Interview with Sunil Pathare & Kapil Pathare

Sunil Pathare & Kapil Pathare
Chairman and Managing Director & Director
VIP Clothing Ltd

Inner Pioneer

The dynamic Jaikumar Pathare started the VIP innerwear brand in 1971 when the market in India was a virgin territory for men's undergarment brands. Today, the Pathare brothers-Sunil and Kapil-helm the company. Sunil Pathare, Chairman and Managing Director, and Kapil Pathare, Director, share their vision for VIP Clothing Ltd for the next decade with M Mistry.

Take us back to how the company was started.

VIP Clothing Ltd, formerly known as Maxwell Industries Ltd, has existed since 1971. It has 45 years of rich and vast experience in the innerwear segment. The company is known for innovative ideas and creating various brands, which have been its core strength.

What have been the major changes that the company has seen, besides the name?

As we are recognised by the name-brand VIP, the focus is mainly to strengthen our brand and revive the name of VIP. The company has integrated SAP (systems, applications and products) systems and field assist software, which support secondary sales. The company's focus is mainly on strengthening its various brands. The company has focused on a brand building exercise and new product development and has hived off the backward integration processes, which were making no value addition. This has brought the overall margins for the company on a positive side.

Why was the name of the company changed?

It's our endeavour to keep up with changing times. The company name Maxwell Industries Ltd suited the business that we were in earlier-like spinning, knitting, processing, etc, focusing more on backward integration. However, with the focus shifting to the brand, the new name represents the industry that the company operates in. The company has been a pioneer in the innerwear space in India, and with our continued efforts we are looking forward to reaching the pinnacle of success once again. Our products reflect our new vision and it was time that our biggest asset also reflected this thinking.

What are the other brands under the VIP umbrella?

The other brands are VIP- classic and contemporary; Frenchie-for the fashion-conscious youth; Feelings-for beautiful and content women; Leader-economy segment product; Brat-for kids.

How are the products faring? What segment of the market is VIP catering to? What about EBOs?

The products under the VIP umbrella include men's briefs, trunks, vests, gym vests, boxers, and track pants. We don't disconnect brands or products, but with the market growing, we keep upgrading them. We are catering to the women's mass market with Feelings, men's with VIP and Frenchie, the mass market with Leader, and kids with Brat.

VIP is readily available on our site storevipclothing.in (company owned and operated portal) and on Amazon, Flipkart and Myntra, besides other online shopping sites.

We currently have two company-owned and company-operated EBOs in Mumbai. These stores are on the lines of current retail stores (by competition) and catering to the customers' needs and different styles. The company plans to expand its retail outlets to different towns.

What are the prices for the different VIP brands? Which is the strongest market segment in India?

The pricing varies for brands and products. For VIP, the range starts at ₹100 onward for briefs and trunks and goes up to ₹700 for boxer shorts. For Frenchie, it's ₹100 for briefs to ₹600 for track pants. For Feelings, the prices start at ₹250 for panties and go up to ₹600 for a track pant. The mass segment in the men's innerwear market is the biggest draw for VIP. VIP has been the innovator in this category with the Frenchie brand, and this segment continues being the biggest contributor to VIP.

What sort of advertising, marketing and promotions are being done now?

About 5 per cent of our revenue is invested in marketing initiatives. Marketing is mostly focused on last mile branding-that is in-shop branding like (dealer boards, danglers, posters). The company has realized that digital advertising is another important medium. The audiovisual scope of digital helps us engage with consumers at multiple levels. Hence, the company has ventured on to digital platforms like Instagram, Facebook, Twitter, etc.

How has the styling changed for the different VIP brands?

The styling of products has changed keeping in mind changing consumer preferences and trends. At one point, the men's market was dominated by trunks, which then moved to briefs and now short trunks are coming into fashion. Our products reflect these trends. Earlier, colours were the standard darks-black, brown, navy blue, but brighter colours are now being accepted. Printed briefs / trunks are another design trend. Motifs are a popular choice in prints.

Where are the products made? And what is the capacity? Who designs the innerwear for men?

Our manufacturing units are in Umbergaon, Thinglur and Kolkata. On an average our production capacity varies from 30 lakh to 40 lakh pieces per month depending on the demand. We have a product development team that designs and develops products as per market needs and demands.

What is the latest in product development?

In keeping with the brand traits, VIP has been integrating technology in the new products. The VIP Fresh range with a quick dry vest, cooling vest, and breathable brief and trunks are the latest additions to the portfolio. A long-time popular designer range has been revived under Frenchie, which has printed inner and outer elastic products. This range will see more additions over time. In Feelings, we have introduced a few new printed panties in various cuts-hipster, regular.

What are the different fabrics and styles offered for the different VIP brands?

We have different fabrics like single jersey, ribs and interlock in white, colours and prints as well.

What is the latest in product development for Feelings?

The newest range is the VIP Fresh and VIP Quickdry range of products. The products have a breathable fabric that helps keep the body cool and dry. One of the vests has a quick dry fabric and the other has a cool finish that keeps body temperature 1-2 degrees lower.

What are the different fabrics and styles offered for the different Feelings brands?

We have mainly 100 per cent cotton and cotton Lycra as the main type of fabrics in Feelings. In panties, we have three cuts-bikini, regular and hipster-that are differentiated on the coverage provided. In bras, we have t-shirt bras, fundamental bras, sports bras and nursing bras. All our factories follow environmental norms and compliances.

What is your strategy for the kids' segment?

We currently cater to the kids' segment with both our men's brands VIP and Frenchie. We are looking at strengthening our kids' portfolio by expanding products in these two ranges. Frenchie Junior offers a range of flashier colourful products, while VIP Junior has more sober colours and designs.

How many styles and categories are there under Feelings? Who designs the collections?

The core portfolio ranges from bras and panties to camisoles and socks. The company also plans to venture into loungewear. All products are designed and developed by our in-house product development team. The quantity and type of products depend on the annual plans.

What are the retail plans for Feelings? How are the categories under the Feelings umbrella faring?

The South markets are strong for Feelings since the overall retail scenario is quite organised in the region. Feelings as a brand is focused on secondary retail sales; hence, the retail programme is very organised. Panties are the biggest contributor to the portfolio. There is a conscious effort to increase the sales for bras. The launch of new bras is a step towards that direction. These two categories are the main contributors to the sales of Feelings.

Which segment of the market is Feelings catering to?

Feelings caters to the mass market for the women who have aspirational dreams but are the women of today. The brand is aimed more towards the daily lifestyles of women; hence, the officegoer, the housewife, the career-oriented are customers of Feelings. Feelings can be bought on storevipclothing.in. The Feelings brand is sold in VIP innerwear stores, which are multi-brand outlets from the house of VIP. However, Feelings itself does not intend to have a separate store as of now..

What is the price range for Feelings? What about sizes?

Products under the Feelings range start from ₹250 for panties and go up to ₹600 for a track pant. In panties, the sizes are S, M, L, XL, XXL. Bra - 30 B, C onwards to 44 B, and barring a few sizes in between, while the sizes for camisoles are S, M, L, XL. We produce 3 lakh pieces every month.

When Feelings started, it had one of the most memorable advertising campaigns with Bollywood beauties like Malaika Arora. Why is the Feelings brand low-key now?

Currently, Feelings as a brand is communicating through retail outlets. So, there is more of in-store branding and it does not feature in the mass media. Also, digital is the key for today's advertising. For advertising, marketing and promotions, we have been falling back on in-store branding, standees, brand fixtures and store headers, besides social media platforms like Facebook, Instagram and Twitter.

Which is the strongest market segment in India for Feelings? What about competition?

The strongest market is the organized mass segment. Unorganised players with lower margins as well as national and international brands reach consumers through the mass media and are available in large format stores (LFSs), online and exclusive brand outlets (EBOs) that reach the upperclass consumer. The international players have not affected the category that Feelings operates in as they compete at a higher price point. Feelings faces stiff competition from local brands that don't have high overhead expenditures, thus selling at a lower price point. Organised as well as unorganised players dominate the regional markets. The panties market is highly commoditised and price plays a factor in decision-making.

Where does VIP export to? Which styles and brands are exported?

VIP exports to all GCC (Gulf Cooperation Council) countries. The styles favoured are Bonus vests, Frenchie Plus briefs, Leader trunks, and Feelings bras. We get ₹16 crore business from Middle-East countries. About 28 lakh pieces are exported in a year.

Has the innerwear market become competitive with foreign entrants?

Foreign brands have shown consistency in fashion trends, quality and styling. Most of the foreign brands that have entered the country compete in the premium or mass premium categories. These players don't compete at the price points of ours. The competition for Feelings is from local players in different regions of the country, which compete for the same wallet share.

Coming to business, how did demonetisation and GST affect your company?

The final product of VIP Clothing Ltd is liable for GST at rate of 5 per cent, being articles of apparel and clothing accessories, knitted or crocheted of sale value not exceeding ₹1,000 per piece. GST has been implemented since July 1, 2017. There has been increased compliance due to the increased number of returns and record maintenance. Under the GST regime, the cost of production and expenses get reduced, as earlier no set-off was available because we were at nil excise duty, etc. The CST paid and URD procurement is not eligible for credit before GST. The output tax liability under the GST regime is 5 per cent whereas the eligibility for ITC (input tax credit) set-off is 5 per cent, 12 per cent, 18 per cent and 28 per cent on inputs, services and capital goods. Therefore, the ITC is always higher than the tax liability. But the innerwear business is an unorganised sector and primarily a retail business. MBOs were hit badly by GST and their liquidity was hurt. They aren't buying stocks of undergarments as they used to earlier. Now, these MBOs are buying less and stocking less too, and they are delaying payments due to which it is affecting the working capital cycle of the company.

It has been reported that the innerwear business is going through difficult times. Why do you think this is happening?

Conceived by former US Federal Reserve Board chairman Alan Greenspan in the late 1970s, the men's underwear index (MUI) suggests that declines in the sale of men's underwear indicate a poor overall state of the economy, while upswings reflect the opposite. A shrinking disposable income is the prime reason why Indian consumers are holding back from new purchases even in essential categories and staples, experts say. The nominal per capita disposable income growth was 13.3 per cent between 2010 and 2014 but moderated to 9.5 per cent between 2015 and 2018. Market researcher Nielsen revised its growth forecast for the fast-moving consumer goods (FMCG) sector to 9-10 per cent in 2019 from its previous outlook of 11-12 per cent, citing a sharp rural slowdown.

How big is the innerwear market in India according to you?

As per industry estimates, the innerwear category estimated at ₹27,931 crore is 10 per cent of the total apparel market and is expected to grow at a compounded annual growth rate of 10 per cent over the next decade to ₹74,258 crore. However, innerwear is evolving from being functional to a segment with a fashion quotient. It's also shifting from being a price-sensitive category to a brand-sensitive one.

How do you see the future of innerwear business in India?

The innerwear business in India needs to be looked at in a two-fold manner. While the mass market still has a huge draw in terms of numbers, there is development at the top end of the market. Customers who are more informed and brand conscious are willing to pay a premium for products or brands that they identify with. The category lines are being defined better and with that there will be an even clearer distinction among brands & their offerings. The innerwear industry is already on the path of the overall apparel industry.

Has it reached a saturation point, although everybody needs to wear innerwear?

Mass-market products have now become commoditised. There is no difference between one product and another or between one brand and another. That's one of the reasons why brands in this space have used celebrities as crutches to further sales. There has been no innovation in this category for many years. At the top end, style and brand pull is what differentiates some brands. But consumers aren't satisfied with the current offerings. Today, innerwear is seen as a parallel to the main apparel categories. The more discerning customers are looking at innerwear differently-be it occasion-specific or utility-specific. Brands are identifying these gaps and are making efforts to plug them. Going forward, we may see some innovations in the category that would not have been expected some years ago.

What are the new developments created for VIP products in the future?

We are currently working on some new developments across categories. We will soon be launching some of our new initiatives in the market.

Published on: 11/02/2020

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.