Key Nike and Adidas footwear supplier Pou Chen signed an agreement with Tamil Nadu government on Monday, cementing the Southern Indian state as a rising force in the shoe manufacturing industry.
Chief minister MK Stalin was present for the signing with Pou Chen subsidiary High Glory Footwear, which committed to investing 23 billion rupees, or about $281 million, to establish production in Tamil Nadu, which exports as much as half of India’s footwear products, according to industry estimates.
Pou Chen’s production was up almost 14 percent in 2022 and shipped 272 million pairs of shoes. While rival sourcing countries such as Vietnam battle rising costs and a labor shortage, India is becoming an increasingly attractive destination for diversification.
Pou Chen vice president George Liu said he hoped this would be the first of many investments to come in remarks made during the live-streamed meeting with the Tamil Nadu minister.
“Over the next 12 years, this partnership will generate employment opportunities for more than 20,000 people in the non-leather footwear sector, especially for the youth and women in and around the Kallakurichi district,” said a representative from Guidance, Tamil Nadu’s government agency for investment promotion, referring to the area roughly 150 miles from the state capital Chennai, previously known as Madras. Guidance is the agency helping to facilitate the investment.
Vertically integrated Pou Chen, which also supplies Asics, New Balance, Timberland, and Salomon, is seen as a catalyst for Tamil Nadu’s flourishing footwear industry.
Stalin announced the “Tamil Nadu Leather and Footwear Products Policy 2022” in August last year, saying this initiative would attract nearly 200 billion rupees, or $2.43 billion, and generate more than 200,000 jobs by 2025.
The state will identify strategic land where companies can create new clusters and ensure newcomers find a skilled workforce, he said. “This would transform Tamil Nadu into the most favored destination for manufacturing of footwear and leather products in Asia,” he said at the time, appealing to industries to popularize “Make In Tamil Nadu” products in a global arena.
Tamil Nadu’s footwear policy is a step in the right direction, but other forces are putting the state on firm footing.
Dr N. Mohan, a footwear industry leader, and director and CEO of Kothari Industrial Corporation which has signed 11 memorandums of understanding, including Taiwanese major Shoe Town for production in Tamil Nadu, told Sourcing Journal why the state was seeing new growth in this sector.
“Tamil Nadu is the first state to come up with a footwear policy,” he said. “India has been a traditional exporter of leather footwear. But 86 percent of the world consumption is non-leather.”
Other initiatives have sprung up to stimulate employment. The footwear Industry largely employs people from underprivileged groups, especially women.
In November 2022, Stalin laid the foundation for another big initiative, the Phoenix Kothari Footwear Park in the Perambalur district.
“Group Phoenix Kothari footwear has been investing in the development of non-leather footwear in the district of Perambalur, in Tamil Nadu, with an investment of more than 30 billion rupees [$366 million] and employment for 40,000, including directly and indirectly,” Mohan said, adding that “covering the 3M’s – materials, moulds and machinery is critical for the development of the non-leather footwear sector.” Because most Indian producers still import the bulk of their inputs, moving in this direction will enhance the footwear ecosystem.
Industry analysts believe the shift toward non-leather footwear will drive more than 200 percent growth in the footwear sector in Tamil Nadu in the coming years.
Other investments inckude Taiwanese company Fentgay in Cheyyar, less than 70 miles SouthWest from Chennai, committing to increase manufacturing along with fellow Taiwanese manufacturers such as Fentgay and the Hong Fu Group.
In April 2022, Hong Fu industry chairman TY Chang signed a memorandum of understanding with the Tamil Nadu chief minister, committing to invest 10 billion rupees or about $122 million, and to generate 20,000 jobs in cooperation with Florence Shoes. This will be spread over 130 acres in the Panapakkam SIPCOT area in the state’s Ranipet district.
Tamil Nadu’s economy is aiming for $1 trillion by 2030 and the state is also a strong player in the textile and apparel sector, as well as automobiles and electronics manufacturing. Global investors are scheduled to meet on Jan. 10-11, 2024 to discuss new opportunities.
Why is Tamil Nadu seeing strong progress in the footwear industry?
“The quality level is much higher, the factories are good with social audit compliance, there is much more employment of women, and this has the advantage of the fact that their sense of quality is much better, they have more patience than men, and also very important is their level of dexterity,” Mohan said.
Other developments are contributing to Tamil Nadu’s success.
“Not only shoe-making [companies] but shoe-making components are coming to Tamil Nadu as well. The entire value chain will develop. This is an immense opportunity to create a lot of jobs, and also to generate revenue and growth for the industry,” Deepak Manchanda, general secretary, Indian Footwear Components Manufacturers Association (IFCOMA), told Sourcing Journal.
What’s more, Pou Chen’s investment suggests the “China plus one” sourcing strategy India has been hoping for seems to be coming to fruition, he said.