Titan Company, India,s largest branded jewellery firm that had sales of Rs 28,799 crore last year, managed to grow its top line and bottom line (Rs 2,197 crore) to beyond pre-pandemic levels in FY22. This success did not come easy. The Bengaluru-headquartered Titan had to transform itself into a more agile and digital-savvy entity with stricter controls on its finances after the blow it received during the first wave of Covid-19, says Managing Director C.K. Venkataraman. In a chat with Business Today's Arnab Dutta, the 61-year-old Venkataraman says that with the Tata group firm's business now on track, Titan aims to become the market leader in all key categories it is present in. Edited excerpts:
Q: The pandemic has disrupted companies and businesses. What changes did it bring to Titan?
A: First, the behavioural change of the people has resulted in us being spoilt for effective solutions that finally go to scale. While earlier it used to take 10-15 days to gather people to discuss an idea, the virtual medium has allowed us to discuss an idea on the go, within hours. This has resulted in significant increase in the number of new ideas not only being discussed, but also being experimented [with] and piloted.
The second major change is in the accountability over our finances and ownership of numbers that has gone deeper into the organisation. Earlier, it used to be some 10-15 people who were responsible for profits and sales; now it is 100. That has resulted in a much better control over our [financial] results and the consciousness has become very deep.
Third, due to the severity of the initial lockdowns, agile thinking related to growth has increased significantly in the organisation. There has been an increased frequency at which KPIs [key performance indicators] are being reviewed, resulting in course corrections becoming the order of the day.
Q: You mentioned about greater and broad-based accountability and ownership of finances since Covid-19. What are the changes that have taken place?
A: All these financial jargons get established in a group and through that establishment [they eventually] become a part of the culture. Till 2019, the ownership of profitability, cash flows or the balance sheet was only at the CXO level. But because of the crisis (for instance, in April 2020, we incurred the greatest loss in the history of the company).... there was tension [among employees] and these were being discussed. Eventually, as we used all possible measures to address the issue, the accountability got entrenched deeper into the hierarchy.
[For us] FY21 was a difficult year. Even though we were profitable, our profits were at 60 per cent of FY20. So, at the CXO level, the performance was being reviewed on a monthly basis, while at lower levels, it was probably being reviewed every week. Therefore, it became a part of the culture of these 100 people, who now own the responsibility. As a result, even the monthly performance of the company is now more predictable.
Q: As the impact of the pandemic began to wane, the Russia-Ukraine conflict started, further aggravating inflationary pressures, among other things. What has been its impact on your business?
A: Essentially, we are a very big jewellery company and a war usually impacts the jewellery business positively. The ongoing war and the inflationary scenario would play up differently for different economic segments of consumers. Titan has an upper-middle to rich customer base. We are playing at the top of the pyramid. Nearly 40 per cent of the inflation that we are facing now is in foods and then there is fuel. The impact of inflation on these products and their share in the total expenditure for a company’s consumers determines the impact. The share of these basic need items in our customers’ [total] expenditure may have gone up from 10 per cent to 12 per cent and, thus, it would have little impact on their buying capacity—unlike a two-wheeler owner for whom this share is much higher. Moreover, nearly 80 per cent of our business is jewellery. Whenever times are uncertain, the jewellery business tends to benefit as people consider it to be a safe asset class. Therefore, I am much less worried about the war and inflation.
If you keep talking about the adverse impact of inflation and the war and other macroeconomic factors, [then] that will impact you. You need to work yourself into the feeling of confidence. It is a very important mind game. Success is, after all, a result of the right mind game than the circumstance. We do it at multiple levels in the organisation—imbibing the sense of ‘yes, we can win’ despite the challenges.
Additionally, in jewellery, any price increase in precious metals is directly passed on to consumers. As our consumers are well-off, that doesn’t impact purchases much. While inflation has impacted our vendor partners and, thus, we now have to pay more for their services, the impact is not that substantial. During the pandemic, work from home and lack of moving out has resulted in $150 billion of additional savings by consumers. The Indian equity markets’ capitalisation has surged to $1.4 trillion, resulting in wealth creation. The size of India’s jewellery market is about Rs 4 lakh crore, while we had sales of Rs 28,000 crore in FY22. We have exceptional customer relationships with over 20 million loyalty programme subscribers. There is so much headroom for growth. Why should I be worried about inflation?
Q: But hasn’t the increase in prices resulted in lower volume off-take?
A: Yes, we do keep a tab on the tonnage but that’s not our final KPI. After all, we are not into the business of selling weight; rather our objective is to achieve targets in terms of value sales. It could be that the average weight we sell per bill has come down as many customers have a fixed budget for jewellery purchases. Thus, there could be downgrading in terms of grammage but not on value. Moreover, the increase in prices of precious metals does not impact our margins much. What is more important for us is the number of customers we cater to, apart from average ticket size and sales value. On all these parameters, we have made progress. We have not only grown our number of customers but have also gained market share.
Q: Covid-19 has accelerated digital transformation. How is Titan leveraging this trend?
A: Digital has played an important role for us since the pandemic. Before Covid-19, we hardly sold anything through the virtual medium. Then necessity became the mother of innovation. Digitisation of day-to-day affairs was established during the initial months of the lockdown. This has helped not only in sales, but also in creation of products. Take, for instance, prototype approvals. Earlier, the prototypes had to be physically approved. But now, as prototypes are approved virtually when they are ready, by the time the third prototype arrives, the first is probably heading for production. This has improved the agility of the company.
Q: Has changing consumer behaviour and the work from home culture impacted sales?
A: The pandemic may have lowered the occasions of moving out and, thus, reduced the instances of dressing up. However, we are doing well in watches and in jewellery—which also is an investment for many consumers. While there is no industry-wide data available, my sense is that the overall demand probably continues to remain lower than 2019. Smaller, standalone retailers may have suffered but the sheer scale and the repute of our brands—be it Tata or Tanishq—have played in our favour, helping us gain share. There is also a trend among a section of consumers who want to feel good. This has also lifted demand for our kind of products.
Q: For Titan’s management, what is the aim for the next 10 years?
A: If we look at the future projections on India’s per capita GDP, the journey from $2,000- to $5,000-level consumers at the top of the pyramid will play an important role. There is immense action awaited among the super-rich and the affluent class. That will benefit Titan and our portfolio is truly aligned to serve these consumers. Further, the substantial competitive advantage that we enjoy in every category is our greatest advantage. In watches, we have very high penetration and our market share is high too. Therefore, the growth rate for the watches business may be a little lower. But in categories like jewellery, eye care, Taneira (women’s ethnic wear), perfumes—in every business where our market share is low or the category itself doesn’t have much penetration among Indian consumers—we will grow much faster. So, making the newer businesses and/or brands much bigger is our five-year outlook. [In] the categories that we lead or are already established, our share of profit is very high compared to the industry. We are also expanding into new categories like under the brand Taneira. Although we will be new players in those categories, the plan is to grow fast and unlock substantial value. In the international market, non-resident Indians (NRIs) and PIOs (persons of Indian origin) are a focus area.
Q: So, would the share of the jewellery business in your overall sales come down?
A: It is very difficult to predict. The share of the jewellery business in our sales is very high—more than double of what we get from all other segments put together. And there is huge headroom for growth in the jewellery business. We are not chasing a goal to reduce the share of revenue from jewellery. The aim is to grow every business. So, if jewellery grows faster than other businesses—even eye care—its share will grow. We are also keenly looking at growing customer share and not just sales. See, the price of a bottle of Skinn [perfume] may be Rs 3,000, while one piece of jewellery could cost 50 times that. But I want our customers to use both. There are opportunities galore in the luxury products market.
Q: Which are the new categories Titan is planning to venture into?
A: [We are] not planning to enter any new categories; rather we want to build our business in the categories that we are already present in. Two years ago, we appointed CEOs for each of them. Now a relatively senior team of CEOs is overseeing these categories and directly reporting to me. This has helped in terms of sponsorships, budgeting and clearing the roadblocks. They have been given full autonomy to dream and explore. We have already declared big targets for each one of these categories. Our objective is to become the leader in each of these categories before we venture into the next one.
Q: Which of these categories will be Titan’s dark horse in the next five years?
A: Our brand Taneira is placed in a market that has a Rs 50,000-crore opportunity, while for Skinn [the opportunity] could be much smaller. So, the perfumes business may remain much smaller than the saree business. But that doesn’t mean it is less important for Titan. Because, while the revenue share may be smaller for some categories due to their nature, it could be that more number of customers are being touched through them than a larger category like jewellery. So, the aim is to become a market leader in each of them and become a wholesome company that satisfies multiple types of customers.
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