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?

Business Today - - CONTENTS - By Ajita Shashid­har

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


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