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August 28, 2023
Bindu D. Menon, Financial Express
August 28, 2023
Calvin Klein, Levi’s, Adidas and Lacoste are among the several players who are looking to tap the potential of Outlet malls, which are generally located on the peripheries of cities and major highways. These malls are fast replacing the old factory outlets of major brands, which were located in the cities in crowded places.
Real estate developers are also strategically choosing such locations to attract a wider customer base. Value-driven customers are thronging to such malls as it offers branded products at a discounted price ranging from 30-70%.
A few companies FE spoke to said Outlet malls are refined version of factory outlets and companies are able to generate revenue by liquidating stocks at a lower price.
Outlet Malls are a concept popular in the international market and are a huge hit among travellers. They are typically large group of shops outside city periphery that sell apparel, shoes and luggage at a discounted price. In the last decade, Outlet malls have sprung all over the country especially adjoining highways.
In New Delhi’s Jasola district, Pacific Premium, real estate firm has opened premium shopping space. Pacific Group operates around six malls spread across Delhi and Dehradun. Its new premium outlet mall is its largest to date and has four storeys and sizeable parking area.
The mall houses aspirational brands such as Birkenstock, Tommy Hilfiger, CalvinKlein, Levi’s, Adidas, Madame, Lacoste, Vero Moda and American Eagle among others. Other leading brands such as Nykaa and CaratLane, too have signed lease for occupying mall space.
Players like Village Groupe are developing mixed use development space in off location like Khapoli on Mumbai-Pune highway, Ludhiana and even Jaipur highway. A company disclosure says that it is developing over 500,000 sq feet mixed use space off-city limits.
“Outlet malls are a great opportunity for consumers who want to get the touch and feel experience. To that they offer brands at a discounted price is huge attraction for consumers,” said Susil S Dungarwal, promoter, Beyond Squarefeet Advisory, a mall management advisory firm.
Asked if online companies will pose a challenge to Outlet malls, Dungarwal says that there is no competition. “Outlet malls are an impulse destination. A consumer may be travelling along a highway, a good mall with discounted brands will be sure shot attraction,” he said adding growth in private vehicles has given a shot in the arm to Outlet malls.
“Till mid 1990s only 20% of vehicles on highways were private vehicles (cars and buses) and the rest were commercial vehicles (trucks and lorries). However, in 2023, almost 60% of the vehicles on highways are private vehicles,” he said.
Devangshu Dutta, Founder, Third Eyesight, said, “Outlet (discount) stores sit at the confluence of a mutual need. Branded chains with excess inventory to liquidate which they don’t want to carry at their primary stores, and consumers who want lower prices for their purchases”.
He points that outlet malls can offer brands some of the same advantages as regular malls, in terms of acting as footfall magnets, and offer shared services, but at lower costs due to a cheaper location.
“Rather than creating their own standalone outlet stores, brands can take up spaces in an outlet mall. The challenge of maintaining and managing footfall is shifted to the mall. However, as with regular malls, outlet malls need to be located well and need to be also managed well,” he added.
According to consultancy firm Anarock, top cities have over 51 million sq feet of mall stocks across the country with Delhi-NCR, Mumbai Metropolitan Region and Bengaluru accounting for 62% of the total stock.
(Published in Financial Express)
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August 28, 2023
Viveat Susan Pinto, Financial Express
August 28, 2023
Coffee Day Global, which operates the Cafe Coffee Day (CCD) chain, has been given a temporary relief against bankruptcy proceedings initiated by lender IndusInd Bank last month. The Chennai bench of the National Company Law Tribunal (NCLAT) last week halted admission of IndusInd Bank’s plea against Coffee Day Global, a subsidiary of the listed Coffee Day Enterprises (CDEL), by the NCLT Bengaluru, till September 20.
What this means for CCD is that it get some more time at a time when it has swung into the black after struggling for the last few years, since the tragic demise of its founder VG Siddhartha in 2019. Coffee Day Global posted a net profit of Rs 24.57 crore for the June quarter of 2023-24 (FY24) versus a net loss of Rs 11.73 crore reported in the same period last year.
Revenue from operations stood at Rs 223.20 crore in the quarter under review, a growth of nearly 18% versus the year-ago period, CDEL results for Coffee Day Global showed.
More importantly, CCD outlets are down to 467 in the June quarter of FY24 from a peak of 1,752 stores in FY19, indicating that the company is shutting down unprofitable operations as it looks to manage its debt and other expenses. Group debt is down to Rs 1,711 crore, according to its latest annual report for FY23, versus Rs 7,214 crore reported in FY19.
“While the coffee retail market in India is growing, in CCD‘s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
CCD’s financial health is critical for CDEL, which derives close to 94% of its group turnover from the coffee retail business, according to its FY23 annual report. In FY22, the contribution of the coffee retail business to group turnover was 85%. Losses of Coffee Day Global in FY23 narrowed to Rs 69.62 crore from Rs 112.48 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.
Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is at around 265 now from a peak of 537 in FY19, the number of vending machines have been growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now at 50,870 in number, the company’s latest results show.
CCD is also expected to fight the insolvency proceedings against it aggressively, according to industry sources. IndusInd Bank has claimed that Coffee Day Global defaulted on a loan of Rs 94 crore, which occurred on February 28, 2020. The company has disputed this in court.
(Published in Financial Express)
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August 24, 2023
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August 11, 2023
Christina Moniz, Financial Express
August 11, 2023
Pizza chain Domino’s recently unveiled a Rs. 49 pizza, its cheapest anywhere in the world. At $0.60, the pizza chain’s seven-inch cheese pizza is priced far lower than Domino’s in China (where $3.80 is the cheapest option). As per media reports, the rising inflation has caused Jubilant FoodWorks, which runs Domino’s outlets in India, to see a 70% slide in profits in the first quarter of CY23.
Competitor Pizza Hut has launched its Flavour Fun range, offering 12 new pizzas in five different sauce flavours, starting at a price of Rs. 79, which is easy on the pocket, especially targeted at young consumers. “We further stabilise costs by rolling out value deals from time to time such as 1 Plus 1 (two personal pizzas at Rs. 299 each), a Hut Treat Box for four starting at Rs. 799 and My Box deals starting at Rs. 229 for solo consumption. While food inflation is projected to persist, QSR brands must demonstrate agility and innovation in their offerings to effectively engage with customers,” says Merrill Pereyra, managing director, Pizza Hut India Subcontinent. Despite the competitive nature of the QSR market, he remarks that the rising purchasing power of consumers opens up promising opportunities for brands to expand.
Get the drift?
Crisil says the cost of a vegetarian thali rose 28% in July on the back of high tomato, onion and other raw material prices. With consumers also cutting back on eating out and discretionary spends, brands are bending over backwards to serve offerings at attractive prices to drive up footfalls .
Other fast food chains in the country too are rolling out value meals and snacks to appeal to price-conscious consumers. Burger King India announced its latest value range of ‘Tasty Meals’ starting at Rs. 99 to encourage dine-in consumers, while KFC too has unveiled its snacker range, featuring its most popular offerings like the classic chicken roll and chicken popcorn, at Rs. 99. McDonald’s India (West and South) also recently unveiled a campaign showcasing its easy-on-the-pocket McSaver meals at Rs. 179. McDonald’s India (North and East) made headlines with its decision to temporarily drop tomatoes from their products due to quality concerns and supply shortage.
This is just the second quarter of the current fiscal, but Devangshu Dutta, CEO, Third Eyesight, observes that the trend among QSR brands is to absorb costs or reduce expenses rather than raise prices and risk a drop in footfalls. Most brands are hoping to keep consumer demand up and make up for the loss in margins in the second half of the financial year.
That would be a 1% hit on margins on account of inflation, say experts.
Pramod Damodaran, CEO, Wagh Bakri Tea Lounge, has a slightly different take. Noting that food input cost is just one cost item for a QSR brand, he says that most companies make gross margins of over 60% on each order. These margins are without taking into account costs of labour, rent, etc. “The new price points are designed to drive more walk-ins and new customers. The menu is vast enough to get consumers to eventually spend more after they walk in. Customers often buy a small burger but that is not a substantial meal and so they need to buy fries or other sides, which have higher margins. Most QSR chains find a way to pass on the inflation-added cost to the customer,” says Damodaran. For example, he says, if the inflation rate is at 5% this year, restaurants may increase the price of certain items on the menu by 3% for the first six months and by another 3-4% in the next six months, thus covering the additional input cost.
Focus on efficiency
The fact that brands have launched affordable, lower-priced offerings may have landed them in a slightly tricky situation, says Rajat Tuli, partner, Kearney. “The value offerings at lower prices have encouraged trials and new customer walk-ins, but existing customers are also opting for these. That has resulted in a lower average ticket size, while the cost to serve stays the same. Order volumes have grown but average order values have stayed the same or reduced, which could be a challenge if the trend continues,” he points out, though he adds that gross margins in the current quarter have shown improvement over the last quarter. Fast food chains need to bring in more efficiencies in cost, streamline processes and introduce more digitalisation.
It is also something that McDonald’s India (West & South) is working towards, says MD Saurabh Kalra. Noting that inflation is not new to the company in India, Kalra explains, “Recognising that food inflation is a domestic truth, over the years, we have developed tools and strategies to manage it effectively. This is attributed to our strategic management of our supply chain and product mix, as well as our cost initiatives. We have been successful in managing our costs and in maintaining healthy margins.” Further, with the reality of global warming, there will be pressures on agricultural output.
Kalra argues that enhancing efficiency and adoption of new technology are the only ways to create long-term solutions, something that McDonald’s has been doing globally too.
(Published in Financial Express)
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August 3, 2023
Viveat Susan Pinto, Financial Express
August 3, 2023
The country’s largest organised retailer, Reliance Retail, is working on a new value retail store format called Yousta. The move will pit Reliance Retail directly with Trent’s Zudio, Landmark Group’s Max Fashion and Shoppers Stop’s Intune, informed sources have told Fe, as growth prospects beckon in the category.
Reliance Retail will roll out the new Yousta stores of around 5,000-10,000 sq. ft. in size in cities such as Hyderabad, Delhi and Mumbai in the initial phase, the sources said.
Pricing will be competitive at under Rs 500 per unit, targeted at youth, children and families.
A gradual ramp-up of stores across more metros and cities will happen in the months ahead, as Reliance Retail is looking to take store count of Yousta to around 200-250 over the next few years. The retailer is speaking to malls and high streets across cities to lease space for the new format, persons in the know said. Executives at Reliance Retail were not immediately available for comment.
However, some experts see Reliance Retail’s move as a belated acknowledgement of a segment that constitutes nearly 90% ($45 billion) of the estimated $50 billion domestic fashion market. The premium end is pegged at 10% ($5 billion) of the domestic fashion market.
“Much of the attention of apparel retailers in recent years has been at the top-end of the fashion market. While affluence at the top-end is high, the space has also become crowded with local and international brands,” says Devangshu Dutta, chief executive officer at Gurugram-based retail consultancy Third Eyesight.
“The larger value retail market has consumers in the middle and lower middle class who while being conscious of their budgets are also aspirational,” he says. “With the right product and pricing, volume sales can be significant in this segment,” he says.
Reliance Retail has an existing value retail format called Reliance Trends, which has nearly 2,500 stores across the country. However, the company has been looking to broaden its appeal in the category with more store formats, sector experts said. Yousta is expected to fill that gap, they say.
“The value retail market has long-term growth potential because there are number of consumers who are moving from unbranded to branded products. They are looking at affordably-priced branded goods, which value retailers can cater to,” says Aliasgar Shakir, retail analyst at Mumbai-based brokerage Motilal Oswal.
Some experts say that the discretionary slowdown in the marketplace has pushed apparel retailers to look at the value retail space more closely.
“Intune is a ‘Fashion For All’ format, which is one of our strategic initiatives to cater to young families,” Venu Nair, MD & CEO, Shoppers Stop, said in a recent investor call.
Nair admitted on the earnings call that the apparel segment in general has been witnessing moderation and that the value retail foray could help the company tap into the growing trend for affordable fashion and lifestyle products.
Trent’s Zudio and Max Fashion have big plans for the category. At Trent’s FY23 annual general meeting held recently, the company said it would open 200 stores of Zudio in FY24, much higher than estimates of analysts. In FY23, Trent had opened 117 Zudio outlets taking the total store count of the brand to 352.
Max Fashion will add 100 stores in the next one year, top officials at the company said, taking its total outlet count to close to 600.
(Published in Financial Express)
