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August 10, 2024
Faizan Haidar, Economic Times
10 Aug 2024, New Delhi
Japanese apparel major Uniqlo’s sales growth in India slipped by more than half to a still-strong 32% last fiscal year while its net profit expanded by 25%.
The Indian unit of Asia’s biggest clothing brand posted a net profit of ₹85.1 crore for the year ended March 2024 with net revenues of ₹824 crore, according to its latest filing with the Registrar of Companies (RoC). Uniqlo India had posted a profit of ₹68.1 crore with sales of ₹625 crore in the previous year. Its on-year revenue growth was 69% in FY23 and 64% in FY22.
Uniqlo opened its first door in the country in September 2019, but lockdowns and other constraints during the Covid-19 pandemic delayed its store expansion plans. At present, it has about 13 outlets in the country. Overall retail sales growth rate across segments such as apparel, footwear and quick service restaurants (QSR) fell year-on-year every month in FY24, reflecting comparatively weaker consumer sentiment.
Last fiscal’s comparatively slower 4-7% growth rate sustained this year as well, with May and June seeing a 3% and 5% rise each, Retailers Association of India (RAI) recently said after a survey of top 100 retailers.
“The market was sluggish for the industry as a whole last year, and that will reflect in practice every brand P&L, whether Indian or international,” said Devangshu Dutta, chief executive of retail sector consultancy Third Eyesight. “However, any brand that is committed to the Indian market as a strategic market for its future growth will take the ups and downs in its stride,” he said.
“Uniqlo’s expansion plans now include store sizes that would be smaller both in the cities it is already present in and in newer cities, which should help it tap into the demand at operating costs that are appropriate to each location,” Dutta said. Inditex Trent, Spanish fast-fashion major Zara’s joint venture with Tata that runs 23 stores in the country, saw its revenue rise 8% to ₹2,775 crore last fiscal, significantly down from 40% growth a year earlier, according to Trent’s annual report. Its net profit fell 8% on year to ₹244 crore.
Over the past decade, global brands Zara and H&M have become market leaders in the fast fashion segment in India.
Uniqlo has said India is one of the most priority markets where consumers are increasingly shifting from ‘fast fashion’ to long-lasting essentials and functional wear. As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Uniqlo is globally popular for functional basics like T-shirts, jeans and woollen wear, unlike fast-fashion rivals which are associated with designs that move quickly from the catwalk to the showroom.
(Published in Economic Times)
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May 6, 2024
Sesa Sen, NDTV Profit
6 May 2024
Starbucks Corp., the world’s largest coffee chain, posted its slowest sales growth in India since the pandemic. The coffee giant is struggling to bring in as much business as it has in the past as consumers reduce their visits even as it prepares for ambitious store expansion in a tea-drinking nation.
The India unit formed in partnership with the Tata Group clocked net sales of Rs 1,218 crore, a growth of 12%, during the year ended March 2024, according to Tata Consumer Products Ltd.’s latest investor presentation.
The Seattle-based retailer experienced a compounded annual growth rate of 21.89% between FY17 and FY23 in the world’s most populous nation. The only exception to this trend was in FY21, when sales plunged by 33% as shops were forced to shut down due to the impact of Covid-19.
“Tata Starbucks had a subdued quarter given the overall trends that we’re seeing in the QSR [quick service restaurants] business,” said Sunil D’Souza, managing director and chief executive officer at Tata Consumer Products.
He, however, indicated that March was an improvement over February, and April was even better than March. “So, we see a better trend right now, and we remain focused on the larger India opportunity.”
Tata Starbucks Pvt. Ltd. took 11 years to scale its operations to a revenue of over Rs 1,000 crore. Although the joint venture turned positive at the EBITDA level for the fiscal year 2023, it continues to be loss-making. In the year ending March 2023, Tata Starbucks posted a net loss of Rs 25 crore on a turnover of Rs 1,087 crore, according to filings with the Registrar of Companies. The net profit figures for fiscal 2024 are not available yet.
The coffee chain has seen its popularity take a major hit over the last two quarters, ending in March and December, with a meagre 7% increase in sales during each period. This is a marked shift from its historical track record of double-digit growth, suggesting that consumers are now looking for more budget-friendly cafe experiences.
“Consumers have turned slightly more conservative with their spends, which is affecting both the frequency and of transactions,” according to Devangshu Dutta, head of retail consultancy Third Eyesight.
According to him, new store openings rather than an increase in sales at existing ones could drive growth.
The other reason is that the coffee market is more competitive today, with most local peers selling at price points lower than Starbucks, Dutta said.
Starbucks competes with Bengaluru-based Cafe Coffee Day and foreign entrant Barista, among others, in the country’s $400 million market. It also faces competition from private equity-backed Third Wave and Blue Tokai, which have opened about 200 stores between them in the last three years.
Since opening its first cafe in October 2012, Tata Starbucks’ store count has grown to 421, implying that on average, each outlet generated roughly Rs 3 crore in revenue from coffee, snacks, and merchandise sales in FY24.
The dwindling sales come at a time when the company plans to open 1,000 cafes in India. To meet the target, it seeks to open one new store every three days.
Starbucks added 29 net new stores between January and March, achieving a record of 95 stores opening in a year, according to the presentation.
The coffee chain had earlier said it plans to enter tier-2 and tier-3 cities in the country and increase the number of its drive-through, airport-based and 24-hour cafes. It also aims to double its headcount to 8,600.
To lure consumers back after a rough start to the year, the coffee giant is launching new products like a boba-inspired summer beverage.
“Over the past 11 years, the India market has grown to become one of Starbucks’ fastest-growing markets in the world,” Laxman Narasimhan, chief executive officer, Starbucks, said in a statement during his India visit earlier this year. “With a growing middle class, we are proud to help cultivate the evolving coffee culture while honouring its rich heritage.”
Starbucks faces challenges not only in India but also globally. A disastrous fourth quarter that saw a slowdown in store visits promoted Starbucks Corp. to lower its expectations for its full-year sales and profit. Its revenue for the January–March period dropped 2%, the first since the end of 2020.
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April 24, 2024
Mumbai, 24 April 2024
Sharleen Dsouza, Business Standard
With the Supreme Court cracking down on Patanjali over misleading advertisements, the advertisement industry is concerned. While industry players acknowledge that some degree of exaggeration in claims is common, the Supreme Court’s firm action signals an impending shift.
On Tuesday the SC said that its interest was not limited to Patanjali but all those Fast-Moving Consumer Goods (FMCGs) and drug companies that mislead consumers through their advertisements.
And Patanjali is not the first one to have crossed the line of puffery. There have been many cases in the past, like Horlicks Ltd versus Zydus Wellness Products where the former sought for a permanent injunction against Zydus for the broadcast of false advertisement.
Similarly, in Rajendra versus Union of India, the Bombay High Court restrained any good or service sale claiming it had supernatural and miraculous powers.
“Puffery in advertising is as old as advertising. There is always an element of exaggeration. Over the years, the government has looked the other way. Guys on the ground should take companies and brands to task and have largely been in cahoots with most of the brands,” said Sandeep Goyal, chairman and managing director of Rediffusion Brand Solutions.
Goyal believes that the SC coming down heavily on Patanjali would be a deterrent for other brands. “Puffery or not is for someone to figure out. In most food products, FSSAI doesn’t care. Who is to identify these ads? I think the SC has done something. This won’t deter other brands and get them to make claims which are within the realm of what is correct,” Goyal said.
A question of ethics
Industry experts point out that the primary objective of advertisement is to stimulate desire in the consumer’s mind. This happens by hook or by crook.
“Misleading a consumer has become inherent in advertising to a certain extent. I think this is dangerous when it comes to food, as it is basic nutrition. If you are embedding misleading information or mis-stating facts in ads then it has a real impact on whoever the customer or consumer is of that product. It is good that the issue has been highlighted,” said brand expert Devangshu Dutta, founder of Third Eyesight.
Then there is the Advertising Standards Council of India and discussions about ethical standards within the industry.
But Dutta believes there is a clear disconnect between what advertisements should say and what actually transpires. “I hope it gets acted upon from the government’s side as well. Self-regulation doesn’t seem to work. We all wish that it works, but it doesn’t. If it becomes more stringent, then it will be good overall,” he said.
While FMCG players are concerned about the stringent action of the Supreme Court, they believe that this will lead to improved advertisement regulation.
Ensuring compliance
Speaking on condition of anonymity, a senior executive of a leading FMCG company said, “The industry is already disciplining itself due to the growing consumer awareness, stringent ASCI guidelines and the impact of influencer marketing. This will further ensure that misleading ads will be few and far in the future.”
Some companies also ensure that their ads adhere to ASCI guidelines before launching them. “We run our ads with ASCI before we release them. This practice has worked in our favour,” said another executive on condition of anonymity.
In its hearing, the SC had said, “We are of the opinion that the issue relating to implementation of the relevant provisions of the Drugs and Magic Remedies Act and the Rules, the Drugs and Cosmetic Act and the Rules, and the Consumers Act and the relevant rules needs closer examination in the light of the grievances raised by the petitioner…not just limited to the respondents before this court but to all similarly situated/ placed FMCGs who have… misleading advertisements, and (are) taking the public for a ride… affecting the health of babies, school going children and senior citizens who have been consuming products on the basis of the said misrepresentation.”
(Published in Business Standard)
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April 15, 2024
Sagar Malviya, Economic Times
Mumbai, 15 April 2024
Spanish fashion company Inditex said it will launch youth clothing brand Bershka and Zara Home in India this year.
“Bershka will open its first store in Mumbai Palladium, and Zara Home will open in Bangalore,” it said in its latest annual report.
Inditex had launched fast fashion brand Zara in 2010 and premium clothing brand Massimo Dutti eight years ago. Its new offering, Bershka, will pitch it directly against Reliance Retail’s Yousta, which too targets the younger consumer segment.
Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing Western-style clothing. Fast fashion brands such as Zara and H&M became runaway successes soon after they entered the country.
Experts said Bershka’s target consumer profile is mostly teens to mid-20s, slightly younger than that of Zara, which is pitched at 20-40-year-old fashion-driven customers.
“The product assortment is different, with a higher share of knits, fewer dresses and more casual overall compared to Zara, keeping in line with the lifestyles of the customer group. So in that sense it wouldn’t cannibalise Zara in any serious way, though some of the younger set among Zara buyers could migrate some of their purchases to Bershka,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “The biggest question is, can they hit the price points that young Indian fashion consumers want as with domestic brands such as Zudio, Yousta and others, or will consumers overlook higher prices for the style mix and a European brand pull in significant numbers to make the brand viable.”
According to a recent report by Motilal Oswal, the ₹2.5 lakh crore value fashion segment accounts for 57% of the total apparel market and is one of the largest and fastest-growing segments. A substantial untapped opportunity beyond the metros and tier-1 cities, driven by better demographics, higher incomes and greater customer aspiration, has compelled several big players to enter a market that was previously dominated by regional and local operators.
Since its inception in 2016-17, Zudio has seen considerable expansion and reached nearly 400 standalone stores, outpacing most apparel brands primarily due to its competitively priced products with an average selling price of ₹300. Following the success of Zudio, a unit of the Tata Group’s Trent, the segment has seen the entry of national retailers in the affordable youth clothing segment such as Yousta by Reliance Retail, Style-Up by Aditya Birla Fashion and Retail and Shoppers Stop’s InTune.
(Published in Economic Times)
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March 29, 2024
Mumbai, 29 March 2024
Sharleen Dsouza, Business Standard
With the IPL kicking off, speculations are rife that the former Indian cricket team captain M S Dhoni will hang up his boots after handing over the captaincy of Chennai Super Kings (CSK) to Ruturaj Gaikwad. However, brand experts believe this is not the end of the road for Dhoni as a celebrity, and he still has some mileage left even if he completely retires.
Dhoni is expected to continue being associated with CSK even after retirement, according to a media report. In an Instagram post, CSK said that Dhoni has handed over the captaincy to Gaikwad, who joined the team in 2019.
PTI first reported the story of Dhoni handing over the captaincy and quoted CSK Chief Executive Officer (CEO) Kasi Viswanathan as saying, “Whatever Dhoni does, it is in the best interest of the team. I got to know of the decision just before the captains’ meeting. You have to respect his decision; it is his call.”
Brand experts say that his brand value will carry through even after he leaves cricket. “He has done a lot of things, and his brand value will persist even after his retirement. There won’t be a drop in momentum immediately after he retires,” says brand expert Devangshu Dutta, founder of Third Eyesight.
According to Kroll’s Celebrity Brand Valuation Report, in 2022, Dhoni’s brand value stood at $80.3 million and was the sixth-highest-ranked celebrity, while he stood at number 5 in 2021.
Brand experts expect a drop, which is natural, but it certainly won’t be a crash in his valuation as brands would still like to associate with him.
Dhoni is also one of those players who can continue to build brand equity even once he retires completely from the sport, according to experts.
Also, the 42-year-old is one of those sportsmen who announced his retirement in phases. He announced his retirement from international cricket on August 15, 2020, and had earlier retired from Test cricket on December 14, 2014. This move, according to brand experts, has also worked in his favour as it continued to help him build his brand equity, and he did not see a sharp drop overnight.
“I think he still has some mileage left,” said brand expert Santosh Desai. He explained that Dhoni’s connection with people is still strong. However, he did not rule out a drop in his valuation but said it wouldn’t be a huge drop.
N Chandramouli, CEO of brand insights firm TRA Research, also believes that the former Indian cricket team captain has been wise with his investments.
“He will continue to remain relevant, and brands will continue to want him. He won’t be a celebrity who goes from hero to zero overnight if he retires after the IPL,” Chandramouli said.
He also explained that Dhoni is going out at a time when he is still performing and added that the question people will ask him at this stage is why now and not why not.
“Dhoni is one of those guys who has a lasting impression which will continue to appeal to brands,” according to Chandramouli.
(Published in Business Standard)
