The rise of natural rubber price in recent years has hit the Indian footwear industry, especially rubber footwear industry, quite hard. The worst-affected was the Hawai chappals industry which uses natural rubber the most. In fact, Hawai chappals are disappearing from the market due to high prices of the raw material.”However, there is still good demand for such chappals even at a premium price,” says V Naushad, Director of a South India-based VKC group, a leading player in the Indian rubber footwear segment.
Over the last two or three years, the rubber footwear industry registered a 50% decline, says another leading rubber footwear maker operating in South India.
Woes of rubber footwear industry
The spurt in rubber prices has hit the industry hard. “Today, only 50% of our turnover comes from rubber slippers,” he told Rubber Asia.
The sustained rise in rubber prices over the past couple of years has made units producing rubber slippers unviable. There were about 300 small units manufacturing rubber slippers in the country. However, price rise and low consumer preference have led to the closure of a large number of these, say industry sources. In States like the Punjab, far away from the rubber producing State of Kerala, the rubber Hawai chappal industry is in bad shape. In Jalandar, which had over 450 rubber footwear SMEs in 1995, has only a little more than 60 units now. Even before the current price pressures, Hawaii chappals started getting partially pushed out of the market by plastic equivalents.
Impact of high NR price
It is not possible to suddenly increase prices of the end product whenever price of raw material shoots up since it will affect sales. At the same time, the margins will fall if the price is not hiked. This leads to a crisis-like situation in the industry. Moreover, the footwear industry could not avoid rubber totally. In this backdrop, many units had to be closed down of late.
Rising rubber prices have made footwear more expensive for the common man. Prices of no-frill rubber slippers and flip-flops have doubled in the past one year or more. Higher prices and the use of substitute raw materials have led to a major slowdown in the growth of the domestic rubber footwear industry.
The Indian footwear market is quite huge and, as such, the domestic industry could not meet the demand fully. This has led to an influx of many major foreign brands and products into the market. Synthetic rubber prices are also undergoing changes in tandem with the rise in natural rubber prices. Footwear with rubber soles are emerging as a premium market in India.
Sales of polyurethane (PU) footwear are more compared to sales of the rubber footwear mainly because the former is light in weight and is more comfortable
Advent of synthetic slippers
According to industry sources, EVA slippers are lighter and more durable.
With increase in rubber footwear prices, the difference in the prices of the two products has also come down. The price of rubber slippers was in the range of Rs 55 - 60 a pair about two years ago. Today, it has touched almost Rs 95 a pair. As compared to this, the price of EVA footwear is around Rs 125 a pair. The durability of EVA footwear, coupled with the sharp rise in the prices of natural rubber, has contributed to the poor show of the rubber footwear industry of late, point out the sources.
In the case of chappals and sandals, the use of non-leather material is on the increase in the domestic market. Non-leather footwear exported from India are shoes, sandals and chappals made of rubber, plastic, PVC and other materials. India produces more of gent’s footwear while the world’s major production is footwear for ladies.
In India, the footwear market is dominated by the small-scale units accounting for 55% of the total production. The total turnover of the footwear industry, including leather and non-leather, is estimated at Rs.85,000 - 95,000 million with Rs.12,000-14,000 million in the household segment alone.
The footwear industry exists both in the traditional and modern sectors. While the traditional sector is spread throughout the country with pockets of concentration catering largely to the domestic market, the modern sector is largely confined to select centres like Chennai, Ambur, Ranipet, Agra,Kanpur and Delhi. Most of their production is for export. Some of the leading players in the rubber footwear segment are the Paragon group, the Lunar group, the VKC group, the Lakhani group etc.
There is immense scope for exports. “Regrettably, we have not been able to fully exploit this opportunity. The need of the hour is to take on global competition by exporting diversified footwear products appealing to the global consumers. We are behind countries like China in diverse products and diverse price level,” says Naushad.
In fact, the domestic manufacturers are to be blamed for the growing presence of China-made footwear products in the Indian market, he says. “The fact is that we could not manufacture and supply the variety the footwear the market badly looks for. The question is whether we should compromise on quality to compete with the Chinese stuff. However, I don’t think that the Chinese footwear has emerged as a major threat to the Indian footwear industry.”
India currently produces about 2.06 billion pairs of shoes of different categories. Per capita consumption of footwear in the country has also increased to two pairs from a mere 0.5 pairs a decade ago. The country’s major export markets are the US and Europe. India allows 100% foreign direct investment in the sector.
Strengths and weaknesses
Resource strength of India in the form of raw materials and skilled manpower is a great advantage for the country. But the crucial question is: How prepared is the Indian footwear industry to cash in on the emerging opportunities and enlarge its global footprint? According to estimates, the Indian footwear retail market is expected to grow at a CAGR of over 20% for the period spanning 2008 to 2011. Presently, the Indian footwear market is dominated by men’s footwear that accounts for nearly 58% of the total domestic footwear
Low level of modernisation, slow upgradation of technology and slow integration of advanced technology are the main handicaps of the Indian footwear industry as a whole. Low level of labour productivity due to inadequate formal training is also a weak point. Little brand image, delayed deliveries and weak support infrastructure for exports are also factors that stand in the way of the industry’s growth
Meanwhile, the entry of multinational brands in the domestic market and stiff competition from other countries are the major threats being faced by the industry. In fact, there are at least 5 countries — China, Indonesia, Thailand, Vietnam and Brazil — which are more competitive than India.
The Indian footwear market is huge and largely dominated by the unorganised sector. Non-leather materials include those made from natural/synthetic rubber and synthetic polymers/plastics.
Usage of plastics for footwear was done initially for replacing leather soles. Today, both nationally and internationally demand for 100% non-leather footwear is on the rise. The Indian companies like Action, Liberty, Lakhani and many others manufacture not only for the domestic market, but also for exports.
Global experience has shown that more than 55% of the footwear made and used are with non-leather materials.
The high volume low-priced segment is dominated by non-leather footwear in both domestic and international markets. Currently, the raw materials being used in the industry are polyurethanes (PU), thermoplastic rubber, rubber compounds, ethylene vinyl acetate (EVA), PU leather cloth, PVC leather cloth, woven/ non-woven fabrics, polyamides, polyester/nylon/acrylic yarn, PU foam, cellulose board, leather board cotton fabric etc.
According to industry estimates, canvas shoes have a share of 55% in the closed footwear market, followed by rubber/PVC having 35% share and leather footwear having the remaining 10%. Sports footwear is increasingly becoming an important segment of the industry and constitutes more than 30% of the closed footwear market. Sports shoes are now increasingly becoming a major growth area in the industry.