challenges for indian leather ind

7/31/2019 Challenges for Indian Leather Ind

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Challenges for theChallenges for the


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n exn ex

1.1. Indian Leather IndustryIndian Leather Industry2.2. Structure of the IndustryStructure of the Industry

.. 4.4. Threats from SyntheticsThreats from Synthetics

5.5. New MarketsNew Markets

..


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1.1. Average growth over the lastAverage growth over the last

12 ears is 6%12 ears is 6%2.2. L&LP average growth over theL&LP average growth over the

..

3.3. If we factor in inflation, growthIf we factor in inflation, growth

4.4. Growth of China, Vietnam &Growth of China, Vietnam &In onesia as een more t anIn onesia as een more t an10% per year10% per year


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n man ma ercen ageercen age

zz GoatGoat 6060

zz CowCow 2020

zz Bu a oBu a o 1515zz

zz

OthersOthers 22TotalTotal 100100

. .. .


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1.1. Economy of Scope / EconomyEconomy of Scope / Economy

2.2. Hardly any listed companies.Hardly any listed companies.

os y am y owneos y am y owne3.3. Raw material availabilit isRaw material availabilit is

inelasticinelastic

..


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conomy o cope conomy o ca economy o cope conomy o ca e

.. os n an compan es opera e onos n an compan es opera e oneconomy of scope in niche products, witheconomy of scope in niche products, with

ow capac y per monow capac y per mon2.2. Problem arises when they want to growProblem arises when they want to grow

3.3. No studies reg. issues of shifting fromNo studies reg. issues of shifting from

economies of scope to economies of scaleeconomies of scope to economies of scale4.4. Factories doing well collapse when theyFactories doing well collapse when they

shift to economies of scaleshift to economies of scale


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..

6.6. Value addition is not the same in allValue addition is not the same in all

7.7. BreakBreak--eveneven--point shifts uppoint shifts up

Solution:Solution:

1.1. Pre are a detailed ro ect re ortPre are a detailed ro ect re ort2.2. Outsource extra production to test modelOutsource extra production to test model

.. --


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1.1. Growth ver slow since internal cashGrowth ver slow since internal cashgeneration is the only avenue for growthgeneration is the only avenue for growth

2.2. Listing cos can bring in cash for quickListing cos can bring in cash for quick

expansion eg. Texti e In ustriesexpansion eg. Texti e In ustries3.3. Can also consider Private EquityCan also consider Private Equity4.4. year p ann ng requ re or ecom ng ayear p ann ng requ re or ecom ng a

listed companylisted company..

very poor. Focus was only to unlock valuevery poor. Focus was only to unlock valueand not for rowth. Minimum size 100 Crand not for rowth. Minimum size 100 Cr


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..

2.2. Industry has complicated matters by havingIndustry has complicated matters by having

3.3. Origins /size/animals/productsOrigins /size/animals/products

.. r y uy u wr y uy u wblue is not used effectivelyblue is not used effectively

.. ur r xur r xconsistent source of raw material fromconsistent source of raw material from


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aw a er a s va a eaw a er a s va a e

Solution:Solution:

zz Ensure all variants add valueEnsure all variants add value

zz Fixed price contractsFixed price contracts

by more than 50%by more than 50%


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..

a)a) Improve qualityImprove quality

b)b) Increase production / productivityIncrease production / productivity

2.2. In most cosIn most cos Capital Expenditure isCapital Expenditure is

..in low technology & inability to keepin low technology & inability to keep

-- --


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.. 2.2. Not desirable in most countries, since theyNot desirable in most countries, since they

3.3. Industry is not proactive to environmentalIndustry is not proactive to environmentalissues, onl reactive. E . Coke announcedissues, onl reactive. E . Coke announced

that they will not use groundwater fromthat they will not use groundwater from20092009.. ee o un researc or so s u ge anee o un researc or so s u ge an

recycling 70% waterrecycling 70% water.. ..

is a tanning hub. We must therefore leadis a tanning hub. We must therefore leadthe world on environment issuesthe world on environment issues


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1.1. Production in the industry has declined. ThereforeProduction in the industry has declined. Thereforenew technologies in last 5 years are negligiblenew technologies in last 5 years are negligible

2.2. Focus on technology is reducing manpowerFocus on technology is reducing manpower.. quality. Chemistry not addressed adequatelyquality. Chemistry not addressed adequately

4.4. Far East manufacturers focus only on copying andFar East manufacturers focus only on copying and

ma ng ow cos mac nesma ng ow cos mac nes5.5. Critical areas areCritical areas are

2.2. ChemicalsChemicals3.3. WaterWater..

Our industries must focus on how to use heterogeneous rawOur industries must focus on how to use heterogeneous raw


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..

upto 25% we are devaluing many low endupto 25% we are devaluing many low end

2.2. Need to calculate value add in each productNeed to calculate value add in each product..

add valueadd value..

offer extra capacity for job workoffer extra capacity for job work

.. adding products to atleast cover fulladding products to atleast cover fulloverhead costsoverhead costs


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1.1. Our leather industr toda focuses onOur leather industr toda focuses on

China and EuropeChina and Europe

2.2. As an industry they should be atleast fourAs an industry they should be atleast fourey mar e s or ea er w a m n mum oey mar e s or ea er w a m n mum o10% share from India10% share from India

.. companies to get this market sharecompanies to get this market share

.. 5.5. New segments like upholstery to beNew segments like upholstery to be

tar etedtar eted6.6. Important to have a mix of Dollar / EuroImportant to have a mix of Dollar / Euro

markets. Eg. Pittards failed because theymarkets. Eg. Pittards failed because theyno o s weno o s we


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Econom of Sco eEconom of Sco e

scope need for innovative highscope need for innovative high--endendproducts every seasonproducts every season

2.2. Important to target 30% sales from newImportant to target 30% sales from newproducts otherwise PD is not effectiveproducts otherwise PD is not effective

3.3. New Products must be able to fetch 0.25New Products must be able to fetch 0.25

0.50 $ higher price. Product life cycles are0.50 $ higher price. Product life cycles areshort and one should be able to get theshort and one should be able to get theadvantage at the beginningadvantage at the beginning


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Econom of ScaleEconom of Scale

1.1. Focus should be on producing leather below $2 /Focus should be on producing leather below $2 /sqft for upper leather and $0.90sqft for upper leather and $0.90 -- $1 for lining$1 for lining

2.2. Build capability to sample large quantities andBuild capability to sample large quantities and

3.3. Raw materials stock essential for thisRaw materials stock essential for this

.. products in the Cow rangeproducts in the Cow range

5.5. Increase new products when cow prices are highIncrease new products when cow prices are highto tempt customers with substitutes. This isto tempt customers with substitutes. This isimportant for Goat and Sheepimportant for Goat and Sheep


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.. structure of the industry changesstructure of the industry changes

2.2. Environmental issues could have major impact andEnvironmental issues could have major impact anda a ac p an or eac ype o pro em s ou ea a ac p an or eac ype o pro em s ou eprepared (what if?)prepared (what if?)

3.3. Industr must focus on uniformit in commoditIndustr must focus on uniformit in commodit

type products so that many companies can sell thetype products so that many companies can sell thesame productsame product--..

they will not be able to survivethey will not be able to survive

5.5. Growth can be mainly in new markets rather thanGrowth can be mainly in new markets rather thann na an uropen na an urope6.6. If business from new products < 30% industry willIf business from new products < 30% industry will

not rownot row


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an ouan ou

challenges for indian leather ind

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