Sagar Malviya, Economic Times

Mumbai, 20 May 2024

Spain’s Inditex, the owner of fashion brand Zara, saw its slowest ever sales growth in India, excluding the pandemic year, in FY24 as the world’s largest fashion group faced rising competition from global rivals in the clothing market that is increasingly getting cluttered.

Inditex Trent, its joint venture with Tata that runs 23 of Zara stores in India, saw revenue rise 8% to Rs 2,775 crore last fiscal, significantly down from 40% growth a year ago, according to Trent’s annual report. Net profit was down too at Rs 244 crore, an 8% drop.

Zara has been a runaway success since its arrival in the country more than a decade ago but after initially doubling sales every two years, the brand’s rate of expansion had come down in the past few years. “The market is very competitive, and the challenges are real. Nevertheless, the opportunity pool and the size of the market means that there is space for multiple successful players. Trent remains well placed to navigate this next phase of growth by leveraging our platform and growth engines,” P Venkatesalu, chief executive officer at Trent, said in the report.

Trent that runs Westside has shifted focus on its lower priced fast fashion brand Zudio, which opened about four new stores every week on average last fiscal to take the total store count at 545 doors. Trent also has a separate association with the Inditex group to operate Massimo Dutti stores in India. The entity saw revenues rise 14% to Rs. 102 crore.

Experts said consumer demand has been affected in the past couple of years with brands having to work extra hard to get same-store growth and much of top-line growth has come for brands from store additions.

“Most international and premium Indian brands are competing for a relatively narrow slice of the population pie in the larger urban centres. While the Indian market is a bright spot amid the gloom in the world’s major economies, global pressures are likely to play a part in the confidence among brands to invest in expansion,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, said, adding there is not necessarily “fatigue” for the brand.

“But if the contest for the consumer’s attention is more intense and the consumer’s choices are more fragmented across a wider choice of brands, that will definitely have an impact on any individual brand’s performance.”

Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing. Most of Zara’s back-end and merchandise sourcing are handled by Inditex, while the Tata expertise is mainly for identifying real estate and locations.

(Published in Economic Times)

The ability of fashion businesses to endure and thrive in the face of stiff competition and changing market dynamics is all about adapting to innovation, customer-centricity, and strategic planning. The correlation between high performing fashion business and product innovation is undeniable.

This panel discussion brings Design and Business Heads together to brainstorm on how fashion companies can devise strategies to drive innovation to remain competitive, meet evolving consumer expectations, and stay ahead of the race.

Moderator: Devangshu Dutta, Founder & Chief Executive, Third Eyesight

Panelists:

• Anshu Grover Bhogra, CBO, Forever New
• Diksha Bhatia, Founder, Gioia Co
• Mansi Lohia, CEO, Black Watermelon
• Rohit Aneja, Director- Grapevine Designs, CEO be-blu! Lake Como
• Sean Ashby, Founder & CEO, Aussiebum
• Swikruti Pradhan, Founder, Rustic Hue
• Yogesh Kakar, Chief Product Officer – Tommy Hilfiger & Calvin Klein, PVH Arvind Fashion

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).

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)

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)