Tata group watches and jewellery major Titan Industries Ltd may induct a foreign financial or strategic alliance partner in case its efforts to penetrate the European watch market alone falter. Titan has targeted sales of 300,000 watches a year within the next two years.
Titan has also accorded Credit Suisse First Boston (CSFB) the mandate for its forthcoming Swiss Franc 30 million convertible bond issue, scheduled for December.
In an exclusive interview with Business Standard, Titan vice-chairman and managing director Xerxes Desai said there was a possibility that Titan may seek an international financial partner to get a firm foothold in the European market by establishing a significant brand presence. Alternately, Titan may form a strategic alliance with a leading watch major worldwide to ensure a brand pull for its watches in overseas markets.
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Desai admitted that the Made in India label for manufactured goods was a question mark when it came to hawking such products overseas. Desai said a better strategy was to establish the brand first and only then reveal to the consumer that it is made in India. We can explain things to the intelligentsia. But that is not what we can do, we have to sell to the common man and that is a problem. A myth has been perpetuated that only Swiss and Japanese watches are the best. But the fact is both of them are dependent for components from outside their countries, Desai said.
Desai said there was a possibility that Titan would make the first moves in establishing a toehold in Europe before inducting a foreign partner. Thereafter, we may even float the company on the international stock exchanges, he said.
We may even go for a strategic alliance, a kind of double-barrel brand with a foreign partner if our own efforts do not yield results. But we would obviously like to first try to go it alone. Europe is costing us a fortune, Desai said.
He added that foreign exchange availability was a limiting factor since hefty marketing costs were required to push the brand in Europe. Some of our shareholders may feel I am taking too long a view on Europe. But I firmly believe that unless Titan establishes a strong European presence, it cannot emerge as a world player. It will take about two years to break even in the European market, Desai said. Titans sales in Europe are estimated at about 100,000 watches per year at present. Desai said the target of 300,000 watches per year is a significant number, which few other watch majors, apart from Citizen and Seiko, can match. At present, Titan sells the bulk of its exported watches in Portugal, Austria, the Netherlands and Scandinavia. A part of the exports in future may also be assembled in Switzerland as a kind of Swiss collection, Desai said.
The domestic market has turned sluggish, and there are new entrants set to come into the market here. The best option to expand is, therefore, to move out and export, he said.
Desai said exports have provided the company a huge learning experience, with Titan gathering manufacturing and marketing experience along the way. Exports are expected to contribute about Rs 70 crore of the companys targeted turnover of Rs 500 crore by the end of the current fiscal.
Desai added that the company has decided to reverse its decision to focus on the upmarket segment. With a huge segment of consumers in the lower end seen as potential Titan buyers, the company has once again decided to target the lower end with models like Sonata, he said.
The domestic strategy, therefore, is clearly to focus on the low end of the market while continuing to grow in the sports and slim watches category in the upper end, where volume growth is not too high. The Indian average consumption is 20 watches per 1,000 population against a world average of 200 per 1,000., indicating the enormous potential for growth in the lower segment, said Desai.
Jewellery under the Tanishq brand accounts for 15-20 per cent of Titans business, and it is opening Tanishq boutiques throughout the country in an attempt to establish Indias first countrywide jewellery shop chain. The company has now got into 22 karat gold jewellery rather than 18 karat only, since Indian consumers tend to prefer the 22 k variety. Titans seventh showroom was set up in Calcutta. The company plans to eventually set up about 40 such showrooms.