C.K. Venkataraman, 60, the new Managing Director of Titan Company - who cycles to office every day and is a regular marathoner - thinks that age is just a number. He loves to sing and has many a times unknowingly entertained his co-passengers on flights as he hummed (loud enough for others to hear) while listening to old Bollywood classics. Venkatraman's friendly demeanor is probably something that is best suited for the Rs 20,000-crore lifestyle major, which is trying hard to break out of its legacy image.
The company's biggest challenge today is to resonate with the aspirational Indian millennial, who account for close to 65 per cent of the country's population. Though Titan is the most loved and respected, it is not considered aspirational enough. A 25-year-old prospective bride may buy her wedding jewellery at a Tanishq store, but owning a Titan watch may not be part of her style statement. She would in all likelihood dismiss it as fuddy-duddy. The lifestyle major may be one of the favourites in the stock market by virtue of its impressive financial performance, but brand Titan definitely needs a makeover.
Venkataraman took over from mentor Bhaskar Bhat, who hung up his boots in September 2019 after being at the helm for over 30 years. Bhat was the classic nuts-and-bolts leader who had an eye for perfection and meticulously crafted strategies. In 2018, under his leadership, Titan was among the most-valued companies of the Tata Group. From jewellery to eyewear and later sarees, Bhat had the knack of entering commoditised businesses and converting them into branded play. He retired with a dream of growing Titan into a Rs 50,000-crore company by 2023, which would touch the lives of 50-million Indians (Titan currently serves 18 million).
Though their leadership styles may be different, Venkataraman considers himself an extension of his mentor, Bhat. "Our values are the same. The value of taking care of multiple stakeholders, empowering and trusting your people and the criticality of ethics are among the things that have always been dear to me too. My respect for Bhaskar is so high because what I deeply care for is what he deeply cares too."
The Pandemic Shocker
Venkataraman may have taken over a fairly stable ship, but months into his new role, the economy came to a standstill due to the lockdown. Titan being a lifestyle company, had to pay a heavy price. It's operating revenue declined by 62 per cent in Q1FY21, the revenue of its flagship jewellery business, Tanishq, dipped by 71 per cent, while revenue from watches and eyewear dipped by 90 per cent and 80 per cent, respectively.
Venkataraman and his new team's priority was to fire-fight the situation. "The greatest challenge staring at me and my team was how do we encourage people to dress up and celebrate occasions staying at home," he says. Taking forward his mentor's dream of building Titan Company into a Rs 50,000-crore entity had to take a backseat, as the priority was to keep the business afloat.
As if fighting the Covid crisis wasn't enough, the lifestyle major was also rocked by controversy for an online ad campaign it did for its jewellery collection, Ekatvam. The narrative of a Muslim mother-in-law's love and acceptance of her Hindu daughter-in-law led to a backlash and the brand pulled down the campaign within hours of going live. Though the narrative was termed as misogynistic, many advertising and marketing professionals felt that by pulling down the campaign, Titan Company had gone against the bold stands that brand Tanishq had always taken.
Its campaign on second marriage a few years ago, which showed a man accepting his wife's daughter from her earlier marriage, was a bold one and took its progressive brand imagery to a new level. "It was really sad that a company from the Tata Group felt the need to backtrack on a socially positive issue - a company known to be non-sectarian and deeply humanitarian. Tanishq could have pulled down its shutters for a week or so to prevent vandalism instead of stepping back from its stand," says Alpana Parida, Founder, Tiivra Ventures, a start-up that specialises in creating designer helmets for two-wheelers.
However, Ajoy Chawla, CEO, Jewellery Business, says there was no point being on a high horse when the campaign had created so much polarisation. "We are a progressive brand and we would like to carry people along with this. Since the ad was creating polarisation and putting staff and our teams at risk, we thought it was better to withdraw," says Chawla. Since then, the company has increased its investment on social listening. "We run our campaigns through a diversity test to understand how people are interpreting it," adds Chawla.
Opportunity In Crisis
Though doing business was tough last year, the pandemic put Venkataraman's vision of creating an agile, younger and digitally savvy Titan (which he had co-created with his mentor, Bhat), on an accelerator. Titan had invested Rs 150 crore in 2016 on its digital transformation, which reaped fruits during the pandemic. Digital contributed an estimated Rs 800 crore to the company's overall business last year.
During the pandemic, Venkataraman and his team trained the store staff to sell through video calls. The company also launched the 'endless aisle' concept, through which customers can choose from the inventory of the various formats of Titan Company from the comfort of her home. A Bengali customer in Bengaluru looking for traditional Bengali wedding jewellery could browse through the inventory of Tanishq stores in Kolkata. They could place their orders online and once the jewellery is shipped to Bengaluru, one can either go to the store and complete the sale, or get it delivered home by paying online. Chawla of Tanishq says his wow moment was when a family in Bengaluru bought wedding jewellery worth Rs 8 lakh through a video call.
Navin Gupta, who is a Tanishq franchisee in Chennai, says over 15 per cent of his sales in February came through 'endless aisle'. Customers who availed this facility were mainly those living in smaller towns where the inventory was not wide enough. In fact, Chawla expects this initiative to churn a large part of his store's sales going forward, as the company penetrates into Tier-II, III towns across the country.
Venkataraman says the company's investments in analytics came in especially handy during the lockdown. Titan, he says, has deep understanding of its customers' buying habits, the kind of products they have bought over the past years as well as the occasions on which they buy. "That's a huge knowledge base to have. In addition to this, our 15,000-strong sales team has a direct relationship with 4-5 million customers on a first-name basis, something they have cultivated over many years. This combination of knowledge and relationship became a huge, powerful force through which customers could be accessed by our sales staff. We reached out to millions with customised offers," he explains.
The pandemic, says Venkataraman, has taught him and his team how to manage assets better. The company sold gold in the market to manage cash flow at a time when there was hardly any revenue coming in. "We had never sold gold B2B earlier, it helped us manage balance sheet, cash flow and return on capital exceedingly well."
Along with managing assets, the company also put together 'a war on waste' programme to cut costs. However, Subbu Subramaniam, Chief Financial Officer, Titan Company, clarifies that the cost-cutting drive had begun earlier and only got accelerated during the pandemic. "While 2019/20 was a good, profitable year for us, our cash management could have been better," he says. In order to democratise the process, the company invited suggestions from employees and finally came up with a sustainable savings plan that could be institutionalised. It cut down on advertising, travel, and spoke to landlords and got substantial rent waivers between the months of April and September. The company also reduced discounting to customers and franchises as well as material costs wherever possible. Watches and the eyewear also went in for SKU (stock-keeping unit) rationalisation.
"From debt positive we became cash positive by September, even though our stores were not open. We converted inventory (gold) to cash. Our cash generation this year is more than what we had planned," says Subramaniam. These initiatives did help Titan to come out of the red in Q3FY21. Its sales grew by 17 per cent, compared to a degrowth in the earlier two quarters. The watches and wearables division recovered by 88 per cent, and eyewear saw a 93 per cent recovery. The jewellery business grew by 16 per cent. Though pent-up demand could have played a role in the growth story, Venkataraman argues that the jewellery business grew by 28 per cent even in January 2021. He believes that growth is back.
"My colleagues and I, who were also new to their respective leadership roles, were thrown into the deep end of the pool because of the crisis. We had to learn to swim, we came out a much better team in a much shorter period than we would have may be in normal times," says Venkataraman.
"Titan Company was the first to bounce back, compared to other retail companies such as Jubilant Foods, McDonalds and Trent. Titan's recovery was the fastest as jewellery bounced back much earlier than other sectors," says Abneesh Roy, Executive Vice-President (Research), Edelweiss Securities.
In fact, some of the unprofitable businesses such as eyewear saw the best-ever performance during the pandemic months. Apart from shutting down close to 15 unviable stores, the eyewear business moved its focus to lens from frames. It launched a range of anti-viral lenses, progressive lenses and those that reduce fogging caused by masks.
"This year lens has contributed 45 per cent to the eyewear business. People are buying expensive lenses as they are spending more time in front of the screen," says Saumen Bhaumik, CEO, Titan EyePlus.
At the heart of the lifestyle company's tech transformation has been its watches and wearables business. In 2016, when Titan watches started losing market share to smartphone manufacturers such as Apple and Samsung who had forayed into the wearable segment, the company realised that it had to quickly embrace technology. Between FY12 and FY15, the watch division's revenue grew at a CAGR of 7.9 per cent, from Rs 1,529 crore to Rs 1,921 crore. Profits, however, dipped to Rs 206 crore from Rs 216 crore. The writing on the wall was clear - its analog watches were on the decline.
The company partnered with the likes of HP and Intel to launch smartwatches Titan Juxt and Juxt Pro. These watches did meet with mediocre success, but the bigger realisation was the need to spruce up the company's own tech capabilities. In the next few years, the company invested in creating own capabilities in Cloud and data analytics. "Culturally, it has kind of seeped into the 2,675 employees in the division that this is a hybrid of watches and wearables. The watches division never had the kind of specialists we have now - hardware and software engineers and people who have specialised in IoT (Internet of Things), Android etc. It's an entirely new system," explains Suparna Mitra, CEO, Watches and Wearables.
Mitra says employees across all its 500-odd World of Titan and Helios stores, who have traditionally sold only analog watches, have now got used to selling smartwatches. "They also know there are two segments of consumers - one is the traditional consumer who came to look for a watch and is discovering a wearable. She is a Titan loyalist and you are explaining the features. The other kind is the new consumer who wouldn't have walked into a World of Titan store earlier. He/she asks for a smart watch, has done his/her home-work online and is far more conversant. The entire salesforce had to evolve."
In the past few years, Titan has launched a variety of smart watches under the Titan and Fastrack brands - Fastrack Reflex, Connected X and more recently, the Titan Payment Watch in partnership with SBI. While most of its launches are in the Rs 2,500-3,500 wristband category (thereby making it affordable for the average aspirational Indian who can't afford an Apple or a Samsung), it also has few specialised wristbands such as Traq Cardio and Traq Triathlon and GPS-enabled performance gears meant for cyclists and runners.
Though smartwatches and wearables contribute in low single digits to revenue, they have played a role in volume growth and profitability of the company. In FY19, the watch and wearables division's profit shot up to Rs 316 crore from Rs 168 crore in the previous fiscal. Titan is now No. 2 in the smart wristband segment with a volume share of 14 per cent. Xiaomi is the market leader with 47 per cent.
Titan, however, still has a long way to go in order to become a force to reckon with in the smartwatch and wearables segment, says Jaipal Singh, Associate Business Manager, IDC. Though the company is reasonably strong in the smart wristband segment, the last one year has seen a 139 per cent growth in smartwatches. Wristbands are on a decline, and Titan is yet to have a good enough portfolio of smartwatches. "Earlier, affordability was a concern as the watches were priced above Rs 10,000. Brands have addressed the price gap and are now launching watches between Rs 3,000 and Rs 5,000," explains IDC's Singh. Upstarts such as Boat and Noise, which entered the market with hearing devices, have now become dominant players in smartwatches. Apart from this, smartphone manufacturers such Oppo and Realme have also launched affordable smartwatches.
"It will be interesting to see how Titan positions itself against the tech hardware players, and also where it positions its devices. Apple has surpassed the overall Swiss watches segment globally. Titan has to plan a long-term strategy to retain its user base from traditional to smartwatches. It has a strong distribution system, if the company leverages that it can have a significant share of the market," points out Singh of IDC.
Venkataraman says the company will make an exponential move into smartwatches in the second half of FY22. "We will be there in terms of prestige, impact and need, like we have made in every category." The company acquired Hyderabad-based technology and wearables firm HUG Innovations last year to strengthen its portfolio.
But How Smart Is It Actually?
Titan Company seems to be making the right moves in an effort to morph into a new-age lifestyle major, with a strong presence in tech-enabled products. Apart from investing heavily in smartwatches, it has also launched smart wallets, Titan Radar. The wallet has a chip that can be paired with one's cellphone and if the pairing is beyond a certain distance, it notifies the user. "If you leave your wallet or it has been flicked, your smartphone will send an alert that your wallet is no longer in the pairing distance," explains Mitra.
The bigger question, however, is, does the average Indian millennial want to buy a Titan wearable or a smart wallet? Twenty one-year-old Arman Singh, who recently bought the newly launched Boat smartwatch, says he "would rather buy a smartwatch from a tech company and not from one that makes analog watches and jewellery."
Brand gurus also agree. Raghu Vishwanth, a former Titan employee and the current CEO of brand valuation company Vertebrand Management Consulting, says brand Titan is beginning to lose its sheen. "The business success is different from what the brand is perceived to be. When they launched, if HMT was like Coke, Titan was an upstart like Pepsi. That streak of being a new kid on the block and therefore the need to reinvent all the time that was part of the culture of Titan in early days, is slowly fading away."
Most analysts believe the company is overdependent on its lucrative jewellery business, which contributes more than 80 per cent to its overall revenue. "Even in jewellery, much of the company's growth has come from its penetration into newer towns and cities. There is nothing much to talk about reagrding the same-store sales of its existing stores," points out a former Tanishq employee on the condition of anonymity.
Experts feel though the company has done an excellent job of spotting opportunities, it has not been able to take them to their logical conclusions. "Skinn had the potential of being positioned as an Indian perfume. It could have been what Titan was to watches. Titan has not been able to translate that element of charm and aura into their new products," says Vishwanath of Vertebrand.
Roy of Edelweiss Securities says the company's eyewear business has been a disappointment. The decade-old business, yet to make profits, has been challenged by newcomer Lenskart, which disrupted the market by offering heavy discounts. "Most value customers went to Lenskart. Till Lenskart gets funding this part of the business of Titan will be challenged. Titan needs to figure out if it wants to be in this business, since in eyewear the customer is more value-focused," explains Roy.
Venkataraman argues that Titan is extremely mindful about the role experiments and innovations play in the journey of a company. He says unlike earlier when new businesses didn't report to the MD, in the last one year he has been personally looking into each of them, be it Taniera (the saree and ethnic apparel brand), Skinn or Fastrack Girls. "It is my intent and my focus to make Titan much more than watches and jewellery. From a sales and profit point of view jewellery will be big, but we can touch a huge number of customers through Skkin or Fastrack Girls."
"We are conscious that sales value is not the only thing. We also look at the number of customers we delight, therefore, bags, perfumes, deos and Taneira will be the next wave of my focus. These need nurturing, resources and patience," he further adds.
The biggest challenge for the company will be to make itself relevant to the aspirational Indian consumer. "There is an over-arching need to do something disruptive and reposition brand Titan as a younger, more modern brand. If you try to do things incrementally or evolutionarily, you may be successful, but it will take a long time," says Vishwanath of Vertebrand.
So, in this journey to morph into a young, aspirational company, will it eventually scale down its presence in analog watches, something that it has been synonymous with? "Wearables will never take over completely. The role of an analog watch, be it quartz or mechanical, is of an accessory. Every morning when I come to work, I spend a few minutes thinking which watch I should wear. The wearable can't compete here with the analog. Our growth plan for FY22 and the next few years for analog watches is ambitious," says Venkataraman. The company has recently launched its most expensive mechanical watch, Edge Mechanical (priced at Rs 1.5 lakh). Venkatraman says that the watch is doing exceedingly well.
Will Venkatraman be able to create a new Titan? Only time will tell.
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