Realty race in Maximum City as Tata Group, Reliance Industries keep on shopping

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February 23, 2024

Kailash Babar & Sagar Malviya, Economic Times

Mumbai, 23 February 2024

Tata Group and Reliance Industries, two of India’s largest conglomerates, are vying for premium retail real estate in Mumbai as they extend their footprints, creating rivalry in a city starved of marquee properties. From Zara and Starbucks to Westside and Titan, the Tata Group occupies nearly 25 million square feet of retail space in India. That is still no match for Reliance Industries that control three times more at 73 million sq ft for more than 100 local and global brands.

But in Mumbai, they are evenly matched, having nearly 3 million sq ft of retail space each. That is a quarter of what is considered the most prime retail real estate in the country, and both the retail giants are looking for more.

“In a modern retail environment, most visible locations contain more successful or larger brands. It just so happens that many of those brands are owned by either Reliance or the Tatas,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm.

“Tatas have been in retail for longer but also slower to scale up compared to Reliance which had this stated ambition of being the most dominant and put the money behind it,” he said.

In a market where demand is much higher than supply, developers and landlords seek to separate the wheat from the chaff, experts said. Ultimately, success in Mumbai’s retail real estate scene hinges on a delicate equilibrium between accommodating industry leaders and fostering a vibrant, varied shopping environment, they said. “In the competitive landscape of retail real estate in Mumbai, commercial developers and mall owners often face the strategic challenge of accommodating prominent retail brands,” said Abhishek Sharma, director, retail, at commercial real estate consultants Knight Frank India.

“These big brands, with a significant market share of 40-45% in the Indian retail sector, can easily be termed as industry giants and possess the potential to command 45-50% of space in any mall,” he said. According to Sharma, there may be perceptions of preferential treatments, but the dynamics are complex, and developers must balance the demand from these major brands with the need for a diverse tenant mix.

Tata Group entered retail in the late 1980s, initially by opening Titan watch stores and a decade later by launching department store Westside. So far, it has about 4,600 stores, including brands such as Tanishq, Starbucks, Westside, Zudio, Zara and Croma.

While Reliance Retail started in 2006, it overcompensated for its late entry by aggressively opening stores across formats. Reliance has over 18,774 stores across supermarkets, electronics, jewellery, and apparel space. It has also either partnered or acquired over 80 global brands, from Gap and Superdry to Balenciaga and Jimmy Choo. A diverse portfolio of brands across various segments through strategic partnerships and collaborations helps an entity like Reliance to leverage synergies and enhance retail presence, especially in malls, experts said.

“The array of brands with Reliance bouquet allows it to enter early into the project and set the tone and positioning of the mall,” said a retail leasing expert who requested not to be identified.

“This positively helps the mall to set its own positioning and future tenant mix. It also helps Reliance place their brands in most relevant zones within the mall. This will emerge as a clear differentiator in a city like Mumbai where brands are already jostling for space, which is the costliest in the country,” the person added.

(Published in Economic Times)

Package Deal

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February 21, 2024

Sharleen D’Souza, Business Standard

Mumbai, 20 February 2024

Over the past year, Amul has undergone a transformative journey, evolving from a dairy-centric entity to a comprehensive foods company.

Since 2022, PepsiCo India, too, has embarked on extensive launches in the food category.

Not to be left behind, ITC, which has been introducing an average of 100 fastmoving consumer goods (FMCG) products across categories every year, has also launched a number of packaged food items.

The shelves in stores are packed. The options on e-commerce platforms are dizzyingly aplenty. The consumer is spoilt for choice. Which flavour of oats to go for? What packet of chips to pick? Should one reach out for those mouthwatering frozen snacks or think healthy and opt for atta (wheat flour) cookies?

Companies are pulling out all possible goodies in the form of packed food.

It is a strategic shift initiated during the pandemic and which has proven to be a lasting trend. During the pandemic, when other businesses were curtailing expenses, food companies started launching new products as consumers turned to packaged food.

Amul identified a growing preference for purity during the pandemic, and realised that this preference was here to stay. The company aggressively expanded its product range, venturing beyond dairy into items such as organic dal, atta, and basmati rice.

“We noticed that consumers were moving from unbranded to branded products, and were increasingly seeking out those that would boost their immunity,” says Jayen Mehta, managing director, Gujarat
Cooperative Milk Marketing Federation. Even later, as the world moved out of the pandemic, the preference for packaged foods continued.

Convenience foods, which had gained prominence during the pandemic, sustained their popularity. The widespread adoption of modern retail formats, including brick-and-mortar, e-commerce and quick commerce, proved to be further growth enablers for packaged foods. These formats facilitate the display of entire product ranges to a larger consumer base, says brand expert Devangshu Dutta, founder at Third Eyesight, and that helps.

Growing platter

Today, while Amul’s flagship product, packaged milk, is recording double-digit growth, Mehta says the company is also focusing on premiumisation by introducing artisanal cheese and products such as
Amul High Protein Buttermilk, high protein lassi and shakes, and whey protein.

ITC’s diverse launches, meanwhile, include lump-free Aashirvaad Besan, frozen breads, Dark Fantasy centre-fill cookies, and a variety of Master Chef frozen snacks such as paneer pakoda and onion rings, B
Natural fruit juices, Aashirvaad Svasti ghee, and so on.

Last year, as the focus turned to millets, and 2023 was declared International Year of Millets, the Kolkata-headquartered conglomerate saw a healthy business opportunity. It launched ITC Mission Millet with
an array of millet-based products: Sunfeast millet cookies, Aashirvaad millet mixes, YiPPee! millet-based noodles, Candyman Fantastik chocsticks with millets, and more.

“The company will continue with its focus on consumer-centric innovation and product launches across its portfolio,” says Hemant Malik, executive director, ITC. A finger on the consumer’s pulse, product research and development through ITC’s Life Sciences and Technology Centre, and an extensive omnichannel distribution infrastructure are helping the game.

PepsiCo India, too, is in the race to capture a growing share of the packaged food market. How serious the company is about this can be gauged from the fact that since 2022, its launches in the packaged food category have been the highest since it entered the food space in 1995.

It is not even two months into 2024 and PepsiCo has already launched three flavours in oats: masala magic, herby cheese, and mixed berries.

Last year, it had four launches and introduced seven new flavours in Doritos and Kurkure. And in 2022, it launched five new products and eight new flavours in Doritos, Quaker Oats and Lay’s.

In Lay’s, it went premium and launched Lay’s Gourmet.

Sravani Babu, associate director and category lead at Quaker Oats, says while the category is nascent compared to other FMCG segments, it is growing in double digits. So, the three new flavours were a
considered call.

While “basic oats continue to be the leading segment in the category,” she says, with these new flavours, the company is looking at oats as not just something one eats for breakfast. With PepsiCo keen on broadening the oats portfolio, the bowl is expected to see even more variety in the time to come.

Food in a jiffy

Quick commerce, which promises deliveries within 10 minutes, has also accelerated in-home consumption trends, said Saumya Rathor, category lead of potato chips at PepsiCo India, in an interview.

Consumer habits, she said, take decades to evolve, but the pandemic hastened that shift. So, the convenience-driven traction for packaged foods has persisted. E-commerce and quick commerce have only expanded packaged snack penetration across the country.

In response to the growing demand, PepsiCo India has announced its first food manufacturing plant in Nalbari, Assam, with an investment of Rs. 778 crore ($95 million). Scheduled to be operational in 2025,
this expansive facility spans 44.2 acres and underscores the company’s desire to make the most of the rising consumption trends in the foods sector.

Other food companies, including ITC and Amul, have also embraced an assertive stance, launching products strategically.

The trajectory indicates a promising future for India’s packaged food sector. The shelves are set to overflow.

Size of the packaged foods market: In 2022, India’s packaged food market size was $2.7 billion and it is projected to reach $3.4 billion by 2027

(According to Statista)

(Published in Business Standard)

Venture Capital in Retail – What Attracts Investors to Retail Business (VIDEO)

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February 15, 2024

An insightful must-watch discussion, moderated by Devangshu Dutta (Founder, Third Eyesight), with venture capital fund managers, investors and entrepreneurs in retail on what factors attract investors to retail businesses.

The panelists included Vikram Gupta (Founder & Managing Partner, IvyCap Ventures), Amar Nagaram, (Co-Founder, Virgio), and Vikram Gawande (Vice President, Growth, Blume Ventures).

India’s consumption landscape: Consumers acquire a taste for premium as mass market lags

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January 26, 2024

Sagar Malviya, Economic Times

Mumbai, 26 January 2024

Hindustan Unilever and United Spirits together present a study in contrasts that seemingly reinforces the current purchasing trends in India’s consumption sector. At the country’s biggest consumer-goods and alco-bev companies, respectively, premium brands are flying off the shelves, but mass-priced products remain relative stragglers.

“At the premium and luxury ends, they (consumers) are continuing to spend, continuing to experiment, continuing to do repertoire drinking, especially experimenting with the white spirits, drinking at home,” Hina Nagarajan, managing director at Diageo-controlled United Spirits, told investors in a post-earnings call. “However, Middle India, or the value-oriented consumer, is actually cutting down on the number of occasions (to spend) to manage their money.”

The maker of Johnnie Walker and Smirnoff posted a 12.4% volume decline in the mass-priced segments, while pricier prestige and above categories saw a 10% growth during the December quarter. The Indian unit of the world’s biggest distiller said it expects this trend in purchasing behaviour to continue over the next couple of quarters.

At Hindustan Unilever, the country’s biggest consumer company by both sales and market value, the story isn’t vastly different. The FMCG bellwether said its premium portfolio expanded more than two-and-a-half times the mass segment over the past few quarters.

This trend was seen even in the rural areas that make up nearly half the annual sales at the maker of Dove soaps and Glow & Lovely skin creams. Pricier products now constitute a third of Hindustan Unilever’s total sales. “In rural areas, there are people who can afford and spend money, and hence, the premium portfolio in has also grown well – like it has grown in urban parts of the business,” Rohit Jawa, managing director, Hindustan Unilever, told investors after the December-quarter earnings. “We have always seen that essential and discretionary are the two realities of (the) rural (market).”

Incomes & Business Cycles

This dichotomy in purchase decisions appears to be a function of income disparity and is market-agnostic, experts believe. For instance, rural India that accounts for nearly 40% of the overall FMCG market saw a noticeable drop in demand for a year due to inflation and erratic monsoons. Cities, meanwhile, appear to be at the vanguard of overall consumption demand across categories as urban incomes, typically linked to organised sectors of the economy, are more resilient to business cycles and promise better protection against broader inflationary pressures. “Even if the consuming class, mainly upper and middle class, saw an impact on their incomes, it is still not significant to affect their discretionary spends,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “There is a buffer available for higher income growth and it will hit them later in any economic downturn. At present, it is felt in the lower-income segment.”

Over the past decade and a half, consumer companies expanded sales by pushing both pricier and affordable products. Companies still have budget-friendly options in their portfolio, but lower incomes, especially in rural areas, appear to have dented purchasing power at the budget end of the market. “The real pressure on the wallet is on the lower side, where we do see upgrades are not happening from country liquor to either the popular category or the lower end of prestige,” said Nagarajan at United Spirits.

(Published in Economic Times)

Ram Mandir Inauguration: Brands opt for on-ground presence in Ayodhya

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January 20, 2024

20 January 2024, Mumbai

Economic Times

Brand managers love a viral campaign that gives them a louder voice in the company boardroom, and leverage during appraisal conversations. An event the size and scale of the Ram Temple inauguration in Ayodhya, to be held on January 22, could be a means to get all this. Yet, brand strategists observe that major consumer brands are focusing on an on-ground presence with kiosks and hoardings around the venue-a more below-the-line (BTL) marketing approach instead of going for a mass media moment-marketing campaign that could fetch them the much-desired social media chatter and a subsequent virality badge.

Branding consultants believe there could be multiple reasons for this. For starters, January may not be a marketer’s favourite month to spend on a big campaign considering the Diwali season – when brands incur huge ad spends to drive festive consumption – concluded not too long ago.

Further, “there are various ways to stimulate consumption around religious festivals. A temple inauguration, while a good opportunity for TV brands to perhaps push people into watching the event on a big-sized television screen, is difficult for many brands to find a direct connection with,” says Ambi Parameswaran, founder of Mumbai-based brand advisory, Brand-building.com. “How does a clothing brand ask people to buy more clothes when they’re not attending the event?” he asks, adding that brands in the airline and travel aggregator sector are likely to start mainstream advertising once the temple is open to the public.

“Logistics and infrastructure brands involved in the construction of the temple will also most probably start advertising their involvement in the project in some time, to showcase it as a key part of their portfolio,” he notes.

Management consultant Devangshu Dutta says that “brands looking to get a boost from the event will still be treading cautiously,” as it is one of the most sensitive political issues pre-dating even the country’s independence. “We may see vanilla marketing, such as congratulatory or celebratory billboards from brands. But marketers will not want to hit any off note that can get hugely controversial, so they may avoid going for something clever or humorous,” he adds. Dutta is the founder of Delhi-based strategic advisory firm Third Eyesight.

Shagun Ohri, founder of Bengaluru-based branding outfit, The Satori Studio, says a client recently approached them for a major promotional activity ahead of the launch . “It was a founder-led brand keen to do something around the event as it aligns with their belief system. But they dropped the idea eventually as it would not have directly helped the brand’s sales and marketing objectives,” says Ohri.

With Ayodhya getting a full makeover, marketing consultants are keen to see the tourism trends that will emerge soon and the brand spending that will follow. “A new generation of India has gotten into religious tourism. It will be interesting to see whether popular consumer brands that are planning to set up shops around the temple area will be able to draw customers in droves,” says Ohri. “For a religious place to become a tourist spot requires a lot of work. Tirupati has taken years to create that pull.”

(Published in Economic Times)