From Hippies to Handbags

Financial Times
December 28 2010

Dilip Kapur, founder and president of Hidesign, is agitated. He and ayoung architect are in his office poring over a draft floor plan for a display in an Indian department store that will showcase Hidesign’s leather purses, briefcases and accessories. “You can’t do anything until you know the foot traffic,” Mr Kapur cries.

When a visitor enters his office, Mr Kapur regains his composure and becomes gracious and friendly. His office is in a red brick building
on a leafy campus in Pondicherry, the former French colony, on India’s south-eastern coast. In an adjacent brick building, which is
Hidesign’s factory, 1,200 mostly women workers cut, sew and hand-finish products known for their vegetable tanned leather and
natural look.

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At 62, Mr Kapur is thin with a youthful face. On a steamy summer day, he wears jeans, black sneakers and a white short-sleeved cotton shirt. A mug of green tea rests on his desk on a leather coaster. One wall is lined with bookshelves filled with titles such as 1,000 Armchairs, Louis Vuitton and Modern Baroque Interiors.

The homegrown leather goods maker is one of India’s most recognisable brands, with 56 stores across the country and 16 international stores in Russia, Vietnam, Oman, Sri Lanka, Nepal, Malaysia and the US. In addition to its own shops, about 100 department stores in India and 500 stores overseas carry Hidesign’s “affordable luxury” bags, priced between $80 to $200.

Hidesign is an Indian company but in the two decades after it was founded in 1978 Hidesign sold primarily to the US, Europe and the UK in stores such as Selfridges, Liberty and John Lewis. It entered its home market only in 1999 as Indian incomes rose and the growing middle-class became more fashion-conscious.

It is a kind of homecoming for Hidesign, which Mr Kapur started as a hobby when he returned to India to live on a commune after his
education in the US at Phillips Academy Andover, Princeton and the University of Denver, where he earned a PhD in international
relations. From its humble origins in a workshop with one artisan worker, Hidesign has grown to a business with $22m in revenues in the  2010 fiscal year.

In 2007, Hidesign received a boost when LVMH, parent of French luxury goods brand Louis Vuitton, took a minority stake in the
family-controlled company and enlisted it to help build a shoe-stitching factory near Pondicherry.

Mr Kapur did not plan to start a leather goods company. After
finishing his studies, he lived at Auroville, a commune north of the
ashram in Pondicherry where he had grown up.

During his time in the US, Mr Kapur “got very Americanised” but he
eventually realised he wanted to return to India in spite of the
stagnant economy of the 1970s. “People thought I was an idiot,” he
says. “But I had a sense of pride growing up in the ashram. I didn’t
want to be driven by American values, I wanted to go back to India.”

He admits: “I didn’t want to be a businessman but I turned into a
capitalist. I hated myself for a long time. For the first 10 years I
refused to accept I had a business. I said it was a hobby.”

Independence and idealism run in the family. Mr Kapur’s father had a
successful shoe factory in Agra, in northern India. But he also had a
strong spiritual bent and at the age of 39 he sold the business and
moved with his family to Sri Aurobindo Ashram in Pondicherry when Mr
Kapur was six years old.

In 1963, when Mr Kapur was 15, he saw a Time magazine article about
Phillips Andover Academy. Mr Kapur wrote a letter to the headmaster of
Andover and to his surprise the school offered him a full scholarship.

“Imagine some strange guy writing to you who lives in an ashram and
didn’t even have the money to pay for his application. There must have
been some amazed curiosity,” says Mr Kapur.

When he arrived in Andover, Massachusetts, Mr Kapur experienced a
harsh culture shock. “It was the toughest two years of my life.
Culturally, I was a complete zombie. America was a lot more insulated.
I was the only Indian and very alienated.”

Nevertheless, Mr Kapur learnt to “concentrate and work very hard”.

Those difficult years, however, paved the way to Princeton where he
became a “hippie radical”, he says, in the late 1960s, starting a
chapter of the Third World Liberation Front.

After graduating from Princeton in 1970, Mr Kapur embarked on studying
for his PhD, fully intending to become an academic. But he also needed
an income. He chanced on a job opportunity at Poor Richards, a Denver
company that crafted handmade leather bags. Coincidentally, the
company imported leather from Chennai in southern India and Mr Kapur
learnt about the Indian craft of vegetable tanning, along with dyeing
and cutting leather.

By 1978, Mr Kapur was at Auroville, a commune near Pondicherry founded
by a Frenchwoman known as “The Mother”. He volunteered in Auroville’s
finance department and taught international relations at its school.

For fun, Mr Kapur began making leather bags in a workshop on his
terrace and spent Rs25,000 (about $500 today) of savings to make his
first bags. He insisted on vegetable tanning even though old tanners
in Chennai said the process was too expensive and time-consuming. His
attention to quality was so strong that when Mr Kapur could not find
suppliers of brass buckles for the bags – only cheaper, brittle zinc
alloy ones were available – he asked Auroville’s metalsmith make
original fittings.

Mr Kapur says Hidesign’s rugged, simple bags were radical in the
1970s. “It was natural, not synthetic. Most normal people said ‘this
is defective’. It wasn’t clean and smooth. It was like us hippies with
long hair. It reflected the same ethos.”

He made a few bags and was selling them in Auroville when a German
visitor spotted the bags. A friend of hers happened to be a buyer for
DW Shop, affiliated with a German organisation that campaigned on
world hunger, and ordered 200 bags.

Mr Kapur and his lone worker could make only one bag a day so he
failed to fulfil the order. But the orders kept coming. His second
order was from Australia, where his bags were sold in “hippie” shops
in Melbourne.

With profits and advances from those first buyers, Mr Kapur added 10
more workers and expanded his workshop to a separate house in
Pondicherry.

By 1982, Hidesign was exporting mainly to the UK, Australia and
Europe. In 1985, John Lewis was the first UK department store to carry
Hidesign’s complete line of products. “People thought of us more as a
UK company than an Indian company,” says Mr Kapur.

In 1990, he opened the current factory in Pondicherry on eight acres
covered with trees and ponds – a bucolic setting where factory workers
eat lunch. Hidesign started selling within India only in 1999 and in
2000 domestic sales were only 6 per cent of total revenues.

Yet India has become a booming market for Hidesign. Last year, India
accounted for 50 per cent of revenues. The company will increasingly
focus on “dynamic Asian countries” for future growth.

In 2006, to keep its products fresh, Hidesign hired former Armani
designer Alberto Ciaschini, who is based in Milan. The company is also
trying out new product lines. Last year, it partnered with Future
Group, India’s largest retailer, to launch Holii, an affordable line
of bags with louder colours and ornate trimmings that is geared toward
younger consumers.

Not all new designs work. One wall in Hidesign’s office hosts a
handbag “graveyard” display. Holii’s second collection “didn’t do so
well”, notes Mr Kapur with casual candour. “It’s not all ups.”
Hidesign miscalculated when it designed bags for more traditional
housewives rather than modern Indian women.

However, laptop bags have been a surprising hit, which he attributes
to the increasing numbers of working Indian women who are seeking
functionality and fashion.

As Mr Kapur says: “With the way India is going now, who knows where
the Indian woman is headed tomorrow.”

Dilip Kapur’s tips for growth

Hidesign is one of India’s best-known leather goods makers. Founder
Dilip Kapur identifies three issues that are critical to growth.

● Human resources. Younger colleagues are ambitious and driven but
also disorganised, weak on implementation and set back by hurdles. Mr
Kapur puts outstanding young employees on a fast track, and tries to
have close interactions with staff, including lunch outside by the
pond. “Young Indians react well to informal conversation,” he says.

● Quality control. Hidesign eschews line manufacturing even if it
produces less than other big leather goods makers. International
partners that work with Hidesign are impressed with the skills of its
craftsmen, says Mr Kapur. Hidesign produces detailed manuals on making
each product. “The tough part is implementation,” says Mr Kapur. The
solution is to have assistants whose sole job is to follow up.

● Working in India. “Love the people, hate the infrastructure,” says
Mr Kapur. India is notorious for power cuts and, like most
manufacturers in India, Hidesign factories have a back-up power
supply.

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