Vip Industries

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A VERY INTRIGUING PACKAGE

ABSTRACT:
VIP industry has sway for over two decades in the organized luggage market. Its customers perceive value for money. VIP’s economically price brand, Alfa sells 1.5 lakhs pieces a month. Market Research shows that an average Indian family pulls out the suitcases merely for a outstation travel a few times a year. VIP has a wide range of market segment starting from Rs 295 to Rs 6000 a piece.

Competition from the unorganized sector hurts the company most. VIP’s Alfa imitated and sold at much lower price. This enables the unorganized sector to typically sell 20 times more than VIP. The lower price threshold is 225 which is impossible for VIP. In the range of Rs.1500(premium) the main competitor is Samsonite.

INDUSTRIAL ANALYSIS:
The luggage industry in India is currently undergoing a consolidation phase. Competition in the sector is expected to intensify with the entry of foreign players like Delsey of France. Companies with good research and development facilities are expected to survive while others may end up as contract manufacturers for the bigger players. The luggage market comprises of three segments namely the premium segment with 15% of total market share, the popular segment and the standard segment. Samsonite (International) and VIP are the dominant players in the premium segment with a market share of 52% in the popular segment. V.I.P. industries and Universal dominate the low-end standard segment. The luggage market is dominated by the unorganized sector with 50% market share. Northern and western India are the biggest markets in the country. V.I.P. and Samsonite are focusing on developing their distribution networks. Both players are also into exports. V.I.P.’s export touched Rs.134 million in 1997-98 and is mainly targeted at Gulf and West European Markets. Samsonite posted an export turnover of Rs.150 million for the year ended December ’98. Luggage manufacturers, particularly V.I.P. have slashed prices following decline in prices of raw materials. The organized sector (8%) is growing at a lesser pace when compared to the unorganized sector (25%). The organized sector will have to face the reality that players in this sector may become organized and come out with branded products emerging as competitors to the existing players in the organized sector. The organized sector has to be cautious of the developing grey market. Indian Luggage Market

The Indian luggage market is worth nearly one thousand crores. A considerable portion of the market is unorganized. The table below gives the distribution of the market between the branded sector and the unbranded sector.

Market Size: Rs. 1000 crores
Organized Sector| 60%|
Unorganized Sector| 40%|
The market for luggage in India can be subdivided into three segments, comprising of the premium, regular and economy segment. The current growth rate of each of these segments shows that the premium segment is the fastest growing one - five times as fast as the economy segment, and two and a half times as fast as the regular segment. Growth Rates (Organized Sector)

Premium| 25%|
Regular| 10%|
Economy| 5%|

The organized sector is dominated at present by the Piramal fleet of companies - VIP Industries and Aristocrat. Between them, they account for 85% of the organized sector market. Their chief competitor is the Rs.41 crore Safari Industries, whose share in the branded market is nearly 14%. The rest of the market is comprised of other brands like Encore, Unilite, Genius, Club and Novex. But the entry of Samsonite India, the 60:40 joint venture between Samsonite and the Bombay-based Rs.28 crore Tainwala Chemicals, would change the whole scenario.

VIP – INTRODUCTION:
VIP Industries Ltd. is the flagship company of the DG Piramal Group. It was established in 1971 and it is a leading luggage manufacturing company, which...
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