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July 27, 2022
Written ByAlakananda Chakraborty
Brand’s positioning may be just below Starbucks
It is against this background that Reliance Brands (RBL) announced its strategic partnership with global fresh food and organic coffee chain, Pret A Manger (PAM).
By Alokananda Chakraborty
India may boast of the presence of several marquee international coffee chains, but none of them, with the possible exception of Starbucks, have been able to make much of an impact. The reasons are obvious; for one, India is largely a tea-drinking market, with coffee penetration still at just about 11%. Coffee remains largely an in-home consumption drink. Then there are the usual challenges of getting prime real estate at a reasonable cost and consumers’ capacity to pay. The pandemic, which disrupted food supply chains and the overall demand, delivered a body blow, leading to shutdown of around 8% of the outlets during 2021.
It is against this background that Reliance Brands (RBL) announced its strategic partnership with global fresh food and organic coffee chain, Pret A Manger (PAM). The first store will open by the end of this financial year. While RBL is tight-lipped about the pricing or positioning strategy, experts say PAM’s biggest advantage is its association with Reliance.
“PAM is a late entrant and would have been at a huge disadvantage if it went alone,” says Anthony Dsouza, executive director & country service line leader, innovation, Ipsos India.
So what does Reliance brings to the table? “Significant investment capability, real estate strength and know-how of retail. These could lead to a much higher scalability and access to the right locations,” says Angshuman Bhattacharya, national leader, consumer product and retail sector, EY India. “However, running a café chain also involves building out the right supply chains across the country, which the brand would need to build,” he adds.
Bhattacharya is bang on. The success of an F&B franchise business depends on getting real estate at the right price. Reliance can offer a tremendous advantage here to PAM. Not only does it run a very large retail business, it also owns malls.
Experts say a lot would also depend on the right pricing. Pramod Damodaran, who had relaunched Costa Coffee India in his earlier stint as COO for that firm, and is now CEO of Wagh Bakri Tea Lounge, says, “There’s a big space between the 240 and170 for a cup of cappuccino, that is, just below the Starbucks/Costa Coffees of the world.”
PAM will probably occupy that window – it is unlikely to be a premium offering for two reasons. One, PAM is primarily a sandwich chain in the UK and it’s not clear how much premium it can command for a pre-made sandwich. Two, if PAM were to take advantage of the retail footprint of Reliance and were to follow a shop-in-shop format, say, in a Reliance Trends store, it can’t afford to be premium. The positioning would be a consequence of that captive audience.
In other words, the store location will, to a large extent, determine both the pricing and positioning of PAM. Agrees Devangshu Dutta, chief executive of Third Eyesight, a specialist management consulting firm: “At the end of the day, PAM is more a quick service outlet than a cafe. (Pret A Manger means “ready to eat” in French). And the consistency of its offering comes from what is called the pre-prep.”
All PAM outlets in the UK follow the concept of “freshness of ingredients” and “quickness of service”. The hero product – the sandwich in this case – is still a convenience food, a grab-and-go item. It is prepared by a central commissary or multiple commissaries and is at the most heated or packaged at the counter. “So it is not a restaurant and it can’t charge a restaurant price,” says Dutta.
In a sense, Domino’s has perfected this model with a lot of pre-prep done at the commissary end but the actual pizza is prepared “at location” or in the store. “In this case (PAM), you are not doing that volume of work at the consumer-facing counter,” Dutta adds. And if that is the model RBL plans to replicate in the country, the positioning, by default, is mass.
“The PAM-Reliance combination is likely to be a mass market offer, with value pricing and highly localised strategy,” Dsouza of Ipsos says.
But mass or premium positioning, PAM’s entry will no doubt roil the waters. “Incumbents have to up the food game if they want to take on the might of Reliance,” says an executive with a rival brand. Beverages form a dominant part of the café industry sales. Besides food and beverages, merchandising, which is employed largely for branding, is rapidly becoming a source of additional revenue. About 60-65% of café sales come from beverages, followed by food which forms about 20-25% and about 10% from merchandise.
For one, Tata Starbucks, which witnessed a 76% growth and logged `636 crore revenue in FY22, has been working at its food menu and delivery for some time. In a recent interview to FE BrandWagon, Sushant Dash, CEO, Tata Starbucks, had said that the brand had to “re-prioritise” because of the pandemic, with innovation becoming more important to keep the brand relevant. Starbucks innovated with the menu to keep the interest level up among customers and introduced new food items and gave the existing food items an Indian twist,” he had said.
Earlier this month, Starbucks added masala chai, filter coffee and an array of bite-sized snacks and sandwiches to its menu card. Its new milkshakes will be priced starting at 275, while masala chai and filter coffee will start from190. It also introduced the ‘Picco’ – meaning ‘small’ in Italian – starting at `185.
Will that be enough? Given PAM’s strong presence in the food space, there is no denying that existing café chains in India have to tweak their food menu considerably. In other words, they will have to get out of their comfort zones.
Source: financialexpress
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June 30, 2022
Written By Aditya Kalra & Abhirup Roy
MUMBAI, June 30 (Reuters) – Reliance Industries (RELI.NS) said on Thursday it would open outlets of Pret A Manger in India under a franchise deal with the British sandwich and coffee chain, a first foray by the Indian firm in the country’s growing food and beverage industry.
Reliance Brands Ltd (RBL), a unit of the conglomerate that also runs India’s biggest retail chain, would start by opening branches of Pret, as the brand is known in Britain, in big Indian cities, both companies said.
RBL Chief Executive Darshan Mehta said in joint statement the partnership was “rooted in the strong growth potential” of the Pret brand, known for its organic coffee and upmarket sandwiches, and the Indian food and beverage industry.
The first outlet would open in Mumbai before March 2023 and India was expected to become one of Pret’s top three markets in three years, a source familiar with the matter told Reuters.
Pret A Manger, whose name means “ready to eat” in French, first opened in London in 1986. It now has 550 outlets globally, including in the United States and several European states. It is owned by investment group JAB and founder Sinclair Beecham.
In India, the brand will compete with Starbucks (SBUX.O), which has a joint venture with India’s Tata, and Costa Coffee, which is owned by Coca-Cola (KO.N).
Mukesh Ambani, one India’s richest men, runs Reliance, which has more than 2,000 supermarkets and grocery stores in India. Reliance also has partnerships with luxury brands, such as Burberry and Jimmy Choo.
“Reliance wants to look at retail in all its shapes and forms. Over time, they’ve realised partnerships are the way for business formats that may be difficult or slower to crack,” said Devangshu Dutta, head of retail consultancy firm Third Eyesight.
Source: reuters
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June 24, 2022
Written By Christina Moniz
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture
The Aditya Birla Group has just announced the launch of its ‘house of brands’ business entity, TMRW, to support digital fashion and lifestyle brands. TMRW, which will operate as a wholly owned subsidiary of Aditya Birla Fashion & Retail (ABFRL), aims to build and buy over 30 brands in the next three years, the company said in a statement.
With this move, the company expects to make its entry into the D2C market, which is expected to be reach $100 billion by 2025. “What a brand like Shoppers’ Stop does in brick and mortar, ABFRL is doing online. While in the past, the company was known for certain brands, it is now pivoting itself towards a wider pitch with bigger variety of brands that could potentially appeal to a wider range of consumers,” said Ankur Bisen, senior partner and head, food and retail, Technopak Advisors. The launch could be ABFRL’s next step in positioning itself as a fashion major, he said.
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture.
ABFRL will compete with start-ups like the Good Glamm Group and Mensa Brands, among others. The number of D2C brands and online sellers in the country have grown over the last couple of years, and experts believe that TMRW could be the company’s endeavour to become relevant to new-age consumers. Brands like Reliance Retail and Myntra are going down the same path, says Bisen.
The opportunity is immense; according to a report by IMARC Group, the Indian textile and apparel segment reached $151.2 billion in 2021 and is set to grow at a CAGR of 14.8% between 2022 and 2027.
ABFRL, which has a network of over 3,300 stores across India, is home to brands like Pantaloons, Van Heusen, Louis Philippe and Allen Solly, and has partnerships with labels like Forever 21, American Eagle and more recently, Reebok. The retail company has also forayed into the ethnic wear business and has forged strategic partnerships with designers such as Sabyasachi, Masaba and Shantanu & Nikhil.
Having reported losses for the last three years, the company narrowed its losses to `108.72 crore in FY22 on the back of revenues of `8,136.22 crore. The company reported a 55% surge in revenues during the last fiscal. While Madura Fashion & Lifestyle contributed 68.4% to the company’s FY22 revenue, the remainder 31.6% came from Pantaloons, according to Bloomberg data.
Ambi Parameswaran, author and founder of Brand-Building.com, said ABFRL has already built a good retail presence for the brands in its portfolio. “There must be significant synergies at the back end, but the brands are managed separately,” he said. “I suppose the new venture, TMRW, will offer all these brands as well as all the other ethnic brands that ABFRL has acquired in the last three years.”
He said the synergies will probably lie at the back end with supply chain, logistics, finance and HR. However, the brands will most likely be given the space to build strong individual identities.
This is not the company’s first foray into the e-commerce space. ABFRL shut down its e-commerce venture, ABOF (All About Fashion) in 2017, though in August last year, it said the brand would be made available on Flipkart and Myntra.
A concept like ‘house of brands’ is potentially beneficial to both — the large conglomerates and also to the smaller, emerging brands that are acquired. In a D2C framework, niche brands that would otherwise find it difficult to navigate the established multi-layered distribution and retail channels see greater feasibility in connecting with their customers directly through digital channels.
According to Devangshu Dutta, CEO of retail consultancy Third Eyesight, this makes it viable to launch a product range, which would not be immediately entertained in established channels, and allows them to retain their distinctiveness. With the passage of time and with their growth, some of these brands could also expand into established modern retail and traditional retail formats and to a more mainstream audience.
“Large companies, on the other hand, can find it difficult to grow their existing brands beyond a certain pace, and often may not be able to break new ground in terms of product development and customer experience. At some point, inorganic growth by acquiring other businesses and brands becomes an important element of their strategy,” Dutta said.
The house of brands model, to be sure, comes with its fair share of challenges. Angshuman Bhattacharya, EY India partner and national leader – consumer products and retail, said the strategy must have clear synergies from an operations and distribution perspective. “Possible challenges could emanate out of the non-compatibility of categories with the distribution. Another potential challenge could be in supporting multiple brands with marketing investments, failing which the realisable value envisaged during acquisition could stay unfulfilled,” Bhattacharya said.
The other downside, as Dutta pointed out, is that over time there is consolidation of market power within a handful of companies. This has happened across the globe and across sectors, and can negatively impact consumer choice, supplier dynamics and pricing.
Source: financialexpress
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May 30, 2022
Written By Akanksha Nagar
Having acquired Patanjali Ayurved’s food retail business, the company has ambitious plans
While its edible oil business has been its mainstay, Ruchi Soya’s CEO Sanjeev Asthana is confident that the share of FMCG revenue could touch 20% this fiscal.
Ruchi Soya has its sights set on clocking `20,000 crore- `22,000 crore in revenue over the next five years from its FMCG business, after recently having acquired Patanjali Ayurved’s food retail business worth `690 crore. The Patanjali food portfolio comprises 21 major products, including top-selling items such as ghee, honey and juices, besides staples such as atta and spices.
To achieve its target, Ruchi Soya plans to launch a D2C (direct-to-consumer) channel in the next two months for its nutraceuticals business, with more categories to follow, while also increasing its investment on e-commerce and expanding its offline footprint. It is quite active across all key online marketplaces including Flipkart, Amazon and JioMart.
According to the latest Statista report, India’s FMCG market was valued at $110 billion in 2020, and by 2025, it is expected to touch $220 billion, as more brands adopt the D2C route. Several top FMCG makers, including Hindustan Unilever, Dabur and Emami, have launched D2C brands in the past two years.
Oiling other products
While its edible oil business has been its mainstay, Ruchi Soya’s CEO Sanjeev Asthana is confident that the share of FMCG revenue could touch 20% this fiscal. It is targeting `7000 crore in revenue from FMCG and `25,000 crore from commodity sales by the end of FY23. “Over the next five years, the revenue split between FMCG and commodities will be equal,” he says.
Furthermore, Ruchi Soya plans on consolidating and rationalising the Patanjali food portfolio, while simultaneously revamping some of its existing products. “The aim is to reposition the entire company towards being a food FMCG major,” says Asthana.
Following the acquisition, Ruchi Soya will be renamed Patanjali Foods (after regulatory approvals). Asthana says that brands such as Nutrela, Mahakosh, Ruchi Gold and Sunrich will continue to be marketed under their existing names, while all the businesses that are coming in from Patanjali will use the Patanjali brand in exchange for a brand licensing fee
evangshu Dutta, chief executive, Third Eyesight, says the company name change may work in its favour, since there is a large audience aligned with the image and values of Patanjali Group and its founder Baba Ramdev.
Casting a wide net
But not all is smooth-sailing. Alagu Balaraman, CEO, Augmented SCM, suggests for the company to scale up, it needs to build a robust traditional distribution network, since a bulk of sales still happens through these channels. “The cost of doing e-commerce delivery is significantly high,” he notes.
Ruchi Soya is working on those lines. Asthana says besides utilising Patanjali’s existing distribution muscle, it is expanding its offline retail footprint by adding 10,500 non-exclusive modern grocery stores and 4,500 exclusive ones every month.
Source: financialexpress
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April 27, 2022
By Manu Balachandran, Forbes India
Apr 27, 2022
Sometime in 2002, in his mid-20s, Ravi Modi wanted to buy a Mercedes. Not because he was a petrol head or because he wanted to flaunt his newfound success in his hometown, Kolkata.
“My belief was that if you can afford it, buy it,” says Modi, who’s dressed in a blue kurta pyjama at his house in Newtown, Kolkata. His then-four-year-old business, Vedant Fashions, which made popular ethnic wear, Manyavar, was doing reasonably well and money was flowing smoothly. However, as he firmed up his plans to buy a Mercedes, his father, who had earlier inadvertently brought out the entrepreneur in Modi, asked his son a few questions. And then doled out some sound advice.
“He asked me whether I can afford it. I said I can,” the soft-spoken Marwari tells Forbes India. “He asked me if my business was sustainable. I said yes. He said you will require capital. I said yes. He asked me if my business has the potential to grow. And I said yes.” Modi adds: “Then he told me, ‘Thode din ke taklif zindagi bharka aaram, ya thode din ka aaram, zindagi bharki taklif (Pain for a few days, and you can have a lifetime of relaxation, or relax for a few days, and you could have pain for the rest of your life)’.”
That stuck with him forever. Modi skipped his plan to buy a Mercedes, and instead decided to plough back all the profits into the business to avoid falling into a debt trap as he expanded. He stuck with his Honda City for the next 15 years, until his son asked him to change it after a family friend met with an accident. “That’s when I bought my Mercedes in 2017,” Modi says. “All these things don’t matter to me. I am a simple man with no materialistic needs. I like the simple life.”
Modi indeed leads a simple life on the outskirts of Kolkata. Unlike many of his peers who relish the hustle and bustle of city life, he has moved out of his home of 36 years to a calm and greener township where he even grows vegetables. “Whatever vegetables we eat, they come from within the house,” Modi says. He prefers to meet people on the verandah of his house, which overlooks a neatly manicured lawn. The scorching Kolkata heat doesn’t bother him.
“Here, the trees talk to me,” says Modi, who tried 12 houses before shifting to the new one immediately after the first lockdown. He has built a clay tennis court there and is now learning to play the game. Modi has also renounced wearing western clothes, claiming not to have worn one in five years. “We must realise that clothes such as suits aren’t meant for the Indian climate,” he says.
He’s even reduced the time he spends in office, and now goes there only once a week. It hasn’t made any difference to his business. Modi makes his debut on the 2022 Forbes World’s Billionaires List—he’s ranked 1,238 with a net worth of $2.5 billion. As of April 15, Modi’s wealth stood at $3 billion and he is among the youngest billionaires in India.
His 23-year-old company, Vedant Fashions Limited, of which he is chairman and managing director, is worth ₹26,000 crore after it listed on the bourses in February. It has over 600 stores across India and 11 international stores, where it sells everything from men’s kurtas, sherwanis and jackets to women’s lehengas, sarees and gowns. They are sold under brands such as Manyavar, Mohey and Mebaz.
Last year, amid the pandemic, Vedant Fashions closed the year with a revenue of ₹564.81 crore, while net profit stood at ₹132.9 crore. A year before that, revenue was ₹915.54 crore and net profit ₹236.6 crore. Modi’s wife Shilpi has a board seat, while his only child, Vedant, after whom the company is named, is chief marketing officer.
“I am a firm believer in destiny,” says Modi. If it wasn’t for his destiny, the 45-year-old believes he would have perhaps been sitting at his nearly-50-year-old family-run shop in Kolkata’s AC Market, selling menswear, and at best opened one more store to expand the business.
Destined for Success
As a child, Modi, the only son of his parents, was good at mathematics. His father then ran a 140-sq-ft retail store inside AC Market in Kolkata—one of India’s first air-conditioned markets set up some 50 years ago.
“In Class 2, I got 100 in mathematics, and my mother threw a party,” says Modi. “In Class 3, when I got 100, my mother didn’t give a party. That’s when I realised that nobody celebrates the same achievement twice. I needed some kick and I started solving the paper faster.” By the time he appeared for his Class 12 exam, he finished his mathematics papers in 45 minutes, scoring a near cent. “Anybody who remembers me from school days would remember me for mathematics,” says the soft-spoken billionaire.
The untold story of how Ravi Modi built Vedant Fashions—the makers of Manyavar—into a .5 billion behemothThat meant, by the time he was 13, Modi joined his father at their retail store, which sold everything from shirts and pants to jeans, after school. “I found a lot of interest,” says Modi. “Somehow, I didn’t realise that my entire childhood from 13 years went in my store.” While he did contemplate doing an MBA after graduating in commerce from St Xavier’s college, Kolkata, his father suggested otherwise. “The real MBA happened in those nine years between 13 and 22,” says Modi.
At the store, Modi played salesman, often catering to buyers his staff didn’t want to deal with. “I would see that the salesmen would deal with some customers with a lot of attention, and some without,” says Modi. “When I probed them, they said the customers wouldn’t buy. I would ask them if they were astrologers, and used to take it on me to sell stuff to them. That was my kick.” Soon, Modi would end up selling over 20 clothes to a customer who would have come to buy one shirt. “It was the best time of my life,” Modi says. By the time he was 21, he was married, and by 22, Modi became a father.
As the business grew, Modi began to run the show and took decisions that would be a contrast to his father’s. He also introduced Indian wear, manufactured by them, in the store after realising a massive vacuum in the Indian wear category. It was Modi’s first tryst with manufacturing. “But one day, my father said something, and I got hurt,” Modi says. His father had questioned a decision that Modi had taken for ₹20,000. “He said ‘Humko barbad kardoge (Will you ruin us)? I might commit suicide one day.’ I said this is enough, I won’t come from tomorrow.”
He took ₹10,000 from his mother and turned to manufacturing Indian wear, selling the finished products in Uttar Pradesh, Odisha, Bihar, Madhya Pradesh and West Bengal, among others. “I started selling to multi-brand outlets (MBOs),” he says. The inability to hire a creative agency meant Modi had to come up with a name. “I thought what was the purpose of life… it was to earn some respect for oneself,” says Modi. “That’s how we came up with the name Manyavar.” He denies that the choice of the name had anything to with his father’s chiding. “He was someone who would never say something like that,” says Modi. “It’s all destiny. Because there was no plan, and I was happy at the store. We would, at best, have opened one more store.”
With Manyavar, Modi started by selling 20 percent of his stock to Kolkata-based Vishal Mega Mart, to raise enough working capital to sustain his business. He sold the rest of the stock to other outlets. “Vishal Maga Mart was the only place that used to buy on cash,” says Modi. “So initially, for about eight months, the working capital came from them.”
Modi sold kurtas which cost ₹200 at a loss of ₹10 to ensure he was paid in cash. “Just because I was strong in math, I thought I will sell 20 percent of my production to him to get working capital, and from the remaining 80 percent production, I will get revenue. That is how we generated revenue in the first year,” Modi says.
Among others, Manyavar’s clothes were sold at outlets such as the Kashmir Vastralaya collection and Kala Mandir in the early days.
Turning point
By 2005-06, Modi had begun selling his products to large format stores (LFS)—from Future Group to Shoppers Stop and Westside—building a pan-India presence. Heeding his father’s advice, he ensured he did not take on debt, and instead channelled most of the money into the business.
In 2006, to take care of his ailing father, Modi stepped away from work for some six months. “I used to work like a typical entrepreneur, managing everything. Life was very busy. Then I realised we were unnecessarily involving ourselves in operations. The business was running well without me for six months. From that day I understood, that instead of ROI (return on investment), it should be return on time invested (ROTI). I realised I should not waste time on things where I don’t add any value,” he says.
That took him back to the drawing board—to focus on strategy for the next phase of growth. By 2008, Manyavar set up its first exclusive brand outlet (EBO). “That’s when the real journey began,” says Modi. “Until then, we used to sell for ₹20-25 crore every year.” The company’s first store opened in Bhubaneswar, and over the next year, opened 12 stores. The early ones were opened by the company before it moved to a franchise-led model. “By that time, I was clear that the way forward for any fashion apparel business in India is EBO,” says Modi.
Modi believed multi-brand outlets were becoming more of a hindrance than being facilitators. “They never used to work on data,” he says. “It was difficult to make them understand anything. And because I had spent nine years with consumers, we used to always think of the customers first.”
That means an obsession with data, and efficiency, something Modi spends a considerable amount of time on. “Anything and everything we do, we want to bring efficiency,” he says. “We have one of the highest productivities in retail. We haven’t sold a single garment at discount. Even then, the dead stock in Manyavar is less than 3 percent. We make 30 percent PAT (profit after tax). We don’t make that by charging more to the consumer. That’s an outcome of efficiency. We keep pricing reasonable and despite that, we have the highest margin. Efficiency is a key pillar in our entire organisation.”
Today, the company operates mostly on a franchise-owned-franchise-operated model. “When we started, we had a COCO (company-owned-company-operated), COFO (company-owned-franchise operated), FOFO (franchise-owned-franchise-operated), and all kinds of models. By 2016-17, we converted all our stores into the FOFO model. People were doing backward integration, and we felt doing forward integration was the way to go. We will do the marketing, designing and supply chain, and not do anything else.” Over the past few years, Modi claims several young customers have become franchise owners, including doctors and consultants, who see massive potential in the brand.
In 2016, the company pulled a coup of sorts by landing then Indian cricket captain Virat Kohli as brand ambassador. “He had just become captain It was the best time of his life,” says Modi. Over the next few years, Kohli led the brand campaign and Modi even roped in his girlfriend Anushka Sharma for a commercial prior to their marriage. Today, the brand has actors Amitabh Bachchan, Alia Bhatt, Ranveer Singh and Kartik Aaryan as brand ambassadors.
The success
Today, Manyavar operates some 1.3 million sq ft of retail stores in the country, choosing not to chase the number of stores. Every year, Modi wants to add between 1.5 lakh sq ft and 2 lakh sq ft of retail space. “The whole business is on a variable, asset-light model,” he says. “There is no capex, there is no fixed expense other than corporate head office salary. Every rupee of working capital can generate an equal rupee of PAT, with 90-95 percent free cash flow. Only Unilever will have a ROCE (return on capital employed) of 100 percent, and we might be the second, and within a year or two, we will be at more than 100 percent.”
The untold story of how Ravi Modi built Vedant Fashions—the makers of Manyavar—into a .5 billion behemothThe company operates in 230 cities, and is busy firming up plans to open stores in 150 new cities. A significant portion of its customers are spread across Southern India, with Bengaluru and Hyderabad emerging as the two big centres. “We have a cluster approach where we believe in 50 or 60 markets, where we have numerous stores,” Modi says. “This is just the beginning of a multi-decade growth opportunity for the category.”
Along the way, in 2017, as business expanded rapidly, Modi decided to turn to private equity, not because he needed money for expanding the business. “We always thought that there is a limit for wisdom and knowledge,” says Modi. “We had been meeting private equity players since 2008 and we thought why not get a good partner. We liked Kedaara Capital and its approach. Money was not the intent, but to have a wise board and to understand whether we were missing on anything.” Kedaara Capital acquired 7.5 percent stake in the company.
“They’ve ridden well on the sector’s growth and consolidation into modern trade, as the desire for brands has grown among buyers of Indian traditional clothing,” says Devangshu Dutta, chief executive of Third Eyesight, a management consulting firm, and managing partner of PVC Partners, an early-stage investment & advisory firm. “Also, the wedding market is more recession-proof than many other segments, which has been a favourable factor during the pandemic.”
Last year, despite the pandemic, Modi says Vedant Fashions closed the year with better profit margins, despite most states putting a ban on weddings and other social gatherings. “The beauty of our business is that while business had reduced, our margins were 30 percent PAT,” Modi says. “The entire business is on the variable model and even franchises didn’t lose money.”
In India, the men’s wedding and celebration wear market was estimated to be worth approximately ₹13,300 crore as of FY20, according to brokerage firm HDFC Securities. It is projected to increase to between ₹17,000 crore and ₹18,000 crore by 2025. In comparison, the women’s wedding and celebration wear market is significantly larger, estimated to be worth approximately ₹7,500 crore as of 2020. It is expected to grow to ₹95,000 crore and ₹100,000 crore by 2025.
“Seventy-three percent of Vedant Fashions Limited’s (VFL) franchisees have operated its stores for three or more years and 65 percent of the sales of its customers from its franchisee-owned EBOs are derived from franchisees having two or more stores is testament to the success of EBO distribution model,” HDFC Securities said in a report in February. “Through a network of over 300 franchisees as of September 2021, VFL has demonstrated a track record of commanding a high initial capital commitment and, in return, providing all necessary support in connection with identifying potential locations for new stores, managing multi-channel advertising on a national and regional basis, assisting in-store development and inventory management, directly managing the supply chain and providing detailed training programmes for store staff and franchisees.”
Today, 90 percent of the company’s business comes from EBO with about 8 percent from online models, a segment that Modi’s son, Vedant, and his team are extensively looking to build. “We might be the only brand with such a high percentage from EBOs,” Modi says. “The segment is unorganised, fragmented, and understanding this is a journey. Because we were data-focussed, we could work it out.” Along the way, Modi says his biggest advantage has been in reducing the inconvenience of wedding purchases.
“Pre-Manyavar, the wedding shopping experience was a problem,” Modi says. “You had to go a few times to the store for measurements or alterations. Now people don’t have the time. We are a one-stop solution where work can be done in one hour.”
Now, as the company looks at avenues for its next phase of growth, Modi has forayed into categories within the wedding market that can drive sales. The company recently launched Twamev, a premium collection of men’s wedding wear, and Manthan, a cheaper option to its popular Manyavar wear. “When you look at the Indian pyramid, there are five consumer layers. Manyavar and Mohey are in the third layer which is the sweet spot, comprising the typical aspirational middle class,” Modi says. “In India, one crore weddings take place, and 30 lakh to 35 lakh marriages happen in that category, which is about 50 percent in terms of value. We believe that is the largest segment, but now we have a strategy where we are going one level up and down.”
While Manyavar caters to the ₹5 lakh to ₹50 lakh wedding market, the ₹50 lakh to ₹5 crore market is being catered to by Twamev, while the less than ₹5 lakh is being addressed by the Manthan range. “We believe once the category grows, we should be there in all these three layers. So, there is clear demarcation and no overlap,” Modi says.
All that means that the reclusive billionaire, who started out two decades ago after his tryst with destiny, is getting ready for a long period of growth. It also helps that he has more time to plot his strategy for it. “People talk about wealth, I believe the real wealth I have earned is time for myself,” Modi says. “The mission is to be a dominant player in the celebration space. We have cracked an unorganised market and we’ve been able to organise it and scale it. Now, the vision is to instill pride in Indian wear.”
Modi seems determined to do that. And he is certain to walk that talk, if the two decades are anything to go by.
(This article was published in Forbes India.)
