Daybreak - Are two struggling denim brands enough to build a poor man's Reliance brands?

Episode Date: October 15, 2024

Today, most conventional or slow clothing brands like Lee, Wrangler, United Colours of Benetton, Pepe Jeans and Levi’s are facing a tough new reality where they aren’t just trying to outperform each other. They are also up against fast fashion brands that are now dominating the industry. In the process, many of these slow brands have lost relevance in the larger scheme of things. In this episode we are going to talk about two of these brands in particular – Lee and Wrangler. Both are international brands that were launched in India in the late 80s and early 90s. But neither really took off. But now, they are trying to make a comeback. And behind this comeback is a Bengaluru based retail company called Ace Turtle. It wants to build a mini version of Indian conglomerate Reliance Brands Limited. That’s a pretty ambitious goal, considering the brands in their lineup couldn’t be more different.Tune in. Daybreak is now on WhatsApp at [phone]. For next Thursday's Unwind, send us your recommendations to us as texts or voice notes. The theme is "favourite folk songs."

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Back in the early 2000s, if you wanted to splurge on a pair of jeans, the brands Lee and Wrangler would definitely be among the stores you would go to to pick them up. But over the last two decades or so, these brands have lost their sheen.

particularly after fast fashion brands like Zara enter the picture. You see, today, most conventional or slow clothing brands that a lot of us grew up with, Lee, Wrangler, United Colors of Benetton, even Levi's, are facing a tough new reality. They aren't just trying to outperform each other anymore. They're also up against fast fashion brands that are now dominating the industry. In the process, many of these slow brands have longed. relevance in the larger scheme of things. In this episode, we are going to talk about two of these brands in particular, Lee and

Wrangler. Both are international brands that were launched in India in the late 80s and early 90s, but since then, both have become somewhat irrelevant, which naturally is the last thing a fashion brand would want to be. But now they are trying to make a comeback. And behind that comeback is a Bengaluru-based retail company called Ace Turtle. You see, back in 2021, Ace Turtle acquired the exclusive licensing rights to sell Lee and Wrangler denims here in India. It saw a huge opportunity in this space. The Indian denim market is booming and it's estimated to reach $9.5 billion in the next two years.

That's up by 50% since FY23. So A. Sturtle wants to come in and spread the classic denim charm of Lee and Wrangler across the country. In the process, it also wants to build a mini version of the Indian conglomerate Reliance Brands Limited, or RBL. That's a pretty ambitious goal, especially considering that the brands in their lineup couldn't be more different. While Reliance flaunts global giants and fashion revivalists like Gap and Burberry, Ace Turtle's Kitty has brands like Lee Rangler and Dockers, all of which are in need of a revival. But Nitin Jhabra and Beir. The founders of A. Sturtle believe that they are the men for the job.

It helps that they are both former Reliance executives. But they have their work cut out for them. To get its slow brands to match up against Reliance's quick and active ones, Ace Turtle must not only keep pace with consumers ever-changing expectations, but also master inventory management. Now, that's a task that seems like a long shot. Welcome to Daybreak, a business podcast from, the Ken. I'm your host Rahal Philippos and I'll be joining my colleagues Niktha Sharma every day of the week

to bring you one business story that is worth understanding and worth your time. Today is Wednesday, the 16th of October. Now the obvious question is why Lee and Wrangler? Why these two brands in particular? Well, of course, Ace Turtle believes that they are both really strong brands. In fact, the company's founder, Nitin Chhabra, told the Ken that they together drew sales of 340, crore in FI-24. He also said that all those sales came from consumer buying, since they don't do wholesale. But if you look at the data, it tells a whole other story. While A. Sturtle's revenue jumped 2x in FI.23, it did touch nearly 300 crore rupees in revenue.

Its losses also increased by 30% to 13 crore rupees. Chabra claims that it is now a beta-positive, but the company is yet to disclose its FY24 financials. Now let's compare that to RBL, shall we? Well, it saw profits of nearly 300 crore rupees in FY24. One factor to consider here is that their target audiences are pretty different.

Reliance is more focused on luxury while A. Sturtle caters to the middle class. Which is also clear from Reliance's portfolio. It has about 85 brands to its name, most of which would fall in the luxury, premium or bridge to luxury categories. And that doesn't really align with Ace Turtle's acquisition interest so far. For context, a pair of jeans from an RBL label like Gas, Super Dry and Marks and Spencers

would cost anywhere between $2,500 and $4,000, while Ace Turtle's Lee and Rangler have pairs priced at $1,500. But here is where their vision aligns. Like RBL, Ace Turtle wants to create a space for conventional brands, similar to what Reliance has built for premium ones. A big part of that strategy is not just taking a leaf out of the RBL playbook, but also identifying what RBL is getting wrong, what it isn't being able to do and which brands it is compelled to let go of.

By doing that, A. Sturtle is able to identify the right kind of brand to convince and get into the fray. More on that in the next segment. If you look back at its origin story, A. Sturtle was initially launched as a software as a service company. It provided tech solutions for inventory planning and fulfillment to large enterprises and brands. Lee and Rangler were in fact two of its clients. Now, this worked in its favor because it helped A. Sturtle identify pain points for both brands. So, they went ahead and pitched to the Asia-Pacific office in Hong Kong and showed them what they could do for these two brands. Now, this came at a pretty challenging time for A. Sturtle.

You see, after the pandemic shut down operations for most apparel brands, the founders realised that their clients no longer needed their services. So they pivoted to create a tech-driven Omni-Channel company for international brands. They wanted to make sure that their businesses would be resilient in the future. Lee and Rangler were the first two brands to join Aest Turtle. Then came American baby products companies, toys are us and babies are us, followed by the semi-formal khaki brand dockers just last year. Now, whether it's by chance or coincidence,

Aest Turtle's tagline bounce back fits perfectly with the brands it's picked up. What do they all have in common? Well, they've all been down on their luck and in need of a revival. All of these brands have repeatedly entered and exited India because of underperformance. But Chabra says what works for them is that they all have recall value. So now the aim is building them back up again. And they're doing that by taking a page from Reliance. On the retail side of things, they're doing that by focusing on store ambience.

For instance, just take the case of Wrangler's flagship store here in Bangal. It is its largest outlet globally. At this 4,500 square foot omni channel outlet located in Indranagar, there are things like electronic shelf labels, which display real-time sizes and prices. There are also smart fitting rooms with digital screens that offer clothing recommendations. So it's some real cutting-heads. stuff. Meanwhile, the flagship lease store on Brigade Road lets customers order out of stock items through something called an endless aisle application, allows them to get their sizes delivered

to their doorstep. All of this, just to make these brands regain a fan base. A. Sturtle is hoping that at least one of these brands really clicks. And if that happens, they'll have the leverage to bring in others and grow from there. But taking over struggling businesses also means accepting baggage. Stay tuned. Here's the thing. The biggest challenge for a retail company is very often inventory keeping.

It's a real headache. The other big challenge is forecasting demand and knowing how to manufacture. Now, fast-fashioned brands like Zara are generally forecasting inventory based on the previous year's number and current goals. This helps accommodate inventory levels for the expected rise in demand.

But if there's any brand that has mastered this forecasting, it is Chinese fashion retailer Sheehan, which, by the way, is all set to re-enter India with reliance. The brand basically spots trends early, manufactures limited quantities and uses data to plan its moves. There are some lessons here for Ace Turtle, especially considering how back in March 20203, it misjudged forecasting inventory.

This sort of thing has huge repercussions for. a company. In A. Sturtle's case, it led to debt with vendors and plenty leftover stock. In fact, it had to spend a lot of money that it raised towards fixing this issue. That was money it could have used to expand stores or to boost supply chains for its other brands like Toys R Us. In fact, the Toys R Us US team felt pretty sidelined in the process. And they had a fair point. You see, the brand is up against a giant like Hamleys. So planning, planning, and inventory management is all the more important. The brand felt like Ace Turtle was just not doing enough.

But Chabda says that the company wasn't favouring Lee and Wrangler in any way. He says that they grew faster only because they were acquired earlier. He attributed the growing pained Stoysa Rassis facing to a supply chain challenge. Now, despite all of this, Ace Turtle is convinced it can restore these brands' lost appeal. starting with getting shoppers back in stalls. Industry experts say a big part of doing that will be making Gen Z aware of these brands. The good thing is, the company has made some progress in that direction.

It's been collaborating with some popular actors and athletes to put these brands back on the map. It's also been reassessing consumer demand. For instance, back in 2023, A. Sturtle deployed AI cameras in stores. They found that 13% of its footfall was women. They then noticed a lack of available merchandise for this demographic. So the company decided to expand their women's product range.

But the bottom line is Ace Turtle is nowhere close to Reliance. And simply borrowing from RBL's Playbook is not necessarily the route to success. It'll take time before Ace Turtle becomes the preferred choice for international brands like Reliance has become over the years. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's and edited by Rajiv Sien.