OVER TWO MILLION workers, many of them semi skilled, and nearly $2 billion in exports, summed up the carefully cultivated Indian leather industry, when a high-profile campaign by an environmental activist group threatened to throw the ecosystem out of sync.

When People for Ethical Treatment of Animals (PETA), ran a high-profile campaign against the unethical treatment of animals at slaughterhouses in India last year, it was the country's burgeoning leather industry that got caught in the crossfire. Following the ban of Indian leather by global giants Reebok, Nike, and Gap, the Indian leather industry hit an unprecedented low. After Gap's refusal to use Indian leather, other companies like Kenneth Cole, Spiegel, J.Crew, Liz Claiborne, Timberland and Clarks ended their contracts for Indian leather, and threatened to leave workers at the 4000-odd tanneries that criss-cross India jobless.

But the reluctance of foreign companies to use Indian leather could have been a blessing in disguise. The move, many feel, has prompted Indian companies to look for business models other than contract manufacturing finished products or components, and spawned companies that were willing to invest significant resources to build their own brands. Despite the existence of widely respected bodies like Central Leather Research Institute and vendor organizations like All India Skins, Hides & Tanners, Merchants Association (AISHTMA), Indian exports amount to just 3 percent ($1.6 billion) of the total world leather imports of $68 billion. In contrast, China contributes nearly 16.59 percent ($11 billion) of world imports.

Branding Hides
One such company that has tilted the scales to its favor is HiDesign. From its beginnings in 1978 as a one-man artisan workshop for leather bags and jackets, HiDesign today has over 1800 employees, staffing its manufacturing units, company tannery, and buckle factory.

Company founder and president, Dilip Kapur, realized that the way to create a lasting name in the leather industry was to go the products way. During his years in the United States, Kapur saw the tremendous advantages of manufacturing and selling leather products under his own brand. The U.S. was then, as it is now, one of the major consumers of leather products. Back in India after his Ph.D., Kapur decided to set up shop on his own. And quite naturally, he gravitated towards the leather industry.

Over two decades later, the company he setup, HiDesign, is one of the largest names in the premium and super-premium leather wear segment in India. And arguably, one of the few Indian names in the leather industry that may be recognized worldwide. HiDesign now sells leather bags and garments under its own name in Australia, Greece, India, New Zealand, Scandinavia, Slovakia, South Africa, the United Kingdom, and the United States. Dilip Kapur is at pains to distance himself from the numerous companies and tanneries that outsource components and finished to companies worldwide. The healthy revenues of $ 2 million validated the founder’s belief in product design.

HiDesign, however, is not the only company to have identified the products route to success. Another up and coming player is the Chennai-based Gaitonde. Founded in 1968 as a small trading enterprise, the company is today a world-class manufacturer of shoes, leather garments, finished leather, leather upholstery and an extensive range of leather accessories with a turnover exceeding $40 million. Gaitonde, however, differs from HiDesign in one crucial aspect. It relies on contract manufacturing for a large share of its revenues. A comparison between the respective branding strategies of the two companies, however, brings out one interesting similarity.

An Exercise in Co-branding
Both Gaitonde and HiDesign identify strategic alliances as the way to go in order to retain the mindshare of customers. In an industry rife with contract manufacturing components to global manufacturers, the two companies have decided to leverage the strengths of their respective brands.

Gaitonde and ColorPlus is an example. Premium brands both; one in leather footwear and accessories and the other in readymade garments, the two have come together in a co-retailing venture where both companies will take large retail outlets together and sell both brands under one roof.

Though the two brands will share store space, there will be separate areas, with ColorPlus garments being sold in one section and Gaitonde footwear and accessories in the other. And while each company will have a separate lease on its portion of the store, the store’s design will be uniform.

HiDesign has a similar arrangement with the upmarket coffee pub chain Qwiky’s. Kapur says the co-branding has worked for them. “The two brands are not in direct competition with each other, yet they target the same clientele. Moreover, it provides a larger reach while at the same time shaving costs of the bottomline.” Given the right market conditions, the companies are not averse to trying the co-branding strategy in international markets too.

“If all the preconditions are right, then co-branding is a good way to go,” says A.K. Narayanan, CEO of Gaitonde. The decision, of course, rests on the target market. “It does not make sense for HiDesign to co-brand its products with coffee chains like Starbucks right now because we are a premium brand even in the U.S. market whereas Starbucks targets the mass market,” Kapur says.

HiDesign products are stocked at departmental stores like Selfridges and Macy's, but Kapur is looking to build a retail chain in the U.S. with a presence in 500 shops.

Services vs Products: The debate rages on
For an industry that has been in existence in an organized form ever since independence, the leather sector, surprisingly, still has not resolved the classic services versus products debate. A majority of the 4000-odd tanneries in India are engaged in curing leather that will be stamped with brand names of companies across the world. This represents the classical paradox that the Indian IT industry faces at present.

Kapur on the other hand, had no doubts in his mind about the need to brand his product, rather than just contract manufacture. “To my mind, it is quite a simple choice. When we have the expertise to create a product that is excellent, why let it be sold as part of somebody else's brand? Even if it entails additional expenditure on branding.”

For an industry recovering from the closure of up to 400 tanneries following the Indian Supreme Court orders in 1996, PETA's campaign must have seemed like the last straw. Things have taken on a semblance of normalcy, though, and with the domestic market growing by leaps and bounds, pundits predict a good year for Indian leather.