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The Denim Industry’s ‘Best-Kept Secret’

Pakistan’s denim apparel exports to the US have overtaken China’s, thanks to local entrepreneurs who have built a vertically-integrated manufacturing hub in the South Asian nation.
Global supply chain disruptions and the ongoing threat of the pandemic continue to impact denim operators in sourcing hubs like Pakistan but, looking ahead, there are reasons for industry leaders to feel optimistic.
A group of denim manufacturers in Pakistan are now competing with suppliers in sourcing hubs like Turkey, Mexico, Bangladesh and Vietnam. (Shutterstock)

It might not be the first country that springs to mind when you think of fashion supply chains, but a growing number of blue jeans destined for the global marketplace are manufactured in Pakistan.

“We are one of the world’s best-kept secrets,” said Faisal Ahmed, chief executive of Artistic Denim Mills (ADM), one of Pakistan’s largest denim manufacturers with a client list including Zara, Primark, Calvin Klein, Wrangler and Lee.

Executives at ADM have seen the sector grow over three decades from a handful of small producers and suppliers to a cluster of hi-tech major players based in cities like Lahore, Karachi and Faisalabad competing on the world stage.

Other companies riding the wave of denim sourcing from Pakistan include Siddiqsons Group, Naveena Denim Mills, Azgard Nine Ltd., Rajby Industries, US Group, Crescent Bahuman Ltd. and of course Soorty, reputed to be the country’s largest vertically integrated denim manufacturer.

Industry veterans from Europe and North America who source denim from Pakistan say the quality of locally made products tends to be high for the market segment they occupy.

“In terms of the denim mass market, I think Pakistan’s denim is of exceptional quality and gives importers the best value for money,” said Juan Chaparro, group director for supply chain, sourcing and quality at Primark, who has over 25 years’ experience during which he worked internally at other high-street companies like Inditex and Esprit.

It is this reputation that has led to a boom for Pakistani denim manufacturing exporters like ADM in recent years, even as Covid-19 dented the global denim trade, completely shutting down manufacturing in countries including Pakistan, India and Bangladesh for periods during 2020.

Today, global supply chain disruptions and the ongoing threat of the pandemic continue to impact denim operators in sourcing hubs like Pakistan but, looking ahead, there are reasons for industry leaders to feel optimistic.

For one, a change in style preferences among some consumers means denim wardrobes are being updated. Indeed, brands from Levi’s and American Eagle to Madewell and Abercrombie & Fitch have all reported high demand for denim products with looser fits and wider-leg silhouettes among some consumers, as people slowly return to public life.

More broadly speaking, “the global adoption of casualisation, which started before the pandemic, is continuing to pick up in popularity and consumers are embracing comfort as they go out again,” executive vice president and president of the Levi’s brand, Jen Sey, told Forbes in June.

Shifts in Global Sourcing

As with many apparel categories, the lion’s share of world denim exports once originated in China, which was a powerhouse in terms of both denim fabric exports, and the manufacturing of denim apparel, including jeans.

China’s efficient, extensive manufacturing units and long-term alliances with major brands mean it continues to have major competitive advantages, but, though it remains the world’s largest denim producer, China is no longer the top source of denim apparel for Europe, according to the Netherlands-based Centre for Promotion of Imports from developing countries (CBI), which says the region sources more denim products from Bangladesh, Turkey and Pakistan.

In the US, according to data from government trade body the Office of Textiles and Apparel (OTEXA), Bangladesh, Mexico and Vietnam make up the top three denim apparel source countries.

An OTEXA report shows that between January and September in 2021 Pakistan was not only among the top five exporters of denim apparel to the US, but that it saw the largest year-on-year growth rate among the top five, with a 63.4 percent increase. This period marked the first time that Pakistan had exported more denim apparel ($275.89 million) to the US than China ($274.63 million).

Business is also looking up in the EU. A 2021 CBI report shows that Pakistan’s share of denim exports to that market roughly doubled between 2015 and 2020.

Recent and ongoing shifts in global sourcing patterns mean alternatives to China have become more attractive for some denim players. While countries like Turkey and Mexico are benefitting from European and American buyers’ nearshoring efforts in the face of global supply chain disruptions, non-Chinese Asian countries like Pakistan are seen as increasingly competitive in other ways.

The exodus from China due to, among other things, the cotton issues from Xinjiang, increased prices and supply chain concerns and has helped boost business for Pakistan.

Not only has the cost of labour in China become prohibitively expensive for many brands, particularly for the cut and sew manufacture of denim apparel, the still simmering US-China trade war has put a dampener on Chinese exports for some players. More recently, concerns about alleged forced labour in China’s cotton supply chain, and legislation in reaction to these concerns from the US and Europe, have accelerated the flight of denim textile sourcing from China.

“The exodus from China due to, among other things, the cotton issues from Xinjiang, increased prices and supply chain concerns and has helped boost business for Pakistan,” said Muhammad Tariq Rafi, chairman of the Pakistani denim manufacturer and exporter Siddiqsons Group.

Pakistan’s Future Prospects

Though other markets — such as Bangladesh and Vietnam — are low-cost production hubs that can compete with Pakistan on price, they don’t all have the assets Pakistan has in terms of raw materials.

“Bangladesh is very affordable, which is a major reason for its popularity. In my experience, though, much of the denim [fashion] that I buy from Bangladesh may originally be from Pakistani fabrics. The quality of the cotton yarn produced in Pakistan makes it ideal for denim production and other countries regularly import loose denim from Pakistan and stitch apparel from it,” Primark’s Chaparro said.

Compared with other textile and apparel categories, denim is advantageous for Pakistan because of the medium-staple cotton grown there which is optimal for the fabric.

“Pakistan’s cotton yarn gives us an advantage over countries like Bangladesh which grow very little cotton domestically,” Rafi added.

The other advantage comes from a long-term build-up of investment and clustering of infrastructure, Ahmed adds, with some manufacturers and exporters working to increase quality and cost competitiveness over a span of decades. In tandem with the growth of Pakistan’s denim giants, a vast network of smaller manufacturers has emerged, many of whom are making inroads with international buyers.

The country’s cotton sector has attracted interest from international investors. Last year, the governor of Pakistan’s Punjab province announced that a consortium of investors from Uzbekistan, which is among the top 10 suppliers of raw cotton in the world, were ready to begin negotiations to offer advanced technical expertise. This preceded a rise in cotton prices globally.

The key for Pakistan’s future appeal — something which is apparent in both the operational structure and the messaging of giants from ADM to Soorty — is in the vertical nature of its denim industry.

In a post-pandemic world in which brands are looking to simplify their supply chains and gain more transparency into every step, especially hard-to-track raw materials, the ability for a single supplier to provide everything from raw cotton to finished garments becomes increasingly attractive.

The denim gets washed in order to achieve the colour and shade required by the customer.

While Pakistan is carving a successful niche for itself in denim, the country’s performance across the broader textile industry is more mixed. Export figures for other categories have been up-and-down over the previous decade.

According to data from the All Pakistan Textile Mills Association (APTMA) export volumes of cotton cloth in the 2018-2019 year (the latest figures available) were up 16.6 percent to 2.76 billion square metres compared to the 2017-2018 year, though the total value of exports in that category dropped 4.63 percent. Garment exports over the same period were up; cotton yarn exports were down.

Diverse Challenges Remain

Industry insiders in Pakistan say that the biggest disadvantage the country has had in developing its denim export market even further is one of perception.

“Pakistan’s volatile political climate and a consistent stream of bad news streaming out to media dissuades customers from visiting. This leads to us losing out on sales to our competitor countries,” Ahmed said.

But it’s not just a problem of perception as the country has a well-documented history of instability. According to last year’s Fragile States Index compiled by US-based non-profit The Fund for Peace, which is an assessment of countries across 12 risks and vulnerabilities indicators, Pakistan ranked as the 29th most fragile out of 179 states, significantly more fragile than nearby Bangladesh (39th) or India (66th).

This said, the last decade has seen Pakistan’s political system run more smoothly than years previous decades and the country has significantly improved its ranking on the World Bank’s Ease of Doing Business Index from 136 in 2018 to 108 in 2019 (the most recent year for which data is available).

Bangladesh is very affordable, which is a major reason for its popularity but...in my experience [much of those denim products are made from] from Pakistani fabrics.

In a bid to improve Pakistan’s national branding across the sourcing industry, Sheikh Raza-ur-Rehman, director of marketing at woven garment manufacturer Garatex, says that the country’s denim suppliers have become more assertive in their outreach than before the pandemic, visiting clients with large stocks of denim samples in tow to trade fairs around the world and apparel company head offices in Europe.

“Eventually, once the customers realise our potential and we gain their trust, we hope that many [may] start making seasonal visits to Pakistan post-pandemic,” he added.

One persistent issue faced by Pakistani manufacturers is the country’s ongoing energy crisis, which established players have evolved to work through with the aid of privately-owned generators and gas supplies, Ahmed added. Smaller players, however, are less able to mitigate energy shortages and disruptions.

As with many other low-cost textile and apparel producing countries, labour rights and garment industry workers’ welfare in Pakistan remains a concern.

According to a 2021 country report on Pakistan produced by Fair Wear Foundation, an independent non-profit focussed on improving conditions for workers in garment factories globally, Pakistan has ratified 36 out of 189 International Labour Organisation (ILO) Conventions to date.

The stitching process where the garments are produced based on the style, sewing details and fit required by the government.

The report points to women’s labour force participation as a particular concern in Pakistan.

“Due to [the] country’s patriarchal structure, women are confronted with a multitude of challenges to claim their rightful place in society and the workplace,” the Fair Wear Foundation report reads in part.

Of the approximate 2.2 million people employed in Pakistan’s garment factories, it estimated around 28 percent of the workforce are women. This is unusual compared to other larger garment manufacturing countries where the percentage of female workers is much higher, such as Bangladesh (65 percent), China (66 percent), Cambodia (82 percent), Vietnam (79 percent), and Indonesia (65 percent).

Like their counterparts in other countries, some major Pakistani players have made moves to ease the environmental impact of denim production. The denim supply chain is notoriously damaging to the environment and has attracted greater scrutiny in recent years as the importance placed on sustainably sourced materials grows throughout the fashion industry.

The use of waterless laser technology, pigments that minimise harmful by-products, recycled materials and more sustainable fibres are now the norm for some major exporters, with plans for further sustainability measures on the horizon.

If Pakistani players continue to improve their sustainability credentials and overcome other long-standing issues that have worked against them in the past — including political instability, labour rights shortcomings and energy shortages — while crucially remaining competitive on price compared to the largest mass market denim producers elsewhere, they can expect to continue on the growth trajectory they have enjoyed in recent years.

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