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Being in the forefront of managing India’s Liberty Group, the world’s fifth largest footwear manufacturer, Liberty Group Chief Executive Officer (CEO) Adesh Gupta has a thorough grasp of the footwear industry and its workings. Having taken over the business, of which his father was one of the three founding members, Gupta has been successful in creating a global footprint for the company.
In Sri Lanka recently to launch Liberty’s first exclusive showroom, after 15 years of partnership with DSI, the Daily FT met with this down-to-earth CEO who shared key insights in to the business that is out to conquer new markets.
Following are the excerpts of the interview:
By Shabiya Ali Ahlam
Q: Liberty is the fifth largest leather footwear manufacturer in the world. Can you share the growth story?
A: Liberty is a family-owned company and my father was one of the three founder members. We function very professionally and that is what I believe has got us this far.
We are the second largest in India, after Bata, and our brand is also ranked number two. In a recent survey on brand equity conducted by Economic Times we were brought to the second position from the fifth, and this illustrates the confidence as well as the penetration amongst the society.
We have a network of over 500 exclusive showrooms out of which 100 are company-managed stores. The latter gives us the pulse of the market. Having our own stores allows us to feel the pain and gains of the business and with that we were able to correct ourselves and come up with new business models.
In the last four to five years, Liberty has made innovations in the business model where we have become unique by implementing the Theory of Constraint (TOC), a business tool that has brought our company to a level where we believe that the demand is not an issue for us. The issues were more related to the reach, penetration and availability. If you have enough capacity and infrastructure, then with 1.3 billion people we cannot go wrong.
In the past we used to work in a ‘push’ model, which means whatever capacity we had, we used to manufacture to the need of the factory or the people who design the products. Today, however, it is a pull mechanism where we are only delivering products the market need. We have evolved and grown to manufacture excellence, which is innovation.
As a result of this we closed our last financial year with 35% growth. In this period of global downturn this achievement emphasises that demand is not the issue.
Q: What changes has the company gone through to remain competitive?
A: We have completed our manufacturing excellence, supply chain excellence, IT excellence, and now we are in the midst of achieving financial excellence. We are currently undergoing a financial restructure where we are looking at a number of options to fund the growth and that is going to happen in the next six to 12 months time frame. We are waiting for the elections in India to come to an end so with a stable government we can take the actions that have been pending for us to achieve higher growth.
With this we hope to increase our reach, and aim at opening about 100 stores years every year. In the past couple of years we have been opening about 60 stores in average. Out of the 100 stores, 50% will be company owned and 50% will be franchise stores. The idea is to bring the product to the critical mass where we have a position in the market, and be able to command the premium. Once we manage financial excellence the growth will be streamlined. However, irrespective of the fund we are looking at about 25-30% growth every year.
Q: Being a family-owned company, what challenges has it faced during its journey?
A: For this business a lot of passion is required since it is a part of the fashion industry. And with the fashion industry it is near impossible to forecast anything. If you are a decision maker, you know the risk you are taking and the benefits. But if you are a professional, it will be difficult to decide since you have to be absolutely certain. As a fashionable footwear company we can take the risk, even a quantum of it and we take responsibility for it. That is why shoe businesses are mostly run by family companies.
In 2000, our business went through a phase of stagnation and this continued for about 10 years. The reason for this was that we were working against the market and we didn’t change our ways of doing business. After identifying the reasons, we took measures instantly and within four years we saw immense changes. We had to make a 360 degree change.
Q: What makes Liberty Shoes stand out from the rest?
A: We are not a fashionable iconic brand. We are a family footwear brand which is value for money with a tinge of fashion. It’s not high fashion where the number of pieces and brand presence is very small. We are looking to the middle and upper middle class as our segment.
We want to position ourselves there since we want to have sustainable sales. That segment is one that is always growing, the middle of the pyramid. At the bottom, they can’t afford, at the top it is unstable, but the middle is where the growth is. At the end of the day it is the products that are the heroes. It is important to continue to evolve and innovate the product range, which we do.
Q: What is the position of Liberty brand outside India?
A: We are the leading brand in India because we belong to that country. And we were the first footwear company that went out and built a brand outside India. We have strong presence in the Middle East where we are well established in the UAE, Saudi Arabia, Kuwait, Qatar, and other gulf countries.
We have about 25 stores outside India. We are in definitely expanding but we are dealing with it in a very conscious manner. It is very controlled.
Q: What is your product range?
A: We manufacture just about anything and everything when it comes to shoes. We are positioned as a family footwear company where we have footwear for the oldest to the smallest member of a family. We have a massive range. Every six months we have about 500 styles which we offer to our customers. Doing more is a challenge due to the shelf space, but we would like to do more.
Q: What is in fashion right now?
A: In today’s context whatever new you bring to the table is in fashion.
Q: Being in business for 60 years, Liberty must have witnessed how trends have changed throughout the years. How different is the industry and the market now compared to before? How did Liberty make use of opportunities within that?
A: In the 1980s when we started marketing our brand, shoes were a requirement. Anything that was manufactured would sell. We came out with shoes that were made of polyurethane and Liberty was the pioneers in that technology in India. It was an instant success. This was an innovation that we brought to the table for the Indian consumer.
Unless you showcase to the customer, they wouldn’t know. Since we were the first to bring such a technology to India in 1983, we had the first mover advantage. And we continued to bring in new technologies to the market and industry.
Q: What role would Liberty play in Sri Lanka’s footwear market?
A: DSI and Liberty has been partners for over 15 years. We not only have a business alliance but also a cultural one. We knew that with DSI being the biggest in Sri Lanka, having a strong network of distribution, Liberty cannot go wrong. We have a readymade platform in terms of the shelf space.
When DSI requires a more lifestyle product, it cannot manufacture everything since in Sri Lanka it primarily caters to the lower class and the middle class. To cater to segments above that it is required to import. For that Liberty is the best bet since it is value for money and is a higher segment for Sri Lanka, but not the highest. That is the gap we fill in the Sri Lankan footwear market.
Q: Liberty just launched its first exclusive showroom in Sri Lanka after years of partnership with DSI. What is the reason behind this move?
A: Though it is an exclusive Liberty showroom, it will still be managed by DSI. We see a lot of changes happening in Sri Lanka in terms of lifestyles. There is a shift in that arena and we see that more and more consumers are demanding fashionable products and Sri Lanka is unable to manufacture such since it is not economical to do so. That way we felt it helps to bridge the gap. This is a beginning of a long journey.
Q: Does Liberty have any plans on setting up a manufacturing base in Sri Lanka and exporting from here since the nation is working towards implementing the five-hub strategy which would facilitate such initiatives?
A: There are two ways to look at this. We can leverage the opportunities with the strength of each, that is our strength in manufacturing and have a common understanding in exporting to other developing countries.
Unless we have the critical mass or the volume, it will not make any economic sense to manufacture in Sri Lanka since if manufacturing is done for the local market, the numbers will be too small. If we are to manufacture to the developing countries, then we already have the setup in India. Nevertheless, we have received a few proposals to purchase shoe manufacturing companies here, but we have to evaluate them well. The issue is that in Sri Lanka the supporting industry for shoe manufacturing is not very strong, mainly the component industry. This means we will have to import and that increases the cost. In India the component industry is strong and well supporting. So it is much more convenient for us to have our manufacturing base there.
Once we have the South Asian Free Trade Agreement (SAFTA) in place, the region of manufacturing will not be an issue. We can then leverage the strength of each other. It is about have an economical free flow of trade and goods and services. However, we do not want to compete with DSI but work alongside.
Q: You mentioned that the component industry in Sri Lanka is weak. Could you elaborate?
A: With a population of 20 million against a population of 1.3 billion, India will always be the giant in terms of consumption and manufacturing. With the 20 million populations, unless there is a clear goal of exporting, the target market is very small. And there as so many players already, so there is no point in competing with them. We feel that Sri Lanka still has a long way to go. For manufacturing shoes, other than rubber, Sri Lanka has nothing else available. We would like to generate employment and start manufacturing, but the support industry is not there. The support industry will only come when there are volumes.
Q: Now that Liberty has launched its exclusive store in Sri Lanka, how many more does it plan on opening by the end of 2014?
A: This is just the first step. We are looking at positive growth. We are treating this as a pilot project. Depending on what feedback DSI will give us, we will act accordingly. But we are looking at expanding.
Q: What is the message you would like to give out about Liberty?
A: Liberty is a marathon runner and not a sprinter. We are certainly not here for the short-term. With six manufacturing plants and the title of being the fifth largest leather footwear manufacturer in the world, Liberty is all set to conquer new markets in a controlled manner.
– Pic by Sameera Wijesinghe
