CHASING LIFESTYLE
Keeping with its tradition of creating a branded play out of highly unorganised businesses, Titan has ventured into saris. But can this, and some of its other smaller businesses, help it become a ` 52,000- crore company by 2023?
Titan has ventured into saris. But can this and other new businesses help it become a ` 52,000-crore company by 2023?
The contribution from new businesses won’t be a small number. We have to look at how the profit pool will grow.”
Bhaskar Bhat MD, Titan Company
The tastefully done up villa in the up-market residential area of Indiranagar in Bengaluru, which houses The Titan Company’s newly launched sari brand, Taniera, is bound to excite sari connoisseurs. Apart from Kanjeevarams, Benarasis and Ikats, the 6,000 sq. ft-store also has Moirang Phi from Manipur, tie and dye Kotas from Rajasthan and mekhla chador from Assam. Bhaskar Bhat, MD, Titan, is hoping to make Taniera, an outcome of its internal accelerator programme in 2015, as successful as the jewellery business. “Tata played a big role in building Tanishq and will now play that role for Taniera as well. In two or three years, our goal would be to establish a footprint and make Taniera the most sought after and desirable Indian ethnic wear brand for the Indian woman.”
The unorganised nature of the business is what excites Bhat the most: “Just as the jewellery business lacked transparency when we entered the business, there is hardly any price transparency in silk saris too.” Bhat and his team are all set to convert a highly unorganised business into branded play.
The Big Question
Bhat has set an ambition of Titan becoming a ` 52,000 crore-revenue company by 2023 (current revenue is ` 15,656 crore) and reach 50 million consumers. He expects the jewellery business, which contributes 80 per cent to the overall revenue, to grow 2.5 times and reach five million consumers. In 2017/18, the company saw 20.75 per cent growth in revenue after years of low growth, and its net profit soared 70.86 per cent. The watch business, which had been posting low single-digit growth for a while, reported its highest ever profits in the last fiscal. Titan’s market cap grew from ` 41,082 crore in 2016/17 to ` 83,656 crore in 2017/18, making it the third most valuable Tata company after TCS and Tata Motors.
Changes such as demonetisation and GST helped. “Formalisation of the economy has helped Titan, especially Tanishq, in a big way. Most traditional jewellers are not transparent and have been losing business. Tanishq has gained at their expense,” says Abneesh Roy, Senior Vice-President (Research), Edelweiss Capital. The other trigger has been scams such as that of luxury jeweller Nirav Modi and owner of Gitanjali Diamonds, Mehul Choksi. “Nirav Modi-like cases is the nature of the jewellery industry. You will see many more such stories unravel in the next few years,” says Bhat.
But to achieve its ambitious growth target, Titan has no choice but to piggyback on Tanishq, as most of its other businesses are either niche or too unorganised. “Sari is clever strategy, but scaling up would be tough. The challenge would be to give enough reasons to a customer not to go to traditional sari sellers such as Nalli and come to them and pay a premium,” says Raghu Vishwanath, MD of brand valuation company, Vertebrand. In fact, N. Chandramouli, CEO of brand audit agency, TRA, feels that Skinn, Titan’s perfume brand, is a mere try and doesn’t fit into Titan’s strategy of creating brands out of traditional categories.
Even watches, Titan’s very first business, has been losing out to tech companies such as Apple and Samsung. Apple sold 80 million smart watches last year, compared to Titan’s 15 million. Titan has a 50 per cent market share in watches, but will that grow? Bhat admits that Titan watches lost attractiveness. “We got preoccupied with
profits rather than keeping the innovation engine alive. We lagged in smart watches. The competitive scenario changed, and international brands came, bringing international designs,” says Bhat.
Titan has now changed its gameplan. “Manufacturing analog watches was our forte, but we realised that consumers wanted good-looking smartwatches. We made hybrid smartwatches, which were fully touch screen. We partnered with Intel for this. Similarly, we noticed that the youth had started wearing activity bands, mostly cheap Chinese bands. So, we launched Fastrack Reflex activity bands. On the back of Reflex, Fastrack became the fastest growing brand,” says S. Ravi Kant, CEO, Watch Division. The company also launched smart watches for women.
Mid-segment watch brands have been the biggest losers even globally and Titan is no exception. Luxury watch brand sales are on the rise, but despite having brands such as Xylys and Nebula and having acquired Swiss watch brand Favre Leuba, Titan has not really been able to reap the benefits. However, it has acquired licenses to market global fashion brands (again, a weak area of Titan, but a growing category) such as Tommy Hilfiger, Coach, and Police in India. It has also expanded its multibrand retail store Helios, which has helped the company retain its over 50 per cent market share in the ` 7,500-crore watch market. It has also scaled up its online presence, which now contributes around 15 per cent of its watch sales.
Though the company plans to launch 10 more smartwatch variants this fiscal, Vishwanath of Vertebrand says, “They need to be more aggressive, but it’s difficult to make an elephant dance.” Titan has to work harder to get rid of the functional time-keeping image it has, says Bijou Kurien, Strategy Board Member, L. Catterton Asia Holdings. “A large part of their business is still functional time-keeping. That’s where they need to shake up,” says Kurien.
Keeping Time
The Titan Company’s journey towards the ` 52,000 revenue target will involve dealing with its watch business as well as scaling up niche businesses such as fragrances, saris and eyewear. A business such as fragrance offers margins as high as 75 per cent but also faces consumer preference for global brands at the higher end. At the lower end, the challenge is to get consumers to use fragrances. “Perfumes are not everyday wear in India,” says Vishwanath of Vertebrand.
Titan has to invest time and money to create the category. “Fragrances won’t be a two crore-brand in the next few years, but it will complement the brand and add to the bottom line,” says Kurien of L. Catterton. Bhat hopes to replicate the success story that personal care companies have created in deodorants, which has become an over ` 10,000 crore-category in a span of four to five years. “People who are using deodorants would like to upgrade to fragrances. It is going to bring us less money... but a lot of people. At ` 545 you can buy great quality 20 ml Skinn Wire (perfume),” says Bhat.
While Titan may want to evolve into a lifestyle company with segments such as saris and fragrances, it will be jewellery dependent for a while. Bhat agrees that none of the new businesses would be anywhere close to his jew-delivering
Titan understands the distribution business very well and should play to that strength”
Abneesh Roy Senior Vice- President ( Research), Edelweiss Capital