Classic polo - Company analysis

The Royal Classic Group forayed into many areas much before others did


IN the garment export cluster that is Tirupur, the Royal Classic Group (RCG) is a bit of an oddity. It started out as a garment exporter just like the others, but suddenly changed focus to the domestic market in 2001 though it was doing perfectly well with its exports. Then, in an industry where vertical integration is not in fashion, RCG deliberately went down that route. Finally, while most exporters in Tirupur are focusing on supplying foreign brands, RCG is valiantly trying to create its own brand (Classic Polo). Primarily into making T-shirts, the company has now forayed into denim wear and other men’s apparel (while others are now waking up to the trend) to strike it big even in the face of easily available global names.

Royal Classic is still a medium-sized company — the 15-year-old (it started in 1991) has a turnover of Rs 225 crore, and its T-shirt brand sales add up to Rs 18.39 crore. What is interesting, though, is that it is trying to overturn the conventional business model of textile exports — and it seems to be succeeding.

The Beginning
RCG was one of many players who were getting into exports in the early 1990s. However, in 2001, the company began building its brand within the country. It was not sure when the textile quota would be lifted and, therefore, it wanted to test the domestic market. In 2005, when the quota ended, the margins narrowed drastically, and other players in the garment export business started exploring the Indian market. “In the domestic market, realisation takes a little longer, but margins are much better,” says R. Gopalakrishnan, chairman, RCG. The company is among a handful of players setting up spinning units. RCG set up a 25,000-spindle spinning unit in 2005 at the cost of Rs 22 crore, which made it a fully integrated player. This has given the company better control over good quality yarn supplies and has also saved costs. The Rs 1.75-crore investment in processing in 1996-97 has been a small step towards complete integration. This came at a time when most Tirupur firms were not keen on investing in processing.

RCG took another unconventional step in 2006. Instead of depending on contract farming, it began purchasing cotton directly from farmers through cooperatives. This gave the company a fair degree of flexibility in raw material purchase. The group also provides guidance on improving productivity using drip irrigation, contamination-free plucking and safe transportation methods to farmers. This has resulted in an increase in yields from 4-5 quintals per acre to 10 quintals per acre. And while most textile companies outsourced ginning (where cotton seeds are removed before spinning), RCG decided to have an in-house facility to produce fibre. In all, the company has invested Rs 62 crore in integration and expansion projects in the past two years.

The company’s latest developments include expanding exclusive brand outlets and foraying into denim wear. RCG now aims to grow at 65 per cent year-on-year in branded garments. The group’s overall growth is expected at 20 per cent in the next few years, the same as the average industry growth.

The Quest For Space
From the cotton fields to posh retail outlets, RCG has a presence across the entire textile value chain — something that very few mid-sized textile companies have managed to achieve.

But reaching this level has not been easy. The single-product focus (T-shirts) was a stumbling block and the brand remained only a marginal player in the menswear segment. “We wanted to sell only T-shirts as it was our core strength. But no dealer was willing to give us enough shelf space for only one product. T-shirts are still considered a weekend product,” says R. Sivaram, executive director, RCG. With new designs coming out of its stable almost on a daily basis, the company was not getting enough display space in outlets. To ensure better brand visibility, RCG opened its first exclusive brand outlets (EBO) in 2004 and expanded product range.

“But when we opened our outlets we needed a range of products,” reasons Sivaram. To do this, it acquired ‘Smash’, an innerwear brand, forayed into shirts (2004) and the trousers segment (2005). It expects amortisation of store investments in five years. RCG hopes that the retail sales would exceed operating costs in nine months of launching a particular outlet. Now, the company, which has presence in over 1,000 multi-brand outlets (MBOs), plans to expand from 27 to 60 EBOs across India. This involves an investment of Rs 10.75 crore.

But Sivaram regrets not having launched EBOs two years ago when the real estate prices were lower. “It is a lost opportunity,” he says. However, he is certain about the success of these EBOs. “The outlook towards retailing has changed. Earlier, people used to shop only during occasions. Now, it has become regular,” he says.

Moreover, expanding EBOs has actually improved revenues from MBOs, Sivaram says. With the growing retail presence, Royal Classic has expanded its product profile besides stocking merchandise that is not in its repertoire. Take for instance, Swiss Club, its premium range menswear, which has been made from wood pulp-based fibre in a co-branding agreement with Birla Cellulose, the fibre division of Grasim, the Aditya Birla flagship. The outlets, known as Relax Junction, sell an entire range of men’s accessories. “The experience in the first two years has given us the confidence to grow,” says Sivaram.

Despite being among the first from the south to have an entire range of menswear products, Royal Classic is strong only in the south. While the company has decent volumes in T-shirts (10,000 pieces a day) and innerwear (40,000 pieces a day), its trousers and shirts production is still low. The company claims a 15 per cent market share in the organised branded T-shirt segment. In fact, it accounts for 85 per cent of revenues. However, it aims to bring it down to 60 per cent in the next two years.

The Competition Is Growing
Though the scope is large, men’s apparel is dominated by unorganised players, who account for nearly 50 per cent of the market. An IMAGES-KSA Technopak study valued the men’s apparel market in the country at Rs 36,558 crore in 2005. Apparel segment is still a man’s world with menswear accounting for a 45 per cent share of the overall market.

More branded players are queuing up for a slice of the pie, as consumers are taking to branded products. Crocodile, in which the Avinashi-based exporter of knitted garments, SP Apparels, took a majority stake this year, is among them. It will open 30 company-owned outlets across the country, according to Sanjay Chandrasekar, vice-president (retail operations), SP Apparels. In the next two years, it wants to take the number of franchisees from 56 to 160. Others like Gangotri Textiles and Lakshmi Mills too have joined the race.

“A few regional players have come up in recent years in their pursuit to become national,” says Vishesh Singh, senior consultant, KSA Technopak. But this trend doesn’t worry Sivaram. “I feel lonely,” he says, “I need people to share experiences. It only shows that our decision to get into branded garments was right. There is enough space for more players.”


Classic Polo, an established knitwear brand in India and the Middle East, is all set to enter the men's wovens segment and has also drawn up aggressive expansion plans in its retail operations. By March 2004, the brand plans to increase the number of exclusive outlets from two to 20, shop-in-shops from 35 to 50 and MBOs from 1500 to 1800.

In its quest to emerge as a complete men's lifestyle brand, Classic Polo is planning to extend its product portfolio and the first major expansion will be the launch of premium shirts scheduled by August'03. Trousers, outerwear, jackets, tracksuits, caps and accessories will follow thereafter, albeit in a phased manner.

The range of shirts will cover the entire story from YD checks to Indigo checks, plains in twills and poplins to fashion series and to club line. The shirts will be affordably priced in the range of Rs.525 to Rs.1100 keeping the basic corporate policy of “value-of-money equation constant.”

“The shirts are a masterpiece and best of the imported and high premium mill-made fabrics are used as per trend study done by our design team,” says Anand Aiyer, Group Brand Manager, Classic Polo. “A customer who understands class and quality will appreciate the collection and when he compares the price with other leading shirt brands he will really get surprised.” He is confident that the shirts will be the major sales contributor in future and will take the turnover well beyond Rs.200 million. “The T-shirts will contribute about Rs.120 million, the share of shirts will be Rs.70 million and accessories will bring in Rs.10 million”, Aiyer says.

Classic Polo will soon be introducing its Pan Euro Autumn Winter collection'03 and the major product thrust will be contemporary knits, full sleeve Tee's, premium shirts, outerwear jackets and accessories. The collection has been designed on European trends with support from Classic Polo's collaborator Kitaro.

Two more brands, in men's innerwear and kidswear category, are in the pipeline and which will be launched later this year. “We want to first consolidate and make Classic Polo a strong national brand with wider product line,” says Aiyer. The idea is to exploit the potential premium men's innerwear segment in future.


There are plans to enter the markets of Madhya Pradesh, Gujarat and Rajasthan. Currently the Classic Polo collection is retailed through MBOs, shop-in-shops and chain stores like Shoppers' stop, Globus and Ebony.

As a first step towards consolidation of the domestic division, the headquarter and the marketing and branding office, which was in Chennai, are being shifted to Bangalore.

About Classic Polo

The company's estimated turnover is Rs.80 million with 50 per cent sales coming from the South. In the year ending 2002-03 Classic Polo recorded sales of 2 lakh pieces of T-shirts. The projected turnover for the year 2003-04 is Rs.220 million.

Classic Polo was launched in India in 2001 in technical collaboration with Kitaro GMBH of Germany and in 2002 the brand was launched at Dubai. 'Polo Club' was started for a better customer interface and there are kiosks at Park Sheraton, KGA Golf Course and Eagalton Golf course for the purpose. Talks are under progress to open more kiosks at shopping arcades of five star hotels, resorts, golf courses and coffee pubs to bring the brand closer to the customers.


The Company Behind Classic Polo

The Rs.2.2 billion Royal Classic Group (established in 1991) is the company behind Classic Polo. It has in-house manufacturing facilities from yarns to garmenting and has invested Rs.450 million on infrastructure and machinery.

The complete group comprises of Royal Classic Mills (P) Ltd, Classic Knits, Classic Clothing Company and Classic Knit processor. Leading international brands like GAP, Kitaro, Giorgio, Lord & Taylor, Sinn Leffers, Clipper, Frenzi Golf, etc source from Royal Classic. All this indicates that Classic Polo has the wherewithal to cast a lasting impact in the domestic market with its new range of products.