SÃO PAULO — Brazil’s jeanswear market expects to see 5 percent growth to roughly $19 billion in 2015 as consumers tighten their belts in a weakening economy, industry executives said.
“We grew 10 to 15 percent in the past few years,” said Fábio Covolan, marketing director at top spinner Textil Canatiba. “This year, we will grow 5 percent.”
Covolan echoed views that the World Cup and uncertainty surrounding 2014’s hugely contested presidential elections combined to dampen sales in Latin America’s number-one economy.
“The World Cup was a mess for the industry. The whole country’s attention was on it,” Covolan sighed. By the time Valentine’s Day came around, the industry’s second-best-selling event, sales “were a fiasco.”
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Covolan said premium brands will suffer this year, while fast-fashion labels will likely do better.
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Fábio Mascarenhas, administrative director at other top denim maker Cedro Textil, agreed business was tough, adding that he expected revenues to be flat in 2014.
While some expect trade to improve in 2015, others expect it to worsen.
“We may see a growth decline for the first time in years,” said Eleonora França, marketing director of smaller supplier Santanense. The industry’s performance is a far cry from 2013, when manufacturers hiked production to meet robust demand, helping it chalk up a 15 percent gain, she noted.
Brazil’s jeanswear sector is highly competitive, with large companies “matching the Italians in product level and the Chinese on price,” Covolan claimed. According to observers, the industry will make roughly 380 million pairs of jeans this year, which, at an average price of $50, gives it a $19 billion retail value. Churning out some 500 million meters of denim annually at an average price of $9, production value stands at $4.5 billion, Franca said.
Canatiba and archrival Vicunha Têxtil make up 50 percent of revenues in an industry dominated by 15 to 20 big manufacturers.
Like other sectors, denim is hurting from Brazil’s recession, which held the country’s GDP growth to only 0.5 percent (if not less) last year. While the Brazilian government thinks growth could rise 1.20 percent — a prediction that was recently downgraded from 1.50 percent — in 2015, there are lingering doubts that will be the case.
As consumption takes a hit, brands are cutting prices and moving up the fashion curve.
“We are focusing on innovation, making new products and fresh items all the time,” Covolan said. He said the company is launching new functional fabrics with more appealing colors and softer and more comfortable finishes made from proprietary Tencel and Modal fibers and thermo-cool fibers.
During last year’s Premiere Vision São Paulo, the firm launched a summer 2016 line of comfort denim called Megaflex Therma Comfort, which incorporates Lycra T400 threads, and enlarged its Cool Max product suite, aimed at regulating body temperature.
The firm’s new bestseller is a line of Emana Denim, which it claims stimulates microcirculation in women’s skin and which Textil Canatiba contends boosts firmness and reduces cellulite. Made from a joint venture with French chemicals firm Rhodia, the product doesn’t wash out, making it unique in the world, Covolan boasted.
Canatiba is also upping the ante on its so-called Duo Core line of stretch fabrics, which have “superior recovery” rates that help to retain body shapes, the executive added.
As competition gets fiercer, Covalan said Canatiba will bolster spending in new spinning and finishing technologies next year and in the medium term.
According to Covalan, rising subvalued imports from Asia and the economic slump are toughening the market, with mills catering to the lower- and middle-class segments and stepping over themselves to win consumers’ hearts. But as competition increases, many of these firms will vanish unless they innovate or form alliances, he said.
Brazil’s currency, the real, continues to slump, making exports more attractive and opening new opportunities for Canatiba and others to muscle abroad.
“In five years, we hope to export 7 to 8 percent of our production, up from about 5 percent now,” Covolan said. Canatiba will target premium brands in the U.S. and Europe, where it already sells to the likes of G-Star in Holland, he added. Mexico, where it currently spins for labels including True Religion and J Brand, is also a key destination, while Chile, Paraguay, Bolivia and Argentina are also targets.
Not to lag behind, Cedro is striving to churn out new value-added functional and technical fabrics. During Premiere Vision, the firm unveiled several additions to its superstretch fashion range, including ones with as much as 70 percent stretchability, “extreme recovery and comfort.” It also rolled out new products made of Sardenha and Lanai fibers, featuring “intense and vintage blues” and providing “a differentiated shine and…offering multiple laundering options.”
Mascarenhas said the firm also uses Emana fibers and that its flame-retardant cotton technology — used in its work clothing unit and developed with Rhodia — is a first in the industry.
Cedro, owned by Mascarenhas’ Brazil-based family, also has a proprietary fabric that helps manufacturing clients save up to 80 percent of the water used in denim washing cycles. Another product, made with chemicals firm Clariant, helps clients reduce by as much as 40 percent the water used to make yarns.
According to Mascarenhas, this year’s denim market will be “a mystery,” adding that growth may be flat. In 2014, Cedro was on track to deliver a 14 percent revenue hike to 800 million reals, or $300 million at current exchange.
Based in Belo Horizonte in Minas Gerais state, Cedro annually makes 45 million meters (147.6 million feet) of denim and 22 million meters (72.1 million feet) of colored and stamped twill. One of the state’s largest enterprises, the 130-year-old firm also runs a textiles museum.
Mascarenhas said high production costs and taxes, which average 30 percent more than in Asia, are denting Brazilian producers’ bottom line.
While many rivals, including Vicunha, are shifting output to cheap production posts in neighboring Paraguay, Cedro plans to stay in Brazil, even as a water crisis in São Paulo state spooks the industry.
Covalan conceded the water shortages are also hurting Canatiba, which is scrambling to employ more resins and foam-based liquids throughout its manufacturing chain.
“It’s a big challenge,” he said. “We have to re-use everything we can — energy, raw materials and even the fumes from our furnaces” — to save water.
To cope, Santanense is rushing to boost recycling.