Weathering storms in leather sector

“We have consolidated our operations to improve efficiencies and lower costs. Out of the three units here, we shut down one to rationalise operations. The two plants will become profitable by December this year,” GK Pillai, Chairman, Tata International told DTNext.  Technology, skilling, globalisation and demographics have influenced the $2.2 billion trading and distribution player to evaluate this option to keep itself nimble and in tune with the current market realities. The rationale behind consolidating operations is to stay competent in a market driven by global developments. Though the Dewas plant in Madhya Pradesh houses the largest tannery, the need to comply with environmental norms including clean processes meant it could not “expand beyond a point.”  Fulfilling more orders was imperative to fuel the company’s growth plans, and so, it strengthened its marketing team. 

“We are looking at means to cope up with the ground realities. We are a leading exporter, manufacturer and supply chain integrator of leather and leather products. We export to over 35 countries and our design house in Italy keeps us aligned to the latest trends. So, be it design or colour, our diversified product portfolio is tailored to customer needs,” Pillai said. However, it is not autumn and winter fashion seasons that influence purchase decisions. 

Disruption seen across industries has not spared the leather sector. “Today, you can get the dimensions of a feet, use a picture to prepare the footwear design and manufacture it using 3-D printing technology before despatching the end-product in 12 days,” Pillai says. “You can even choose two different colours for each foot,” he adds, while noting that such a customisation from a buyer perspective is not possible in factories. Noting that technology disruption has come to stay, Pillai said, “Smaller brands with niche offerings force established businesses to think differently. Large firms gobble up smaller enterprises to maintain market dominance and stay ahead of the competition.” Tata International has also completed the buy-out process of the Chennai-based Bachi International, with the pure-play children’s footwear manufacturer now a fully-owned subsidiary of Tata International. 

“We had a 50:50 JV with them. We bought them out and the share transfer process is over. Bachi’s CEO PV Gopalakrishna has come on board,” Pillai adds. Having organised its global business into five verticals (leather and leather products, metals trading, minerals trading, distribution and agro-commodities trading), the conglomerate is looking at a 20 per cent surge in its turnover.  Tata International has development centres in China and Portugal also. Emerging technologies and gaining a foot-hold in newer markets such as Africa are driving the growth of the company. “The Africa market is big but the margins are not huge. Our presence in such markets help us mainly cover risks and insulate us from slowdown (global) shocks,” he said. 

Observing that Chennai is a hub for leather industry, Pillai said the buyer profile, preferences and penetration of technology have turned the focus on understanding newer technologies. On the other hand, in Agra, a former leather stronghold, the industry has completely collapsed. To execute an order of producing 10,000 to 15,000 shoes a day as per specifications, it is viable to outsource it to contractors from Agra. “It is a win-win for all stakeholders,” Pillai says. He believes it makes better business sense to deploy contract workers at a time when the global markets are turbulent and lack clarity. The highly-labour intensive sector has been facing multi-fold challenges such as buyers negotiating contracts given the impact of Brexit, refunds for export orders which authorities withhold in case of disputes, the impact of the GST and the increasing preference to outsource to stay competitive.