Indian Leather Industry

The leather industry occupies a place of prominence in the Indian economy in view of its massive potential for employment, growth and exports. There has been an increasing emphasis on its planned development, aimed at optimum utilisation of available raw materials for maximising the returns, particularly from exports. The exports of leather and leather products gained momentum during the past two decades. There has been a phenomenal growth in exports from Rs.320 million in the year !"#$"" to Rs."!##% million in !!"$!&. Indian leather industry today has attained well merited recognition in international mar'ets besides occupying a prominent place among the top seven foreign exchange earners of the country. The leather industry has undergone a dramatic transformation from a mere exporter of raw materials in the sixties to that of value added finished products in the nineties. (olicy initiatives ta'en by the )overnment of India since !&3 have been instrumental to such a transformation. In the wa'e of globalisation of Indian economy supported with liberalised economic and trade policies since !! , the industry is poised for further growth to achieve greater share in the global trade. *part from a significant foreign exchange earner, leather industry has tremendous potential for employment generation. +irect and indirect employment of the industry is around 2 million. The s'illed and semi$s'illed wor'ers constitute nearly #0, of the total wor' force. The estimated employment in different sectors of leather industry is as followsSector .laying, curing / 0arcass Recovery Tanning / .inishing .ull 1hoe 1hoe 2ppers 0happals / 1andals 4eather )oods / )arments Structure of the industry The leather industry is spread in different segments, namely, tanning / finishing, footwear / footwear components, leather garments, leather goods including saddlery / harness, etc. The estimated production capacity in different segments is as under Product Leather 5ides 1'ins "3 million pieces "" million pieces Capacity Total Employment %,00,000 ,2#,000 ,&#,000 &#,000 3,#0,000 ,#0,000

Footwear & Footwear Components a6 1hoes b6 4eather shoe uppers c6 7on$leather shoes8chappals etc Leather Garments Leather Products Industrial Gloves Saddlery 00 million pairs &% million pairs 2# million pairs " million pieces &0 million pieces 30 million pairs "000 pieces

The ma9or production centres for leather and leather products are located at 0hennai, *mbur, Ranipet, :aniyambadi, Trichi, +indigul in Tamil 7adu, 0alcutta in ;est <engal, =anpur in 2ttar (radesh, >alandhar in (un9ab, <angalore in =arnata'a, +elhi and 5yderabad in *ndhra (radesh. Raw material supplies There exists a large raw material base. This is on account of population of !3 million cattle, &0 million buffaloes, !# million goats. *ccording to the latest census, India ran's first among the ma9or livestoc' holding countries in the world. In respect of sheep with 3% million sheeps, it claims the sixth position. These four species provide the basic raw material for the leather industry. The annual availability of "" million pieces of hides and s'ins is the main strength of the industry. This is expected to go up to 2 % million pieces by the end of year 2000. 1ome of the goat8calf8sheep s'ins available in India are regarded as speciality products commanding a good mar'et. *bundance of traditional s'ills in training, finishing and manufacturing downstream products and relatively low wage rates are the two other factors of comparative advantage for India. Tanning and finishing capacity ;ith tanning and finishing capacity for processing !2 million pieces of hides and s'ins per annum spread over different parts of the country, most of which is organised along modern lives, the capability of India to sustain a much larger industry with its raw material resource is evident. In order to augment the domestic raw material availability, the )overnment of India has allowed duty free import of hides and s'ins from anywhere in the world. It is an attraction for any foreign manufacturer who intends to shift his production base from a high cost location to low cost base. Export Potential The leather industry, one of the ma9or foreign exchange earners of the country recorded significant growth since the beginning of the decade. Today the share of the value added finished products in the total exports from leather sector are %0, as against 20, in !&0s.

Category .inished 4eather 4eather .ootwear .ootwear 0omponents 4eather )arments 4eather )oods 1addlery and 5arness Total

?:alue in million 21@6 199 !99 2"#.2 2!0.2 233.& 3"%." 32!.0 33.3 1"#$%1

Export of Leather and Leather Products from India

30000 20000
Rs% (illion

&223.3 0333.2 0 % #20.3% " #&0." 33 "!##&.%

00000 %0000 "0000 30000 20000 0 !!3$!3

!!3$!#

!!#$!"

!!"$!&

!!&$!%

!!%$!!

Country Germany 21* Italy 2= .rance 1pain Russia (ortugal *ustralia +enmar' 7etherlands 5ong =ong Athers Total

199 !99 1546 0%2" %3 & !&33 3230 3 03 00! 230 3"# %0% 2 2& 2#% !!#% "9&&

?:alue in million Rs.6 Share in total exports in 199 !99 ! "# #.#" , .!" , 3.00 , 3." , 3.3" , .33# , .&% , 2. 0 , . ", 3.0" , 3.2# , 3.32 , 1$$ '

Top ten Indian leather exporters Tata International 4td. .lorind 1hoes 4td. (unihani International .arida 1hoes 4td. BirCa Tanners 4td. T. *bdul ;ahid / 0ompany 5industan 4ever 4td. 1uper 5ouse 4eather 4td. R14 Industries 4td. (residency =id 4eather 4td. Indian Leather Footwear Industry India is the worldDs second largest producer of footwearE its production estimated over &00 million pairs per annum. *t about 21 @ 300 million per year, footwear accounts for % percent share of total exports of leather exports. :arious types of shoes produced and exported from India include dress shoes, casuals, moccasins, sports shoes, horacchis, sandals, ballerinas, and booties. Ba9or production centres are 0hennai ?Badras6, +elhi, *gra, =anpur, Bumbai ?<ombay6, 0alcutta and >alandhar. Bost of the modern footwear manufacturers in India are already supplying to well established brands in Furope and 21*. The large domestic mar'et and the opportunity to cater to world mar'ets ma'es India an attractive destination for technology and investments. FGually relevant is it for the footwear components industry, at this 9uncture, it is posed for real growth and diversification. Indian Leather Goods Industry Items produced by this sector include, in addition to bags, handbags, handgloves and industrial gloves, wallets, ruc' sac's, folios, brief cases, travelware, belts, sports goods, upholstery and saddlery goods. * surfeit of modern units in 0hennai, =anpur and 0alcutta employing s'illed human resources and eGuipped with modern and sophisticated machinery account for a diversified range of superlative small leather goods including bags, purses, wallets, industrial gloves etc. made of Guality leathers of cows, sheep, goats and buffaloes. The products meet the reGuirement of bul' buyers and consumers in Furope, 21* and *ustralia. The ma9or mar'et for Indian leather goods is )ermany, with an offta'e of about 2# per cent of the leather goods produced in India followed by 21*, 2=, .rance and Italy. ;ith products ranging from designer collections to personal leather accessories, this sector has a share of 20.#3 per cent in the leather industry, while maintaining an average growth rate of per cent recorded in the last five years.

Indian Saddlery Industry India is one of the largest producers of saddlery and harness goods in the world. The saddlery industry was established in the !th century primarily to cater to the needs of military and police. .rom then on initiatives were ta'en to develop, the industry and today there are over #0 units in the organised sector, out of which approximately 0# are 00, export oriented units. =anpur, in the state of 2ttar (radesh, is a ma9or production centre for saddlery goods in India accounting for more than !#, of the total exports of saddlery items from India. =anpur, because of its specialisation in tanning and finishing of buffalo hides is the only centre in the country where harness leather, which is ma9or input for saddlery industry, is manufactured. The export of saddlery and harnDess items have showed an annual growth rate of about 30, reaching +B "3 million during !!%$!!. The ma9or importers of Indian saddlery are )ermany, 21*, 2=, .rance, 1candinavia, 7etherlands, >apan, *ustralia and 7ew Healand. Indian Leather Garments Industry The 4eather )arment Industry occupies a place of prominence in the Indian leather sector. The product classification of leather garments comprise of 9ac'ets, long coats, waist coats, shirts, pant8short, children garments, motorbi'e 9ac'ets, aprons and industrial leather garments. Indian leather garments, which entered the world mar'et only in the mid$eighties with exports of Rs. # crores in !!&$!%, account for about Rs. #30 crore in !!&$!%. The ma9or export destination of leather garments from India is )ermany. In !!&, )erman imports of leather garments aggregated +B &%" million of which +B 303 million worth of imports went from India. India, 0hina and Tur'ey were the ma9or suppliers of leather garments for the )erman mar'et, as they accounted for about &%, of the mar'et share. *mong the three ma9or exporting nations of leather garments, India maintains a similar level of mar'et share of about 20,, in both )erman and F2 mar'ets. Ather mar'ets for India include Italy, 2.=., 2.1.*. .rance, 1pain and 7etherlands. Recently, successful attempt had been made for exports to +enmar', 1witCerland and 0anada. Indian leather industry ! In)estment * Sales The ratio of in)estment + sales value is - 2.2#, which is very low when compared to other industries. This is mainly due to low capacity utiliCation of the units. The capacity utilisation of units in respect of hides converting raw into unfinished leathers is estimated at 3!,, raw to finished "0, and unfinished to finished &0,. In the case of s'in based tanneries, the respective percentages are "3, "& and

&0. The main reasons reported for under utilisation of capacity are raw material shortage, high price of raw materials, lac' of modernisation, financial constraints, power constraints and stringent environmental regulations. In)estment details of Indian leather industry 1ector Tanning 11I Large 1 medium .oot ;ear 11I 4arge 8 medium 4eather goods 11I 4arge 8 medium 4eather )arments 11I 4arge 8 medium ,o% of -nits .)erage Investment per unit I /in Rs% Crores0 2.2# #.00 Su2 3 Total /I0 0.%0 3.&% Su2 3 Total /II0 0.#0 ."% Su2 3 Total /III0 .00 3.00 Su2 3 Total /I50 Total Cost /in Rs% Crores0 2323.2# 300.00 4 4#%4& 330.00 %!.00 "49%$$ !#.00 ".%0 411% $ 3!0.00 30.00 6#$%$$ 6$96%$& 22%.2 &#44%4"

0&& %0 ##0 #0 3!0 0 3!0 0 Total /I7II7III7I50

-norganised sector /8#$' of total amount0 Total .mount

Composition of Indian leather exports to 9ermany /199 !990

3% 31% 15% 30% Leather Leather Garments Leather Fo o twear Leather Go o ds Fo o twear Co mpo nent Saddlery and Harness 8% 13%

Export of leather and leather products to 9ermany /199 !990

20 0!.# 3.2

Billion 21 @

00 %0 "0 30 20 0
Leather Leather Fo o twear Fo o twear Co mpo nent Leather Garments Leather Go o ds

3%.%" 2%.2#

#".03

%.#
Saddlery and Harness

(ar:eting of leather and leather products in 9ermany * the EThe leather sector offers a good potential which Indian entrepreneurs can exploit in )ermany and other F2 mar'ets characterised by ever growing competitiveness in terms of price and Guality, on one hand, and the environmental considerations, on the other. ;ith a strong foothold that the Indian leather industry has had for long in these mar'ets, and its advantage of raw material and labour resources, Indian leather exporters can, and should, mount a concerted mar'eting campaign to wrest a share consistent with their inherent strength and potential. This has to be done against the bac'ground of the well$ 'nown salient features of the )erman mar'et The worldDs second largest import and export mar'et * difficult buyersD mar'et with hyper competition and high expectations * dynamic multi$faceted mar'et with rapid technological development and innovations * mar'et where a considerable amount of buying power is devoted to satisfying individual needs * mar'et influenced by the rising average age of the population and low birth rate * mar'et where environment awareness and eco$friendly production becomes more and more a pre$reGuisite for successful mar'eting of products Recipe for mar:et intelligence $ar%et in&ormation throu'h (ournals and ma'a)ines 1chuhmar't 1chuh'urier 4ederwaren Report

*uic% $ar%et +ssessment ;indow shopping <ac'ward calculation of price 0atalogues8 leaflets ,rade Fairs )+1 J +usseldorf Fxpo$Riva 1chuh $ Italy 4eipCig .ashion .air 4ederwarenmesse $ Affenbach +'ents (ar:eting channels The emerging trend in )ermany has been towards direct imports. The other noteworthy feature is the integration of retailing and manufacturing, particularly for the footwear sector. This has led to increased emphasis on distribution aspects of business. Ather distributors, li'e departmental stores, mail order houses, super mar'ets and non$leather shops have also gained importance. Bany outlets get direct supplies either from the manufacturers and importers or from wholesalers and buying associations ?Fin'aufs$ :erband, e.:.6. These developments necessitate the mar'eting strategies to be attuned to the specifics of the different channels, 'eeping in sharp focus the changes ta'ing place in the distribution pattern of chain stores, retailers, discounters, etc. The strategy should focus on a structural approach to the promotion of export of leather products from India. This must include mar'et information for exploring new mar'ets, participation in different international trade fairs, organising trade delegations, organising buyer$seller meets, liaisoning with the representatives of the buying houses, etc. .or the successful mar'eting of their products, the Indian exporters should aim for long lasting trade relations based on stable partnerships. In such a context, the )erman importer needs to be viewed as much more than only a buyer and distributor. 5e would normally ta'e care of the timely development of the samples and collections through fashion and design information and also by employing pattern ma'ers and designers. In addition, he would organise advertising and (R activities, besides holding sufficient stoc's. En)ironmental aspects for leather products Banufacturers who produce environmentally sound products will en9oy a competitive advantage in all business relations with F2 in general and )ermany in particular. The pitch has to be to successfully emphasise the environmental

5erren Bode ;oche $ Bunich Igedo .ashion .air $ +Ksseldorf 1(A)* $ 0ologne

soundness of the product in the information to the buyers since ma9or attention is being paid to the increasing role of the environmental regulations. Therefore, the manufacturers have to view their products and production processes not 9ust by loo'ing at traditional aspects li'e price, Guality, customer demands, etc. but also at the environment. Fnvironmentally sound production, conseGuently, opens new mar'et opportunities. The regulations concerning the ban on the use of *Co +yes and (0( need to be specially ta'en care of. 2se of both these inputs has been banned due to their carcinogenic nature. 4i'ewise, for compliance with the )erman pac'ing regulations, Indian suppliers have to stic' to the basic principle that pac'aging material be reusable and recyclable. 0onsumers may have a tendency to choose products, which are easily recognisable as such and are labeled according to legal stipulations. The hallmar' for these environment$friendly products is normally referred to as ;EC<!L.=EL>. This indicates that the product is manufactured in consonance with the environmental regulations. 9lo2al Scenario + The global trade in leather and leather products has been increasing over the years from mere 21@ 3 billion in !&2 to 21@ &0 billion in !!&. *lthough the exports of Indian leather and leather products have grown manifold during the past decades, our countryDs share in global trade is around 3, among world imports of leather products. ;hereas IndiaDs share in world imports of leather footwear is ,. Ba9or exporting countries of leather footwear are 0hina ? 3, share6, (ortugal ?", share6, <raCil ?#, share6 and Indonesia ?3, share6. IndiaDs share in world imports of leather garments is ",. Ba9or exporting countries of leather garments are 0hina ?3", share6, )ermany ?!, share6, Italy ?&, share6, Tur'ey ?#, share6 and (a'istan ?3, share6 IndiaDs share in world imports of leather goods is &,. Ba9or exporting countries are 0hina ?22, share6, Italy ?22 , share6, .rance ?&, share6 and )reece ?#, share6, IndiaDs share in world imports of harness and saddlery is %,. Ba9or exporting countries of harness / saddlery are )ermany ? 3 , share6, 2.=. ? 3 , share6, 0hina ? 2, share6. Averall, India is facing fierce competition in international mar'et from countries li'e 0hina, :ietnam, Thailand, Indonesia, etc., which are emerging as ma9or manufacturing countries. Fast Furopean countries li'e (oland, Romania, 0Cech and 1lova' Republics have re$emerged as ma9or production centres particularly for footwear sector. These countries pose ma9or challenge to Indian exporters as they en9oy geographical advantage.

S?<T .nalysis of the Indian leather industry

Strengths

5igh )rowth Ready availability of highly s'illed and cheap manpower 4arge raw material base (olicy initiatives ta'en by the )overnment 0apability to assimilate new technologies and handle large pro9ects

<pportunities

Threats

Rising potential in the domestic mar'et )rowing fashion consciousness globally

Ba9or part of the industry is unorganised 4imited scope for mobilising funds through private placements and public owned6 issues are in of ?many family$ businesses

0ontinuous product

emphasis

on and

2se of information technology and decision support software to help eliminate the length of the production cycle for different products

development

design upgradation

+ifficulty high cost

obtaining private

2se of e$commerce in direct mar'eting

ban' loans resulting in borrowing 1tricter standards ?ea:nesses

international competition from

5igh

4ac' of warehousing support from the government International price fluctuation 5uge labour force resulting in high labour charges 4ac' of strong presence in the global fashion mar'et 2nawareness of international standards by many players

Fast Furopean countries and other *sian countries 4ac' of communication facilities and s'ills