denim-industry Jan2020

The Unfading Denim Industry

Consumers nowadays prefer to lead a comfortable yet stylish life. A life wherein they blend in and at the same time stand out on the basis of what they are wearing. This is what Denim represents. Denim has always been one of the most versatile and classic garments worn by people of all age groups globally. Originally created as work wear, denim has now become an essential part of the wardrobe and has gained importance because of its durability, adaptability, comfort and style. This quality has also made denim usable for leisure wear in the late 20th century.

Global Denim Fabric Scenario
Denim fabric manufacturing has gradually shifted to the cost competitive nations such as China, India, Pakistan and Turkey owing to cheap labour and local availability of cotton. The global denim production capacity is estimated to be ~7.7 billion metres. In terms of trade, global denim fabric trade was US$ 4.82 billion in 2018. The denim fabric trade has regained its former glory in 2018 after minor dips in the past five years.

In terms of major suppliers, China and HK dominated the global trade with a share of ~51% followed by Pakistan and India with a share of 12% and 8%, respectively.

Figure 1: Global Denim Fabric Trade (US$ Billion)
denim-fabric-trade
Source: UN Comtrade

Figure 2: Major Exporters of Denim Fabric (2018-19)
major-denim-exporters
Source: UN Comtrade

India’s Denim Fabric Industry Scenario
India’s installed capacity for denim fabric manufacturing is estimated to be ~1,700 million metres with an additional ~300 million metres manufacturing capacity in the pipeline. Though the installed capacity is 1,700 million metres, the actual supply is only 1,000 metres out of which 80% is consumed domestically consumed while rest 20% is exported.

Figure 3: Indian Denim Fabric Manufacturing Capacity
indian-denim-capacity
Data Source: Wazir analysis on Published Data

India’s denim fabric exports have increased at a CAGR of 4% in past five years to reach US$ 410 million in 2018. However, the last five years saw a lot of fluctuation in trade with decline in 2015 and 2016 (Y-o-Y 10% and 1%, respectively) and increase in 2017 (Y-o-Y 18%). The trade maintained the growth in 2018 and is expected to further grow in the coming years.

Figure 4: India’s Denim Fabric Trade (US$ Million)
indian-denim-trade
Source: DGCI&S

Global Denim Apparel Market
The global apparel market of denim was valued at US$ 56 billion in 2017 and is expected to grow by 6% CAGR to reach US$ 75 billion by 2023. Europe and USA are the biggest markets for denim merchandises even as new-age economies such as China and India are witnessing a steady rise in demand.

Figure 5: Global Denim Apparel Market (US$ Billion)
global-denim-market
Source: Wazir analysis on Published Data

In India, denim segment is anticipated to grow both in terms of volume and value. The expanding urban population, increase in the number of white-collar employees, growing base of women in the workforce and the acceptance of jeans as business casual attire will continue to fuel the growth of this segment. The number of Indians who say they “love or enjoy wearing denim” has grown significantly between 2003 and 2018, from 22 percent to 53 percent, according to the Global Lifestyle Monitor Survey.

Denim apparel market in India is estimated at ~US$ 3.64 billion in 2018 and has grown from US$ 2.34 billion in 2013 by a CAGR of 9%. Owing to the increased consumption and adaptability, it is further projected to grow at a CAGR of 11% to reach US$ 6.22 billion by 2023.

Figure 6: Indian Denim Apparel Market (US$ Billion)
india-denim-market
Source: Wazir analysis on Published Data

The overall market is dominated by unorganized & mass segment with around 60% market share in 2018. The share has reduced from ~70% to 60% owing to increasing brand awareness and disposable income. In terms of gender segmentation, the denim market in India is dominated by the men’s segment with a massive 76% share in 2018. Strong prevalence of ethnic and traditional wear among Indian women is the reason behind women’s denim market being much smaller than men’s denim.

Figure 7: Price wise segmentation of Indian Denim Apparel Market
price-wise-segmentation-denim
Source: Wazir analysis on Published Data

Most of the unbranded players operate in the lower price segment of the market where awareness of quality of fabric, finishing and washes, design and fit are relatively low. Though the share of organised brands currently is only ~40%, however, it is projected that the organized market will grow faster owing to increasing penetration of these brands into Tier -II and III cities and the rising aspirations of consumers from smaller cities.

Trends Shaping the Denim Industry
The denim industry has definitely changed the way we dress and multiple market factors suggest that there is more to come. As sustainability becomes the primary concern of the denim industry, the focus of the fabric mills as well as apparel manufacturers has shifted towards use of better practices. The need for more sustainable raw material and technology to reduce the waste generation is expected to serve as the breeding ground for the denim market in the future.

Changing Retail Trends

India’s per capita GDP has grown at a CAGR of 4.5% since 1980. However, the growth since 2006 has been fairly rapid at 5.4% CAGR. Simultaneously, the spending power of Indians is also on the rise. By 2023, 38% of the Indian population is expected to be living in urban areas, rising from 33% in 2018. The rise in per capita income of Indians is adding new consumers to middle class whose soaring aspirations are changing the dynamics of the apparel market. This ballooning middle class is expected to boost denim apparel market both in terms of value and volume.

Figure 8: GDP per Capita and Households as per Income Bracket
changing-retail-trends

Change in Product Trends
• Fits and Designs

In the recent seasons, cropped and flared versions of denim with embroidery, patchwork and embellished surfaces have replaced the skinny fit jeans that ruled the market for almost a decade. Also, 90s denim is making its way in the market and attracting a lot of eyeballs especially from the youth segment. The sale of straight fit jeans is also gaining momentum over the last few months making it a sought after trend in the coming time.

In terms of designs, the denims now have eye catching details on the bottom i.e. hem. Ruffled trims, embroidered patches, knots, cigarette hem ankle length, jeans with slits etc. The popularity of athleisure wear has influenced street wear in the last few years and denim has started following the same trend by incorporating side stripes, ribbons & pin-tucks etc. to lend a sporty chic feel to the pieces.

• Colors

Over the last few years, there has been a decline in the variety of washes and the demand for solid coloured jeans has grown considerably. The classic blue wash and greys are making a comeback. White is also making its mark on the denim sector as searches for white denim rose 42% since the beginning of March 2019 as per Global Fashion Search Platform, Lyst.

The monochromatic trend is gaining momentum, the wide acceptance of the same has encouraged brands to continue the same in the future seasons.

• Fashion Trends

The one trend that has been going on for ages now is denim on denim i.e. people prefer to carry a casual look while wearing their favourite denim with a denim shirt. This trend ensures that the consumption of denim will grow at a higher rate in the coming years. In a report by Edited, the outerwear category in denim has grown 101% in the last two years. The printed and embroidered denim are appealing to the youth, designs like slangs, flora & fauna are popped out over denim jeans, jackets etc.

Categories such as culottes are gaining a lot of popularity among as smart casuals in among the working populations, whereas denim is making a strong hold as a part of corporate wear.

• Fabric

Denim fabric have traditionally been made up of cotton but in the last decade, the demand of stretch and soft handle denim has grown exponentially. People look for feel-good factor in their denim, resulting in comfort and stretch fabrications taking the centre stage. Mills continue to invest in elastic fabrications be it stretch in the warp, bi- stretch or hyper-stretch. The use of blended fabric with Lycra, modal & Tencel in denim will grow rapidly in the coming times.

One of the uprising concepts is how sustainability can be clubbed with functionality and more comfort. The use of recycled cotton, recycled polyester, man-made cellulosic fibres made from more innovative sources, such as agricultural residues and recycled textiles rather than forests, sustainable method of dyeing by water and energy savings will set the course for the future of sustainable denim.

Change in Production Trends
The textile and apparel industry in general is amongst the largest contributors to the global pollution. There is no denying that denim manufacturing has one of the worst images when it comes to environmentally thoughtful manufacturing and has to make a lot of strides before any results show up. A simple denim jeans goes through various chemical and cosmetic changes before ending up on sales floor. The concept of responsible manufacturing will make its way into the denim industry.

Aspects of manufacturing responsibly include:

• Manufacturing excellence
• Environmental responsibility
• Responsible sourcing

This is where the need for a garment factory consultants arises. A consultant can help you realise the concepts of responsible manufacturing and successfully implement them in your manufacturing setup. Though the denim fabric industry is currently battling with underutilization, the potential of denim manufacturing in India is immense. The above trends point towards a very crucial time for Indian denim apparel manufacturers. On one hand, the global market is expanding, creating opportunities for the manufacturers while on the other hand, and global competition is taking a toll on the profitability of garment business. It is hence very important that Indian manufacturers make a move towards manufacturing responsibly and manufacturing efficiently.

This blog has been authored by Priyam Pandit, Associate Consultant and A. Ashwini, Research Analyst.