Having escaped the axeman in 2001, Tanishq became the undisputed jewel in Titan’s crown. But despite his confidence in the jewellery brand, Managing Director Bhaskar Bhat is also counting on Titan Eye Plus and Fastrack to meet the company’s 20 percent growth target consistently. And, as recent numbers show, his faith is not misplaced
It was late February when Forbes India met Bhaskar Bhat, managing director of Titan Company, in Bangalore. This was only a month after the third quarter results of the last fiscal were declared. The expectation was that the 59-year-old would be preoccupied, even on edge. The numbers had been devastating for the company. Net sales were down to Rs 2,675 crore, a 12 percent dip over the same period last year.
The disappointment was exacerbated because the October-December period marks the festive season during which consumer spending peaks. Jewellery and watches are inevitably in demand; these are product categories in which the company has a dominant brand positioning. But the double whammy of falling gold prices and weakening consumer sentiment had not spared even the mighty Titan, jointly owned by the Tata Group and the Tamil Nadu Industrial Development Corporation.
It follows that Bhat should have been retooling strategy. Instead, he showed no intent of moving a single piece on his well thought-out chessboard. “Strategy is not based on the outcomes of a couple of quarters,” he pointed out. “Once sentiment improves in a year, we should be back to high growth.”
Fast forward to the quarter just gone by and Bhat’s optimism has been validated. There has been a marked improvement in consumer confidence resulting in increased footfalls at Titan’s stores. Even watches—something people buy less and less these days—grew by 12 percent. Overall sales for FY2014 ended 8 percent higher at Rs 10,916 crore and profits were up 2 percent to Rs 741 crore. Aided by a hopeful market, the stock, too, rallied 25 percent since May 6, when its annual results were declared, to Rs 325 as on June 4, 2014.
Industry watchers are bullish. According to them, there is little doubt that once economic recovery kicks in, Titan will be well-positioned to grow at a brisk 20 percent clip. Investor Rakesh Jhunjhunwala, who owns 7 percent of the company, also said in a recent interview to CNBC-TV18 that “Titan is undoubtedly the best play on consumption in the country”. This confidence stems from hard facts: Titan is the fifth-largest watch manufacturer in the world; it sells 13 million watches a year, out of a total 42 million watches sold in India, and is still enjoying healthy growth in a category that is often written off as mature.
The real trigger for growth, though, has come from the jewellery business which contributed 81 percent to the company’s topline in FY2014. Tanishq, it is widely acknowledged, has never had a stronger brand proposition. This is a marked change from 1996 when the first Tanishq store was set up and from 2001 when the board, dissatisfied with its performance, threatened to pull the plug.
Cut to the present, and an impressed investor community is wondering if Titan can possibly incubate another Tanishq. Eyewear retail chain Titan Eye Plus, launched in 2006, may never play in the same league (scale-wise, because of the smaller size of the market) as Tanishq, but it is on track to break even this year.
Last quarter same-store sales growth was 21 percent while overall growth was 35 percent. These businesses, along with the Fastrack range of accessories, are enough to power Titan to its target 20 percent year-on-year growth, say senior management officials. And, for a company that almost collapsed in its effort to make Tanishq viable, this is a fair ambition.
In the early 1980s, Tata veteran Xerxes Desai had decided to take on the challenge of founding India’s third homegrown watch brand after HMT and Allwyn. Titan, when it was launched in 1983, found unexpected—the Tatas had not seen much success in consumer-facing businesses—acceptance in the market. The company set unprecedented benchmarks in design, quality and retailing. For instance, it launched with five times the number of watch models than its nearest rival HMT. “We were the first to have a national selling price, something unheard of in those days,” says HG Raghunath, CEO of the watches & accessories division. By the late 1990s, one-time market leader HMT was perceived as an also-ran, as Titan became a brand to aspire to.
Source: http://forbesindia.com/article/boardroom/titan-looking-beyond-tanishq-to-fasttrack-growth/38050/1
