After more than 50 years in business, VIP Industries is a well-known brand in the Indian baggage market, but these are difficult times for the company right now. This obstacle exists even though the Indian luggage market is still expanding at a rapid pace. The market is being driven by several factors, including rising domestic and international travel, increased demand during the wedding season, the emergence of e-commerce, evolving lifestyles, and the evolution of luggage from a simple functional item to a fashion statement.
Further driving industry expansion has been advantageous demographics, rising purchasing power, and a shift in customer preference from non-branded to premium brands.
Notwithstanding these encouraging developments, global brands and cutting-edge startups are posing a growing threat to VIP Industries. Due to the growing perception of baggage as a lifestyle accessory, the entry of new competitors has resulted in a loss of market share. Although in the past endurance was the main consideration, modern travellers—especially Gen Z and millennials—also place a high value on design, colour, and innovation.
In addition to the external constraints mentioned earlier, the company’s underperformance in FY23 has been mostly attributed to internal issues. Even in a robust market, VIP found it difficult to seize chances because of high soft luggage inventory levels brought on by waning demand and an inability to adjust its product line to meet changing consumer demands.
The financial statistics unmistakably reveal these problems, with revenue from operations for FY 2023–2024 increasing by a meagre 7.8% to ₹2,245 crore. The prior year’s profit after tax (PAT) dropped sharply to ₹54 crore from ₹152 crore, despite a 10% increase in domestic revenue. Additionally, the company reported a 93% YoY decline in net profit to ₹4.03 crore to start FY25 on a poor note.
Analysts are hopeful about VIP Industries’ future despite these obstacles, pointing to the company’s strong emphasis on business revival as a major factor in any possible turnaround.
The business has presented fresh tactics to recover its diminished market share. With increased market share expected in the first half of FY 2024–2025 and improved EBITDA starting in the second half of FY 2025, it seeks to surpass industry growth.
Leading luggage, backpack, and handbag producer and retailer in Asia, VIP is also the second-largest in the globe. With a 38% market share, it is a well-established leader in the oligopolistic, organized Indian luggage business. It offers a wide variety of products in the hard luggage and soft baggage categories, such as handbags, school bags, trolleys, executive cases, backpacks, suitcases, duffels, and solutions for overnight travel.
Top 3 strategic priorities
The management has determined that portfolio transformation, brand premiumization, and process transformation are the three strategic initiatives that will form the cornerstone of a resurgent VIP Industries to recover its lost market share and reclaim its previous prominence.
Portfolio Transformation
VIP Industries’ strategic roadmap’s first pillar is centred on modernizing the company’s product line. VIP intends to introduce several items that will be the first of their kind in the Indian luggage market.
The company told investors in its FY24 annual report that it has hired a globally recognized designer to improve the look and feel of its product line. It is also introducing new items in three different categories: premium, technology-enabled, and lightweight.
Brand premiumisation
This would cater to India’s increasing inclination for high-end merchandise. The company intends to introduce high-end product lines tailored to the Carlton and VIP brands, which are intended to align with the changing goals of its substantial middle-class clientele.
To improve the brand’s posture, the corporation is also refining its customer outreach initiatives as part of its premiumization plan. Among the initiatives to increase the brand’s premium appeal are the development of exclusive brand outlets in upscale venues and the hiring of celebrities as brand ambassadors.
Process transformation
The third pillar focuses on streamlining VIP Industries’ processes to increase cost-effectiveness and fill rates. The company has responded to the decrease in demand for soft bags by restructuring its manufacturing facilities in Bangladesh, which involved a reduction in workforce.
In line with the growing trend in that area, VIP Industries is actively expanding its hard luggage capacity at the same time, as the company’s MD, Ms Neetu Kashiramka, indicated in the FY24 annual report.
