Denim price wars on cards?

December 17, 2005 - India

Have denim price-wars come home to roost? With Arvind Mills, the largest denim maker in the country, focusing hard on the domestic market, local players have already started gearing up for a possible price war.

Also, significant addition to denim capacity in the country in past six months is expected to lead to prices remaining subdued in the domestic market in days to come.

Executives at Arvind say the company is selling more in the domestic market today since its exports have been hit in the previous as well as current quarter. Denim exports of Arvind, which also supplies a wide range of products to many international brands, were down by 10% in the previous as well as current quarters.

More, the capacity utilisation is down to 85% from 92% in the corresponding period last year. And worse, the trend is likely to continue for a couple of more months.

“We are focusing on the domestic market,” Jayesh Shah, director and CFO of Arvind Mills told ET on Monday. Arvind has been doing good in the domestic market. Strong players in the domestic market like Aarvee Denims and Exports have already started gearing up for the challenge.

“Our products have achieved a strong comfort level with our clients. Still, we can foresee competition getting fiercer and prices coming under pressure. But we are prepared for it,” Vinod Arora, chairman & managing director Aarvee told ET.

According to Mr Arora, apart from increased competition in the domestic market, the large scale capacity expansion would also result in a glut in the market. Industry estimates suggest the total denim capacity in the country is set to grow at 65-70% to touch 500 million meters per annum by next year end from the current 300 million metre capacity.

While the growth in denim demand is a modest 6-7% in international market and a little over 10% in the domestic market. Other domestic players admit that coming days would be extremely competitive.