Biyani rolls out ethnicity, denies retail slowdown

The Future is changing track. The pioneer of organised retail in India, the Kishore Biyani-promoted Future Group has altered its strategy. From mass to class, the aspirational top-end consumers, to be specific. The undisputed king of Indian retail tells ET that he will focus more on the group’s fashion-driven retail formats like Pantaloon and the latest, Ethnicity, to achieve a turnover of Rs 10,000 crore in 2008-09. Mr Biyani insisted that slowdown is not reflecting from consumer spend. Excerpts:

Despite retail slowdown, you have launched yet another format Ethnicity. What makes you so sure that the concept will click?

Who says there is a slowdown? Although the environment looks gloomy, the Indian consumer is spending on FMCG, consumer durables and garments. Sales do not drop even if the sentiment is negative. Roti, kapda, makaan are essentials and consumer does not stop buying them.

Ethnicity is targeted at the aspiring urban Indian consumer who is looking for exclusive ethnic product-mix during marriages and festivals. It is an attempt to go back to our roots and create a niche category of ethnic wear and products like mojris, semi-precious jewellery, handbags, home decor products, handicraft, etc.

With brands deserting Ahmedabad and two Big Bazaar outlets closing down, are the times too challenging? Do you see a retail graveyard here?

It is a wrong presumption. With Nano happening in Gujarat, there is so much positivity around the state. If Nano can happen, so can Ethnicity. As it is, the success rate of any brand is 20-30%. While we had to wrap up one of the stores because of high rentals and another because we targeted the wrong consumer, we are expanding other formats (in Ahmedabad).

We have plans to set up eight Ethnicity stores across India in the next two years at Rs 8 crore per store spread over 25,000-30,000 square feet. Considering the urban poor customer is devoid of aspiration, a Big Bazaar would not click with them. At the same time, we have realised that we have to focus more on fashion even in Big Bazaar outlets to draw the aspirational `India One’ customer. (Future has re-categorised its target segment under India One, India Two and India Three.)

You are known to experiment with different retail formats. Which one has been your favourite?

All formats launched by the group are close to my heart. At this point in time, Ethnicity and Pantaloon are my favourite formats. That’s where the money is. Pantaloon is overachieving its target. We expect to record a turnover of Rs 10,000 crore in 2008-09 compared to Rs 6,500 crore in the last fiscal.

Ethnicity alone would fetch us revenues worth Rs 25 crore in the first year of operation.
How have real estate prices hit you?

Real estate scenario in a city like Ahmedabad is not inhibiting. In fact, realtors are so welcoming that they let us set shop without expecting any rentals for the first six months. We will add 5-6 million square feet of retail space in the near future.

There was a simultaneous boom in retail and aviation sectors. Now that the crisis looms over aviation sector, do you expect retail to be hit sometime soon? Could retail sector expect lay-offs?

Growth is important to avoid such stagnation. We believe that retail is booming and so there is no question of lay-off at this point. While investors like lay-offs (as it cuts down on the expenditure), promoters believe otherwise. One has to strike the right balance between the capitalist and socialist ideologies. I am a mix of both. A socialist-capitalist and vice-versa.

After Ethnicity, what next?

We are going to open the first stand-alone outlet of John Miller in Mumbai on Friday. The outlet will be located at Kala Ghoda and at the same store where I had started my first journey as an apparel supplier.

CavinKare to take on HUL, ITC in bottled shampoo biz

CavinKare, a Chennai-based unlisted FMCG company known for its Chik brand, has embarked on a strategy which will test its mettle as a low-cost bottled shampoo-maker in the southern markets.
The company, which has successfully competed with multinationals, including Hindustan Unilever (HUL), in the sachet segment to retain leadership in key southern markets, will now have to prove its acumen in the bottled shampoo segment, which is increasingly getting competitive with the new marketing strategy of ITC and other players.
CavinKare’s sub-brand Chik Satin will address the affluent customers, pitting the company against HUL’s Clinic Plus and Sunsilk brands. Chik as a shampoo brand has predominantly been sold in the sachet format and has been positioned as an economy brand consumed largely in the rural market.
In effect, while attempting to address a larger portion of the urban market, CavinKare is also pushing its economy brand to the next level, currently populated by brands from HUL and P&G.
The overall market for shampoos in India is estimated at Rs 2,000 crore a year. The popular segment, where Chik Satin has been positioned, commands an estimated 25 per cent of this market.
According to a CavinKare executive, 75 per cent of Chik sales come from the rural market, while the industry sells only 52 per cent of its shampoo brands in the rural markets.
In the Indian shampoo market, where sachet (7ml) format accounts for 75 per cent of the total sales, Chik has been bringing in 90 per cent of its sales in this format.
CavinKare’s Executive Director Ramesh Viswanathan said, “Chik Satin is not a premium or niche segment product. It is slightly higher in the value chain.”
Experts believe that what CavinKare is attempting now is a bit risky and has not worked in the past. However, the earlier failures were at a time when affluence levels in the Indian market were far lower than what it is now. “Traditionally, when brands tried to move from the bottom of the pyramid to the top, they have not succeeded. For instance, Lux to Lux International and liquor brands such as Bagpiper to Bagpiper Gold. But then, times have changed. Those were when the economy was liberalising and now it is liberalised. It may work. We just have to wait and watch,” said Madhukar Sabnabis, Country Head (Discovery & Planning), Ogilvy & Mather.
The pricing of the new product is also done with an intention of taking on market leaders such as Clinic Plus. Chik Satin is priced at Rs 56 for a 200-ml bottle, while Clinic Plus is priced at Rs 63 and Sunsilk at around Rs 87 at the higher price point.
Sabnabis cites another recent success — Ponds Age Miracle, an anti-aging product that has found a niche for itself.
Santosh Desai, CEO of Future Brands (part of Kishore Biyani’s Future Group), believes that there is no one stand on whether what CavinKare is attempting will succeed. “When you attempt to move the economy brand up the value chain, it will not work if you peg it on price or as a category about status. It would be a numerator game, if value is equal to what you offer divided by the price.”
Desai cities the success of Lifebuoy soap that had managed to move up the value chain from being an economy product for several decades.
CavinKare has budgeted Rs 4 crore on television commercials to promote the new Chik Satin over a four-week period.

KB’s Fair Price Shop

Pantaloon Retail India Ltd is moving into the smaller retail store format through their launch of the KB’s fair price shop. It is going to be a no-frills, fair price shops chain; with a tag line of “Saare Jahan se Sasta” the new retail chain would alter a few rules of the game in India. Subhiksha is "Bachat Mera Adhikar", while KB's (Kharido Becho) fair price shop wants to be "Saare Jahan Se Sasta" retailer in India. KBFP’s target should be to provide essential items cheaper than the market price and to look at a 20% to 30% market share of the neighbourhood retail market.

With each shop measuring an average of 2,000 square feet retail space, it will be based on neighbourhood, convenience, stores concept. Stocking only a limited variety of items required to meet daily needs of its customers, the chain proposes to offer merchandise at 10% lower prices than market for national brands and up to 20% lower than market prices for local brands. ¨

KB’s fair price shop needs to differentiate itself from Competition and then maintain a sustainable competitive advantage by offering consistency in service efficiency and product quality. ¨

These are the two areas in which Subhiksha will be lagging behind and hence it is essential to make it an immediate Point-of-Difference. ¨ Subhiksha is positioned as “Lower Priced” store as seen from the results of the primary research in the following sections. ¨

The Indian consumer however wants “Value for Money” and not “cheap” products/brands. Hence this is how KBFP should position itself against the Kiranas and organized players like Subhiksha