Only Asia — that’s the slogan for international growth at Titan Industries, India’s leading watch manufacturer. Titan’s logic is simple: Much of the world economy is expected to be driven by Asia in the coming years and Titan executives believe that being part of an Indian company, they understand the Asian culture and markets and that focusing on this part of the world can yield huge returns.
Even within Asia, Titan has sharpened its focus. The Gulf Cooperation Council (GCC, comprising the United Arab Emirates, Qatar, Oman, Bahrain, Saudi Arabia, and Kuwait) followed by South East Asia and the SAARC nations are where the company is placing its biggest bets. The GCC accounts for two-thirds of Titan’s international business, emerging as the Indian watch-maker’s sweet spot.
"Asia is going to be the big story for the next 10 years at least," says Titan’s managing director, Bhaskar Bhat. "At present our international sales are around $25 million but we see a huge potential for growth. We plan to invest in building our brand in select markets in Asia. Our target is to increase our international revenues five times over the next five years."
With revenues of nearly $850 million, Titan also has a jewelry business that accounts for some 70% of sales; and a fledging eye wear business which it entered a couple of years ago. For international markets, however, Titan has decided to focus only on watches. "We did try with jewelry in the Middle East for a few years sometime ago and also in the U.S. last year but it did not work out. In the Middle East it was not profitable and in the U.S. our timing was wrong. Our international strategy now is to focus only on watches and only within Asia," explains Bhat.
At present Titan has a low 3% to 4% share across the GCC watch markets. Bhat’s mandate to his team is to increase this to 10% especially in markets like Dubai and Saudi Arabia over the next five years. To enable them to meet this target, Bhat has tripled their marketing budgets from 5% of net sales to 15%.
Bhat’s team has a two-pronged strategy. First, it is no longer targeting just the Indian diaspora in the GCC but also other expats and local residents of the Emirates. Second, it is moving up the value chain from the mid-market segment ($40 to $80) where it has been traditionally present to the mid-premium segment priced at around $80-200. In line with this, it has been launching new collections from its portfolio and strengthening its advertising and retail presence. Titan watches are sold in more than 1,200 points-of-sales across the GCC. These include multi-brand outlets, department stores, hypermarkets, malls and so on. "Our focus now will not be just on increasing the numbers but strengthening the quality of our retail presence. We want to be accessible with our new products to both our existing customer base and our new target customers," says Suparna Mitra, Titan’s global marketing head. "Apart from Dubai, the modern retail story in the Middle East is yet to evolve and as that grows we also expect to grow with it," she adds.
The GCC watch market is estimated to be around 20 million to 25 million watches and growing at around 5% annually. This market is flooded with brands – both big international names as well as local players. Swiss watches are very popular among watch buyers in the Middle East. At the top of the pyramid are brands such as Omega, Rolex, Rado and others priced more than $250. Then comes the mid-premium segment comprising the upper end range from players like Citizen, Seiko and some fashion brands followed by the mid-market range from Seiko, Citizen, West Star, Swiss Star and others. The rest is accounted for by a host of local and international brands, including cheap Chinese imports.
Time to Market
Titan entered the GCC market in the early 1990s and positioned itself in the mid-market segment. It was the watchmaker’s first foray outside India. Bhat recalls that Titan’s international move was propelled by three considerations: The Indian market itself was very small; with liberalization it was imminent that global players would enter India and Titan needed to learn how to compete with them; and that success in the international markets would enhance the brand in the domestic market also. The Middle East — because of its proximity to India, its familiarity with Indian brands and large Indian diaspora — was a logical destination.
Even as Titan was learning the ropes in the Middle East, it shifted focus and entered Europe. Unlike the Middle East where it put products from its existing range, for its European foray Titan went the whole hog. To cater to the European taste Titan roped in European designers, introduced steel watches unlike the gold-plated ones it had for the Indian market and also set up a separate manufacturing plant in India. It also opened offices in London and Paris, hired an advertising agency in London and launched simultaneously in 11 markets in Europe.
Europe proved to be disastrous for Titan. The company failed to make an impact, suffered huge losses and finally pulled out of that market in 2002. "We went with a very clear vision to make a mark in the most evolved watch market across the globe but we did not correctly estimate the investments that would be required. The economics just did not work out," recalls Bhat. The issue of country of origin also proved difficult to crack. "The entire European foray was driven more by pride and prestige rather than business considerations," he adds candidly.
Having learned its lesson in Europe, Titan has been more cautious in the GCC region. The company has been following an incremental and profit-oriented approach. "We decided that we must first build adequate volumes and the business must generate funds which in turn will fuel growth," says Ajoi Chawla, vice president and global business head. Also, unlike in the mid-1990s when Titan had to build an entirely new product line for Europe, the company now has a portfolio of products and can pick and choose the relevant ones for different markets.
Titan is present in the GCC through exclusive distributors – one each in every country. As a conscious strategy, Titan has opted to go with big names in the region though not necessarily in the watch category. Its distributors include groups like ETA, Al Hussaini, Bahwan, and Al Futtaim. "For some of our partners like ETA, for instance, retail and watches are a very small part of their business but we have chosen to go with these big players because of their reputation in the market and their ability to help open doors which an outsider may otherwise find difficult,’ explains K.S. Ghai, general manager, head – international business.
Santosh Desai, CEO of Future Brands believes that Titan is on the right track. He points out that in the Middle East the local retailers have a lot of power and it is therefore imperative for Titan to have strong distributors. Says Desai: "Distributor partnerships are crucial in the Middle East. Local knowledge is very important." Desai adds that Titan’s decision to focus on Asia makes more sense than its foray into Europe. "In the Middle East market the top end is serviced adequately by a host of international brands but there is certainly space in the mid market that Titan can address profitably by expanding its range," he adds.
Harish Bijoor, CEO of Harish Bijoor Consults and visiting professor at the Indian School of Business in Hyderabad, agrees. "I believe the Middle East market offers Titan opportunity as the product quality on offer is a true-blue international quality that can compete with most brands already available and popular in the market," he says. He adds a caveat, though. Titan, he says, needs a focused plan that is based on understanding the psyche of the local market and what moves it. The company also needs to loosen its purse strings, he adds, and spend more on advertising and marketing than it does. "Success in the region is a long-haul game," he notes.
According to Chawla, Titan’s focus in the past was on establishing its brand presence in the region as a serious player with reliable products. For the future, the focus will be on targeting and building brand relevance among new target groups. These include non-Indian expats and locals with special focus on the youth and women. With a vast product portfolio for the India market Titan can choose those relevant for the GCC market. However unlike India where Titan has multiple brands for different segments (the flagship brand Titan, youth brand Fastrack, the top end Swiss-made Xylus and budget brand Sonata) in the Middle East markets all of Titan’s offerings will be under the Titan brand.
The reason, Chawla explains, is that India Titan is the market leader and in order to grow further it is critical for the company to grow the category. It is important for Titan to capture every segment of the population. The Middle East, on the other hand, is a highly evolved market with a slew of brands and Titan therefore needs to have a more focused approach. "Also, unlike the ’emotional connection’ that we are focusing on in the domestic market in the GCC we will be focusing more on the newness on the products, the designs and of course the price," says Chawla. Adds Bhat: "To be successful in the Middle East market the product has to be highly differentiated. The environment in which it is presented needs to be very appealing."
Distributors believe that Titan has what it takes to be big in the Middle East market. Merril Dias, sales manager at the watch division of Doha Marketing Services Company, an Al Futtaim group company and Titan’s distributor in Qatar says: "Titan has excellent designs and its product launches are more frequent now than in the past. It also has proactive consumer and dealer promotions which are comparable to others in the market."
Will this approach make Titan a winner in the GCC? Time, as always, should tell.