Braving the Indian winter – Best of Luck…

Talk of global warming and every one around seems to have one common observation – winter this year is quite peculiar with unusual chillness during the nights and sharp sun rays during the day. I felt this myself when I was in Delhi last week. Thankfully, I was carrying a blazer at the insistence of my colleague, lest I would have certainly caught up with severe flu. Delhi winters are famous for their biting cold – in India, that’s 2-3 degree Celsius. (which is not the case in the US or in Europe!). During the months of Oct – Jan, sales of winter related merchandise see an increase substantially and premium brands such as Benetton and Tommy take advantage of this by bringing some of their iconic international collections that are otherwise non-saleable in Indian conditions. Sales of cold drinks, colas and even ice-cream take a dip during these months and the Brand owners try several promotions to entice consumers to buy their products. While it is usual for consumers in the western world to have ice-cream during winter months (temperature sub-zero), it is not the case in India. I remember the long discussions that we used to have while I was in Bengaluru International Airport – to have or not Ice-Cream as a concept as the sales in winter months was less than half the average in summer months. Though it made business sense (the summer’s steep sales offset the losses in winter), it was always a question on top of mind.

Branded Ice-Cream market in India, according to various estimates is in the range of INR 800 – 1,000 Crores and the super-premium bit is about 25% of the total. Haagen Dazs is the latest entrant in the market with its Indian franchise partner and is expected to open its first outlet in Delhi in Dec. 2009. Although the ice-cream varieties were present in India through gourmet stores and restaurants since quite sometime, it was out of reach even for the discerning middle-class due to its upwardly pricing, that’s 2-3 times than its Indian counterparts. This is mainly due to import restrictions, like in many other products that are brought into the country. The history of Haagen Dazs dates back to the 1920s when Mr. Reuben Mattus, the founder, worked in his mother's business in New York, selling ice-cream in horse-drawn carriages. Later, he spun off the business into a company and named it Haagen Dazs. The business grew rapidly and spread globally as distribution logistics and popularity of the brand increased. In 1983, Haagen Dazs was bought over by the Pillsbury Company of the US. Haagen Dazs has a range of traditional ice-creams, frozen yoghurt, gelatos, sorbets and frozen ice-cream bars in its product range and is the most favorite ice-cream for the Americans.

The prevailing popular international ice-cream brand “Baskin Robbins” story in India began in 1993, when it opened its first store in Mumbai. Today they are spread across the country with more than 300 outlets in over 60 cities and catering to other premium channels like star hotels, leading airlines, malls, multiplexes and top retail chains across the country. The Baskin Robbins story began with two brothers in law- Burton – “Burt” Baskin and Irvine – “IRV” Robbins. Burt and Irv strongly believed people should have choice, so they offered 31 flavours - one for every day of the month. And they believed people should be able to try any flavour without cost - a belief that led to the iconic pink spoons. Their ideals live on at Baskin-Robbins even today, where they now possess a flavour library that consists of more than 1,000 ice cream recipes. By the way, I used to be a scoping boy at Baskin-Robbins in Madras 14 years ago – my first job to say so! In my experience, 7 out of 10 customers who tried the ice-cream actually bought it. Those days, a scoop of 33 gms of ice-cream used to cost INR 45.00. And the sales were not bad at all. The franchisee used to make us try a scoop everyday (on the house) so we actually knew what it felt like and we could convince our customers to buy them. That parlour shut because a flyover construction began on the road opposite to it and the Location which was once considered lucrative turned into a dead spot.



Ice-Cream in India is available from as low as INR 5. Many local brands – some even city specific have been quite successful in this aggressive, yet challenging market. AMUL, part of the Gujarat Cooperative Milk Marketing Federation is the single largest popular Indian brand of ice-cream that’s available across the country while ARUN ice-cream is market leader in South India. McDonald’s single scoop is affordable available although only at a few places across the country. Walls, from Hindustan Unilever is the most popular packaged ice-cream brand, mainly drawn by the distribution strength of the core business. Nestle SA, which recently bought over the Movenpick Swiss Ice-Cream brand has not launched it officially in India although the previous India franchisee has several outlets across the major metros, many of which were shut due to poor patronage.

So, there are two main challenges in this business – Price and Climate. Even if one is favorable, there is no surety of success. And between the two, it’s almost impossible to say which one is riskier. Given the scenario, the big daddy of the business is venturing into India during the infamous Delhi winter with the highest price per ml. Bravo! I hope this venture takes off well, like how they have in many other countries. My sincere best wishes.

When LOOTing is legal and fuels consumption

This article comes after a long gap - mainly due to my hectic travel over the past week to the two most important markets in the country, Mumbai and Delhi. There is something very special about these two cities, the former is the financial capital of India and the latter, the political capital. (And all the states and their capitals beleive they are "the nerve centres" to the administration of governance in the country! hic). Both cities and their suburbs have a population of over 15 million people and growing! A great boon to Retailers of all shapes, sizes and pedigrees. During peak hours, the average time taken to commute from work to home and return is approx three hours in Mumbai. Both cities have the most terrible public transport systems which makes the usage of personal commute almost a necessity. So, higher sales of cars, car tyres and car freshners - with Godrej Ambipure leading the market with over 65% share. Delhi Metro is a saving grace and the new extension to Noida has been welcomed graciously by commuters. The influx of people from neighboring cities and states is so high that there is almost no control of who lives where.

The sheer number of people is such a great opportunity for us in business. While this is not specific to only these two cities, there is something special about consumers here. Most forms of modern retail were experimented here and have only proved successful that they have been replicated all across the country. And one such format is the Discount stores. Typically in Apparel and accessories. While the format is quite famous all across the world - even Hugo Boss sells on discount at Metzingen - it is quite recent in India - probably less than a decade. While it is a bit difficult to say which Brand/Retailer first established this concept, the biggies have been on it for quite some time - Madura Garments, Arvind Mills and other popular Indian and International Brands and smaller retailers. In the fashion apparel and accessories business (including where the brand is franchised), the franchisee usually pays the full cost price and buys the products from the Brand, on which he enjoys a margin of 20-55%. After the season is over (Spring-Summer from March to Aug and Autumn-Winter from Sep. to Feb.), the products must be marked down and sold as they cannot be carried over to the next season - simply because they are usually not the fabric that could be used. That's how the End of Season Sale or EOSS came in place. The average discounting for most brands during the EOSS is as high as 35% and what remains after the sale with the retailers is less than 10% of the original stock.

These usually remained with the Retailer for sometime until they were sold out. And that's where someone found an opportunity - to create seperate stores that could sell these merchandise at discounted prices throughout the year. If they were closer to the downtown stores, then the full-price business would get affected, hence they are usually located in the suburbs or outside the city. The stores are quite basic - no air-conditioning, no great fixtures and furniture, simple lighting and minimum staff. The cost of operation is very low since the margins are also low - between 10-15%. Consumers take an effort to go all out to shop as their savings in lieu of the effort taken is well deserved. One such Retailer in India is The Loot. Founded in 2004, this retailer opened its 100th store in Bangalore in May 2009 and currently has over 120 stores across the country with plans to cross the 200 mark in a year. This retailer roped in Bollywood's infamous bad boy Gulshan Grover as its Brand Ambassador with the store resembling doors and images of a jail. And the store aptly named The Loot with a rug sack pic along the main logo.

Last week, one of my cousins wanted to buy a shirt quite urgently and it was the only store located on the way while we were driving on the outskirts of Mumbai, at a place called Thane. Not that he was looking for a discounted product though, but we ended up here. The store has special schemes - Buy one and get one for free or Buy at 40% discount, etc. The store, which appeared like a franchised one had popular apparel brands such as Louis Phillippe, Arrow and other lesser known brands, and even stocks luggage, hand bags, belts, deodarants and perfumes. While my cousin had gone with an intention of buying just a shirt, he ended up buying a matching pair of denims as well... all in span of less than 30 minutes. And we were not alone; on a Sunday afternoon, there were atleast 5-6 families shopping together. We ended running a huge bill but when we walked out, it did seem like it was indeed a loot.

There are several lessons here - In India, families shop together. So, there must be something of interest to everyone - atleast to keep them engaged while the others in the group are shopping. Next, locate the store as close as possible to the consumer. If not for anything, they would end up just because the store is closeby or on the way. Adequate parking and management - a great boon to shoppers. Last but not the least, rotate merchandise as often as possible, what we call as Stock Turn. Even if it means selling at a lower margin, atleast the cost is recovered and there is fresh cash flow for new merchandise. Afterall, sometimes such a loot fuels consumption and brings back people seeking more.

Central realigns the city...

India's largest retailer, The Future Group opened its 2nd Bangalore Central Mall recently at JP Nagar. Until a few years a quiet residential locality, JP Nagar is famous for its various attractions such as the Hanuman Temple and Woodys restaurant. The 60 feet road is abuzz with a host of retailers over the past few years with Viveks (Electronics Retail) being one of the earliest occupants followed by Big Bazaar and many other stand alone restaurants and eateries. While residents in and around JP Nagar and Jaya Nagar frequented these places, the offering was not strong enough to keep the crowds engaged for long. This is where Central has done a great deal.

CENTRAL opened its first mall in May 2004 - THE reason why I moved from Madras to Bangalore. It was the first of its kind in the country then - a seamless mall that had the usually famous brands - regional, domestic and international, all sharing floor and (virtual) wall space - this was infact the highlight of the Mall. There were no seams or walls between the brands and billing was unified across the floor. So, unlike in regular malls, there was no need to visit various brand stores and end up multiple billings. It was more than a Department store whereas not the convential mall in terms of total floor area. Right from Day One, it was a superhit. The second Mall opened in Hyderabad in Oct. 04 and the third at Pune in early 2005. As of today, there are eleven malls across eight cities.

The new Central Mall, spread over 200,000 sqft has a frontage of almost 200 feet - along the main road and is a corner property. While the entry to the mall is from the main road, the exit which curves a bit finally leads into the adjacent road. There is adequate parking space for atleast 150+ cars and a equal number of two-wheelers in the two leves of basement. The ivory colored vitrified marble makes the floor appear bigger and larger than it is and so does the main atrium that goes upto the fourth floor. The toilets are spacious and tucked away in good corners leading shoppers across the various aisles. There are many anchors and mini-anchors - PVR being the leisure anchor, McDonalds for Food, Cafe Coffee Day for beverages and the spacious foodcourt and restaurants (that are yet to open) for multi-cusine F&B. These are sure to bring in regular footfalls to the mall. The ground floor has Ladies and childrens's sections along with the usual perfumes and jewelry categories. The toys section is quite sizeable and is sure to attract chidren and those at heart. The first floor houses ethnic wear for men, women and home - yes, there is a very attractive homewear collection which already seems to be a super hit. The Men's formal wear is also nicely tucked on one side and the spread of brands is wide and fresh.

The second floor is focussed on the Youth - the teens and tweens as I famously refer; those in their teens and twenties - a very important segment for most brands today. Reliance TimeOut that offers books and music is a surprise! Cafe Coffee Day is located next to the Customer Service area - great thinking by the Mall planners to keep those waiting for various services such as alterations, membership, etc. E-Zone on the other side showcases latest offering of electronics and home-needs. The third floor houses Home Town, the division of the Future Group that specializes on furniture and home needs. There is also a Food Bazaar that completes the family shopping offerring a wide variety of Grocery and household products. The fourth and fifth floors would have PVR Cinemas while the sixth floor would have food courts and restaurants. This is the only confusing bit - and challenging to bypass shoppers into the F&B  areas as also to redirect those who have watched movies into the food-court.


The building opposite to the Mall is BIG Bazaar. I was wondering how would it be to connect both the buildings - probably with a skywalk that cuts across the road. While this surely sounds exciting, it is as much impossible due to corporation rules and regulations. The Mall in general looks like Takashimaya or Isetan in Singapore with its wide alleys, choices and selections. A refreshing look on designs and images is visible all acorss the Mall with images that nicely depict the mood and reasons to shop. With these and more on offer, this Central Mall is sure to realign the centre point of the city. Over a period of time, it is not just the residents of neighboring areas such as JP Nagar (various phases), parts of Jaya Nagar, Koramangala and even Bannerghatta Road who would visit this mall, but even those from far-off places. The Second Bangalore Central,  Mall as the name suggests, would surely become central for shopping in this part of the city.