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Bangalore witnessed a series of events last week with a focus on sustainability and allied issues.
Sustainable Apparel Coalition, US, held its annual meeting in the city at which its members (brands as well as leading Indian exporters) took part.
Then there was Planet Textiles 2017 in which sustainability heads of brands like Puma, Adidas, Nike as well as Indian apparel exporters like Pratibha Syntex, Orient Craft, Eastman Exporters, Sharadha Terry Products participated. More than 300 delegates from over 20 countries participated in the event, which tapped on numerous sustainability issues like chemical management, wastewater, circular economy etc.
Similarly Fabric of Change Globalizer Summit also concluded in Bangalore. An announcement was made at the event that Fabric of Change, a global initiative to support innovators for a fair and sustainable apparel industry initiative, and C&A Foundation will launch a new Scaling Impact Fund as part of their joint venture to support social innovation in the apparel industry.
Top-notch professionals from various brands and organizations, along with Indian apparel export houses, participated in these events, shared their ideas and discussed various issues related to sustainable apparel industry. A collective approach; need to increase transparency; and a fresh look to existing sustainability practices were the key highlighted points at these events.
Bangalore is one of the biggest apparel manufacturing hubs in India.
"Much like the fear of online retail, there has been an influx in intellectual properties of brands. A new report by TrademarkNow suggests, the industry has seen a major spurt in luxury goods-related intellectual property (IP) protection. The report says top five clothing, apparel & luxury goods companies applied for more than 6,400 marks around the world in 2016, and a more globally diversified playing field – both in terms of competition and in companies' vies for IP protection."
Much like the fear of online retail, there has been an influx in intellectual properties of brands. A new report by TrademarkNow suggests, the industry has seen a major spurt in luxury goods-related intellectual property (IP) protection. The report says top five clothing, apparel & luxury goods companies applied for more than 6,400 marks around the world in 2016, and a more globally diversified playing field – both in terms of competition and in companies' vies for IP protection.
The report titled ‘Trademarks, Now: Trademark Industry Review Q1 2017’ says, LVMH Moët Hennessy Louis Vuitton SE; Victoria’s Secret’s parent company L Brand Inc.; VF Corporation (which owns Wrangler and Lee, Timberland, Nautica sportswear, and The North Face); Gucci, Balenciaga, and YSL’s parent Kering; and Richemont, which owns Cartier, Chloe, and Alaia, top the list of most active trademark-filers, in terms of luxury goods and apparel brands. LVMH’s direct competitor, Kering, which took a luxury goods ranking of No. 4 and an overall ranking of No. 54, applied for over 800 new trademarks around the world in 2016 – a little less than it did in 2015 (when it filed more than 1,200). Leather goods and jewelry were Kering’s top product classes in 2016, with fragrances taking a backseat.
Cosmetics dominance
Cosmetics-related trademarks continued to dominate in 2016. Accordingly, while the top five companies in the clothing, apparel & luxury goods space obviously have varied areas of focus in terms of products, leather goods (trademark class 18) registered consistent growth in trademark applications over the past five years among these companies. Cosmetics (Class 3) and jewelry, while still a larger fraction of the total product mix, have had a flatter growth in trademark filings.
Of all the companies survey by TrademarkNow, the largest-volume trademark classes in 2016 were those within the always-busy broad business-oriented categories (e.g., advertising & business; research & development), and the prominent technology/ media/telecom categories (electrical & scientific devices; education & entertainment). Clothing and pharmaceuticals & medical supplies also placed near the top.
China leads the pack
China took the top spot in terms of trademark filing activity. The State Administration for Industry and Commerce (SAIC) in Beijing accepted 3.7 million trademark applications during the year, a 29 per cent increase over 2015 and more than seven times the filing volume of the second-busiest trademark office, the US Patent and Trademark Office. Following China and the US was India, Japan, South Korea, Brazil, Mexico, European Union, Turkey, France, and Australia respectively.
Global companies counting
LG Electronics was second in portfolio growth, with over 3,600 filings; Time Warner was third, with over 3,500. Pharmaceuticals and medical devices conglomerate Johnson & Johnson and global cosmetics company L’Oreal rounded out the top five. As noted, LVMH took the number 12 spot (filing 2,100 applications, an increase of 4 per cent compared to 2015), Victoria’s Secret’s parent company L Brand Inc. took the no. 45 placement (filing 922 applications, an increase of 60 per cent), and VF Corporation came in at number 49 (filing 840 applications, down by 91 per cent).
Apple was at number 15 (filing 1,800 applications, down by 62 per cent), Chinese e-commerce giant Alibaba at number 18 (filing 1,700 applications, down by 95 per cent), Japanese cosmetics giant Shiseido at number 31 (filing 1,300 applications, down by 94 per cent), Abercrombie & Fitch Co at number 42 (filing 973 applications, a 5 per cent increase), and Amazon at number 50 (filing 837 applications, an increase of 15 per cent). A key fact that has emerged from the study is that there has been an exponential growth in the trademarked brands within the newly-industrialised economies.
"Lot has been said and debated on the usage of water that is required to produce a single pair of jeans. It takes more than 900 gallons of water to produce a single pair of denim jeans using conventional practices. That’s equivalent to a faucet left running for 15 hours, flushing the toilet 128 times in a row, or five years’ worth of drinking water for one person. All these are startling facts when water has become a scarce commodity. Therefore, water-saving measures are a must for the textile industry. Denim mills and chemical manufacturers have been consciously making efforts to find new water-saving dyes, waterless or near-waterless processes or manufacturing facilities equipped with technology to reduce water consumption. "
Lot has been said and debated on the usage of water that is required to produce a single pair of jeans. It takes more than 900 gallons of water to produce a single pair of denim jeans using conventional practices. That’s equivalent to a faucet left running for 15 hours, flushing the toilet 128 times in a row, or five years’ worth of drinking water for one person. All these are startling facts when water has become a scarce commodity. Therefore, water-saving measures are a must for the textile industry. Denim mills and chemical manufacturers have been consciously making efforts to find new water-saving dyes, waterless or near-waterless processes or manufacturing facilities equipped with technology to reduce water consumption.
Levi Strauss & Co say they are only responsible for about a tenth of the water consumed in the entire lifecycle of a pair of jeans; cotton cultivation and consumer care use the most amount of water. Nuria Estape, Head, marketing and promotion of textile specialties at Swiss chemical company Archroma, points out water scarcity is unfortunately already a harsh reality in some parts of the world. The most responsible brands and players in the textile industry fully acknowledge this reality and, under their leadership, impetus and initiatives, the entire industry is slowly but surely turning to more sustainable practices.
Sustainable steps by brands
Levi’s created Water Less, a set of standards and tools that removed up to 96 per cent of the resource from the denim finishing process. For instance, instead of using a lot of water and detergent to achieve a stonewashed look, Levi’s discovered how to get the same result using ozone gas. Patagonia reduced its reliance on the resource by 84 per cent after swapping out synthetic indigo dye for low-impact alternatives that adhere more easily to cotton. Similarly, Eileen Fisher worked with its Los Angeles jeans factory to develop two new washes, Utility Blue and Indigo, that both use 62 per cent less water than the brand’s most intensive wash.
Meanwhile mills and suppliers are also taking initiatives. Hong Kong-based Trusty Trading, a waistband and pocketing specialist partnered Archroma to create a Eco Pocketing range. With Archroma’s near-waterlesss Optisul C dyes, it was able to reduce water usage by 94 per cent, while also increasing speed to market. Archroma offered two eco-friendly dyeing processes under its Advanced Denim concept, Denim-Ox and Pad/Sizing-Ox, since 2009. By using sulfur dyes instead of indigo, traditional dyeing ranges comprising 15 vats are replaced with systems that use no more than five vats.
Jeanologia has been working with ozone finishing for more than 15 years and introduced its G2 washing machine in 2008, which uses oxygen and ozone gas instead of water and toxic processes to give jeans an aged look. As per the firm, G2 cuts water consumption by up to 70 per cent and chemical usage by up to 80 per cent. Carmen Silla, Marketing Manager, Jeanologia says technology minimises water consumption and chemicals, eliminates waste and reduces energy in all processes.
In line with this, Mexico-based mill Global Denim recently launched a zero-discharge dyeing process called Ecolojean that uses less water and energy than conventional methods required to dye one pair of jeans. Anatt Finkler, Creative Director, Global Denim, says instead of passing the denim or thread through water vats and dyeing vats, Ecolojean process only puts them through dyeing vats and the dye bonds to the fabric without having to go in the water. When you dye conventionally, as much as 25 per cent of the dye ends up in the water, but with Ecolojean, 100 per cent of the dye that’s applied remains on the yarn.
Kaltex will release Aqueduct in Autumn/Winter18, a collection of fabrics created using water-saving practices such as a dyeing system that eliminates rinsing in fabric production. Jadel Lam, managing director – R&D, Kaltex, informed that they are constantly looking, researching and investing in new technologies that aid in reducing water, energy and chemical usage.
Cost an added burden?
As a general belief, consumers do not want to pay more for something that is the manufacturer’s responsibility. Arpit Srivastava, Marketing Manager, Arvind feels it’s worth it. With water becoming a depleting resource, this is the future of the denim industry. Another hypothesis on the way of sustainability is that the product quality will diminish, but it has been made clear by experts that there is no aesthetical difference between denim dyed or finished using eco-friendly methods and denim treated using large amounts of water and chemicals. Alvyda Kupinas, head – design, Kaltex, reiterated that safe and sustainable does not require sacrificing aesthetics or quality.
For fiscal 2017, Decker Brands has reported gross margin of 46.7 per cent compared to 45.2 per cent last year.
Non-GAAP gross margin was 46.7 per cent compared to 45.4 per cent last year. The year over year increase in gross margin was primarily due to lower input costs and supply chain efficiencies, partially offset by foreign exchange headwinds.
The company's SG&A expenses as a percentage of sales were 46.8 per cent compared to 36.5 per cent last year. Non-GAAP SG&A expenses as a percentage of sales were 37.4 per cent compared to 35 per cent last year.
There was a 4.5 per cent decline in net sales compared to last year. On a constant currency basis, net sales decreased 4.1 per cent.
Over the course of the last year, the organisation has been hard at work identifying margin enhancing initiatives and detailing plans that significantly improve the profitability of the company. It anticipates that the 150 million dollar cumulative savings plan announced in February 2017 will drive a 100 million dollar operating profit improvement by fiscal year 2020.
It is confident these improvements will drive a significant increase in shareholder value over the long-term.
The company’s fiscal year 2018 outlook includes targeted savings which are expected to result in over 17 million dollars of operating profit improvement. Its gross margin is expected to be approximately 47.5 per cent while net sales might be in the range of down two per cent to flat.
A team of scientists from the Indian Institute of Technology (IIT) in Delhi has made a breakthrough in the development of 3D bioprinted cartilage. The research team, led by Sourabh Ghosh from the Department of Textile Technology at IIT, has successfully developed a bioink that can be used to print structures like the cartilage found in human knees.
3D bioprinting is arguably one of the most promising new avenues in the medical field, which is why every breakthrough in the technology, no matter how small, is exciting to us. A recent bioprinting announcement by the IIT, not a small feat in the least, marks the first time a bioprinted tissue has been created in an India-based lab.
A new bioink developed by a team led by Professor Sourabh Ghosh contains a high concentration of bone marrow, derived from cartilage stem cells, as well as silk proteins and a few other materials. According to the research team, the 3D printable bioink was designed to not only support cell growth, but also to ensure the long-term survival of the cells.
Ghosh explained that the silk protein has different amino acids that closely resemble the amino acids present in human tissues. As recent tests showed, the 3D bioprinted cartilage was able to remain physically stable for a period of up to six weeks. But there is still some work to be done before anyone will reap the benefits of the 3D printed cartilage cells.
The IIT’s 3D bio printing technology could, however, offer an alternative to this, as the team has figured out a way to transform the cartilage stem cells in the bioink into chondrocyte-like cells, which are cells that produce and maintain the extracellular matrix of cartilage.
Sowing of cotton has begun on a strong note in the key growing regions of north India such as Punjab and Haryana, and in southern parts of the country such as Karnataka, for the 2017-18 season.
The arrival of cotton during April 2017 is estimated at 30.75 lakh bales as compared to 22.25 lakh bales arrived during the same month last year. The total arrival this season up to April is estimated at 306.25 lakh bales, which constitute around 90 per cent of the total estimated crop.
Buoyed by the high prevailing prices, farmers are bringing in a larger area under the fiber crop and the seed industry expects acreages this year to increase by up to a fifth over the previous year.
The rains would play a crucial role in sowing operations and helping farmers decide on which crop to opt for. Last year, there was a decline in acreage in north India, owing to pest attacks and erratic weather. This year, the weather seems favorable and also farmers are geared up to tackle any pest attacks.
Initial indications are that during the current season the cotton area sown would be around six lakh hectares in Haryana (as against 4.98 lakh hectares during 2016-17) and four lakh hectare in Punjab (as against 2.56 lakh hectares in 2016-17).
Apparel Training and Design Center (ATDC) will open a new center and a regional training hub at Ahmedabad and Gandhinagar.
The aim is to fulfill the steadily expanding requirement of the skilled youth in the rapidly developing textile-related sectors in Gujarat.
Gujarat is one of the fastest developing textile apparel manufacturing clusters. ATDC has state -of-the-art infrastructure offering shop floor, supervisory and managerial skills to develop an industry- ready workforce.
ATDC also plans to set up an India International Skill Centre, with the National Skill Development Corporation, additional ATDC-SMART centers in major textile/apparel clusters in Gujarat and also apparel design centers (as fashion and crafts design and innovation cells) with a focus on innovative designs for the apparel industry to create new brands and global fashions for youth.
ATDC under the aegis of the Apparel Export Promotion Council has emerged as India’s largest vocational training network for the apparel sector whose presence currently spans 200 ATDCs including 65 ATDC vocational institutes and over 135 ATDC- SMART centers and skill camps present in major apparel clusters spread across 23 states and 85 cities across India.
Apparel Training and Design Centre has a mission to upgrade the technical skills of the human resources employed in the garment industry.
Adidas has hired Alain Pourcelot as the new managing director for Western Europe, succeeding Gil Steyaert, who has been appointed as the new executive board member for global operations.
Effective October 1, Martin Shankland will take over as MD, emerging markets, succeeding Osman Ayaz, who has decided to retire at the end of the year.
Both Pourcelot and Shankland will report directly to Roland Auschel, executive board member of Adidas, responsible for global sales.
Pourcelot joined Adidas in 2005 as MD for Adidas France. He led the company in France as MD from 2012-2015. Since 2015, he has held the position of senior vice president Direct-to-Consumer in Western Europe.
Shankland initially joined Adidas Russia in 1997 as CFO. He has served as MD for Adidas in Russia/CIS for the past 17 years. Under his leadership, Adidas’ business in Russia/CIS grew exponentially and remained steady despite challenging market conditions during the last few years.
Sales of Adidas increased 16 per cent in the first quarter of 2017 in comparison to the same period for the earlier year.
For 2017, Adidas expects sales to increase at a rate between 11 per cent and 13 per cent driven by double-digit growth in Western Europe, North America and Greater China.
"India’s denim segment, with close to 10 per cent market share of the textile industry, is expected to witness deterioration in credit profile in the absence of improvements in realisations in FY18, says a recent report, ‘Stable Input Prices, Fiscal Incentives to Support Textile and Cotton in FY18’, by India Ratings and Research (Ind-Ra). Denim’s operating margins is slated to fall 10-11 per cent in FY18 owing to cost inflation amid surplus capacity in denim standard products with low cotton content."
India’s denim segment, with close to 10 per cent market share of the textile industry, is expected to witness deterioration in credit profile in the absence of improvements in realisations in FY18, says a recent report, ‘Stable Input Prices, Fiscal Incentives to Support Textile and Cotton in FY18’, by India Ratings and Research (Ind-Ra). Denim’s operating margins is slated to fall 10-11 per cent in FY18 owing to cost inflation amid surplus capacity in denim standard products with low cotton content. Ind-Ra has estimated prices to moderate in second half of FY18. However, the denim surplus situation and inventory losses are likely to pressurise margins.
Level playing field for Manmade fibres
Meanwhile, the man-made fiber industry is looking for a level playing field for the taxation of cotton, which is exempt from indirect taxation. If cotton is brought under the Goods and Services Tax (GST), then cotton fabrics including denim sector’s profitability may come under pressure in the transitory period. Raw cotton prices have increased by 32.8 per cent YoY in March 2017 and Ind-Ra expects it to remain high until first half of FY18. For denim manufacturers, cotton forms more than 35-40 per cent of the total raw material requirement. For many basic denim fabric manufacturers catering to domestic consumption average realisations remained steady, despite higher cotton prices in nine months of FY17.
However, some of them have been able to increase realisations for Q4 of FY17 partly passing the cost inflation with a lag. Denim garment players are likely to perform better than fabric players, as retail margins may sustain as fabric prices remain under pressure.
Future Prospects
The research agency expects the denim sector will post robust volume growth of over 10-15 per cent in line with the past trend along with rising disposable incomes, rapid growth of the retail sector, westernisation trend, young population demographics, and versatility of denim as a fabric. However, Ind-Ra views capacity addition is growing at a faster rate. Moreover, existing capacities will face competition from New Age cost efficient plants.
The denim fabric industry is cyclical in nature and characterised by periods of excess capacity followed by narrowing the demand-supply gap. The apparent short project pay-back has encouraged a number of denim fabric manufacturers to put up additional capacity, higher than the estimated demand growth. Further capacity additions are likely to keep domestic competitive pressures heightened. As per CMIE data, a moderate level of new capacity ramp-up is underway in FY18. This includes capital expenditure for expansion and backward integration by a few companies namely, Nandan Denim, Raymond Uco Denim and RSWM.
The credit profile for most players has come under pressure due to the stretched working capital cycle and debt-led capacity expansion in the backdrop of operating margin pressure. Aggregate peer set net leverage (Net Debt/EBITDA) increased to 4.59 in first half of FY17 compared to 2.83x in FY16. The working capital cycle has got stretched to 61 days in first half of FY17compared to 54 days in FY16, on account of the high credit period and inventory holding for the new capacity ramp-up. Increased competition in the international arena and higher receivable days will impact the exports profitability.
Ind-Ra foresees that the credit profile of value-add export-oriented manufacturers will remain robust. Industry players with diversified revenue lines with a mix of man-made textile products are better placed than the pure denim players. Also, companies with strong liquidity, low leverage and short working capital cycle are better placed to face the challenging times.
Bangladesh’s garment exporters want relief from tax at least for the next two fiscals. They say the industry has experienced a gradual drop in export growth in the past few years and describe the current market situation as critical. The withdrawal of the tax at source on garment products would help the sector stay in the world market.
Exporters say taxes are already paid on yarn, cloth, accessories, washing and end products and so taxes are paid on the same product repeatedly.
The average growth of export in the readymade garment sector was 13 per cent in the past ten years, but has dropped to 2.21 per cent in the current fiscal.
Blame for this is assigned to unsuccessful bids to enter new markets, the crisis of gas and power supply, and the high rates of interest on bank loans.
Following demands by businesses, the proposed tax at source on all products, including readymade garments, was 1.5 per cent for the 2016-17 fiscal year but was later cut to 0.7 per cent.
The 28 billion dollar readymade garment sector contributes to around 80 per cent of Bangladesh’s total exports but exports from this sector have dropped by 6.8 per cent to the US and 5.91 per cent to the EU countries.
