Issue #15. Turning Plastic Waste into Footwear in India
How Neeman’s finds new ways to use plastic waste
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When it comes to the environment, India is not in a great place. It ranks second in the Air Quality Life Index which measures how much would life expectancy improve if pollution levels met WHO guidelines. India also ranks second in deforestation rate, behind only Brazil. Pakistan is the only country in Asia where water quality is worse than in India. In 2019 alone pollution has led to 2.3 million premature deaths.
The culprits of such a poor state of the environment are plentiful. Take water pollution, for example. Every day 40 million liters of wastewater enter India’s water bodies. 70% of states treat less than half of their wastewater. India’s heavy reliance on coal for electricity production also harms water quality with fly ash, a byproduct of burning coal, finding its way into rivers and lakes. These issues lead to 580 deaths daily.
Another obvious factor in India’s environmental struggles is industrial production, which is responsible for 51% of air pollution. Although India’s role as a manufacturing hub is growing, the country generates under 3% of the global manufacturing output, yet is the third largest CO2 emitter at 7.3%. The reason for that is fairly straightforward: India’s ‘dirty’ industries are expanding quickly.
For today’s topic, two industries are of interest to us: plastics and rubber. India’s plastics production output has increased by 139% between 2008 and 2019, for rubber that growth stands at 56%. With India’s middle class expanding rapidly, the demand for both product categories will only increase. Just this century an average Indian has grown their plastic consumption 5.5 times. The country’s tire industry is projected to grow 3.5 times between 2015 and 2026.
While industrial expansion betters people’s lives, it also causes pollution. All over the world startups are trying to combat the problem with innovative and more environmentally friendly solutions. For India, where environmental issues are felt more than in practically any other country in the world, such solutions are in dire need. Luckily, companies like Neeman’s are trying to do exactly that.
The business
From its inception in 2018, Neeman’s was tackling three problems.
The impetus for Neeman’s creation was the problem that Taran Chhabra, the company’s founder, faced: he couldn’t find shoes that fit him and were comfortable enough to wear for long hours. He owed hundreds of pairs, but couldn’t find the right one.
He also looked at the Indian market — a huge market with not much innovation in the space. The market, encompassing essentially every adult in the country, combined with a shortage of high-quality local rivals, sets the stage for a massive surge for any newcomer introducing innovative ideas. Should the product be of decent quality, the extensive market size will naturally support its success
Finally, Chhabra and his co-founder Amar Preet had no background in footwear manufacturing. To acquire that knowledge Chhabra spent 3 months in China, and 2 months in South Korea traveling to local factories, learning how shoes are designed, how materials are sourced, and how footwear is produced. During those visits, he realized how polluted the industry is, how much carbon dioxide it generates, and how much water and animal skin are used. And so he decided to leverage the things that already exist in the ecosystem to build a better option.
The end result is a shoe without compromises, as Chabra puts it:
…making sure your shoes make you feel good, look good, and do good for your planet.
Creating a shoe, or at least a quality one, is not that easy and a lot of design work goes into it. The shoe has to be comfortable, should not fall apart after 6 months, be stylish enough, etc.
But creating a shoe from recycled materials is a whole different proposition. First, plastic bottles weren’t designed to have shoes made out of them. Second, there’s less knowledge on how to make shoes from atypical materials, so the learning curve extends beyond what might typically be expected from a new brand in the space.
Neeman’s experienced these challenges first-hand: it took 22 months and 1,400 prototypes for the company to launch a shoe with a suitable design. The first shoe was made from Australian Merino wool, a material that made the shoe comfortable and adaptable to the foot’s movement. Then came PET bottle sneakers and tyre-made slippers.
The strategy
The strategy employed by Neeman's is distinct, rooted in its unique product vision, and further bolstered by beneficial market conditions during its initial years of operation
Going D2C by leveraging the internet’s growth and ad prices. Neeman’s had two options for its go-to-market strategy.
The most traditional way is to go through wholesale and not have to deal with the customer acquisition headache. But that doesn’t work for a brand like this: the company is unknown and the product isn’t your standard run-of-the-mill shoe, so it needs marketing support from the retailer (which the retailer isn’t incentivized to provide) and creates additional risks (which retailer doesn’t want to be taken upon them).
Logically, Neeman’s went the D2C route, which, considering that ad prices in India were comically low and internet penetration started to take off thanks to Jio, created a perfect storm to launch a D2C brand. In addition, the product was unique and, priced at ~$75, which wasn’t cheap for the local market. Consequently, it needed to be supported not only by ads with a giant ‘Buy’ button on the ad, but by campaigns, explaining what it is and why it is more expensive than most shoes on the market.
Becoming mainstream through scale. From the get-go Neeman’s wanted to become a mass-market brand, albeit with a twist. With that focus in mind, Neeman’s went through a three-step process:
Launched the product at ~$75 and received orders;
After a 3-4 month period started to get repeat orders which motivated them to reduce prices by 20% and inevitably led to more orders;
Raised a seed round, allowing the company to bring manufacturing to India and improve margins, which in turn allowed it to reduce prices even more.
Using problem statements for product creation. On the surface, it’s kinda obvious: you know what your customer’s problem is, and you solve it by creating a solution. But Neeman’s does two things that are interesting here.
First, it looks at problems that are not being stated directly, thus coming up with ideas like shoes that you can wear without socks and that won’t smell. Second, they have a research team that looks at reviews worldwide. And that’s just a different level of dedication.
Compressing the decision cycle. When you go to any traditional footwear brand’s website, you probably see hundreds if not thousands of options. Neeman’s wanted to make it easier for customers to quickly find the right option for them. To do that, they’ve limited their collection to several types of shoes, and each shoe is offered in no more than 2-3 colors.
Being India’s first. At least the first 10 products that Neeman’s created were India’s first: the first merino wool shoe, a shoe made from recycled PET bottles, a shoe from organic cotton, etc. From the company’s standpoint, this helps position the brand as truly innovative: the market is getting something new and this new thing solves a real problem. From each design’s standpoint, this helps with in-category differentiation.
Creating multi-advantaged shoes. According to Neeman’s, their shoes keep you cool during summer and warm in winter. They are also light, easy to wash, breathable and eco-friendly. On the surface, whether you care about the environment, how comfortable your shoes are, or want a multipurpose shoe, Neeman’s is the choice for you.
Putting an emphasis on brand marketing. Chabra believes that the brand is bigger than the product, which is why the company has focused on brand marketing from day one. In three years the company has grown its Instagram following 14x. Its paid traffic has grown 13x in just two years. It has also forged partnerships with well-known actresses and cricketers for various advertising campaigns
Customer acquisition is what kills D2C companies. But if you survive long enough and enough people start to recognize you, you become a D2C brand, where word-of-mouth and repeat purchases become your go-to sales channels. And to that point — what previously was a tax on your margins becomes excess profit.
The company continues to invest majorly in promotion, underscored by the fact that, according to Marketing Monk, Neeman’s puts 25-30% of their revenue towards different sorts of marketing. Besides traditional ads, the company employs influencer marketing. One such campaign, ChangeTheNorm, involved an Indian cricketer Jasprit Bumrah (and if you don’t know, cricket in India is a big deal) relaying both the idea of Bumrah’s unusual bowling style and Neeman’s’ approach to creating footwear.
The numbers
Bootstrapped initially, Neeman’s received its first funding in 2020 in a pre-Series A event from Anicut Angel Fund which invested $1 million in the Hyderabad startup. That round has bolstered both the launch of new product lines and new marketing initiatives.
The next round came in 2021 with the company raising $2.7 million in a Series A round. Besides the further product expansion, with this money, Neeman’s planned on going international. In June of 2022, the company raised $5.15 million in its Series B round.
In the first full year of operations, Neeman’s generated $360,000. In 2021 the company grew by 600% to $5.4 million in revenue despite the Indian market overall contracting 13.3%. Although numbers for 2022 or 2023 aren’t available, when you consider the growth in traffic, it probably has at least 5x’ed the revenue.
The future
Neeman’s has several things to be mindful about.
1. Channel expansion. D2C brands have experienced troubles as the pandemic subsided, with consumers going back to retail, and Facebook, now Meta, the main acquisition channel for D2C brands, struggling after Apple implemented new tracking restrictions. But Neeman’s website traffic is growing steadily (5.9 million in Q4 2023 vs 2.5 million in Q4 2022), and the brand is exploring other channels.
First, it started selling on Amazon and Flipkart, which control over 20% of the country’s e-commerce. Next, it also went the retail route, opening 8 stores in Hyderabad, Mumbai, and Bangalore, and plans to open more stores this year.
While the company has successfully scaled its D2C business, these new channels may present unique challenges. Marketplaces diminish a brand’s control over customer experience and make it harder to showcase product differentiation. Retail outlets require a different distribution scheme and may produce lower margins.
2. India’s sustainable future. India’s push towards a greener future, although admirable, has still a lot of obstacles to overcome.
The most significant step that India has taken to date is the ban on single-use plastic. Though the items included on the ban list are plentiful with commodities such as plates, cups, and straws, the question of how effective this ban is remains. And although per capita consumption in India significantly lags behind the developed world1. Neeman’s won’t be running out of raw materials any time soon, that’s for sure.
But what is important for the company in the long run, is how open are consumers to reducing their waste and joining the ‘green’ movement. Positive reviews go a long way, but I would imagine for most consumers it is still a bit weird to buy plastic shoes. And when you buy under two pairs of shoes per year and you make under $500 per month, you might think twice about whether a plastic shoe is a way to go.
Although India’s consumers, as consumers in every other nation, claim to favor sustainable products and businesses, the on-the-ground picture tells a different story, with non-sustainable consumption expanding rapidly.
3. Product expansion. Now Neeman’s is pushing into apparel. Last year it launched a product line of minimal style basics with the same premise: sustainable and comfortable. For now, the company only offers t-shirts and polo shirts, but it doesn’t take a genius to know that people need other types of clothing too.
However, several potential issues with the expansion. First, customer returns in the apparel sector are even higher, than in footwear. Although t-shirts are probably the most basic product there is in apparel, they still can suffer from high returns. Then there’s competition which in apparel is stiffer. And we also should not ignore the fact that Neeman’s is known as a shoe brand, the whole story behind the brand is about shoes. Changing that might be a tough task.
Final thoughts
The idea behind Neeman’s is compelling. The execution, if we were to believe customers’ reviews on the company’s website, although tough, has provided quality results. The market is growing and it’s not like Neeman’s is going to run out of raw materials any time soon.
The biggest issue, as it’s pretty much always the case in D2C, is competition. Will Neeman’s be able to scale quickly enough to fend off competitors and become profitable, or will it encounter similar challenges as Allbirds, and stumble? We’ll find out in the coming years.