India : the 3rd largest men’s luxury jewelry market

Fancy bracelets, rings, studs and chains are fast becoming part of the fashion statement for India upscale city-dwelling males, who have already added fairness creams to their repertoire. The following comments are excerpted from The Economic Times

Jeweler C Krishniah Chetty & Sons’ managing director Vinod Hayagriv’s workstation is a vantage point for the goings on at his diamond boutique in Bangalore. “Take a look around the room,” he says referring to the number of men at the store. “Men are probably much more comfortable participating in jewelry shopping now than ever before.”

“Wearing light-weight gold jewelry is becoming a fashion amongst youngsters,” says Rahul Singh, retail and marketing head at Kolkata-based Shree Ganesh Jeweler House, which recently rolled out a men’s jewelry range under brand Gaja.

No wonder then that India has overtaken the U.S. to become the third-largest men’s luxury jewelry market in the world according to researcher Euromonitor International. The researcher estimated the Indian men spent almost $200 million on this sector in 2011 and may increase their spend by as much as 36 percent in the next year.  “Although it’s a niche market, it is growing. Nobody can ignore it now,” says GR Radhakrishnan, MD of GRT Jewellers, which pegs his share of men’s jewelry at 20-25%.

“The metrosexual man is driving this demand,” says Orra Director and CEO Vijay Jain. Men in their late 20s and 30s are the biggest consumers, say jewellers. More men are independently venturing into jewelry stores today than ever before.  Many are there to buy gifts for their partners.

For top diamond jeweler Gitanjali Group, men account for almost 42% of its sales. The average purchase value of these consumers has also doubled in two years while spending by women grew by 20 percent. A senior executive at Forevermark, a De Beers brand, says that most of these independent purchases are being made on Hindu fall festivals such as Karva Chauth and Dhan Teras.

As GRT Jewelers’ Radhakrishnan says, “It seems men today do not lose as much patience as they did at jewelry stores earlier.”

What this means

Men in India don’t necessarily behave like men in other BRIC countries or in the West. Also today’s urban men behave differently from their fathers and even their older brothers.  Not so long ago, most jewelry in India was custom crafted by small store owners. Western companies addressing categories that affect both men and women, would be smart to question their basic assumptions before making investments in India’s consumer market.

When I immigrated to the United States, one of the snack foods I began to enjoy was microwave popcorn. My American born kids grew up with it during their elementary school years. But we missed it on trips back to India. Some time ago, we began finding ACT II popcorn on the shelves in major Indian cities. This is a product of Nebraska-based giant ConAgra Foods, Inc. and they entered the Indian food market  via a minority investment in India’s Agro Tech Foods Ltd (ATFL).

A few weeks ago, ConAgra   became the majority owner of ATFL) increasing its ownership of shares to more than 50 percent, through the $10 million purchase of existing shares from a third party.

“ConAgra Foods has enjoyed a strong partnership with Agro Tech Foods, dating back to 1997, and we believe strongly in its business model and leadership team,” said Gary Rodkin, CEO, ConAgra Foods. “Expanding our International business is a key part of our strategic plan, and India represents an attractive growth market for ConAgra Foods. We will continue to work with Agro Tech’s management team to expand its business and our investment in this important region.”

Agro Tech Foods is a public  company that markets food and food ingredients to consumers and institutional customers in India. The company’s products include Sundrop branded edible oils, shelf stable pudding and peanut butter, Crystal branded sunflower oil, Healthy World branded dried green peas, and, based on a license from ConAgra Foods, ACT II branded popcorn.

What this means

Sicne Agro Tech Foods has enjoyed consistent EPS growth for the last five years,  from 6.60 rupees/share in 2007 to 13.04 rupees/share in 2011 and since the company reported an 11 percent increase in net sales, and a 26 percent increase in profit after tax, it was not a bargain buy for ConAgra. But I think it is a sensible purchase given the projected growth in consumer packaged food sales in India over the next decade.  The middle class population and the spending per capita are rising to create a virtuous spiral that your company should probably also consider!.

Companies in India sold 9.02 million motorcycles in the financial year ended March 31 2011, a growth rate of  of 23%, but 42% of those comprised motorcycles with small engine capacities of up to 0.125 liters.  For years Enfield’s Bullet ruled the performance motorcycle world in India with no rivals. It was also popular in rural India, due to its ruggedness on unpaved or poorly maintained roads.

In recent years Harley-Davidson Inc.,  Yamaha Motor Co.  Suzuki Motor Corp. and Ducati Motor Holding SpA, have started selling  higher-end motorcycles in the world’s second-fastest growing major economy.

Victory Motorcycle plans to enter India market

UK’s Triumph Motorcycles Ltd. is the latest entrant,it plans to start selling its motorcycles in India from 2012. The maker of the Daytona 675, Sprint and Rocket III motorcycle models plans to sell its products by importing them as fully built units.

“India is a very important motorcycle market and Triumph has assessed it carefully before deciding to step in,” said Nick Bloor, Triumph’s chief executive. “We see it as the next step in our global business model.” Triumph has appointed Ashish Joshi, the former head of European operations for Indian motorcycle maker Royal Enfield as its managing director for India.

A few months ago Victory Motorcycles, the Minnesota bike manufacturing subsidiary of Polaris also announced that it will enter the premium market with its cruisers next year. The company manufactures luxury touring bikes, classic-styled motorcycles and powerful inter-state cruisers, among several others.

German detergent and glue maker Henkel has sold its 51 percent stake in Henkel India to Jyothy Laboratories Ltd , a fabric whitener and detergent maker, most known for its iconic Ujala brand. Jyothy already owned 15 percent of Henkel India (via a purchase of from Tamilnadu Petroproducts earlier this year) The new acquisition will give Jyothy nearly a 66 percent stake. Henkel India employs 400 people and had sales of 70 million euros in 2010.

Pril from Henkel, now controlled by Jyothy in India

Henkel’s international brands Fa and Pril will be licensed to Jyothy. Henkel will maintain its presence in the Indian market with the Schwarzkopf Professional hair care business. The deal generated a one-time gain of more than 30 million euros ($42 million) for Henkel.

Media reports say Jyothy has been already talking private equity players such as Actis, Apax Partners, Bain Capital, Carlyle, Temasek and GIC to raise funds to retire the $150 million debt it had taken while buying Henkel India.

What this means

First, western companies need to recognize that M&A in India is a two way street. India’s Godrej bought Sara Lee’s business in India while UK’s Reckitt Benckiser purchased Paras Pharma recently.

Second this activity is likely to keep moving forward as India’s consumer segment continues to grow frenetically.

Third, gaps and opportunities are  being created every day as both the consumer needs evolve and the provider landscape shifts. Nimble companies are likely to gain the most over the next five years.

Colgate Palmolive India’s  Sensitive Pro-Relief Toothpaste was the latest launch in a series of actions over the last couple of years in India’s Fast Moving Consumer Goods (FMCG) market, particularly in the fast growing personal care segment.  While the company leads the market in oral care in India, Koushik Gupta, general manager, marketing, over-the-counter and oral healthcare, GSK Consumer Healthcare,  said that his  firm notched up a share of 10 per cent within the first four months of the launch of Sensodyne. “We are now the number three player in the segment.” claimed Gupta. Sensodent from Warren Pharmaceuticals is the number two with a share of 14.8 per cent  just behind Colgate’s 15.4 percent, per Nielsen reports.

According to the Business Standard, the mouthwash segment is growing at  of 35 per cent year. In the last few months, Colgate has launched two variants under the Plax brand to take on Johnson & Johnson’s Listerine, the market leader in the segment.

What this means:

India’s rising consumer class is ready for greater and greater variety and differentiation of products and needs as incomes rise and media consumption continues to increase. Foreign companies continue to gain but local players remain strong. There is room for more growth and new entrants in India’s CPG market today.