Meghna Maiti, KR Sudhaman, Financial Chronicle

Mumbai/New Delhi, November 11, 2013

PepsiCo and Coca-Cola are in a competition of another kind, both saying on Monday they would invest huge amounts in India. If they do come about as promised, investments amounting to a total of $10 billion will come in from the two cola giants by 2020.

Elections or no elections, PepsiCo’s India-born chairperson and CEO, Indra Nooyi, said the firm would invest $5.5 billion (Rs 33,000 crore) in India by 2020 to more than double its capacity here.

“We are not guided by elections. We are guided by the potential of India. We are not waiting for any election results. We are investing in India for its economic story,” Nooyi told reporters after her meeting with finance minister P Chidambaram.

The company has so far invested $2 billion in India since its entry in 1989. It said new investment would be made to strengthen its capability in various strategic areas, including innovation, manufacturing, infrastructure and agriculture. “The Rs 33,000 crore investment we are making is going to cover both food and beverages and we will more than double the capacity of our business over the next seven years,” Nooyi said.

Not to be left behind, Coca-Cola India said it planned $3 billion new investments in India till 2020 to further capture growth opportunities in fast-growing, non-alcoholic, ready-to-drink (NARTD) beverages. This would take Coca-Cola’s India investments between 2012 and 2020 to $5 billion, a company statement said.

“Achieving continued, sustainable and responsible growth in India is core to achieving our 2020 vision of doubling system reven­ues in this decade,” Muhtar Kent, chairman and CEO of Coca-Cola, said.

“Our ongoing investment in India is focused on delivering innovation, partnerships and a portfolio that enhances the consumer experience, ensures product affordability and builds brand loyalty to deliver long-term growth,” he said.

Devangshu Dutta, CEO of Third Eyesight, said, “India is a fairly strategic market for Pepsi since its focus on non-carbonated beverage and packaged food has gone up significantly.”

Alpana Parida, president of DY Works, a brand strategy and design firm, said, “Pepsi could look at launching its own new brands and acquiring outside brands to make a deeper entry in the Indian food market.”

As per Euromonitor, Coca-Cola enjoyed leadership position in carbonates in 2012, accounting for 60 per cent of the total value of sales. It maintained a strong position with two brands — Sprite and ThumsUp.

“Also, stronger distribution in the existing categories and entry in new markets in rural India helped the company retain its strong position,” Euromonitor said.

Pepsi is the only other significant player in carbonates with 36 per cent retail value share in 2012, according to Euromonitor.

Pepsi has 42 plants in India, including franchises. Nooyi said, “India is a country with huge potential and it remains an attractive, high-priority market for Pepsi. We’ve built a highly successful business in India over the course of many years and we believe we’ve only scratched the surface. This investment is PepsiCo’s vote of confidence in India’s future.”

For the company, India is the largest market. Pepsi will continue to expand the range of foods and beverages in its portfolio. In India it has eight brands that generate Rs 1,000 crore or more in annual retail sales — Pepsi, Lay’s, Kurkure, 7UP, Slice, Mirinda, Mountain Dew and Aquafina.

Apart from raising capacity, Pepsi will expand its selling and delivery infrastructure. It will also step up collaborative farming that the company claimed has benefited 24,000 Indian farmers. “Most importantly, our investments will be aligned with India’s interests,” Nooyi said.

Since entering India, Pepsi claims it has created opportunities for more than 200,000 people through direct or indirect employment and agriculture collaborations. It is estimated that the strategic initiative announced on Monday will add more than 100,000 additional employment opportunities.

On the other hand, Coca-Cola said it had already invested more than $2 billion in India since it re-entered the country in 1993. The fresh investments will raise the amount to $7 billion.

Coca-Cola India directly employs over 25,000 people and indirectly more than 1,50,000 people. The carbonates market is projected to grow at 10 per cent annually in terms of retail volume, according to Euromonitor.

Growth will be driven by rural areas, as urban areas are facing a degree of saturation, as well as shifting to healthier options, such as fruit/vegetable juice and bottled water. Companies are targeting rural areas to build share.

Coca-Cola has equ­ipped retail outlets in remote rural areas with solar coolers. Smaller pack sizes are driving sales in rural areas whereas PET bottles are pushing sales in urban areas.

Coca-Cola bought up Parle’s four big soft drink brands — ThumsUp, Limca, Gold Spot and Maaza — which gave the company an instant 60 per cent share of the Indian softdrinks market when Pepsi had less than 30 per cent.

(Sourced from Financial Chronicle .)

Raghavendra Kamath & Sayantani Kar, Business Standard
Mumbai, November 10, 2013

Shikhar Dhawan has often twirled his much-coveted handlebar moustache after his blazing international cricket performances. But he will now be seen flaunting his moustache in ads for Fashion at Big Bazaar (FBB), Kishore Biyani’s flagship clothing brand sold in his hypermarkets. The yet-to-be-launched promotional campaign for FBB’s winter collection replaces the earlier Desh badla, bhesh badlo (new attire for a new nation), featuring cricketer M S Dhoni and actor Asin.

The close-to-Rs 200 crore budget for FBB’s promotions would mean the audience will soon see a lot more of brand Dhawan in the next seven to eight days when the campaign is launched. What it also signals is Future Group’s designs on the apparel industry, after its Pantaloons venture.

After selling off the department store format to the the Aditya Birla Group, Kishore Biyani, Future Group’s promoter and group chief executive (CEO) now wants to drum up the credentials of his other apparel brands.

Other hypermarkets across India are stressing on their apparel merchandising, too, because of the comparative high margins, starting from a basic layout change by bringing apparels upfront at the stores. Fashion carries 40-50 per cent gross margins, while food and grocery 10-15 per cent.

Devangshu Dutta, CEO of Third Eyesight, says non-food items always add more margins than grocery and food items. However, clothing also brings with it the extra task of product development apart from the merchandising and stock planning that are common to food and non-food for the retailer. He explains, “Future Group has its roots in fashion and textiles, having started with Pantaloons. So, it is now looking to redevelop the front-end presence with such campaigns. It will also have an impact on how Big Bazaar will now look as fashion items would need a zanier space than what grocery calls for.”

The new campaign is geared to achieve an image makeover for the brand, which Biyani expects to clock Rs 3,000 crore next year. Dhawan is seen inviting viewers for a makeover and a chance to feature with him in further ads, with the refrain: “My mooch (moustache), my style”. Referring to H&M, the Swedish departmental store’s racy campaigns, Biyani says, “We are styling our campaigns on similar lines with edgy shots and ambassadors with an attitude. If H&M has (UK footballer David) Beckham, we have Shikhar Dhawan.”

Abneesh Roy, associate director, institutional equities, research, Edelweiss Securities, says, “Biyani sold Pantaloons because of the stress on the company. Pantaloons had EBITDA (earnings before interest, taxes, depreciation and amortisation) margins of 13-14 per cent. That must have given him confidence in building the next big brand. But the question is how many years it will take him to build the next Pantaloon despite investing heavily in advertising, given the market slowdown and a competition more intense than the time Pantaloon was launched.”

But unlike in the past, Future Group has access to scale, as Biyani points out, in both retail outlets and the supply chain. Sourcing from multiple suppliers across Tirupur, Jaipur, Ahmedabad, Delhi, among others, with 29 designers on board and a lean supply chain (a national distribution centre at Nagpur has cut supply chain and transport costs by 20 to 40 per cent and inventory by half, say group executives). Biyani insists that the scale would be an entry-barrier for others to replicating FBB’s strengths. The retail reach would span all of

Big Bazaar’s stores and 30 standalone FBB outlets. “Hypermarkets/supermarkets have 10 to 15 per cent sales coming from fashion but Big Bazaar gets 35 per cent of sales from fashion,” Biyani says.

While the communication for FBB would be aspirational, a la departmental stores, the ground play would see a lot more stress on volume sale. The selling strategy would be as much about the price points as about the looks its new spate of ambassadors will sport. Apart from Dhawan who will make eight to nine appearances for the brand and feature in national campaigns over the next couple of years, the brand will focus on regional celebrities, like actor Jeet in a campaign leading to this year’s Durga Puja in Kolkata. Print ads would carry the prices for the items of clothing that Dhawan and company will be sporting.

“My idea is to sell a lot more under the FBB brand. Europeans buy fashion items eight to nine times a year and 11-12 items together but Indian buyers buy three to four times a year and two-three pieces. The real challenge is how to make people pick up eight pieces instead of three pieces of clothing, which they are now doing at our stores,” says Biyani, while pointing out FBB has a low-cost supply chain that ships in bulk as prices (beetween Rs 199 and Rs 999) are low and encourage cluster-buying. FBB is targetting selling 100 million pieces next year. Biyani plans to set up neighbourhood stores for more modular consumption of the brand, with such stores selling basic T-shirts, salwars, churidars and such for mix-and-match purchases in 4,000-5,000 sq ft stores. The group has already done some pilots in cities and is looking to open such stores soon. However, FBB will face stiff competition from Reliance Trends, Max of Dubai’s Landmark group and Megamart by Arvind who are aggressively expanding their footprint and wooing customers with offers.

(Sourced from Business Standard.)

Nupur Anand, DNA – Daily News & Analysis

Mumbai, October 26, 2013

Happy hours, a concept limited to liquor, is finding its way into quick-service restaurant and cafe chains.

Dominos, the pizza chain, is giving buy-one-get-one free offer, while fine-dine restaurants such as Blue Frog in Mumbai are offering 50% discount during lunch time.

Costa Coffee has also been running a happy hour programme post 7 pm.

Devangshu Dutta of Third Eyesight said though this concept originates from bars, other retailers are also increasingly using it to drive footfalls.

“No doubt there is a slowdown and consumer sentiment has been dampened. Retailers generally use the happy hour concept during a low footfall period.”

In fact, Dominos has been witnessing the slowest growth ever since it got listed in 2010.

Since there are very few players in the quick-service restaurant space which are listed, experts believe that Dominos growth story can explain the entire industry’s scenario.

Santosh Unni, CEO Costa Coffee, said they have come up with the happy hour promotional offer to increase the coffee drinking hour. "Typically after seven consumers don’t have coffee. With this, we are aiming at extending the hours by giving them a value for money offer." He said with the promotional scheme, business transaction during that time has trebled.

The domestic quick service restaurant business, estimated to be Rs 3,400 crore in 2012-13, has been struggling with slowing growth in the past one year.

To provide more value offerings to the consumers, restaurants have been coming up with low price point products or increased discounts and promotions.

Experts said such promotions are going to continue and even intensify.

(Sourced from DNA.)

Agence France Presse
Mumbai, October 23, 2013

The Centre One shopping mall on the outskirts of Mumbai is gloomy and bereft of customers, even during India’s annual festive and wedding season when retailers traditionally cash in.
"Business is dull, usually weak," said one bored-looking fashion salesman.
The shopping centre’s empty look is no exception. In the past decade, supermarkets and malls have spread across India’s large cities and towns, fuelled by fast economic growth and excitement about middle-class buying power.
A "Malls in India" report released by Images Research last month found 470 shopping centres were operational this year, up from just 50 malls in 2005, and expected to soar to 720 by 2016.
"But over 90 percent of India’s malls are struggling," said Susil Dungarwal, founder of Beyond Squarefeet, a mall management and advisory firm based in Mumbai. "Just 15 of these can be counted as running successfully."
India’s middle-classes with their rising disposable incomes have long been considered a dream for mall-builders. The country’s retail sector is set to grow at an annual rate of 16 to 19 percent, reaching 56.8 trillion rupees ($901 billion) in 2016, the Images Research report shows.
The government has also relaxed foreign investment rules in a bid to attract international supermarkets and boost the economy through retail.

But Dungarwal and other analysts say the majority of India’s shopping centres are struggling with a potent mix of high real-estate prices, bad planning and sluggish demand as the economy slows.

When it opened in 2003, the 150,000-square-foot (14,000-square-metre), three-storeyed Centre One was billed as the first world-class mall in Navi Mumbai, a satellite town that is filled with apartment and office towers. But competition from larger, better-designed malls such as Inorbit and Raghuleela, which sprung up nearby later, drew the crowds away.

In the last year alone, Mumbai suburbs have seen the Milan Mall and the City Mall shut down, while others such as Evershine and Mega Mall are struggling to stay afloat, analysts say.

India’s slowing economy, with growth at a decade-low of 5.0 percent in the year to March 2013, has put a firm dampener on spending. But other factors are compounding the troubles at the tills. Over the past decade, builders and developers have rushed to build without paying sufficient attention to what a mall requires to survive.

Until recently, most ignored the so-called "catchment" area, analysing the geographical area from which a mall attracts most of its visitors, experts say. In the northern Indian city of Gurgaon in Haryana state is the hyped "Mall-Mile" — a vast stretch of nearly a dozen shopping malls, built almost one after another. "Not all of them are working out," said Devangshu Dutta, chief executive with retail consultancy Third Eyesight, adding that they were all chasing too few shoppers.

The oversupply of malls means many have empty space: about a fifth of Centre One lies bare and so does up to 75 percent of the Dreams Mall in Bhandup, an eastern suburb.

Mumbai’s Atria, once a packed mall, now has "For Rent" signs coming up and looks deserted, with low footfalls owing to "bad designing, causing people to miss stores," Dungarwal said. Another nearby mall, Sobo Central, is unable to draw the crowds as it does not offer a food court nor a multiplex.

"People do not go to a shopping mall to shop. They go there for the experience, to hang around," said Dungarwal.

India’s real estate is amongst the steepest in the world, and Kishore Bhatija, owner of Inorbit Mall, said costs have risen by 300 percent in Mumbai, which is 50 times more than markets such as Delhi, Bangalore, Chennai or Kolkata. Retailers are therefore facing the double whammy of spiralling real estate prices and sluggish sales.

They also face growing competition from online retailers such as Flipkart, India’s answer to Amazon, which hand-delivers goods to the front door for minimal cost. Shoppers can buy with the click of the mouse, with no need to battle traffic jams or India’s punishing weather.

"Malls will have to do everything to drive footfalls. They will have to make sure there is enough excitement to attract people," said Dutta from Third Eyesight.

(Sourced from The Times of India.)

Sagar Malviya, The Economic Times

Mumbai, October 17, 2013

Barely a week after the world’s top retailer Walmart ended its association with Bharti Group, its British rival Tesco has moved a step closer to entering the $450-billion Indian retail market with the Tatas launching a neighbourhood convenience store format modelled on Tesco Express.

Tesco Plc, the world’s third largest retailer, has a partnership with Tata Group’s Trent under which it provides back-end support and retail expertise to the Indian conglomerate’s Star Bazaar hypermarkets.

Tesco Hindustan Wholesaling, the Indian unit of the British retailer, supplies merchandise including some of its own labels, to 15-odd Star Bazaar outlets, sized anywhere between 40,000 sq ft and 80,000 sq ft and selling food and grocery to apparel to consumer durables.

The new format, Star Daily, is completely different. The first Star Daily outlet, opened in Pune last week, is just about 1,800 sq ft in size and stocks mainly fresh foods, groceries and essential items, a person aware of the store launch said. "Similar to a kirana store, Star Daily is kept open almost 15 hours starting at seven in the morning," the person added.

Both Trent Hypermarket and Tesco did not respond to an email query.

Globally, corner shops — such as 7-Eleven in Japan, Taiwan, Thailand and Singapore, Lawson in Japan and Oxxo in Mexico — are among the largest retailers in their respective markets, reflecting the growing business of small outlets in several countries despite the presence of international supermarket and hypermarket chains. Even Tesco runs more than 1,500 convenience stores averaging 2,200 sq ft in small shopping precincts in residential areas and countryside in the UK.

In India, ubiquitous kirana wallahs generate more than 90 per cent sales of consumer products industry.

Analysts say high sales volume will be the key to Trent’s success in the convenience store space. "The newer format can help them (Tatas) penetrate better catchment areas, but volume needs to be maintained to compensate for the higher overhead costs including real estate," Devangshu Dutta, chief executive at retail consultancy Third Eyesight, said.

So far, Trent Hypermarket has been relatively conservative in its retail expansion despite rivals adding hundreds of stores each year. In fact, it did not open a single Star Bazaar store last financial year, but managed a 21 per cent increase in total revenue to Rs 801 crore.

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