Global Jeans Market Sees Fruits of Economic Recovery but There are Challenges Ahead

Although the jeans market was resilient during the recession, 2010 saw stronger volume and value growth as consumer spending picked up. Euromonitor International takes a look at both the most promising regions and future challenges for the industry.

Global jeans market returns to rude health

Whilst the global jeans market was able to weather the recession, posting positive growth rates of 3% and 2% (US dollar fixed exchange rate) in 2008 and 2009, respectively, 2010 marked a return to strong growth. Whilst overall apparel recorded positive value growth throughout the recession, jeans outperformed the wider market thanks to being one of the most versatile items of clothing. The category’s 6% growth in 2010 showed that consumers are now willing to spend more on one of the most popular types of clothing. Jeans are often staple items for Western consumers who wear them on a variety of occasions, ranging from work to socialising, with the markets with the highest jeans volume per capita being North America, Australasia and Western Europe. The recession may have led to consumers simply buying jeans to replace old, worn-out pairs, but now the global economy is experiencing a recovery jeans are starting to be treated like a luxury, with the global share of premium jeans showing a slight increase in 2010, albeit less than one percentage point. The 17% increase in annual sales for global luxury brand True Religion in 2010 illustrates the strong demand for luxury denim and the fact that jeans are no longer merely considered as casual wear.

The global jeans market is expected to continue growing at a CAGR of 3% over the forecast period, which shows that demand for denim is not likely to fade. The performance of jeans will be in line with that of the overall apparel market over the forecast period, so denim will benefit from the strength of apparel as a whole.

Improvements in the shape and fit of jeans are also boosting category sales globally. Trends from Latin America and Africa, where females prefer clothing that shows off a curvier figure, are being exported globally. The launch of Levi’s Curve ID in autumn 2010, which the company claims to offer a more flattering fit for women with curvier body shapes, in Asia, Europe, North and Latin America clearly demonstrates this trend.

Jeans also became increasingly popular in Asia Pacific over the review period, with per capita volumes increasing for both men’s and women’s jeans. However, the level remains the lowest of all the regions, with just one pair of jeans bought per every 10 inhabitants in 2010, demonstrating the continued prevalence of traditional dress in a number of Asian countries. However, as countries such as India become more westernised due to the influence of the media through the internet and television, Western styles of dress are expected to see strong growth over the next few years, and this will also contribute to positive value growth over the forecast period.

Latin America outperforms the market

Latin America was the fastest growing regional jeans market in 2010 with value growth of 11%. The fact that Latin America is the only region in Euromonitor International’s global apparel database which has a specialist jeans player, Levi, in the top 10 apparel companies, shows the importance and popularity of jeans for Latin American consumers.

The typical female Latin American consumer is very image conscious so is willing to invest in high-quality jeans. Whilst the most popular price brand is standard, this is closely followed by the premium segment, which is unusual for an emerging market, particularly as the economy price band is the most popular in Western Europe. Jeans manufacturers could capitalise on the strong demand for denim in this region by tapping into the trend of jeans with shape enhancing features to focus on curves. Curve-enhancing shapewear is available in most traditional Latin American apparel retailers, which shows that body image is very important to consumers in the region and curves are celebrated, partly due to voluptuous Latin American icons such as singer Jennifer Lopez. Levi would be wise to focus on launching its new Curve ID range, introduced in autumn 2010 and designed to fit curvy body shapes, in more Latin American countries as the line is currently only available in Mexico and Brazil. However, it may trial the range in the biggest Latin American markets before launching in other countries, particularly as it has been criticised for its sizing, which only goes up to a UK 14 so excludes a large proportion of curvy women who require bigger sizes.

Asian consumers expected to drive jeans sales over the forecast period

Asia Pacific is anticipated to be the best performing region for jeans over the forecast period with a predicted value CAGR of 6%. The region’s growth prospects will be boosted by India and China, which are currently two of the world’s fastest growing economies. Indeed, the jeans markets in India and China are both set to experience strong volume and value growth over 2010-2015, registering value CAGRs of 11% and 8%, respectively.

Middle-class and wealthy Asian consumers are keen on wearing either high- end designer labels or mid-priced but well-established international brands such as VF Corp’s Lee, the second biggest women’s jeans brand in Asia Pacific after Levi’s. However, Levi appears to be one of the most innovative denim companies at the moment, and launched a new brand specifically targeted at the Asian market in August 2010, dENiZEN, in South Korea, China, Pakistan, India and Singapore. The fact that Levi now plans to launch dENiZEN in its biggest single market, the US, in summer 2011 indicates that it has performed well.

Soaring cotton prices could limit future value growth

With the price of cotton reaching a record high in 2010 and further price hikes expected in 2011, all credible apparel companies, but especially denim specialists or those with a wide jeans range, have already set out a strategy to deal with this challenging situation. For instance, teenage apparel company Abercrombie & Fitch, ranked fifth and sixth in women’s and men’s jeans, respectively, in the US, has set out a detailed plan to help it cope with rising raw material and sourcing costs. The company’s CEO Mike Jeffries revealed that instead of reducing the quality of products it will enhance the quality whilst passing the increased costs on to consumers. Jeans specialists have the option of increasing their range of stretch jeans which often contain a high proportion of cheaper fabrics such as polyester. However, Abercrombie & Fitch has indicated that it will not replace cotton with cheaper synthetic fabrics as a means of cutting costs. It will instead focus on increasing prices in its international business rather than in its home market, the US. Super-premium denim brand True Religion revealed in its fourth quarter results that in 2010 it increased the sportswear mix of its brand in its US Consumer Direct business, which consists of its branded retail stores and transactional website, so it is moving away from denim in its branded stores. This resulted in lower average unit prices compared to 2009. Whilst it did not state that this was driven by the increase in cotton prices, it appears to be a logical coping strategy, and a number of other apparel companies are expected to adopt a similar approach. Apparel companies and denim brands in particular will need to work hard and plan carefully in order to protect margins whilst maintaining competitive prices.

Jeans market remains durable

The jeans market has always been strong as it appeals to all consumers regardless of sex or age. Jeans are staple products for people in most regions, but particularly in Latin and North America. The value and volume growth of the jeans market was strong in 2010 and it is expected to continue to grow over the forecast period despite the maturity of the product which has strong penetration in a number of countries. However, in order to fully capitalise on the continued popularity of jeans, denim brands and apparel companies should focus on innovation and regions where jeans have lower penetrations, such as Asia Pacific, in order to outperform the wider market.