admin
June 26, 2014
Nikita Garia, Mihir Dalal, MINT (A Wall Street Journal Partner)
New Delhi, 26 June 2014
Cab services provider Uber announced the launch of its low-cost cab brand UberX in Bangalore, New Delhi and Hyderabad to directly compete with local rivals such as Meru Cabs, Ola Cabs and others.
Uber launched in India last August with its higher priced, luxury car service, UberBLACK that charged a minimum of Rs.250 per ride. Though the company, which accepts payments only through credit cards, reduced fares later, they were still at least 50% higher, on average, than those of rivals such as Meru Cabs and Ola Cabs.
UberX will offer a base fare of Rs.50, and also charge Rs.1 per minute and Rs.15 per kilometre. The charges will vary based on the city, but the fares are similar to those offered by local rivals.
Analysts said the move by Uber reflects the need for brands to offer lower-cost but so-called “value” products that Indian consumers typically prefer. Foreign companies such as Amazon, McDonald’s and others have had to approach India as a distinct market and “localize” their products and services to appeal to Indian shoppers.
“We are a cost and value-conscious country. Value is more than low cost,”said Devangshu Dutta, chief executive at Third Eyesight, a consultancy. “Our service expectations are very high. Any company which is looking at the Indian market whether it is a product or service company, has to modify its approach, adopt different strategies and tactics to make its Indian business a success.”
Despite launching a lower-priced service, Uber still misses out on a significant part of the market as credit card usage is low in India and a majority of customers still prefer paying cash, an executive at an Uber rival said.
“Uber has only a credit card-based mobile app and no call centres,” said Aprameya Radhakrishna, co-founder, of TaxiForSure.com. “You can only go for immediate bookings. So they will have limited reach in the market. Let us see how they perform once they get into the lower end of the market.”
Uber is running a promotional campaign to boost sales, where a first-time user can get Rs.500 off on the first UberX ride.
The Google Inc.-backed start-up that started its operations in 2009 is present in 39 countries. In India it offers its services in Bangalore, New Delhi, Hyderabad, Chennai, Mumbai and Pune.
Uber, which does not own cars, uses state-of-the-art technology to connect drivers with passengers through a mobile app.
The radio taxi market is moving towards an asset-light model where websites such as TaxiForSure.com lend their brand to drivers and cab operators in exchange for a fee. Meru, too, has become part cab operator, part marketer.
(Published in MINT.)
admin
June 25, 2014
Anshul
Dhamija, The Times of India
Bangalore,
25 June 2014
Tech
tycoon and Wipro chairman Azim Premji is a hidden dragon springing
out an impressive fast-moving consumer goods (FMCG) story in Asia’s
new tiger economies, knocking close on the heels of global powerhouses
Unilever and Proctor & Gamble (P&G).
Billionaire Premji’s Wipro Consumer Care and Lighting (WCCLG) is now among the top three personal care companies in Malaysia and Vietnam and is gaining ground in China’s southern provinces. Sixty-eight-year old Premji — with personal wealth topping $15 billion — took the FMCG unit private through a de-merger of non-IT businesses, which are housed under Wipro Enterprises.
"Our internal estimates suggest that Unilever is number one in personal care in Malaysia followed by us. We are currently placed number three behind Unilever and P&G in Vietnam’s personal care market," Wipro Consumer Care & Lighting President Vineet Agarwal told TOI.
In Malaysia, which is among the top three South East Asian economies, Wipro enjoys market leadership in facial cleansers (27%), facial moisturizers (26%), fragrance (22%), talc (51%) and kids toiletries (60%)."We are also the number one with a 50% market share in halal toiletries," added Agrawal, a Wipro veteran who has overseen the company’s inorganic expansion globally.
Wipro Consumer generates more than 50% of its revenue from international markets through a string of acquisitions boosting its foot print across south east Asia, Middle East and Africa. In doing so, it notched up Rs 5,000 crore revenues in FY14, becoming the third largest India born FMCG major after Godrej Consumer Products (Rs 7,602 crore) and Dabur (Rs 7,094 crore).
WCCLG’s revenue grew 16 times from Rs 304 crore reported 13 years ago. It went past Marico’s consolidated revenue of Rs 4,686 crore in the last fiscal. India and international markets posted similar growth giving the Wipro unit 17% revenue growth and 11.4% expansion in operating profit.
"Wipro has been a successful consumer products company. However, the consumer business got lost in the shadow of its bigger and sexier IT business. The origins of Wipro are in consumer products and that is hidden in its name, which is an acronym," said Devangshu Dutta of Third Eyesight, a consultancy firm.
Wipro – Western India Products Limited was set in 1945 to manufacture vegetable and refined oils, which the company has exited from.
Over the last decade Wipro has spent more than $500 million acquiring international brands like Yardley, Woods of Windsor and Enchanteur among others. "Malaysia is our biggest international market for us followed by China, Vietnam, with Indonesia and Middle East almost at same levels. We are in all developing countries in Southeast Asia and want build in these countries," added Agrawal.
Santoor with revenues of around $240 million (roughly Rs 1,500 crore) is still the biggest brand in WCCLG portfolio, followed by Enchanteur ($130 million), Yardley ($50 million), halal brand Safi and skincare brand Bio-essence (at $50 million each). Enchanteur, Bio-essence and Romano (a male toiletry brand) are market leaders in ASEAN countries.
Agarwal is focused on improving the China show, an ambitious play which no other Indian FMCG company has dared till now. "We are buoyant on China because it’s a country that’s still developing, it’s a large market and if you can play your cards right you can make money there and expand," said Agarwal.
(Published in The Times of India.)
admin
June 22, 2014
Raghavendra
Kamath, Business Standard
Mumbai,
June 22, 2014
Aditya
Birla Retail, which started operations in 2007 with the brand
‘more’, was looking to break even in FY 2013. The wish
remains unfulfilled — still.
Spencer’s Retail, part of the Sanjiv Goenka group which started in 1990s and opened stores in the modern format in 2006, was originally looking at a breakeven in financial year 2010-11. After missing two fresh goal posts, the retailer now says it hopes to break even in the next couple of quarters.
Birla and Spencer’s are just two of “the many supermarket chains, promoted by big corporates during 2006-08, are still making losses. While Star Bazaar opened its first store in 2004, it began expanding only post 2006. Sunil Mittal’s Bharti Retail, Raheja-owned Hypercity, Tata-owned Star Bazaar are also yet to turn profitable.
Consultants said ideally, retail ventures should break even in five to six years, but the tough economic environment and some not-so-prudent decisions have put paid to any such efforts.
According to a recent report by Crisil, the top 10 food and grocery retailers such as Aditya Birla’s more, Bharti Retail, Raheja owned Hypercity, the food and grocery business of Reliance Retail, accumulated losses worth Rs 13,000 crore in FY 2014. Crisil estimated that these retailers have invested about Rs 19,000 crore.
According to the report, Avenue Supermarts, which runs D Mart stores and Future Value Retail which runs Big Bazaar and Food Bazaar, are the major retailers which are profitable. Crisil said Future had the first mover advantage and Avenue had a low cost model which helped them to break even.
So what is holding back these chains from being profitable?
Besides the competition from kirana stores and the inherent low margins in food and grocery retail, costs associated with people, property and supply chain seem to the major issues that posed challenges to the chains floated by corporates.
While the retailers did not respond to mails, consultants say they were doing many things to achieve faster profitability. Hypercity is reducing the sizes of stores from 1, 00,000 sq ft to 40,000-50,000 sq ft and increasing share of fashion which carries high margins. Star Bazaar is also halving store sizes of large format stores and coming out with mid-sized and small sized stores to achieve faster profits. Spencer’s is looking to open 80 stores and focusing on improving its supply chain.
Crisil says the losses of the top grocery retailers will mount by about 30% over the medium term and may peak in 2017. After that, half of the players will start break even. Apart from Spencer’s which is looking to break even this financial year, even Hypercity is looking at Ebitda level profits this year. Since the developers have deep pockets and they see potential in the retailing business, they will continue to invest in retail, it said.
Some say one of the major reasons for the failure to have a consistent strategy over the years is the many changes at the top. Sanjay Badhe, former head of marketing at Aditya Birla Retail, says Birla Retail has seen too many changes in management and operations. “They need clarity in management,” he adds.
While Birla made Sumant Sinha, the group’s M&A specialist as CEO when it launched the business, Sinha quit within one and a half years. Thomas Varghese was then made CEO but in 2012 he was shifted to the textiles business and replaced by Pranab Barua, who came from Aditya Birla Nuvo. Late last year, the retailer named Vishak Kumar, CEO of its both formats.
Reliance Retail has also changed its top leadership frequently. While it debuted with Raghu Pillai as CEO of value formats. He was replaced by Gwyn Sundhagul who came from Tesco, Thailand in 2010. In a major rejig next year, Reliance Retail named Rob Cissell, former chief operating officer of Walmart China, as CEO.
But retail consultancy Technopak Advisors chairman Arvind Singhal said Reliance was firm on getting the right people on board. “Some people worked and some did not. But now they have good team in place,” Singhal said, adding some retailers stuck to people who did not deliver or stuck for too long.
Dipankar Halder, CEO at PingStripe and former head of supermarkets at Bharti Retail believes that some retailers are making losses due to their top heavy organizations with costs that are disproportionate to their store level costs. “Successful retailers abroad pay very good salaries to store managers because they are the people who drive the sales. But here we get cheapest guy at stores and have number of presidents and vice presidents at top,” he adds.
Indian retailers had to deal with expensive properties while running their stores. Indian grocery retailers pay rents which are almost double of what retailers pay abroad. But the chains earn 2-3% net margins in food and grocery. Ideally, hypermarket chains should pay 2.5 to 3% as% of rents to revenues to make them viable and supermarket chains should pay five to six% as% of revenues.
“Once you build a high cost base that is created for rapid expansion, it is easy not to reduce it. The quickest option available then is to scale down operations,” said Devangshu Dutta, chief executive of Third Eyesight, a retail consultant.
Though retailers such as Aditya Birla, Reliance, Spencer’s expanded aggressively between 2006 and 2010 to build scale, most of them exited unviable stores.
Aditya Birla shut over 150 super market stores in the last five years while Spencer’s exited cities such as Pune to focus on profitability. Even Reliance closed 50 shops, and exited three formats —Reliance Kitchen, which sold modular kitchen furniture, Reliance Wellness, a beauty and lifestyle chain and Delight, its non-veg store.
There are supply chain issues as well. According to Badhe, retailers such as Star Bazaar and Aditya Birla’s More are still sorting out their supply chain issues and could see improvements soon while Reliance has got its processes right. Pingstripe’s Halder says many retailers make the mistake of not treating unbranded items such as fresh produce, and meat as a separate category.
“You buy products such as meat, fish and fresh produce from middlemen, obviously the store level profits will come down. The more you do it, you have to share the profits,” said Halder.
Kumar Rajagopalan, chief executive of retailers body Retailers Association of India, says that inability of retailers to build scale at state levels and local taxes are posing challenges to retailers to be profitable. “It is scale per state, or in many cases per city, and not scale per nation thanks to the cascading effect of taxation like local sales tax, local entry tax, etc. It takes time to build that kind of scale.” Rajagopalan states.
Though retailers such as Reliance Retail tried a ‘farm to
fork’ strategy, it did not take off the way it wanted due
to opposition in many states. “Most of them open their distribution
centres according to taxation and not according to transportation,”
says Kumar, adding ”once GST comes in, they can set up large
DCs at one place instead of multiple DCs."
(Published in Business Standard .)
admin
June 21, 2014
Vikas
Kumar, Outlook Business
New
Delhi, June 21, 2014
On Gurudwara Road in central Delhi’s bustling and crowded
Karol Bagh market, it is easy to miss the nondescript, grey four-storey
building that houses Aero Group’s corporate office. Entering
the reception, you feel as if you have been transported to a trading
house from the 1980s. The ageing paint and weathered wood paneling
gives the sense of a company steeped in its past, nowhere close
to the youthful and vibrant image of Woodland, the popular homegrown
adventure brand it represents.
That is, until you step into the cramped but modern elevator that takes you up to the first floor. Here, gleaming workspaces, open layouts, wall cabinets whose doors cleverly double up as writing boards all give out a fresh vibe of a company gearing up for the future.
Clearly, Woodland is a brand that’s being refreshed for a new innings. The transformational process has been underway for some time now, says MD Harkirat Singh. “We needed to reinvent the way we do business, because if we didn’t change, somebody else would have come in,” he says.
Since its launch in 1992, Woodland has single-handedly built a small category — outdoor lifestyle — and grown it through a mix of sharply targeted advertising for its young buyers, community building and events and alliances with environmental organisations such as the World Wildlife Fund and the United Nations Children’s Fund. In doing so, it has cleverly straddled an expanding adventure gear market.
“Woodland connects with the outdoor lifestyle image without being dependent on it,” agrees Devangshu Dutta, CEO, Third Eyesight, a retail consulting firm.
Now, Singh and his team are upping the ante. Preparations have been underway for a couple of years: a new line of innovative products has been unveiled and the brand extended into specialised categories within the adventure and outdoors space. Take, for instance, shoes and garments used in mountaineering, trekking, cycling and equipment for rappelling. The idea was to address the needs of entry-level users and not necessarily professional climbers and trekkers to begin with. “Some products need safety approvals and we may not go for them right now,” points out Singh. For sourcing such products, it has tied up with global manufacturers. A few of these products have already been introduced, such as GoPro outdoor cameras and climbing stick sourced from an Italian company, and trekking umbrellas from a German supplier.
The initial response has been encouraging, prompting Woodland to work on a plan to introduce five to ten new products each year. “Right now, I am holding a Woodland shoe with Gore-Tex lining and a Vibram sole, which will cost you only Rs 8,000 a pair,” says Singh, who is down south visiting the company’s Kochi store. The point Singh wants to make is this: Woodland makes shoes that are comparable with global brands.
But old-time sellers such as Avinash Kamath of Mumbai’s Avi Industries haven’t heard of these yet. He remembers the company’s traditional range being perceived as rugged but bulky and unsuitable for climbing mountains. “Their shoes are 50% heavier compared with European brands,” he says. Started by his father in the ’70s, the business is run by Kamath, a seasoned mountaineer. Stores such as Avi, Adventure18 in Delhi and Cliff Climbers in Dehradun have been the go-to places for gear for professional or early mountaineers. They are also the key influencers for the category, which grows mainly by word-of-mouth. Kamath is pleasantly surprised when told about Woodland’s advanced range. “If they have such products, they should be promoting them.” It’s exactly what Woodland is trying to do with marketing and innovation.
Brand push
From selling shoes to adding apparel (extending into a more formal line of wear under the Woods brand), the Rs 1,000-crore group has come a long way from its origins as a supplier of finished leather uppers to footwear manufacturers across the globe. An impulsive decision to replicate a design that the Aero Group was manufacturing for an Italian client and test it in the Karol Bagh market led to the creation of a brand that is now available in 4,000 multi-brand outlets and boasts of 450 exclusive showrooms in around 200 cities. In the past few years, Woodland has been clocking 13% to 18% growth (see: On a firm footing), compared with 20% for the overall footwear and apparel market. But Singh is in no hurry to grow any faster. Though he wants the company, which earns 60% of its revenues from footwear, to be seen as a more entrenched and focused player in the outdoor wear and adventure gear business, which currently accounts for a negligible share of revenues.
The reason — the adventure sports market is gradually picking up pace in India on the back of corporate outbound programmes and a general sense of awareness through television. Trekking, climbing and rapelling have been most popular in that regard. It’s a category that barely existed among the most passionate of adventure lovers — trekkers, mountain hikers and climbing enthusiasts. “The outdoor category is a huge universe. We are addressing only a small part,” says Singh. And the company is doing that by creating awareness of the category, celebrating everyday heroes. Woodland’s brand ambassadors include people such as Loveraj Singh Dharmshaktu, an assistant commandant in the Border Security Force who has climbed Mt Everest five times; Planning Commission employee and ace endurance runner Arun Bhardwaj; Deeya Suzannah Bajaj, who at 14 was the first and youngest Indian to go kayaking in the Arctic Ocean in Greenland; and Archana Sardana, who is the country’s first woman B.A.S.E. jumper, skydiver and scuba diving instructor. Woodland, in fact, developed special gear — a flappy bird-like jacket — for Sardana for B.A.S.E. jumping, considered among the riskiest sports since it involves leaping off buildings and bridges with a small parachute.
Apart from using images and videos of these ambassadors and sharing details of their achievements on its website, Woodland also leverages them as field testers for its ongoing product development and design process. Dharmshaktu, who has been tapped for his feedback on a new range of jackets, has also been hired as a consultant for an upcoming adventure zone being created on the outskirts of Delhi. Located on a 100-acre property on the Faridabad-Gurgaon Road at the foothills of the Aravallis, Singh says the zone, which is likely to be ready in six months, will serve as an events hub to connect with its audience and demonstrate its newer range of mountain gear.
True to its Timberland-inspired positioning, Woodland has stayed consistent over the years about what it stands for — rugged, outdoorsy and for people with a desire to explore and seek adventure. Communication, too, has remained largely consistent with the brand’s core values. “Over the years, it’s been the most well-defined brand I’ve worked on,” says Tanul Bhartiya, senior VP at Lowe Lintas & Partners, the agency that’s been handling the brand since its launch in India, now under division Karishma Advertising. While Woodland’s advertising is largely print-centric, over the years, there has been a greater push towards digital marketing to stay connected with its target group — 18-24 year olds. The rethink process was kicked off four years ago, when Singh enrolled for a two-week Taking Marketing Digital course at Harvard Business School with Amol Dhillon, vice-president, strategy and planning. That led to a digital marketing push for the brand that continues over popular platforms such as Facebook, LinkedIn and YouTube. Woodland now has 3.2 million fans on Facebook and 6,000 followers on Twitter. Its in-house social media content team is currently working on a Woodland TV app for iOS and Android, and a quarterly digital adventure magazine modelled along the lines of Redbull’s Red Bulletin. “Brands have to be their own content creators,” says Dhillon.
All these initiatives assume importance as the larger market for adventure and sports goods opens up in the country.
Continued below…
admin
June 13, 2014
Rashmi
Pratap, The Hindu Businessline
Mumbai,
June 13, 2014
In
a market where homegrown and multinational companies alike make
a beeline for the hinterland, here’s one that has boarded
a bus to urban India after becoming a household name in villages.
Jyothy Laboratories has meticulously targeted rural consumers
to grow its brand into the country’s fifth-largest in the
fast-moving consumer goods category.
Every month, truckloads of Ujala fabric whitener and detergent, Maxo mosquito repellent coil and Exo utensil cleaner arrive at the doorstep of retailers in lakhs of villages, saving them precious time and transportation costs. The goods are also sold on credit, which is a major draw for rural retailers such as Gyaneshwar Kadam of Ajang village in Maharashtra’s Dhule district. “We are always short on working capital. Credit is a big help. Even our buyers prefer to pay after they get their wages. So I don’t stock products of distributors who don’t give me credit,” he says.
This, then, is the story of thousands of retailers who now swear by Jyothy Labs products. “In rural India, we have the first-mover advantage. Since we went to villages first, gave them respect and credit, we get trust in return. Big companies don’t give credit, but I ensure my distributors do it. The moment you give credit, people become your patrons,” says Ullas Kamath, joint managing director of Jyothy Labs, best known for its Ujala fabric whitener.
City shops beckon
The company’s products are available through 2.9 million outlets, and it supplies directly to one million of them. Now, as it readies to spread into every urban nook and corner, it has re-jigged some strategies. To begin with, it has added more products to its line-up.
“When you are in business, you want to spread your risks as well as product portfolio. And that’s what we have done,” says Kamath.
The company acquired 50.9 per cent in loss-making Henkel India, a subsidiary of Germany’s Henkel AG, for ?60.73 crore in March 2011. With that it attempted to improve its rural-urban sales mix. Before the acquisition, 65 per cent of its Ujala sales came from rural India. “Now it is 50:50 from urban and rural. That is how Henkel has helped. They have distributors in urban areas and that network has improved our reach,” Kamath says.
Earlier, retailers and stockists in urban areas were reluctant to take on Jyothy Lab’s products. “Along with Henko (Henkel’s detergent brand), we are able to push other categories too like personal care and liquid mosquito repellent. And people are accepting it.”
Villagers buy more
“In rural India, the consumption per family might be small but the number of families is so large that it outgrows urban India,” says Kamath. His assumption is not without basis. Rural spending at ?3.75 lakh crore far outstripped urban consumption at ?2.994 lakh crore during 2009-12. Rural consumption per person exceeded the urban equivalent by 2 per cent, according to CRISIL and data from the National Sample Survey Organisation.
But for a national presence, Jyothy has to look beyond rural India. “In moving to urban India, there will be more opportunities than challenges. Migratory population in cities is humongous. And their needs are more like those of rural consumers — whether it is the kind of products or even the price they are willing to pay. If a company can ensure a good supply chain across large cities, it can grab a substantial chunk of the market,” says Devangshu Dutta, chief executive at consulting firm Third Eyesight.
Jyothy has accordingly made changes in its management structure. Its top team now has 17 people, including the CEO, S Raghunandan. Each brand head operates in a silo. “We have brought in a new management team to grow the categories. We give them enough money to spend on a brand and understand the reasons behind their performance or non-performance.”
The gamble seems to be paying off. Raghunandan, an FMCG veteran, has helped the company restructure and cut the distributor margin from eight per cent to six per cent.
Advertising and sales spend has increased by 65 per cent to ?135 crore in FY14. “Brand expenditure continues to pay returns over a long period of time,” says Kamath. He points out that even when MNCs advertise, they not only grow their own brands but also create new categories. “Everybody’s brand grows as people know a product exists and then they compare similar products.”
Global dream
Jyothy Labs is looking to launch newer products and re-launch some others. “We should be in at least two more categories in a few years. The aim is to be among the top three players in each category,” Kamath says.
That does not appear to be daunting. Henkel can still buy a 26 per cent stake in Jyothy Labs by 2016. That would give Jyothy the financial muscle to take on the biggies. Moreover, an equity partnership with Henkel should allow it to hop onto the German company’s wide international network and ride into emerging markets.
But until then, Kamath and his team are busy marking the miles and the milestones on the road to urban India.
(Published in The Hindu BusinessLine .)
