Daybreak - Why it's a bad time for Campus to be India's top sports shoes brand

Episode Date: April 17, 2024

In 2021, Campus Activewear took away the top spot in India's athleisure-footwear market from Puma, thanks to its affordable and trendy sneaker offerings. And by May 2022, it became a publicly listed company. Within a span of five months after its listing, its valuation shot up to a staggering US$2.2 billion.However, two years later now, its market capitalisation has nosedived to under US$890. The reason is a combination of factors including the slow down in demand and also, an ever-increasing number of competitors with similar offering.But out of all its rivals, there is one that stands out–Abros. And it was co-founded by a man who worked with Campus for nearly three decades.Tune inDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories. 

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 Ganeshan, 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 an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts 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. For a few seconds, let me transport you back a few decades to the early 90s. A television ad is playing.

Picture a grungy-looking, dimly-lit underground garage, Some very 80s electronic synth music is playing in the background. There are some fancy bikes parked around and a few girls and boys dressed in superheb clothes, leather jacket, jeans and all. Just chilling. And in walks a young Sachin Tindulkar. The camera focuses on his shoes. He's wearing a white pair of sneakers with neon lights. You see this system?

Action car has this light system. Light system from action shoes. You see, these shoes with lights on their souls were a thing back in the day. Elder millennials and millennials like me will remember. Now, if you're wondering, why did I play this ancient ad for action shoes? It's because today I am going to tell you the story of India's top sports shoes company. Campus. and the campus origin story cannot be told without mentioning action.

Action was founded back in the 80s by four brothers, the Agarwal's. And they'd sell everything from everyday footwear to school shoes for children. I'm sorry for indulging into the 90s nostalgia again, but do you also remember this? Its website says that Action was the first brand to start selling sports. shoes in India. It was in 1999 when campus was introduced as a sub-brand under action. A few years later, in 2005, one of the brothers, Hari-Khrishan Agarwal, went his own way and took campus with him. And it was then when campus became a full-blown sport shoes brand. Campus sold 7 million pairs of shoes in the December quarter of 2023 alone. And you know what? Around half of them cost

less than 1500 rupees. Now, think of a young girl or a boy in a small town somewhere in India. They want to buy a fashionable pair of sneakers and obviously a Nike or an Adidas or a new balance is out of question, right? So their only option was to buy a rip-off of these big brands. And Adi bus maybe, I'm quite sure you've seen one of those while street shopping. And then came along campus and changed that. Not only were its shoes priced just right, it also offered a whole range of styles. And this is exactly what a huge chunk of our population, which is heavy on the youngest side, was waiting for. So you see how this gap in the market that campus filled was massive. And no other sports shoe brand, not Nike, not Adidas,

not even Puma could keep up with the kind of growth that campus saw. Between March 2019 and 2021, campus's sales grew 10% annually. Which is why it was no wonder when in 2022, it went for its IPO and it was listed at more than a 23% premium over its issue price. Investors more than double the company's market cap to over $2 billion within five months of its listing. Now, that is something, isn't it? But what's happening now two years later is a whole, different story. Nobody was expecting this, not even campus's worst critics. To put it simply, it is a terrible time to be campus right now. In the last quarter of 2023, campus's revenue was

flat. Its sales have gone down substantially and so has its profit. Its stock too is trading well below its issue price. So what could it be? Is it because the demand in general has become somewhat weak? Because it is true, every big listed footwear company, including Bata and Metro, have been struggling to grow their top line in the last quarter of 2023. So yes, that is a part of the reason, but there is more and honestly, it makes for a fascinating story. Welcome to Debray, a business podcast from the Ken. I'm your host, Nick Dha Sharma, and I don't chase the new cycle. Instead, thrice a week on Monday's Wednesdays, and I don't chase the new cycle. Instead, Trice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time.

And by the way, from this week onwards, daybreak will also be dropping on Tuesdays featuring my brand new co-host, Rahal Philipos. Today is Wednesday, the 17th of April. So before I begin, I have a disclaimer. You might notice more than the usual amount of numbers in this episode, but I promise it will not be difficult. to follow. So, to start with, let me tell you about how campus left the likes of Puma and Adidas behind to become the country's top spot shoes brand. Before campus, Bata was the king of footwear in India. Quality stuff for a good, reasonable price. It was dependable. But it was mainly known for its leather shoes and sandals. So if you wanted a nice pair of sport shoes, there was no trustworthy

Indian brand around. If you could afford it, you just have to go for a Nike or an Adidas, which costs more than 1,500 rupees back then. And this was where campus came in. It was not just that it was priced reasonably. It also offered a whole range of designs. Now, here is where the story gets interesting. Very instrumental in campus's rise was a chartered accountant called Promote Sharma. He spent close to 30 years with campus and the group that controls the campus brand. He was into the marketing and finance for the company and then in 2009 he moved to sales. At the time, the company's revenue was just a little over $8 million. Promote Sharma then went on to become campus' chief operating officer or CEO. And by the time that his three-decade journey at campus

came to an end in 2020, the company's revenue was close to $80 million. We will come back to him in a bit. Now, while Sharma was still with campus, giants like Adidas and Nike were helplessly watching their revenue from shoes in India take a hit. But for campus, it was exactly the opposite. By 2021, its top line went up to nearly $150 million. Its share prices post-listed. to was soaring. So, as you can probably tell by now, campus had a simple strategy.

Offer consumers sturdy but stylish shoes. In fact, bomb bought them with design varieties. In a recent earnings call, its CEO, Nikola Garwal, said that the company adds 300 new designs every year. And also, while doing all of this, make sure that it's affordable. Or like my colleague, the Ken's deputy editor, Sita Raman, Skih. said in his report on campus, give them Nike at butter prices. And how did it do that? So, first of all, campus has been very conscious of not outsourcing completely, which is what brands like Adidas do. For 90% of the production of the upper parts of its shoes, it depends on contract manufacturers because it is a label intensive process. And for its source, for example,

it outsources about 65% of the manufacturing. But again, it acts as a middleman for all the raw material requirements of its suppliers, and it also assembles 100% of its final products. Oh, and also, there is one more thing. While prepping for its IPO back in 2020, Campers realized that less than one third of the Athleisure footwear market in India was made up of women. Men, meanwhile, made up more than half of it.

So, Campus decided to focus its offerings accordingly. Around 70% of its stockkeeping units or SKUs are meant for this demographic. For comparison, it's just roughly 50% in the case of Puma, Nike and Adidas. So that is that on how campus reached the top. Now, cut to 2024 when campus is struggling to stay there. Stay tuned. For starters, campus' market cap has fallen from over $2 billion to less than a billion now. And the overarching problem for campus is the slowdown of demand.

And then the other important reason is also its e-commerce strategy. Campus has had to deal with the ripple effects of depending too much on online B2B or business-to-business platforms like Uran and the Reliance-owned Agio. because now these platforms are being forced to scale down their operations to cut their losses. But these are not the only reasons. Let us for a moment go back to the young boy or girl from a small city who wanted to buy a pair of spot shoes. Campus came in and made stylish spot shoes accessible to them. But now they have a whole bunch of other options. Like Anuj Newatiya, the co-founder of Bukha Buki,

an online-only footwear company, told Sita. They can now also choose from other footwear brands offering the same kind of stuff like Abros, Asian or even Lee Cooper. I'm sure you know Lee Cooper. We mostly remember it as the black and brown shoe brand. But since 2017, it has launched a range of affordable at leisure options. Asian footwear, meanwhile, has raised nearly $30 million in funding. and Abrose, it's turning out to be quite the bane of campus's existence right now.

And guess what? I've been waiting to tell you this. Remember Promote Sharma, the guy I told you who was instrumental in campus's rise? Well, he is the founder of Abrose. He started the company with an erstwhile supply of campus back in 2020. Now, naturally, after spending three decades with campus, Sharma knew the company's playbook in and out. For example, campus launching 300 new designs every year.

Now, even though an analyst told us that this is just a gimmick and that a lot of the designs are way too similar to each other, Abrose is playing the same game. Imagine, in just about four years after launching, it is already unveiling about 150 new shoe designs every year. Also, Abrose has a design team of 60 to 70. people based in its factory near Delhi. And campus, as of March 2023, it just had 50 designers.

Now, this is despite the fact that campus sold more than 20 million pairs of shoes last year. And Abrose just sold one fifth of that. Plus, it really helped Abrose that its co-founder, Anil Sharma, used to manufacture shoes for brands like Puma and Fila. He had the technical knowledge. Nevertheless, like Sita pointed out, Abrose 2 is not immune to the slowdown in demand. And neither are all the new homegrown sports shoes brands that have come up lately. That's all for today.

Thank you for listening and I will catch you next on Friday with a brand new story. 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. To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website.

Today's episode was hosted by Snigda Sharma and edited by Rajiv Sear.