August 2011 | Vibha Rao

Perfect timing

 

Titan Industries’ impressive success story is literally one for the textbooks. The company has ridden through the downturn by banking on innovation and investing in its brands. Titan’s managing director, Bhaskar Bhat, talks about building desirable brands and becoming a globally admired company

 Titan’s financials have been remarkable. What are the critical factors that have affected the growth and performance of the company in the year gone by?
We have benefited enormously from the Indian economy, which has shown an overall income growth. The propensity to spend has increased and people are looking for good brands, good products and good shops. Titan is uniquely positioned in the conspicuous consumption space with products, brands and categories that are highly accessible, and our extensive distribution network brings us close to our customers. Also, with varied price points through multiple brands, our products are accessible to all income classes.
 
On the financial performance side, we have focussed on certain fundamentals of business, which is looking at margins and cash and not just sales. Our performance has been impressive with respect to growth in margins, top line, use of capital and return on capital. We have been working at margin improvement and making it lean in terms of capital for the past several years now.
 
Titan has put the recessionary trend of 2007-09 behind it. What were the lessons learned from the time and how have these affected the direction the company has taken?
Retail expansion and investing in brands are fundamental drivers in business and even during the recession, we never stopped investing in the consumer. Since we continued to build desirable brands, we have stayed in the consumer’s mind through the difficult period and are reaping more than proportionate benefits now.
 
Through the recession, we involved our employees in overhead reduction exercises across the company. Our high employee engagement level resulted in significantly lower attrition and we shared our prosperity with our employees. In a good period, the multiplier effect of that is even more.
 
The lessons really are to not stray from the fundamentals, to not take short-term decisions and to continue to invest in your brands. Also, we realised that there were sectors and geographies where the slowdown was less evident and we channelled our resources to those areas.
 
Titan’s jewellery business has been on a high despite the rising price of gold. What’s the outlook for this business in the days ahead?
I think the Indian consumer has always embraced gold jewellery and the rise in gold prices has not led them away. The Tata name is a big advantage because during a downturn, customers prefer a trusted name. We have a strong brand image with good designs and retail and the consumer realises the benefit of coming to an organised retailer. The outlook for Tanishq is continuous growth; we want to touch Rs100 billion by 2014-15, three times the size of last year’s turnover.
 
Titan has been trying to crack the global market with its watches and jewellery for some time now, but with modest results. What are the problems confronting the company on this front and how do you plan to overcome them?
We have had a calibrated approach to global expansion. We started in the early 90s with watches and have been very successful in the Middle East and Far East and have stepped out to South Africa recently. We did go to Europe in the 1990s but that didn’t work as the cost of building a brand in Europe is prohibitively high; the same thing happened when we went with Tanishq to the US.
 
What are the other critical challenges facing Titan as it maps its growth agenda, in manufacturing and retailing, with its watches and jewellery, and with finding the right human resources?
The biggest challenge is how to sensibly manage this growth. In jewellery, the agenda is to take the share from the current 4.5-5 per cent up to 10 per cent, which is being done by establishing large format stores, and increasing the diamond jewellery percentage.
 
In watches, making good watches is important, but making good-looking watches and continuously innovating is also important. So the challenge is to make watches continually attractive for customers as an accessory.
 
The challenge in manufacturing is to continually improve productivity. We have a very high wage bill in manufacturing and the challenge is how to add value, considering the looming threat of Chinese competition.
 
The entire retail challenge in jewellery is how to enhance customer experience through people in the store and recruiting, training, retaining and motivating — the whole gamut of HR is very important.
 
We have relatively less of a challenge in HR, not just because of the fame of our brands, but also because we are now seen as a successful company and a very good economic engine.
 
Titan has had a more-than-interesting journey to reach where it has, and it has realised its ambition of reaching the $1-billion milestone in revenues. How much further have you now set your goals and what will it take for the company to get there?
The next stop is at $3 billion by 2014-15. We aim to significantly increase the diamond jewellery range, set up large format stores and make fine jewellery desirable to the young. The conscious idea is to expand at retail and become a lifestyle company. We plan to add a new category every two or three years and are continuously exploring new categories like footwear, writing instruments, fragrances, leather, etc. Luxury could be our next big step.
 
Innovation has been a running theme with Titan for a while now. What kind of processes and resources are driving this effort, and are you satisfied with the benefits you have secured?
Earlier, innovation was restricted to the product design and the manufacturing R&D teams. Today we are increasingly driving the idea of innovation deeper and wider in the company. We have an Innovation School of Management and an Innovation Council; we are also partnering with Indian Institute of Management, Bangalore, to create innovation champions in the company. We had an Innovation Bazaar with 120 counters over two days to showcase innovation. We have many reward and recognition programmes to facilitate cross-pollination, build the science of innovation and popularise innovative technologies.
 
Our most famous innovation is the Titan Edge watch. Our entire retailing effort and the jewellery business model are other innovations. We have had several product innovations: The Bhagwad Gita pendant, the Jodha Akbar collection, the Taj Mahal collection, HTSE, Raga, the whole Fastrack range, etc. HTSE, our latest offering, is the product of Innovedge, a technology innovation cell in the watch division.
 
How does Titan see itself evolving over the next five years? What are the company’s plans and projections?
Our first target is to reach $3 billion, which is going to happen in 2014-15. More important is to take advantage of the continuing prosperity of India, and become very strong in our three categories and create a strong relationship with our 120 million customers. We have a unique combination of manufacturing, marketing and retailing across several categories and are market leaders in three different industries. We want to be India’s most admired lifestyle company and eventually, a globally admired lifestyle company.

This interview is a part of the cover story of the August 2011 issue of Tata Review in which ten Tata CEOs talk about the past, present and prospects of the companies they head:

Overview

Gearing up for growth: RS Thakur, Tata AutoComp Systems

Racing ahead: Praveen Kadle, Tata Capital

‘We’re bigger and better’: R Mukundan, Tata Chemicals
‘We have to keep doing different things’: N Chandrasekaran, Tata Consultancy Services
‘Jaguar Land Rover has been the big positive’: Carl-Peter Forster, Tata Motors
Powering up for the future: Anil Sardana, Tata Power
True mettle: HM Nerurkar, Tata Steel
The challenge of transition: N Srinath, Tata Teleservices
Building on the positives: Sanjay Johri, Voltas