India's Titan: How To Sell to 1.2 Billion People

by Bina Jang, 05 January 2012

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Finance and Banking

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With a population of 1.2 billion people, India is second only to China in terms of consumer market size. Demographers say that India will overtake China (population: 1.3 billion) in the next 20 years, as 181 million new citizens are born in youthful India every decade compared with 73.9 million in ageing China.

This is good news for a consumer company like India’s Titan Industries. The company sells its Sonata watches, GoldPlus ornaments and Eye+ optical products to the huge mass market, Titan and Fastrack timepieces and eyewear and Tanishq jewellery to the expanding middle class, and Xylys watches and Zoya jewellery to the tiny but moneyed premium and luxury segments.

Founded in 1984, the joint venture between blue chip Tata Group and state-owned Tamil Nadu Industrial Development Corp. notched sales of US$1.2 billion in the fiscal year to March 2011, up nearly 40%. By 2015, Titan aims to double revenue to US$3 billion, despite India’s current problems with surging inflation and a sharply depreciating currency.

“There will always be temporary slowdowns, but our view is that in the long term the India growth story is very much intact,” says Titan CFO S. Subramaniam (pictured).

He spoke to CFO Innovation’s Bina Jang about financial management at Titan, how it is meeting macro-economic and industry challenges, and other issues such as the government’s controversial plan to open the retail industry to foreign investors. Excerpts:

India’s economy grew just 6.9% in the July-to-September quarter, the slowest in two years. Some economists now expect 2012 expansion at 7% or lower, compared with 8.9% in 2010. Is your US$3 billion sales target too ambitious?

We are quite confident of achieving those numbers . . . We will continue to invest more on network rollout and expand [product] categories by leveraging our brands.

All our jewellery [which accounts for 79% of sales] is sold through our retail network . . . our Tanishq jewellery brand showrooms and GoldPlus brand showrooms. We do not sell jewellery through either department stores or chains of jewellery houses. So, to increase our sales we need to expand our network.

India is pretty much the largest segment for jewellery anywhere in the world . . . [but organised] players like us would have less than 10% of the market. The remaining 90% is made up of what is called the traditional or family jewelers who are local to each area.

We are currently in 79 towns with Tanishq and about 30 towns with GoldPlus. We should reach out to as many towns as possible, because growth will be mainly in what we call middle India – the top 300-400 towns which have populations of over 100,000. That would be our strategy.

On top of that, we are increasing our store sizes in the larger cities to what we call large format stores of more than 10,000 square feet. The stores are a branding exercise in themselves. We’ve seen that the returns, the paybacks are much earlier in large format stores.

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