Hong Fu, the world’s second-largest trainer manufacturer, is making an aggressive bet on India. To that end, they are building a 135 acre integrated manufacturing facility in Panapakkam, Tamil Nadu. Upon completion, this new plant will churn out a staggering 25 million pairs of shoes annually. In addition to halting the crumbling asphalt disaster, it would provide work for some 25,000 employees. And the international market is quickly filling up. Riding on these new opportunities, Hong Fu has set its sights on the expanding Indian footwear industry, booming with cheap Chinese goods.
The company manufactures for global names such as Nike, Converse, Adidas, and Puma. It acknowledges the huge potential within India’s footwear industry. Hong Fu’s products are projected to account for 66 percent of the total footwear market. They are doing so strategically, knowing that with their help the sector is about to enter a massive period of rapid growth and changes. The Indian government is keen to attract such foreign investments, viewing them as essential for raising industry standards and enhancing exports.
As Hong Fu prepares to launch this ambitious project, it is part of a global trend with major brands looking for new markets. “The international market is saturated and they were looking for a new market,” noted Aqeel Panaruna, an industry expert. The market need for cruelty-free non-leather footwear options in India is growing. Hong Fu expects to leverage this consumer-oriented trend away from single-use plastics.
The new plant launches with ambitious brands finding it difficult to ramp up their retail footprint in the semi-urban/rural frontier. This confluence of timing produces an incredible opportunity for expansion. Ashok, a local entrepreneur, highlighted this issue by stating, “Many organized brands struggle to expand their retail footprint in semi-urban and rural areas because we cater to them.” Consumers in these geographies often favor lower-cost domestic options over brand-name shoes, forcing larger firms to navigate a challenging market environment.
Despite the challenges posed by the existing market structure, experts believe that the Indian government’s approach will play a crucial role in shaping the future of the footwear industry. “I think the government is trying to walk a tightrope here. They can’t just shut down thousands of small businesses that employ millions of people – that would be economic suicide,” said Mr. Sharma, another industry analyst.
Mr. Sharma elaborated on the government’s approach. It’s a good compromise of pushing the stick for better standards, but looking out toward the best interest of small manufacturers. What I’m seeing is more of a carrot and stick approach. They are driving standards but deploying programs to assist small manufacturers in retrofitting and changing their processes,” he added. The intention isn’t to get rid of these unregulated sectors but to slowly transition them into the formal economy.
As Mr. Sharma very rightly points out, a regulatory framework that is supportive is key to success. He points to accreditation as being especially important for smaller firms. “The government should give us accreditation and certificates so our factories don’t close down. Once we too are included in the organized sector no one can beat India in the shoe manufacturing industry,” he asserted.
Hong Fu’s growth illustrates a sea change that’s taking place in the market, especially as larger players flex their muscles. Experts are confident that nimble companies will find other methods to succeed. “The market is definitely going to shift. You’ll see the bigger players getting bigger—they have the resources to pivot fast,” said Mr. Sharma. He doesn’t predict the end of all smaller manufacturers. I don’t believe it’s the end of the road altogether for the little guys. The smart ones will find their niche.”
As Hong Fu gets ready to open its India operations, opportunities and challenges await them. This investment represents a groundbreaking entry into a new promising market. It responds directly to changing consumer preferences and the increasing market demand for non-leather alternatives. At the same time, it requires careful maneuvering through a new cutthroat ecosystem of local incumbents and an often inconsistent patchwork of municipal regulations.