He is the man who scripted the Titan success story, the visionary behind one of the very few globally recognised Indian brands. Meet Xerxes Desai, time-keeper, scholar and the managing director and vice-chairman of Titan Industries
He launched the country’s premier watch company in 1986 and today it is one of the few really global Indian brands. He is known for his erudition and scholarship. Not so well-known is his love for dogs. His dachshunds Max and Minus often attend office with him, sharing his business concerns and rewarding him with a fond lick now and then.
Xerxes Desai, vice chairman and managing director, Titan Industries, showers the same love and shows the same dedication to his company as he does to his pets. With great foresight, he has built the world’s sixth largest watch manufacturer and marketer of ‘own-brand’ watches, and has made Titan the brand Indians admire the most. He is now in the process of doing the same with Tanishq, the branded jewellery division of the company.
After graduating from Oxford University, Mr Desai joined the Tata Administrative Service in 1961. He has been with the Tata Group ever since. He shares some of his experiences with Christabelle Noronha, who met him at the Titan Corporate Office in Bangalore
tata.com: Sameer Jain of The Times of India once said, "Titan is as large a brand as Tata." What did it take to establish such a powerful brand?
Xerxes Desai: Well, I suppose Sameer is correct in a way because Tata is seen more as a corporate name than as a brand. A brand is normally associated in people’s minds with a specific product. It was a mix of many things that went into making such a powerful brand. Titan is, of course, predominantly an Indian brand with 90 per cent of our business in India, even though, outside of India, we are present in around 40 countries.
Titan's success story has been written about extensively. It has become a case study in business schools, both in India and abroad. I reckon it is a bit of everything that went into making it such a powerful brand – the choice of technology, focus on styling, and the good fortune to be able to put together good marketing and manufacturing teams. We were also fortunate to begin life in a sheltered environment where there was little or no competition within India. There was, of course, massive smuggling then as now, but we still set our sights very high. We created the right sort of culture in the organisation and we were not the stereotype corporation.
tata.com: What does it take to launch a global brand and what were the hurdles you encountered?
XD: First of all, an essential prerequisite to make a brand global is a combination of guts, vision and belief in oneself. I think it also takes a certain amount of vanity to venture forth in the manner in which we did. Importantly, we had the basic manufacturing and marketing strengths and the opportunity outside India was clearly evident to us: India consumes about 20 million watches a year; the world consumes 700 million. And it was going to become a seamless world of commerce. The danger of limiting oneself to India was obvious. If we didn't go to the world, the world would, nevertheless, come to India. If we did not learn to fight competition in the global arena, we would have to learn more expensively on our own turf.
The biggest problem was ‘country of origin’. Generally, people the world over are less and less concerned about the country of origin and more interested in the brand. When you drink a Coke you don't ask where that Coke came from; when you eat a hamburger you don't ask which branch of McDonalds made it, and so on and so forth. The same applies to a host of other products, even computers and automobiles.
But in the watch segment people are still very conscious of the country of origin. In fact, most people still believe that the best watches can come only out of Japan or Switzerland, while India's image for engineered goods is poor. India has substantial exports but, again, not in branded products. So that's been a major hurdle. One way to get round that hurdle is to refrain from unnecessarily broadcasting the country of origin at the start of the game.
People in other continents often don't realise that India is very heterogeneous, very diverse, a country full of contradictions. It harbours the best and the worst. So we don't at present broadcast to the general public the fact that we are Indian though the trade knows, of course. But a time will soon come when we will be able to do so with pride. It is beginning to happen in some countries.
Secondly, the advertising and promotion budgets which our competitors have are very large, and to get a share of mindshare and of voice requires staggeringly high outlays, which we were not able to sustain after launch. We did have an initial splash but our pockets were not deep enough and foreign currency in those days was not easily available.
Another factor, perhaps, is that shareholders these days increasingly take a short-term view. If you look at many of our great companies, it took years to become both large and profitable. Today, managements are under pressure to take a short-term view. If you want to succeed in the global market, it will take a long time. We knew we had the inherent strengths and could deliver high-quality products, but what we could not do was buy into the consumer’s mind in a hurry. That was the biggest hurdle.
It was different in the Middle East because the initial appeal was to the Indian community. They had a greater awareness and the brand had a strong image. In fact, we are among the top three or four brands in the key markets in the Middle East. In Oman we are the number one brand and the appeal of the product extends well beyond the Indian community.
tata.com: Do you brand your products differently for the global market?
XD: No, not as of now. We sell only under the Titan label. But the product offering varies from region to region in terms of styling and price points – always, of course, providing very good value for money
tata.com: Why did you choose to enter the European market first, considering that Switzerland is the home of watches? Why not the United States?
XD: Well, while Switzerland is the home of watches, the Swiss are not really in the volume business, except for Swatch, which is an exception to the rule. The Swiss are focussed on the upper end. We sensed an opportunity in the mid-segment which, at the time we planned our entry, was inadequately served and presented an opportunity to a high-quality volume player.
Typically, brands are created in the European market and then taken to America. In fact, there was only one important American brand when we started and that was Timex (Guess and Fossil were still to happen and Bulova had faded away). But, since we had just started an association with Timex in the Indian market, it wasn't appropriate to compete with them in the American market.
We were also better known to the European market – having sourced technology, equipment, materials and components from there – and had many more friends there. We, therefore, felt a higher level of comfort in Europe.
Another reason was that the American market has a retail structure which is rather difficult to penetrate. You have retail chains in every country in the world, but much more so in the US. To penetrate a retail chain in America is difficult, but if you make a mark in Europe it becomes your passport to retail America.
tata.com: Would you say that you have succeeded in the European market?
XD: We did not expect to do exceptionally well in every country in Europe. In some we did well, in some not so well, as is true of almost every other brand. For instance, we are doing well in Portugal, Spain, Greece and, to some extent, in France. Northern Europe has been more difficult than southern Europe. We have not yet entered Germany or Italy and are working to a major new launch in Britain in partnership with that country’s leading watch company.
tata.com: Do you operate via the franchise route or do you have your own showrooms?
XD: Neither. We sell out of established retail outlets, mostly independents. The next step is to get Titan into the major chains.
tata.com:You have your finger on the pulse of the Indian market, as far as the watch market is concerned. However, Tanishq, your jewellery brand, hasn't made a dent in the middle-class market, which is the largest. What are your plans?
XD: The jewellery market is huge; it’s a Rs 40,000-crore market. One had no choice in the initial years but to be a niche player. When we started, the objective was to export and earn foreign exchange for the company and the country at a time when foreign currency was difficult to come by. But, in response to a changing external environment, our strategy also changed to a focus on the domestic market. In the last three to four years, we've become the single largest player in the Indian market, though with a market share of only 0.5 per cent as yet.
Jewellery is a very fragmented business. There are around 2,50,000 jewellery retailers and there are many more manufacturers. What I’d like to see is Tanishq getting a 5 to 10 per cent marketshare – that’s the target and it is, to my mind, not unrealistic. With encouragement, we can do it.
Significantly, we are the only national player in the serious fine jewellery segment. The others are in just one city or have a very limited regional presence; we have close to 50 shops. So we've achieved size and spread. We have acquired a high reputation for styling and reliability and have already become an aspirational brand.
As regards reliability, the jewellery industry has chronically lacked ethics. We're setting standards, trying to change the way things are done. The buying public’s focus is now on the purity of gold, which is entirely our doing. We are making people conscious about quality and reliability.
As for styling, the industry has been extremely traditional and very slow to change. When we introduced our fusion products, we were a few years too early but the concept is now catching on.
So it’s incorrect to say we haven’t made a dent. In fact, we have made a huge impact. More importantly, we've also turned profitable, despite the fact that we have a very high debt to equity ratio and, therefore, a very high interest burden. The next few years will see a significant increase in the return on capital. By 2003, the returns in the jewellery business should be as good as in the watch business.
We could have achieved all this faster but we became too cautious because of the doubts, worries and concerns expressed by many who were following our act. We, therefore, decided to be more careful, to take less risks. I believe that if we had acted with a little more daring we would have done better sooner.
tata.com: Was the timing of the Tanishq launch wrong?
XD: Soon after we launched Titan, the government of that time told us, "If you want to grow in the watch business, don't come to us for foreign exchange for equipment, components or raw material; you have to find a way of earning your own foreign exchange." So we looked for a foreign currency earning business to get into and we found that the most relevant business for us was jewellery. It was also big, very big. However, by the time we acquired the skills and set up the plant, the world had changed! India no longer had a foreign currency problem, imports were easy to come by, demand had come down in the global market, supply had grown in Asia, and margins had become very thin.
We decided, therefore, to focus on the Indian market. We started with the 18K jewellery, which we had created for the world market and which is the world standard for fine jewellery. But women were not ready to purchase 18K jewellery except in the case of diamond jewellery, nor were they quite ready at that time for gold jewellery that did not look very ethnic.
tata.com: But it is a known fact that Indian women purchase 22K gold more as an investment.tata.com: What are the future plans for the jewellery business?
XD: But when you buy 18K you are paying for only 18K gold and, what’s more, it’s a superior alloy. It’s much harder than 22K and, therefore, will not lose its form or lustre. If you want to invest, buy 24K gold coins or biscuits; if you want to adorn yourself, it should be 18K or even 14K jewellery. I think Indian women are wrong and that we were right in introducing 18K jewellery.
XD: Well, it is to seek the same kind of positioning in the minds of people as we have in the watch segment; acquire about 5 to 10 per cent market-share; become indisputably aspirational; become the benchmark for the industry in terms of design, workmanship, retailing. I see it as symbolising the Tata reputation for reliability, especially among women, where we currently have no aspirational products reaching out to their hearts. It is the best product for winning over this constituency, given the importance and emotional benefit Indian women accord to jewellery.
tata.com: As you look back, is there anything you think you could have done differently?
XD: In the case of Tanishq, we should have been more pragmatic at the start, more market-led, and our retail shops should have been more inviting and friendly than they turned out to be. The focus should also have been on younger, working women. Recent research shows that such women are more open to the kind of things we've been doing.
tata.com: What is your perception of the future as far as Titan is concerned? Do you foresee any threat to the company and is it equipped to handle these threats?
XD: (Laughs) Right now we are the threat. The biggest threat in the watch segment will come from fashion brands, not from the Swiss; also, cheap produce from China. But we have many strategies, both production and marketing related, to counter such threats. Perhaps the biggest threat could come from lack of guts and lack of vision on our own part.
tata.com: Can your experience in building the Titan brand be replicated across group companies or is it strictly an FMCG strategy? What are the lessons to be learnt?
XD: The most important lesson to be learnt is that if you set your mind on something, you can do it. The notion that the Tatas haven’t built great brands is incorrect. The Tatas have built terrific brands – Taj, Lakme, Tata Trucks, Hamam, 501 and several others. We have been too humble about our brand-building achievements.
tata.com: Finally, who would you say were the people who influenced you most in the Tata Group and motivated you to continue with the group for over 40 years?
XD: There were many, starting with Vinod Bali, Darbari Seth and Leslie Sawhny in the early days. The process has no end, nor should it. But the greatest influencer and motivator has been the Tata philosophy of playing a vital role in the economic and social development of the country, epitomised in the lives, teachings and achievements of Jamsetji Tata, Dorab Tata and J. R. D. Tata.
I joined the Tata Group more by accident than design, as a sabbatical from the academic career which was my first preference, yielding to pressures placed on me by well-intentioned family friends in Bombay House while I was still at Oxford on a J. N. Tata scholarship. That was over 40 years ago. That I continue till today is entirely attributable to the values that we have long cherished in this extraordinary entity we call the Tata Group and the bonds created by the many who preserved, protected and enhanced these values.