Rupa eyes softer touch with Fruit of the Loom brand
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Mumbai: Quintessential men’s underwear brand Rupa & Co. has long been tied to its image of a mass-appeal brand, with its tagline, “Yeh Aaraam Ka Mamla Hai”, emphasizing comfort.
Rupa has now set its eyes on diversifying to premium categories and customers and reaching out to women, a category that dominates the innerwear market.
Mint reported on Wednesday that Rupa’s Mumbai-based subsidiary Oban Fashions Pvt. Ltd had signed an agreement to manufacture and sell products under the “Fruit of the Loom” brand name, whose licence they acquired from Warren Buffett-owned Berkshire Hathaway.
Rupa & Co.’s shares gained more than 10% on the announcement on Thursday. Its shares closed 3.4% higher than the previous day’s close at Rs294 apiece, while the Sensex closed at 29,586 points, higher by 188 points.
“Fruit of the Loom was already there in India in 2009,” said Siddhant Agarwal, vice-president of projects and acquisitions, Rupa, in a phone interview. “They exited in 2012 because while they were selling very well, they were unable to manage their back-end operations very well since they did not have experience with business in India.”
Agarwal said the Berkshire Hathaway subsidiary has been looking for an Indian partner for a joint venture or a licence agreement to re-enter India ever since. “We have been talking to them for a long time and this deal has come through now,” he said.
Rupa will launch Fruit of the Loom with their men’s and women’s innerwear line at the same time, and will bring its entire catalog of innerwear and casual wear to India except socks, according to Agarwal. Rupa sells socks under the brand name Footline. “We hope to launch by September this year and we are working toward it, but we will see it latest by Q3 this year (fiscal year 2017-18),” Agarwal said.
“We are positioning Fruit of the Loom as a value premium category in India,” Agarwal added. “However, it will have a premium image and be marketed as a foreign brand, which is why we acquired a license for it.”
Agarwal said Rupa is in talks with “two agencies with global networks” for advertising and promoting the brand in India, and that the company will make a decision by next week. Rupa will initially outsource manufacturing, and set up a plant only in three years’ time, Agarwal said. “In the next 4-5 years, we want to bring Fruit of the Loom products to 30,000 stores in India.”
According to a white paper launched by retail advisory firm Wazir Advisors last August, the innerwear market in India was worth Rs24,000 crore in 2015, making up 7.1% of the country’s total apparel market. As much as 60% came from sale of women’s innerwear worth Rs14,500 crore, The premium and super premium category segments made up 15% and 6% of the market in 2015, respectively, although the report said they will grow at a higher pace as disposal incomes and brand consciousness rise.
“Rupa has more or less been taken as a mass range and they have been talking about bringing premium international brands to India for a long time,” an analyst with an equities brokerage firm said, requesting anonymity. “The company’s management has been saying they want to take on [companies like] Jockey. They have the distribution network to match,” the analyst said.
This is Rupa’s second international brand license acquisition since the subsidiary was set up in December 2015 to be a vehicle for international brands. In April last year, Rupa acquired the licence for FCUK Innerwear, owned by UK apparel maker French Connection.
“The brand is doing very well, although the numbers right now are negligible since we have been selling it for just six months,” said Agarwal.
Rupa has positioned FCUK products as super premium and they will be priced at a 100% premium to products from Fruit of the Loom.
For financial year 2016, when subsidiary Oban Fashions was set up, Rupa posted no turnover and a net loss of Rs18.09 lakh, which were costs for running the business between December 2015 and March 2016. The company’s balance sheet was worth Rs1.92 lakh. The December quarter results for the current fiscal year didn’t have details on Oban separately. Oban Fashions was set up in December 2015.
We are just starting out, but I expect both brands—FCUK and Fruit of the Loom—will contribute 10% of Rupa’s total revenue in the next 3 years,” Agarwal said.
In February this year, ICICIDirect said in a report that listed parent Rupa & Co. was improving its Ebitda (earnings before interest, tax, depreciation and amortisation) margins by “premiumising” products. “Rupa has been constantly focusing on foraying into premium brands to expand its operating margins,” the report said, as the company’s Q3 margins rose 11.6% year-on-year. “In the knitted garments and innerwear space, Rupa has one of the largest distribution networks, which comprise around 1,000 dealers and 1,18,000 retailers,” the report said. “We believe premium brands will be a major margin driver, going ahead.”