The Hindu Business Line : Dressed for the big league

The event may have gone largely unnoticed, but the launch of a joint venture between Arvind Brands and the world's largest branded apparel maker, the $7-billion VF Corporation, indicates that global garment makers are lining up even before foreign direct investment in retailing opens up in the country.

The joint venture is also perhaps the first in the country for any domestic garment maker and for VF Corporation, it is the first such joint venture globally. Its President and Chief Operating Officer, Eric Wiseman, hours after launching the venture, was clear that his company couldn't have struck a better deal. "India is a perfect market for us," said an exultant Wiseman.

The $7-billion VF Corporation is a leader in branded apparel including jeanswear, outdoor products, intimate apparel, image apparel and sportswear. It has around 40 brands and some of its principal brands include Lee, Wrangler, Reef, Kipling and JanSport. Vanity Fair is one of its intimatewear brands from which the company draws its name.

According to its annual report, VF Corporation expects to grow between 6 per cent and 8 per cent with organic growth accounting for half of that and the rest coming from acquisitions. A unique feature of its 2005 annual report is that all the models featured in the report are its own employees, including its Chairman, President and CEO, Mackey J. McDonald.

The report says that VF Corporation is looking to add brands to its sportswear and outdoor coalitions and other brands as well. The US-based company expects a substantial change in its business mix. Currently, about 30 per cent of its revenues come from its lifestyle coalitions — outdoor and sportswear — but as these businesses continue to grow over the next few years, it expects to them to account for about 60 per cent of its total business.

The deal itself has several unique features apart from the fact that it is the first joint venture for VF Corporation globally. The valuation of $33 million for a 60 per cent stake in the venture has set a benchmark for the branded apparel industry. The valuation is at least two times the topline figure for the existing brands, putting the ColorPlus valuation in the shade. Raymond acquired ColorPlus for a valuation which is one-and-a-half times the topline of the brand, according to market estimates.

Retail consultant Technopak's Chief Operating Officer Harminder Sahni sees the joint venture as a reflection of the potential the retail market has. "VF finds a huge potential and wants to have a part of the pie of the action in the retail market," he explains. He expects more and more international companies to invest in such joint ventures with Indian partners and suppliers to ensure the durability of relationships.

While VF took its time to understand the market after taking the licensing route, other international players may not even do that. In many ways, VF has done the homework for them. Wiseman believes that India, and, of course, China, are turning out to be huge growth areas for his company even though revenues from these two countries are not big enough right now.

For the joint venture's Chief Executive Officer, Darshan Mehta, the new venture will allow it to source more brands from the portfolio of 40-odd brands which VF Corporation has. "We are already looking at several brands and may start launching them soon after we complete the necessary market surveys," says Mehta. The credit for shepherding VF Corporation's brands in India to a level from where the joint venture could take off goes to Mehta and his team of 180-odd executives. "Our relationship with Arvind has been a longstanding one and they have done a great job for us," says Wiseman.

Mehta has himself set benchmarks on how international brands should be nurtured and grown. "We didn't try to milk the brands but helped them grow as if they were our own," says Mehta. Since their launch, sales (at wholesale prices) from Lee, Wrangler, Nautica and Kipling, which are growing at 25-30 per cent have been around $40 million with Lee and Wrangler contributing at least 80 per cent of the total sales.

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