MARKET ASSESSMENT OF LUNGIS IN GCC REGION PREPARED BY 15 July 2019 FINAL REPORT 1 Research Background and Scope Project Objectives • The company is a leading Bangladeshi based diversified company, which has presence across multiple sectors including Power Generation, Textiles and Apparels, Cement, Real estate, and Hotels and Resorts • The company’s Textile and Apparel division manufactures all kinds of apparels and garments for men, women and kids. • The company is interested in relevant insights on the lungi market in GCC region. The company has partners with in this strategic endeavor • This research study will enable The company to assess the market potential of lungis in the GCC, identify sales and distribution strategy and develop its market growth strategy for GCC Project Scope • Geographical Scope: GCC • Product segment under focus: Lungis worn as daily wear and night wear only. • Key Intelligence topics covered in the study are as follows: • Demand Analysis and Trends • Supply Analysis and Trends • Sales and Distribution Channels 2 EXECUTIVE SUMMARY 3 DEMAND ASSSESSMENT OF LUNGIS IN GCC REGION KSA, Oman, and UAE are the largest lungi market in the GCC region, and are expected to grow at a rate between 1-3% during forecasted period 2019-2023. GCC LUNGI MARKET SIZE (Qty in mn pieces.) GCC LUNGI MARKET SPLIT 2019 (%) CAGR 2019-2023 1.5% 45.15 45.83 1.1% 43.20 43.84 44.49 KSA 19% UAE 2.8% 51% 43.2 mn pieces KUWAIT 1.7% 18% OMAN 1% 5% 3%3% BAHRAIN 1.9% KSA Oman UAE Kuwait Bahrain Qatar QATAR 1.8% 2019 2020 2021 2022 2023 • Lungi market in GCC is expected to slightly recover in 2019 after a fall in 2014-15 onwards, and is expected to grow at a steady rate of around 1.5% till 2023 • Increasing number of immigrant population, especially from the Bangladeshi and Indian community, is the major driving force behind the lungi growth momentum in these region 4 SUPPLY ANALYSIS OF LUNGIS IN GCC REGION The demand for lungis are adequately met, thanks to UAE’s friendly trade relation with lungi traders as majority of the lungi supplies are imported to UAE, and then re-exported to remaining GCC countries. GCC LUNGI SHIPMENT PAST TRENDS (in mn pieces) GCC LUNGI SUPPLIES SPLIT 2018 (%) 81.48 72.89 CAGR 2015-2018 (-15%) Demand slowdown 70.73 Import duty (+5%) Qatar diplomatic crisis 59.53 19% 48.29 51% 43.91 43.2 mn pieces 19% 3%3% 5% 2013 2014 2015 2016 2017 2018 KSA Oman UAE Kuwait Bahrain Qatar • UAE acts as a trading hub to majority of lungi traders to access other GCC markets • However, import duty levied by UAE government on all finished textile products has deterred many traders to export lungis and other garments to Dubai port 5 SUPPLY CHAIN ANALYSIS OF LUNGIS UAE plays a key role in trading lungis from Indonesia, Bangladesh and Indian region to GCC countries. • Indonesia is one of the largest traders of lungis to GCC region, followed by Bangladesh and India (50-60%) INDONESIA (15-20%) (60-70% of total exports Shipment To UAE 45% Re-export to other GCC to GCC) Dubai Port ~45-50% OF LUNGIS RE-EXPORTED (10-15%) TO OTHER GCC REGIONS BANGLADESH (20-30% of total exports to GCC) (3-7%) Direct Shipment To Other GCC Countries INDIA (5-10% of total exports to (0-5%) GCC) • GCC imports majority of its lungis from Indonesia • With the levy of import duty by UAE government, the direct shipment to other GCC countries is expected to go high in the coming years LUNGI MANUFACTUERS OTHER GCC COUNTRIES *UAE has discontinued its trading relationship with Qatar from July 2017 onwards 6 SALES AND DISTRUBUTION TRENDS IN GCC Lungis are widely available across multiple channels, including wholesales, retail outlets and over online. LUNGI WHOLESALER LUNGI RETAILERS END CUSTOMER Offers lungis to retailers and Shopping Streets/ Readymade customers directly as a finished garment shops product or as a fabric material in KGS or SQ MTRS Most of shopping streets or shopping areas sell lungis of Wholesalers offer products at a multiple brands lower price. Leading Malls/Hyper markets/ A typical cotton lungi could be Outlets that sell lungis Imported Lungi offered in the price range AED 13 – • Abdulla Hussain Khunji traders • Most customers buy lungis AED 17 stores in Dubai Mall/ Al Wahda from small readymade shops mall • Customers typically buy 1 • Kalyan Silks lungi in a year • Kibs International has exclusive • About 10-20% of customers outlet in most GCC region prefer to get lungis from their native country Online websites • Online lungi shopping is least • Alibaba, Desertcart, Amazon, preferred 7 Way Forward for The company 1. Key focus on UAE, Oman market Almost all the citizens of UAE and Oman wears lungi underneath thobe. Currently this market needs are largely catered by Indonesian lungi suppliers. The company could offer a better-quality product at a competitive price to tap this segment of population 2. Immense opportunity for a Bangladeshi lungi brand Only about 5% of the lungis belongs to Bangladeshi brands. This is way too small when considering the Bangladeshi immigrant population based in GCC. Currently, Bangladeshi customers buy lungis which are exported from India or Indonesia. The company has an immense opportunity to tap the Bangladeshi segment of population by highlighting and advertising the product as “ Made in Bangladesh” 3. Sales and Distribution Strategies 1. The company could have tie-ups with popular and budget friendly supermarkets and hypermarkets which sell garments in GCC region. Few leading retails chains in UAE includes Al Maya Supermarket, Geant Hypermarket, and Lulu Hypermarket 2. The company could open exclusive outlets in GCC. For example: Kibs International has exclusive outlets in most of the GCC regions. It has also tie-ups wit key retail chains that sell Kibs lungis in their respective stores. 8 DETAILED ANALYSIS: DEMAND ASSSESSMENT OF LUNGIS IN GCC 9 MARKET SIZE OF LUNGIS IN UAE The lungi market in UAE is expected to pick up gradually from 2019 after a slowdown witnessed in the previous three years. LUNGI MARKET SIZE ESTIMATION (Qty in mn pieces) LUNGI MARKET SIZE ESTIMATION (in AED mn) 2.8% 8.8 3.7% 136 8.5 131 8.3 126 8.1 122 7. 8 118 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 • Increasing construction and other economic activities preceding the Dubai Expo 2020 is anticipated to attract more expatriate population to the Dubai market • Lifting visa ban on Bangladeshi citizens seeking jobs in UAE is expected to bring a positive impact for the Lungi market in the near future 10 DEMOGRAPHIC SPLIT OF LUNGI MARKET IN UAE The positive net immigration rate of Indians and Bangladeshis in UAE is expected to drive the lungi market in the coming five years. DEMOGRAPHIC SPLIT OF LUNGI MARKET, UAE 2019 • Majority of the Emirati men wear lungis (Wozar), preferably white in color under the thobe 10% • Indians, mostly South Indians, and Bangladeshis are the largest expatriate population in UAE who buy lungis 8% 52% • Most preferred lungis among the above segment includes cotton checked and printed lungis 7.8 million pieces • The lungis are largely used as night or daily wears by Indians and Bangladeshis, and about 50% of the lungi wearing 30% customer segments purchase at least 2-3 lungis in a year • Lungis are not used as casual outfit, and there are few restrictions imposed by Dubai and Sharjah government in the past on wearing lungis in public places including Dubai Emiratis India Bangladesh Others Metros and parks Others category includes Sri Lankans, Nepalese, Pakistanis, Iranians and Indonesians 11 MARKET SIZE OF LUNGIS IN BAHRAIN Bahrain has a positive net immigration rate, and the lungi market is expected to grow at 1.9%, one of its highest growth rate after UAE. LUNGI MARKET SIZE ESTIMATION (Qty in mn pieces) LUNGI MARKET SIZE ESTIMATION (in AED mn) 1.61 1.9% 2.6% 24.8 1.58 24.2 1.55 23.6 1.53 23.0 1.50 22.5 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 • The growth in non-oil sector, triggered by the rise in iron-ore exports is expected to support the economy in this year 2019 • Government's plan to promote various infrastructural projects including the refinery modernization program could create multiple job opportunities and attract more expatriates in the near future 12 DEMOGRAPHIC SPLIT OF LUNGI MARKET IN BAHRAIN Though Bahrain is a small market, its growing expatriate population could make the country an attractive market for lungi manufacturers. DEMOGRAPHIC SPLIT OF LUNGI MARKET, BAHRAIN • Bahrain is the least populated country among the GCC 2019 countries with over 1.7 million population in 2019 • However, its population is expected to grow at about 3.6% in 5% the coming years 12% • Bahrainis largely prefer wearing cotton pants (serwal) under the thobe. However about 20% would prefer wearing lungis under their thobe 1.5 million 54% pieces • Indians and Bangladeshis are the largest expatriate 29% communities in Bahrain and they together constitute about 41% of the lungi buyers in Bahrain • Bahrain imports large quantity of its lungis from Indonesia, Bangladesh and India to meet its ever-growing demand Bahrainis Indians Bangladeshis Others • Strong infrastructural projects and non-oil segment growth could attract more expatriate population in the near future, Others category includes Pakistanis, Sri Lankans and Yemenis which could in turn increase the demand for lungis 13 MARKET SIZE OF LUNGIS IN QATAR Qatar remains a huge opportunity for lungi manufacturers, owing to its rapid growth in construction segment, and increasing job opportunities for expatriates, prior to the great event to take place in 2022.