In this weekend’s Stock Insights, we discuss Titan, one of India’s most successful consumer brands.
We have already covered Titan in the past. We all have worn Titan watches at some point in our lives, and so have our parents. But this story isn’t about its “watch” journey. Instead, this story is about a company that ventured into the jewelry business, and today its jewelry division “Tanishq” accounts for roughly 80% of the company’s revenue.
So, let’s get going.
It was May 2000 when Titan’s Managing Director, Xerses Desai, was absorbed in thinking about its future. He was looking for a worthy successor to carry on his legacy for a long time, but selecting a leader to lead the company was no easy task.
He finally narrowed his choices down to two. On the one hand, there was Bhaskar Bhat, an IIM Ahmedabad Grad with experience working in multiple divisions. On the other hand, Vasant Nangia, an IIM Calcutta Grad, was Tanishq’s Vice President of Marketing and a hands-on man. Xerses selected Bhaskar Bhat to lead India’s largest watch company after much deliberation. Nangia was asked to take over as COO. However, things didn’t turn out well post this decision, and Vasant Nangia resigned.
“On that day, the entire sales and marketing team resigned.” What happened shook the company to its core. Many people believed that this was the final step in Titan’s closure of its jewelry business. “After all, we were in our fifth year of losses at the time,” says Jacob Kurian, COO of the jewelry Business.
And rest is history, Bhaskar Bhat, with a new and admittedly inexperienced team, seized the control right away, steadied the ship, turned the loss-making Tanishq into a profitable company, and wrote a turnaround story for the ages. They took a customer-centric approach and grew to become India’s most trusted jeweler.
Titan’s Jewellery Division – Q3 Business Update
Titan’s jewelry business grew 37% year on year. The demand for the jewelry increased in October and November, respectively, due to festive solid demand and the postponement of the wedding season. Due to increased footfall and higher wedding demand, a similar trend continued on December 21.
Tanishq’s regionalization winning strategy in focus markets contributed to higher new buyer growth than overall buyer growth. Ticket sizes were 15% larger than pre-pandemic levels. Tier-1 town contributions continued to rise and were approaching pre-pandemic levels. Both the plain and studded categories grew by double digits. Compared to the same period last year, the studded share of the overall pie has increased slightly. Tanishq’s network expansion of 14 stores (net) includes two new locations in Dubai, at the Dubai Mall and Al Barsha. Titan had 428 jewelry stores at the end of the third quarter.
On the other hand, Titan’s subsidiary, CaratLane, an online jewelry company, did exceptionally well! Their revenue increased by 64% year on year, aided by omnichannel solid offerings.
In December, the company opened its first airport store in Bengaluru and launched Caratlane’s US website. The ‘Dunes’ collection, which debuted during the quarter, was well received. CaratLane opened six new locations during the quarter, bringing the total number of locations to 129.
How are the other divisions performing?
The watches and wearables segment saw a 28% year-on-year increase in revenue during the quarter, with multi-brand channels (both online and offline) growing handsomely in the quarter, owing primarily to the Titan brand.
The premiumization journey is assisting in increasing value. Sales from trade and large-format stores (LFS) grew the fastest, followed by retail. Tier 2 and Tier 3 towns outperformed metros. Titan Smart Watch, which was released in late December and includes Alexa, heart rate, sleep and stress monitors, V02 measurement, and a period tracker, has received an extremely positive response from customers.
Titan’s new releases during the quarter included ‘Titan Maritime II’ and ‘Raga Love Alf.’ In October, Titan Mechanicals saw a 2.5X increase in sales after a high-impact television ad campaign featuring a fresh and young take on the company. In addition, through a series of TV commercials and social media conversations, Fastrack unveiled its new brand proposition for Generation Z, ‘You Do You.’
During the quarter, Sonata debuted its flagship collection, ‘Unveil,’ which features skeletal quartz designs for both men and women. In addition, Titan added 20 new (net) watch and wearables stores, bringing the total number to 809.
The eyewear segment increased by 27% year on year, owing to significant network expansion, with 53 stores (net) added during the quarter, bringing the total number of eyewear stores to 682 at the end of the quarter. Sunglasses and frames also contributed to the segment’s growth, increasing demand seen in international brands.
‘OfficePro,’ a one-of-a-kind visual solution in office lenses, was launched, covering distinct work profiles of meetings, laptops, and desktops with salient features of absolute power for specific working distances, improved intermediate and near fields, and peripheral vision with no distortion. Finally, in the third quarter, Titan Crest launched ‘Crest Bold,’ ‘all acetate’ material eyeglasses.
Their fragrance and accessories business also performed exceptionally well. SKINN’s new ‘Feel Your Best’ campaign and Fastrack women’s bags’ digital campaign for the Autumn-Winter collection on the theme of ‘Wear it Your Way’ were both well received. During the quarter, all retail and department stores experienced strong growth.
‘Taneira’ opened two new locations (Noida and Bangalore), bringing the company’s total store count to sixteen across seven cities. During the festive season, the brand’s launch of multimedia elements and the Navratri ‘#9days9colors’ micro-influencer campaign received positive feedback from customers. In addition, Taneira launched the ‘Tussar Festival campaign in December ’21, intending to raise awareness about tussar silks.
Indians adore gold more than any other people on the planet. So even the poorest Indian will try to obtain even the smallest trinket that serves as both jewelry and the safest long-term investment. There are 10 million weddings in India every year, and people spend close to 2-3 lakhs on bridal jewelry.
We believe with the increasing aspirations of Indian’s, increased sales through the e-commerce platform, a shift to branded players. In addition, expansion of retail footprints in tier 3 and 4 towns, and the likely stabilization of gold prices at lower levels, are expected to drive volume growth for jewelers, which will help maintain the long-term structural story of India’s retail and jewelry industries.
However, as with such companies, there are risks like rising gold prices which could impact the profitability, then slowdown in discretionary consumption due to stringent lockdown restrictions resulting in store closures and increased competition in highly penetrated categories from unorganized jewelry players.
So we will have to wait and see how the company develops from here on out.