \n looking at selling international brands in the premium segment \n in India. Lee became Arvind\u2019s first pitch at the upper \n end of the market. <\/p>\n
One could argue about the pros and cons of VF\u2019s pitching \n two of its own brands head-to-head in the premium segment. The \n fact was that, while the sister brands were fighting for the \n small space at the top, the market itself was evolving with \n several mid-market Indian brands coming into their own. <\/p>\n
Therefore, despite initial successes, the relationship with \n DuPont Sportswear delivered less than VF expected. Despite the \n head-start, by the mid-1990s Wrangler already seemed like an \n \u201calso-ran.\u201d <\/p>\n
Where Arvind had invested in creating exclusive Lee franchise \n stores in addition to the distribution through multi-brand outlets, \n backed by large amounts of advertising and significant trade \n credit, DuPont Sportswear\u2019s small size meant that it could \n match Arvind\u2019s strategy only partially. <\/p>\n
Eventually, by the end of the decade, VF decided to transfer \n the licence to Arvind Mills. Arvind re-launched Wrangler in \n 2000, and invested in revitalising the brand. <\/p>\n
Nevertheless, at present in terms of sales Lee\u2019s lead \n remains, evident in the fact that exclusive Lee stores will \n number 74 compared to 55 exclusive stores for Wrangler by the \n end of this financial year. Together, Lee and Wrangler are estimated \n to account for about 80% of all sales of VF brands in India, \n and 10-12% of the total denim market. <\/p>\n\t\t\t\t \n
Licensee constraints<\/b>
\n VF\u2019s other launches in the early-1990s also fared poorly \n due to the choice of the licensee. It first launched Healthtex \n children\u2019s wear with Ocean Knits and then Vanity Fair \n intimate wear in 1995 through Very Fine Apparels, both companies \n being largely held by the same owners. <\/p>\n
Both brands were constrained by the lack of capital available \n to create an impact in price-sensitive and fragmented market \n segments for each. <\/p>\n
Healthtex was launched first through \u2018Little Kingdom\u2019 \n stores (also owned by the common owners) which was the leading \n retail chain for children\u2019s wear at the time. Its wholesale \n foray was less than successful \u2013 with indifferent quality, \n an uphill struggle in marketing the product, poor financial \n backing and the demise of the parent chain, Healthtex had died \n a quiet death by the mid-1990s. <\/p>\n
Upon the expiry of the term of the first licence, VF expressed \n confidence in Arvind again by transferring the Healthtex licence \n to it, for a soft-launch in 2002. However, the brand was allowed \n to fade away in India, as VF subsequently sold the brand globally \n to Lolly Togs Inc. <\/p>\n
Vanity Fair\u2019s launch story was an even briefer flash-in-the-pan. \n It entered the market in 1995 as a totally imported product \n at very high retail prices, and died-out for much the same reasons \n as Healthtex. <\/p>\n
However, as with its other brands, VF has been persistent \n with Vanity Fair in the Indian market, and re-launched it in \n 2003 through La Reine Fashions, a group company of Maxwell, \n the leading undergarment group in India. <\/p>\n
This time, the product range has been a mix of domestically \n manufactured and imported styles, and available from one-third \n the price of the initial launch a decade ago. Although it is \n still pitched at the premium end, the market around it has grown \n further with brands such as Triumph, Marks & Spencer and \n others, and is expected to perform better than it did in its \n first incarnation. <\/p>\n
Having established a fairly wide and deep distribution network \n through its licences of VF and other brands, as well as its \n own, Arvind Fashions also launched Jansport and Kipling accessories. \n By 2005 its relationship with VF covered four leading brands. \n <\/p>\n
With this clutch of brands under the same licensee, it was \n logical for VF to place confidence in Arvind again for its most \n recent major brand acquisition, Nautica. <\/p>\n
At its launch in 2006, Denise Seegal, Nautica president and \n chief executive, said: \u201cArvind\u2019s reputation for \n successfully launching and maintaining international brands \n make them an ideal partner for us.\u201d <\/p>\n
Arvind opened the first free standing Nautica stores in India \n in Bangalore (a 6,800 sq ft exclusive store) and in New Delhi \n in May 2006, with plans to operate the first 12 stores and to \n franchise the subsequent stores. <\/p>\n
Joint venture vehicle<\/b>
\n As the involvement with India has intensified, VF\u2019s desire \n to take control of its presence in a strategic market such as \n this has come to the fore. Since 2004, Arvind Brands\u2019 \n president, Darshan Mehta, has spent significant amounts of time \n in the USA, negotiating the details of a deal that culminated \n into VF\u2019s very first joint-venture in the world. <\/p>\n
The 60:40 joint venture, VF Arvind Brands Pvt Ltd, between \n VFC and Arvind Brands, brings in-house activities related to \n the VF brands handled by Arvind. The team of about 180 people \n from Arvind Fashions, the main licensee, have been transferred \n to the joint venture, along with assets and the existing licences. \n On its part, VF is paying US$33m for its 60% stake in the business. \n <\/p>\n
The joint-venture is now expected to be the vehicle for further \n launches of VF brands in India, and also of any potential acquisitions \n of Indian brands in the future. <\/p>\n
The current retail infrastructure will be retained by Arvind, \n and is expected to expand to 300 stores by March 2007 from around \n 270 currently. Discussions are also reported to be on with the \n new retail business of the US$20bn Reliance Industries, to launch \n Hero (by Wrangler) and Riders (by Lee) in the mid-market segment. \n <\/p>\n
Darshan Mehta takes over as the CEO of the joint-venture, \n reporting to Eric Wiseman, president and chief operating officer \n of VF Corporation, who will be chairman of the new company. \n <\/p>\n
Thus, VF\u2019s involvement with India has gone from tentative \n entry in the 1980s with one brand, to multiple licences and \n multiple brands. Its consolidation now into a majority-holding \n in a joint venture reflects VF\u2019s desire for control of \n a growing business in a strategic market. <\/p>\n
Underlining this, Mackey J McDonald, chairman and chief executive \n officer of VF Corporation said upon the formation of the joint-venture: \n \u201cWith its rapidly expanding economy, growing retail base \n and favourable demographic characteristics, India presents a \n source of enormous future growth for our brands. <\/p>\n
\u201cThis move underscores our commitment to leveraging \n VF\u2019s powerful portfolio of brands to capture new growth \n opportunities in expanding markets.\u201d <\/p>\n