The threat to Titan

Boby Kurian

Almost a decade after driving the State-owned watch maker, HMT, into the hinterland of the domestic market, Titan Industries, producers of the eponymous brand of watches, has remained alert to the threat from foreign labels following the removal of quantitative restrictions on the import of watches.

Has it held its own? Perhaps, as it controls over 50 per cent of the organised watch sector in the country. Even last year, the company braved difficult conditions and posted impressive double-digit growth. The sales grew from 5.90 million to 6.68 million units, a nearly 15 per cent jump, resulting in a larger value share of the watch market that declined in terms of volume.

But the devil is in the details. The income from the watch division crawled from Rs 468.22 crore to Rs 487.48 crore last year, creeping up four per cent, against the 10 per cent jump in the companys overall topline. Titan is seen leaning heavily on its branded jewellery division - Tanishq - to duck troubled times for its watch business. Tanishqs topline vaulted 32 per cent last year to touch Rs 203 crore and turned profitable for the first time. The income from Tanishq is expected to shoot up 60 per cent this year even as watch sales may stay flat, indicating the companys growing dependence on its jewellery division, floated 10 years ago.

In context, Titans fear about the expanding ambit of global watch brands appears real. International labels such as Esprit, Swatch and Citizen, hitherto restricted to the premium end, have entered the mid-priced segment, bracketed between Rs 1,200 and Rs 3,500, as they find it a tempting plank to garner volumes in the local market. Titans market share in this segment, estimated in the region of three to four million units annually, is a whopping 75 per cent. It is our bread and butter. Almost 65 per cent of the Titan brands value and nearly one-third of our entire watch business is locked in this segment, says Bijou Kurien, Vice-President (Marketing), Titan Industries Ltd. The trouble is heightened as its old ally, Timex, is making a spirited comeback, hitting hard at the mid-priced market.

The Indian watch market is estimated at 25 million units annually with 12 million falling in the organised sector, valued at approximately Rs 1,000 crore. At present, Titan looks well-fortified, accounting for 60 per cent of the organised sales. HMT is its closest competitor in numbers, selling around two million watches. But Timexs CEO, Kapil Kapoor, claims his brand has increased its stake from 18 to 22 per cent in the last four months. Titan remains unperturbed. Says Kurien: Maintaining or growing market share wont be a problem. The challenge lies in keeping our value share in the organised sector, which is approximately 60 per cent.

Till now, Titans average purchase value has had a comfortable lead over rival brands such as Timex and HMT. The average value of a Titan watch sold is Rs 1,100, while that of Timex and HMT is Rs 700 and Rs 550 respectively, says Kurien. Interestingly, Timex claims that its average purchase value has climbed steadily to Rs 1,050 from Rs 650 two years ago. There will be some upward movement in the case of Timex mainly because of its shift in focus to the segment priced above Rs 1,000, adds Kurien.

Until last year, Timex in India was seen largely as a player in the mass market, where watches are priced below Rs 1,000, and addressed to budget conscious buyers. The brand recently revamped its portfolio, aiming for a major push in the price bracket of Rs 1,000 to Rs 5,000. Two years ago, about 90 per cent of Timexs sales in India came from the mass market. Now, we sell 62 per cent of our volumes below Rs 1,000, 35 per cent between Rs 1,000 to Rs 3,500 and three per cent above Rs 3,500. We expect volumes in the Rs 1,000 to Rs 3,500 bracket to be the mainstay of our business in the years ahead, says Kapoor.

Titan's problems, analysts say, is partly due to its sway over the mid-priced segment for too long. Rivals now accuse Titan of keeping the segment underdeveloped on account of its sheer dominance. As against an approximate 75 per cent market share in the mid-segment, Titans market share in the mass market, through its Sonata brand, is only between 18 to 20 per cent. Its grip over the premium end is weaker at about 10 per cent. The mid-segment sales, estimated at Rs 400 crore, accounts for 40 per cent of the organised sector sales of Rs 1,000 crore annually. The premium end is valued at Rs 150 crore leaving the rest with the mass market. There is no authentic data on the value of the unorganised sector, which is pegged between 16 and18 million units in numerical terms. The value attached to this sector varies from Rs 300 to 500 crore.

The obvious significance of the mid-priced segment and Titans vulnerable hold on it is not lost on international brands. The price bracket of Rs 1,500 to Rs 3,500 is exciting in volume terms. This segment itself has been underdeveloped due to lack of choice to the customer and due to the relative monopoly of Titan in a closed market, says K. Chandy Jacob, Vice-President (Marketing), Citizen Watches India Ltd. Since 1999, when the Government allowed full imports, the variety and range available in this segment has increased dramatically. With more brands and more choice, the segment itself is growing. So to some extent while we are eating into Titans share, the segment itself has great scope for expansion, adds Jacob.

Our main fight is against brands such as Timex, Citizen, Esprit, and Swatch. Tissots lowest range begins at Rs 3,700,says Kurien. While Timex is reinventing itself in the segment priced above Rs 1,000, others have their base range starting at Rs 2,000. Among these brands, only Timex and Citizen have a sizeable retail presence in the country. Citizen is officially present in 300 outlets. It is present in Delhi, Mumbai, West Maharashtra, West Bengal and the southern States. The brand recently set up an exclusive shop in Bangalore and is poised to open more in the coming year. Timex claims to be present in 5,000 odd retail points, which include 27 exclusive showrooms. The brand is poised for an aggressive expansion by foraying into non-traditional outlets and expects to add another 300 retail points through this route before the current year ends.

Titan is geared up to face the challenges, says Kurien. The company had anticipated the unfolding scenario and made early moves in differentiating the market through a second brand, Sonata, and segmented Titan brands equity in the mid-priced segment according to customer categories. This shielded the brand from a single point attack, Kurien adds. The Titan brand umbrella includes sub-brands such as Fastrack, Dash and Nebula and ranges such as Titan Steel, Raga, Regalia and Classique. Fastrack is targeted at the youth in the age group of 15 to 25 years, while Dash caters to the childrens market. The recently launched Titan Steel is aimed at the trendy urban youth in the 25 to 35 years age bracket. Titans Raga range boasts of silver watches targeted at working women. Most of these differentiated offerings fall at different price levels within the mid-segment. Nebula, being pure gold watches, is priced above Rs 6,000.

Titan is also evaluating the potential to launch a brand priced at Rs 10,000 and above, which offers the ``consumers a set of values distinct from Titan and competitive in that space, says Kurien, adding, We know that we cant fight global brands in image and stature. So we are focused on fashion and style with international quality. Titan is also offering technological innovations on premium analog watches, he adds.

The company hopes to build on its understanding of the local watch market and is now poised to provide a specialised shopping experience based on customer segments. For instance, Titan is likely to open outlets specifically for youth and women. This is still in the experimental stage and could take definite shape next year. Besides, Titan is in the midst of cementing its relationship with customers through focused initiatives on the service front. It has started company-owned customer care centres apart from authorised franchisee service points across the country.

Titan expects to keep global brands at bay by building on its already established strengths and a better understanding of the domestic watch market. The multinationals, however, are hoping to tap consumers search for more options and lead an attack on Titans position as the overwhelming leader in the organised sector.