Bengaluru: Bhaskar Bhat, 62, has been at the helm of Tata group firm Titan Co. Ltd for nearly 15 years. His association with the Tata Watch Project, which eventually led to the creation of Titan, has continued for more than three decades, during which he has seen the Titan brand expand from watches into jewellery, eyewear and precision engineering.
About four months ago, Titan entered yet another category—traditional women’s wear—as part of a pilot project, while watches and jewellery continue to be its mainstay, accounting for a major portion of its revenue. Unlike the jewellers in the unorganized sector who have been hit by demonetization, Titan expects the government’s move to help boost its sales in the longer run. The company estimates it has less than 5% market share in jewellery and therefore abundant headroom for growth.
As of now there are no acquisition plans in the pipeline, says Bhat, and the company’s focus is on integrating brands such as CaratLane in jewellery and Favre-Leuba in watches and Maison Montblanc—which makes jewellery, writing instruments and leather goods—as all these were acquired less than two years ago. In an interview, Bhat spoke about the company’s key business segments and the fillip it expects from demonetization. Edited excerpts:
How has this fiscal year shaped up so far and what kind of growth rate do you expect over the next two years?
Overall, like we reported, we had been growing in the first six months, by a small amount, but still, growth was there. In fact, we even said that we’re expecting a 15% growth in the jewellery business and we expect to clock those numbers. In watches also, the growth rates are better than last year. So the year as such is better, that much I can say. We will be able to keep our current rate of growth, i.e. 15%. Whether it will be much more for FY18 and the year after, we cannot say. But for us FY18 will be better than the current year primarily because demonetization has, in a way, sucked the winds out of the sails of the unorganized sector.
Do you expect any fallout from demonetization on Titan’s future performance?
Right now I can confidently say that the concerns because of demonetization—for instance, concerns that there is no cash for daily transactions so I won’t buy watches—has diminished considerably. It was an event that has affected most companies and we have also articulated that we did get affected in the first week to 10 days. After that, normalcy has come back; the informal (unorganized) economy was affected whereas it has not affected us. In the end, consumers have to buy jewellery, watches and eyewear. If the unorganized sector is not able to give them the product, they’ll have to come to us, right?
Companies that were doing business in black will not be able to transform to our kind of model or any other kind of model where you accept credit cards and cheques, you keep your books of accounts and you pay taxes. That’s not a transition which will occur easily. And that is where the demand which is there, fundamentally, will flow to companies that can and have been operating legitimately.
You’ve said in the past that the jewellery industry will be full of turmoil due to policy changes. Is that still your expectation, in particular for this year?
Over the past two years, there has been considerable turmoil in the jewellery industry. Gold-on-lease was stopped and later restored, customs duty was increased from 6% to 10%. Then excise duty was introduced and, if you remember, stores were closed for 43 days. Disclosing PAN cards was introduced for purchases above Rs5 lakh and then further dropped to those over Rs 2 lakh. And then we had demonetization. But I think jewellers have now learnt a lesson. At what rate the government decides to impose GST (goods and services tax) is the only other policy change in store and that will benefit us because a lot of the jewellers will have to fall in line—demonetization plus GST is a nightmare for them. So we should benefit from FY18 onward.
Which of your jewellery brands are you betting big on and do you expect sales from your Golden Harvest Scheme (GHS) to get a significant boost going ahead?
There is a lot of excitement in CaratLane, which we acquired, and Mia. Both are appealing to younger consumers. But between Tanishq, Mia, Zoya, CaratLane—Tanishq is certainly the biggest brand. It is a very steady high-growth brand and is at a very high level of sales. Sales from GHS are basically advance booking orders; so you’ve got a guarantee that one year later at least this much business you will do. It’s always been 15-20% of our sales. We aggressively push GHS. Maybe its contribution to sales can increase a little more but I don’t see it becoming the new normal.
Watches and eyewear have not been doing too well. What’s the plan to boost sales?
Watches are bought today as an accessory, not as a time-keeping device. So the strategy is clearly accessorization and premiumization. Getting into the smartwatch segment is also a strategy that we’ve introduced and we’re doing well at it. Eyewear has been slow this year, yes. Right now the effort is in ensuring existing stores grow rather than new stores. Growth will come out of the so-called same-store sales growth mantra.
Is Titan planning to enter any new categories?
We began piloting traditional women’s wear in October and are looking at opening a physical store. And we still have to grow perfumes, for example, which is still at a level of Rs30-40 crore. So we don’t have any other category in the pipeline.
What is your strategy when it comes to competing with online marketplaces?
We participate, we don’t compete. In watches, we are with online marketplaces like Flipkart and Myntra, and we have a strict contractual obligation with them as to what price they can sell our products at. Discounting is at our behest, not theirs and they have agreed to this so they’ve become a partner.
The biggest advantage we have is we have offline stores. Our strategy has always been omnichannel but there are very big advantages of bricks and mortar, which I think bricks-and-mortar companies need to play up and not just assume that everybody is going to migrate to online. The need to go to a store is least in watches, because watches you can buy online also, and highest in jewellery. The higher the ticket size, the more risk-averse people will get. So convenience is not everything when you are buying. And I think this trend of buying eyewear online is a passing phase. People will realize that unless you get the quality that you want, it can be quite bad. If your lens is not good enough, for example, it’s a risk. You also can’t touch and feel your frame (before placing an order online).
You’ve been associated with Titan, and earlier the Tata Watch Project for about three decades. What would you say is the one significant event in the history of the company?
We didn’t know a thing about retail. So the first retail store we opened in Safina Plaza (a shopping complex in central Bengaluru) in the late 1980s was very memorable. It was a 350-square-foot store but it was very well designed. I remember we sold 17 watches on the first day and we were very thrilled! That was a significant event in the life of Titan—the introduction of retailing.
When you look back, I don’t think we ever dreamt that we would be a watches, and jewellery, and eyewear, and precision engineering company. It was inconceivable. We were just about relieved that we’d got government approval to get into the watch industry and that we were able to make good watches and overtake HMT in five-six years. After that, it’s been kind of a dream run.