Jockey: What lies beneath

A visit to a Jockey store for day-to-day apparel like underwear or just plain pyjamas is sure to make one’s wallet lighter. For example, for men who like to laze at home in their boxers, the cost of the garment is upwards of ₹419 apiece. Pyjamas, another comfort garment, costs a shade under ₹1,000 apiece. Jockey, an American brand that re-entered India in 1995 (it was around for about three-four years in the early 1970s), generally carries a premium of at least 20% over other Indian mainline innerwear brands like Lux, Rupa, and Dollar.

Billionaire Sunder Genomal, though, likes to think of Jockey as a “value for money proposition” for the Indian consumer. “An aspirational, yet affordable brand,” says the 67-year-old managing director of Page Industries, the exclusive licensee of Jockey International Inc. in India, Sri Lanka, Bangladesh, Nepal, the U.A.E., Oman, and Qatar. The company is also the licensee of the U.K.’s swimwear brand, Speedo International, in India and Sri Lanka. Jockey, though, is the mainstay brand of Page Industries. Genomal, along with his elder brothers Nari and Ramesh, holds about 54% stake in Page Industries, which commands a market capitalisa - tion of about $3.2 billion, as of mid-November. “We like to offer the consumer more than what we have promised—quality, style, and comfort at a sensible price,” Genomal tells Fortune India. His words are solidly backed by the performance of the company

Having reported a nine-year revenue and profit CAGR (compound annual growth rate) of 27% and 29%, respectively, in this decade, Page Industries has been the fastest-growing apparel company in India, according to a report by brokerage firm Anand Rathi.

Jockey, too, is the single largest-selling apparel brand in India. On the bourses, the Page Industries share price has moved from ₹395, after its stock market debut in 2007, to ₹22,185 as of mid-November this year—a whopping 5,550% growth and an indication of investor confidence in the company. Its share price had even touched a high of ₹34,688 in August 2018 but slipped after two consecutive fiscals of moderate-to-flat sales growth. This made retail analysts question whether the innerwear maker had peaked out. “At some point you start to hit the glass ceiling of overall market growth, which also depends on how the economy is doing,” points out Devangshu Dutta, CEO of Third Eyesight, a consultancy firm.

Ranked No. 368 on the Fortune India 500 list, Page Industries has no doubt been a decadal success story like no other. “Post 1995, a new generation of professional executives in IT, banking, and other sectors had emerged, and Jockey, being an international brand, appealed to them,” says Govind Shrikhande, the former managing director of departmental store chain Shoppers Stop. Ironically, the brand is “not as strong in the U.S. as it is in India,” he adds.

Regarded by stock analysts as a quiet and efficient performer, Page Industries has been devoid of any major controversy. That’s up until September this year when reports of human rights violations at a company factory in Bengaluru surfaced. The Worldwide Responsible Accredited Production (WRAP), a non-profit entity dedicated to promoting safe, lawful, humane, and ethical manufacturing around the world, began an investigation into the alleged violations; Jockey is a founding member of the industry watchdog.

While Genomal steered clear of the issue, a Reuters report in October said: “Page [Industries] denied wrongdoing and called allegations of verbal abuse and workplace intimidation against employees ‘outrageous’.”

Brokerage firm Edelweiss, in its results report on Page Industries in November, highlighted that clearance from WRAP could come in the coming weeks. The report, which detailed the conference call highlights with the company’s management, said: “WRAP has conducted a rigorous inspection in October and they are satisfied with the status of affairs… WRAP has indicated that none of the allegations highlighted were mentioned by the employees.”

Brand consultant Raghu B. Viswanath says the investigation by WRAP would hardly dent the overall image of the company. “I don’t believe that brand Jockey will be seen in a lesser light by the consumer given its extremely strong equity,” says Viswanath, also the chairman and chief vision holder of consultancy firm Vertebrand. From a low of `18,000 in September, Page Industries’ share price was up 23% by mid-November, showing no signs of investors losing confidence in the company.

Jockey re-entered the Indian market at a time when innerwear was a segment of little worth to the consumer, and investing in a premium brand was hardly a trend. But Page Industries focussed on product quality and quickly built a go-to brand around Jockey. It developed an extensive network of distributors, much like an FMCG company, across the country; changed the rules of retailing with product displays and attractive packaging, and—to a great extent—brought the innerwear category out of the closet. “It helped redefine the entire category,” says Viswanath. “This created a headstart advantage for the brand, even as many other players with deep marketing budgets are still trying to play catch-up.”

Data sourced from Page Industries’ FY20 annual report shows that India’s innerwear market has an estimated worth of ₹32,000 crore, accounting for 9% of the total fashion retail market. Of that, 64% comprises the women’s innerwear segment, with the balance being the men’s and kid’s segments. The innerwear market is projected to grow at a CAGR of 11% to reach ₹89,700 crore by 2028. The women’s segment is projected to grow at 12.5%, almost double the pace of the men’s segment. According to brokerage firm Geojit, Jockey has a 19%-20% market share in the men’s premium innerwear segment, and 5%-6% in the women’s segment.

Given the projected growth in the women’s category, Page Industries is already on the ball. It has been adding exclusive brand outlets for women to its retail network (44 such outlets have been rolled out so far), and is adding another 90,000 sq. ft. of manufacturing space in Hassan, Karnataka, to cater to the growth of the women and kidswear segments. The latter is another key growth driver for the company, given its projected market size of ₹1.34 lakh crore by 2025. At present, almost 45% of Jockey sales in India is driven by the men’s innerwear category, where competition has picked up pace.

Over the last 24 months, the retail industry has suffered heavily—beginning with a slowdown in the economy and followed by the Covid-19 pandemic, which led to brick-and-mortar retail being shut for about two months. “Right from the last quarter of 2019, the Indian economy has been under stress. There have been huge pileups of unsold inventory across many brands since then,” says Viswanath. Page Industries’ FY20 performance (see graph) was a testament to the headwinds in the retail sector.

Now, in the shadow of Covid-19, there are more headwinds for innerwear brands, and they need to re-examine their strategies given that people aren’t going out as often as they did. Consequently, the need to buy more undergarment pieces comes down. Intrinsically, the category has challenges such as a higher replacement cycle, especially among men. “In the U.S. and Europe, men typically buy underwear multiple times, and every year, as it is part of their fashion and lifestyle wardrobe. In India, the replacement cycle varies between two to three years as this category is still only a necessity,” says Shrikhande. “This can only be addressed through product innovation, fashion, personality, and brand-led differentiations,” he adds. And that’s already visible with niche men’s innerwear brands such as XYXX and One8, which is owned by India’s cricket captain Virat Kohli. Page Industries’ profitable growth and low barriers to entry have also led to a rise in competition.

Three years ago, Pepe Jeans Europe entered into an equal joint venture partnership with hosiery major Dollar Industries to manufacture and market premium fashion innerwear, loungewear, gymwear, and sleepwear clothing for adults and kids. Likewise, for a play in the premium segment, Kolkata-based Rupa & Co.’s subsidiary, Oban Fashions Private Limited, acquired the brand licences of FCUK and Fruit of the Loom. Apart from this, a few domestic and international fashion brands like Van Heusen, U.S. Polo Assn., and Tommy Hilfiger have also started jostling for space in this category.

“While in the past the competition wasn’t credible, the newer competition is more credible, has sound brand equity, and better distribution,” says the Anand Rathi report. “We believe the increase in competition will have a slight impact on Page’s [Industries] growth ahead.” Moreover, the new entrants have the second-mover advantage: entry into a market that’s primed and ready for a brand. “It took Van Heusen innerwear about two years to reach revenue of ₹200 crore while Jockey had taken about nine years to hit half of that, and another 14 years to reach ₹200 crore,” the report added.

Many within the industry believe that the innerwear category will evolve much like the fashion space, where different kinds of products would be positioned for different occasions. For example, different underwear for work, home, and for partying. “That said, the brand Jockey, I feel, is still synonymous in India with what is ‘inside’. It’s the ‘Intel Inside’ of the Indian innerwear market,” quips Viswanath.

If Covid-19 is ensuring that people aren’t going out enough and, hence, not changing their underwear often enough, then leisurewear, which includes the athleisure clothing segment, is “going through the roof”, says Genomal. “People have realised that these are multi-functional products and the athleisure segment’s share of the pie will certainly increase significantly, in terms of the overall sales, going forward.” For the first six months of the ongoing fiscal, Page Industries reported revenue of ₹1,025 crore, a 36% drop compared to the corresponding period a year ago, on account of the impact of the pandemic. Its profit fell by 68% to ₹71.3 crore. Genomal maintains that sales are back to near pre-Covid-19 levels across product categories.

But it still begs the question whether Page Industries would be able to repeat its phenomenal decadal growth in the next decade. Despite the headroom for growth, analysts are doubtful, given the rise in competition. “It will be vital for them to retain the appeal among younger consumers, without which the momentum is bound to slow down,” says Dutta of Third Eyesight.

Genomal, a citizen of the Philippines who has set up base in Bengaluru, though, believes that brand Jockey is in a sweet spot. “We just need to focus on our core competency and keep our heads down,” he says. “The kind of portfolio that we have is still highly under-penetrated. We are actually more excited today than we ever were about the future,” says Genomal, whose exposure to the Jockey brand began when he was 10 years old. His father, Topandas Verhomal Genomal, was granted the exclusive licence to manufacture and retail Jockey in the Philippines in 1959. Genomal brought that legacy partnership to India and the rest, as they say, is history.