The Hindu Business Line : Mega plans, mega brands

Sanjay Lalbhai, Chairman and Managing Director of the world’s third largest denim maker, Arvind Mills, was in a relaxed mood. Clad in a pair of jeans and a sober white cotton shirt, he was sipping an orange drink at the Café Coffee Day ou tlet on the fourth level of the Megamart Outlet Centre in Chennai. With him was J. Suresh, CEO, Brands & Retail Division of the company, also in a cheerful frame of mind.

That was the day Lalbhai was to formally launch the company’s first large-format store, spread over 45,000 sq. ft. Between sips, he said, “For now, we bet very big on our brands and retail business.” To a question on how the company’s denim business is doing, he said, “Denim is just one of our businesses. Despite a robust growth in demand worldwide, our textile (he meant denim in particular) business isn’t growing much, as there is a glut in supply.”

The Rs 1,800-crore integrated textile major is operating in three segments – fabric, garment exports and brands and retail. Arvind Brands, which manages the company’s brands and retail business, is now juggling over a dozen garment brands and retail plans. Of course, the timing could not be better, with the country’s retail revolution at its best. “We have identified multiple growth drivers with the primary ones being brands and retail,” said Suresh. Arvind Brands currently has 14 brands in its portfolio – a blend of own, licensed and joint venture brands. While Flying Machine, Ruf & Tuf, Newport and Excalibur are its own brands, and US Polo, Arrow, GANT, Izod and Cherokee are licensed, the joint ventures are Diesel (51 per cent with Italian apparel maker Diesel and 49 per cent with Arvind), Tommy Hilfiger (50:50), and Jan Sport, Nautica, Lee, Wrangler and Kipling (60:40 with VF Inc of the US). Apart from this, it also owns brands such as Ruggers (casual wear) Auburn Hill and Elitus (in formals), Leisha (women’s ethnic wear), Yash (men’s ethnic wear) and home furnishings brand Mystic Dew. However, according to Suresh, these brands are meant to be sold only at Megamart stores. It has also extended its Auburn Hill brand into footwear. It recently revamped its Newport brand as Newport University and positioned it as a campus wear brand.

Suresh says there is no cannibalisation as each brand is positioned differently. While the company is licensed to manufacture and sell brands such as Lee, Wrangler, Arrow, US Polo and Cherokee, it has to import some of the joint venture brands from partners abroad. “Though our export division makes garments for some of those brands, we have to place orders and then import,” Suresh explains. “We are also evaluating various other international brands that will match Indian requirements,” he says.

On the one side, Arvind is building a good portfolio of brands cutting across price points (Ruf & Tuf jeans are priced at Rs 400; Diesel is priced upwards of Rs 12,500 a pair), and targets becoming a top player in the value-retail concept on the other. “To address all the consumer segments and to achieve good market share in each category, we have created a chain of lifestyle stores under brands such as Arrow, Lee, Tommy Hilfiger and Nautica,” says Suresh.

As of today, there are 85 Lee EBOs and the company will be adding another 10 by the end of the financial year. Wrangler has over 50 stores and 20 more will be added by the end of the financial year. There are five Kipling stores and three more will be in place by the end of the financial year.

Arrow currently has 56 stores across the country and will have another six stores added by the end of 2008. “With another 24 stores next year, we are targeting to have at least 85 to 90 stores by the end of 2009. It has 20 Tommy Hilfiger stores and two GANT stores (to open the third one soon). “And it proposes to open its first Diesel outlet in Delhi in May. “We plan at least five stores in the first two years in Delhi, Mumbai and Bangalore.” According to Suresh, Diesel stores will also stock “Diesel spare parts” including footwear, eyewear and perfumes.

Its Megamart chain currently has 75 stores across the country, and plans to add another 200 stores by 2010. “Most of them will be in tier-II and tier-III towns,” he adds.

Apart from this, it plans 30 large-format stores involving an investment of Rs 8-12 crore each in 21 towns by then. Suresh claims to have identified those towns too. Apart from apparel and home furnishings, these large-format stores will retail footwear, luggage and cosmetics.

A Chennai-based textile research analyst says the company has a roster of fairly well-known brands and has been around for quite some time. And the company’s decision to strengthen its focus on retail expansion might help put it on a higher growth trajectory. So far, only a few branded apparel retailers seems to have made it. Most still depend upon department stores and multi-brand outlets to make their brand presence felt. That might continue to be the case for the next couple of years.

“Until companies start committing huge sums of money to brand building (like how Titan invested in building a brand for both Titan and Tanishq), people will not head out to stand-alone stores. Of course, a store such as Megamart that promises to showcase multiple brands and at ‘value’ prices, if it manages to communicate this proposition effectively, could still work,” she said.

However, Lalbhai expects the retail business to contribute 50 per cent of the company’s total turnover by 2012. According to him, it currently chips in with 7 per cent. “We plan to invest another Rs 400 crore in the retail business,” said an upbeat Lalbhai.

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Mega plans, mega brands