FMCG companies get IT savvy

Adoption of projects like ‘push technology’ in sales expected to improve efficiency.

Fast moving consumer goods (FMCG) companies are looking at 10-20 per cent improvement in production and efficiency levels this year because of the adoption of newer technologies to track expansion of product portfolio and manufacturing locations, besides aggregation of godowns and shipment warehouses.

FMCG companies will spend around 10-15 per cent of their net profit on technology. Companies like ITC Limited, Emami and Marico have forayed into diverse businesses in FMCG alone. This has not only led to the rapid expansion of the supply chain but has also increased complexities.

ITC’s manufacturing locations have increased rapidly to about 200 from about a dozen-owned manufacturing facilities for its different businesses. In addition to these manufacturing locations, ITC’s aggregating of godowns and shipment warehouses have grown exponentially in a couple of years.

Emami’s recent investment in IT has ensured finalisation of its balance sheet in a record 35 days against the 60-day norm.

Mohan Goenka, director, Emami, says: “We foresee an improvement of 10 per cent in production and efficiency levels at Emami for financial year 2008-09. This will be achieved by implementing sales and operation planning, demand management and distribution resource planning which will enable system control to forecast sales, check inventories at locations, plan manufacturing resources and logistics to meet the customer schedules.”

Marico, on its part, is investing in better connectivity through enterprise portals, wi-fi enabled offices and in unified communications.

Marico is investing in automation of many workflows like Writeoffs, insurance claims, and media spend management portal.

According to Udayraj Prabhu, head, business applications, Marico: “We have commenced Project Edge, an initiative to improve the budgeting, planning and review systems using the TM1 tool of IBM-Cognos. This will enable us to strengthen our budgeting, planning and review processes by making them quicker, error-free and less tedious. This should lead to a significant saving in time for those involved in these activities.”

The company has also launched HR portal platforms as active channels of communication within the organisation.

ITC Ltd is building an IT infrastructure to bar code its produce at the warehouse itself, even before it reaches the retailers.

This is expected to help ITC keep track of product manufacturing time, thereby enabling implementation of first-manufactured-first-out (FMFO) strategy, which means items manufactured first are shipped out of the factory and the warehouse earlier than products manufactured later.

Among other projects, ITC will also implement this year usage of ‘push technology’ for its sales force.

VVR Babu, chief information officer, ITC Ltd, says: “Each salesman is allotted specific locations and he has to track sales and requirements of all shops and stores of a particular area. We are working on an integrated IT system which will gather and push information onto our salesmen’s laptops so that they don’t have to waste time looking up details on the company portal. For instance, if a salesman is covering 10 outlets of a region, every evening ITC’s systems will push onto his laptop the sales, distribution and requirements of that region and also the target to be met.”

Business Std: Thursday, Sep 11, 2008

To open 30 Xcite consumer electronic outlets in India by 2009.

Impact Retail Private Limited, a newly-incorporated company promoted by West Asian retailer Tony Jashanmal, has drawn up plans for the Indian consumer electronics retail market.

“We plan to open 30 exclusive Xcite consumer electronic showrooms in top 15 cities in the country by the end of 2009 with an investment of Rs 200 crore,” Srikant Gokhale, chief executive officer of Impact Retail, told mediapersons, after inaugurating the company’s first store in India at Hyderabad on Wednesday.

Impact retail has forged a franchise and original equipment manufacturer (OEM) relationship with Alghanim Industries, a Kuwait-based conglomerate with interests in consumer electronics retail, auto retail and manufacturing, to run its stores under the Xcite brand.

Gokhale said each of the multi-branded large-format stores, with a carpet area of over 20,000 sft, will offer over 3,000 products across different categories – home entertainment, small appliances, white goods, computers and peripherals, communication, music, imaging and gaming – from 150 national and international brands.

Besides, it will sell its private label products (excluding laptops and mobiles) under the Wansa brand, sourced from the OEM.

“The company will soft launch eight Xcite stores in cities like Pune and Bangalore by the end of 2008 to fine tune our understanding of customers and the format. With this learning, we plan to expand aggressively for a pan-India footprint,” Gokhale said.

The Indian consumer electronics market is currently pegged at $13.3 billion and growing at 10 per cent a year. Of this, organised retail accounts for 7.3 per cent.

5 Reasons Retailers Replace their Retail Management System

Article From:Software advice

http://www.softwareadvice.com/articles/retail/5-reasons-retailers-replace-their-retail-management-system/

As software selection advisors, my team has talked to thousands of retailers considering a major new software purchase. The vast majority are replacing an existing system - one they’ve used for years. Why?

Why replace what’s familiar? Why pay up for something entirely new when an upgrade is - on paper - less expensive? Why move away from a long-term vendor relationship?

There are plenty of reasons. Here are the top five responses we hear when we ask, “What’s driving you to replace your existing system?”

1. Improve usability and adoption. For many businesses, the system that best matched their functional requirements turned out to be too difficult to use. In an environment where employee turnover is high, poor usability can make it very difficult to get new employees up-to-speed. By far the biggest challenge we hear from buyers is that their existing system is non-intuitive; they are looking for a new system and their primary requirement is ease-of-use.
2. New store growth. It’s a big leap to go from managing one store to managing two, five ten, one hundred or more… This challenge is especially difficult if a retailer plans to manage their inventory and accounting for multiple stores in one single POS software or inventory management system. Often the simple, single-store system that was easy to get going is grossly insufficient for rapid new store growth.
3. Poor tech support. Frequently, buyers come to us when they’ve gotten too frustrated with the poor support they are getting from their existing vendor. Either the vendor was a “one-man shop” that couldn’t keep up, or the vendor “lost its personal touch” as it grew too big, too fast. This impetus for change is even more powerful when poor service is combined with increases in support fees.
4. Integrating multiple channels. Many retailers are moving to support multiple channels - retail stores, e-commerce websites, mail-order catalogs… As they roll out new channels they often implement separate, redundant software systems - one for each channel. We talk to a lot of buyers that are now looking for a new, all-in-one system for multi-channel retailing.
5. Hardware failure. Many retailers have been on the same system for a decade or more. They may have remained patient with an old, DOS-based system, but their hardware eventually gave out. An upgrade to new hardware presents a logical opportunity to bring their software up to current standards as well. Much of the time, they can’t even install a dated system on new hardware and are forced to move to new-generation software.

We’ve heard many other reasons for replacing existing systems, but these are the most common. They also present a good lesson for new retail organizations that want to invest ahead of rapid growth. Consider these challenges and invest in a retail management system that will support your expansion plans.

ITC’s ‘holy smoke’ biz adds to the bottomline

Business Line:

If there is a product that requires lighting up, ITC will make it — cigarettes, of course, but also agarbattis and candles.

ITC officials say that the company’s leap into fragrant incense sticks received a telling comment from Sri Sri Ravishankar — “from smoke to holy smoke.”

In a business context, the contribution of Mangaldeep agarbattis to ITC’s turnover is a trifling Rs 40 crore to the company’s net sales of Rs 13,000 crore. However, the business is growing and is profitable. The three-year-old agarbatti division has now gathered enough momentum to grow, like its safety matches business did, into a medium-sized business in a few years.

Now, ITC wants to replicate the agarbatti model in its new candles business. The company got into this business only in November last year. A Bangalore-based company Wellburn makes the candles for ITC which are packed and exported under the brand ‘Expressions’. In November-March last year, ITC sold Rs 1.2 crore worth of candles.

US market

But the US market for aromatic candles is $3 billion big. Mr V. M. Rajasekhar, CEO of ITC’s agarbatti division, who is also incharge of the candles business, says that ITC saw an opportunity when the US imposed an anti-dumping duty on Chinese candles. The market held by the Chinese is now slowing moving into Vietnam and Thailand and ITC moved into for a bite.

However, why does a company of ITC’s size get into these little businesses? (There are many of them — stationery, greeting cards, and organic manure.) Mr R Srinivasan, Member, Corporate Management Committee, notes that first of all these businesses have a synergy with one of ITC’s main lines of operations — FMCG. Secondly, they are profitable, with prospects to grow to a few hundred crores of sales in good time.

Building managers

But according to Mr Srinivasan, more important than these considerations is the management-bandwidth spin-off that ITC gets from these divisions. “Each division is an incubation centre for a future manager,” Mr Srinivasan told Business Line. Professionals who manage these divisions, like Mr Rajasekhar, learn aspects of brand building, quality control, handling human resources, and above all, working under tight budgets.

Marketers adapt retail trends in changing times

ET: Monday
MUMBAI: Traditional shopping-streets, bazaars and markets, predecessors of India's organised retailing, have emerged as equal contributors to the country's retail eco-system and have become resilient.

India's leading high streets such as Connaught Place or Khan Market in Delhi, Mumbai's Linking Road, Colaba or Breach Candy, Brigade Road in Bangalore, T Nagar in Chennai, Kolkata's Park Street and Pune's F C Road have adapted themselves to cater to the changing aspirations of consumers as well as changing retail trends.

The appeal of the high street is expected to be enhanced in the future, a study conducted by international property consultants Jones Lange La Salle-Meghraj (JLLM) said.

"India's leading high streets have been at the forefront of India retail and consumer change and have demonstrated their resilient nature."

"The prime shopping street rentals across the board in these streets have almost witnessed an increase over the last few years ranging anywhere from 30% to up to 100%," said JLLM country head Anuj Puri in its study "Leading High Streets, Embracing Change."

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Kolkata, Pune, Bengaluru, Hyderabad and Chennai also figure in the pecking order. More than 50% of the top 30 brands with high penetration are of international origin, while the rest are domestic brands.

High streets in particular enhance the retail appeal and attractiveness of a brand. Malls on the other hand, enhance the overall shopping experience for any brand.

But the ability and willingness of the buyers to spend and the catchment area are some of the key factors for growth of these high streets, Mr Puri said.

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Malls in India are taking time to establish themselves as a one-stop destination. Also, the construction of a mall takes time. Moreover, usually high-end malls come up in some distant suburb or off-prime locations.

But high streets do not have that kind of customised environments. Pantaloons CEO Rakesh Biyani said, "High-street shopping areas are existing since ages.

It is expected that they will do well, in spite of organised retail coming in. Retailing is a new phenomenon as far as Indian consumers are concerned. But unfortunately there are not many high streets in India."

The retail supply is limited in inner city locations of high streets. With the customers base exploding over the years, there is a greater demand for products.

Despite the high valuations and the spectre sealing in the non-regularised commercial streets, Delhi's main high streets have been successful in targeting consumers, as well as national and international retail brands.

Innovative retail concepts trigger consumer frenzy

Source: ET, NEW DELHI:

They are making enough noise to pull people to malls, they are the toast of big retail set-ups and are a small but fast growing part of a multi-million dollar industry within the country. Yes, we are talking about recreational retail. From pottery-painting to portrait-making, creating toons or casting gold and silver impressions, there are a variety of concepts that abound in malls or exist as standalone ventures. In fact, a whole new concept of leisure retail beckons the Indian consumer like never before.

“Indian consumers are rapidly upgrading lifestyles and their recreational spend is growing by leaps and bounds. But entertainment options for them are still very limited. That’s when we decided to come up with Colour Factory, places where people can come and be themselves,” says Vikas Verma, Founder and CEO, Colour Factory. The company started operations in January 2006. At its stores, people can choose utility items such as cups and mugs and colour them at will with food-safe colours. These are then glazed, fired and returned to them within a week.

Verma noticed something similar in an outlet in Netherlands and brought the concept to India. “We are a small part of the Indian recreational industry that is approximately worth Rs 20,000 crore. We currently have five stores and plan to have five more by the year-end. The fact that we are growing at 70-80% per annum proves that people are liking the concept. We had set up a temporary camp in Meerut and people there too were extremely excited.”

Besides Verma, there are others who have some illustrious clients for their unconventional retail concepts. Ask Bhavna Jasra, CEO, First Impression, who casts 3D hand and foot-impressions in gold, silver and bronze. Bhavna, who started the concept six years back after chancing upon tiny foot impressions of a friend’s daughter in London, today counts famous names such as Abhishek-Aishwarya, Rani Mukherjee, Anil Kapoor and Subhash Ghai as her clients.

Says Bhavna, “I have been achieving steady 30-40% y-o-y growth over the last three years. It’s an extremely niche concept and I have deliberately kept it class rather than mass.” With a price point starting at Rs 15,000 for babies and Rs 30,000 for impressions of a couple holding hands, the concept no doubt is niche. But that hasn’t stopped its growing popularity and Bhavna has already introduced her second brand under First Impression called ‘Photo Concepts’.

Ditto for Meghna Pant, CEO and founder of Make My Toon, which is into the business of making customised cartoons online. The costs vary from Rs 3,000-10,000 depending on the clients’ needs. “We got a very encouraging response. We started a year back and at that time we barely got one-two orders a month as against 30-40 orders a month now,” she says.

But how effective are these concepts in a market where acceptance of unconventional business models is yet to pick momentum? “We have 50 people visiting our store everyday. The conversion rate is greater than 50%. This is an American concept but today’s Indians are ready for it. They are well travelled and give us great response,” says Surabhi Sawhney, director, StarShots, a store where people can get themselves properly modelled and have photographs clicked.

The fact that these concepts are affordable adds to their popularity. While a StarShots portrait costs anywhere between Rs 2,500 and Rs 5,500, Colour Factory’s products cost in the range of Rs 145-200. But even if they are priced in a higher range, the concept is unique and does draw eyeballs. “When I started six years back, the concept was novel. But now with increasing travel, exposure and awareness, the market has opened up considerably. I get at least 100-200 enquiries a month and convert close to 50% of them into sales,” adds Bhavna.

What’s more, their traction power also keeps mall management in high spirits about housing such retail concepts. “More than footfalls, such stores help drive interest to our mall. That is why they are so popular. We take extreme care before selecting the outlets. They are unique and that’s why they are here,” says Anjali Wadhawan, senior business development manager, Select CityWalk Mall in Delhi. The mall has invited some such stores to start operations in its premises. Their growing numbers and customer interest is a clear sign of the fact that leisure retail is definitely here to stay.

Strong consumer demand should help boost revenues

Growth in consumer spends and value generated by price hikes are expected to deliver steady growth for fast moving consumer goods (FMCG) companies in the quarter ended March, 2008.

The year-on-year average growth in the operating profit growth could be around 18 per cent on a net sales growth about 15 per cent while the net profit is expected to be about 20 per cent.

The better performers in the FMCG space could be Nestle and Godrej Consumer: the former is expected to post the highest growth in net sales over around 17 cent whiel the latter Godrej is expected to post the highest growth in net profit at 40 per cent. Both these firms should benefit from margin expansion resulting from price hikes taken by them to offset cost increases.

ITC may well post a decline in volumes growth due to the recent excise duty hike on non-filter cigarettes. However, together with the FMCG and other businesses, ITC should turn in a growth in net sales of over 11 per cent and growth in operating profit of close to 18 per cent. (Rs crore) Company Net sales Operating profit Profit after tax Q4FY08 E Q4FY07 Change % Q4FY08 E Q4FY07 Change % Q4FY08 E Q4FY07 Change % ITC 3,867 3,466 11.6 1,095 930 17.7 753 650 15.8 HUL 3,627 3,184 13.9 446 362 23.5 397 333 19.2 Nestle 1,054 899 17.2 220 178 23.2 139 111 25.4 Dabur 480 444 8.0 86 73 18.0 75 65 15.0 Marico 359 335 13.0 42 38 12.0 30 27 11.0 Tata Tea 287 251 19.0 18 15 26.2 11 2 636.3 GCPL 210 186 12.9 39 32 21.2 35 25 40.6

Price hikes taken in the detergent category and growth in personal care products business could help Hindustan Unilever deliver a growth in net sales of about 14 per cent and an operating profit growth of about 24 per cent.

Other companies which are expected to witness strong growth in earnings are Dabur, Marico and Tata Tea. However, Dabur's expected net sales growth of 8 per cent and operating profit growth of 18 per cent would be primarily volume-driven as it has not taken any price increase in this quarter.

Marico should deliver a revenue growth of 13 per cent and an operating profit growth of 12 per cent, enabled by the growth in sales of its functional foods and hair care brand Parachute.

For Tata Tea, the impact of profit from Glaceau stake sale could cause a jump of over 600 per cent in net profit. However, its operating profit due to better domestic performance could grow by 26 per cent and net sales are expected to grow by about 19 per cent.