Daybreak - Tanishq wrote the gold-retail playbook. Kalyan Jewellers hijacked it.

Episode Date: August 19, 2024

For more than two decades, India’s jewellery industry has been dominated by one name and one name only – Tanishq. The Titan-owned brand has managed to become the go-to jewellery store for people across the country. Some may even call it the gold standard…literally. But since last year, things have been changing. Tanishq’s dominance is being challenged. Not by some massive international player or any other pan-India brand. Nope. Instead, it is regional players that are starting to dim Tanishq’s shine. You may have noticed all the Malabar Gold and Kalyan Jewellers ads and billboards that have popped up in the last year or so. Both are regional brands that have really been giving Tanishq a run for its money. The funny thing is all of these regional brands have risen to the top by doing exactly what Tanishq does best. They are literally hijacking Tanishq’s own playbook. And in the process, what was once Titan’s exclusive territory, with its 8% market share in a sea of unorganised competition, is now getting crowded.Tune in. Listen to the latest episode of Two by Two hereDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. In two decades, India's jewelry industry has been dominated by one name and one name only. Tanishk.

The Titan-owned brand has managed to become the go-to jewelry store for people across the country. For a lot of those people, it is the only jewelry store that they would go to. Now, the way that Tanishk rose to become the literal gold standard was by doing something that's both very simple yet really powerful. You see, back when it was launched, Tanishk managed to completely shake up the jewelry retail business. Until then, this was a space dominated by family-run businesses. But Tanish comes in and brings some order to the system.

Finally, it made selling jewelry, a fair and square game. What that meant was if you were to walk into a Tanish jewelry store anywhere in the country and pick up a 22-carat gold chain, you knew you were leaving the store with a legit 22-carat gold chain, which until then wasn't always a given. You see what I mean by simple yet powerful? So in the process, Tanish became synonymous with quality

and relegated everyone else to the sidelines. But since last year, things have been changed. changing. Tanishk's dominance is being challenged. And not by some massive international player or any other Pan India brand. Instead, it is regional players that are starting to dim Tanishk's shine. You may have noticed all the Malabar, gold and Kalyan jeweler's ads and billboards that have been popping up in the last year or so. Now, both of these brands are regional and they've been giving Tanishk a real run for its money. The funny thing is, all of these regional brands have risen to the top by doing exactly what Tanishk does best.

They are literally hijacking Tanishk's own playbook. And in the process, what was once Titan's exclusive territory with its 8% market share in a sea of unorganized competition is now getting crowded. You see, before this, Tanishk had two major factors working in its favour. First, because most of the jewelry on offer is diamond-studded, it enjoys higher margins than jewelry retailers dealing primarily in pure gold. And second, Tanishk has a presence everywhere.

And I mean literally everywhere. It has stores in the furthest corners of the country, 475 in total, more than most of its rivals. But now, other players are quickly catching up. Regional players in particular are expanding their businesses with a vengeance. They're doing this by opening more stores across the country as well as by increasing the amount of diamond-studded jewelry on offer, a la Tanishk. And it seems to be working. Brands like Kalyan Joolers and Malabar Gold are gaining market share like never before. Meanwhile, the stock prices of Titan, Tanish's parent company, have been steadily falling.

So what has changed? Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Philippos and I'll be joining Snigta Sharma every week to bring you one business story that is worth understanding and worth your time. Today is Tuesday, 20th of August. Even for legacy jewelers with decades in the business, taking on Tanishk is not easy. But South Indian jewelry brands like Kalyan jewelers and Malabar gold and diamonds are not backing down. Both these brands have their sights set on going pan-India. They want to open stores in every corner of the country, something that until now only Tanishk has managed to do.

And it seems to be working. The proof is in Titan's loss. Initially, Titan was blaming factors out of its control for its slow growth. things like high gold prices, elections, heat waves. But the company says it hasn't lost significant market share. The numbers, however, tell a whole other story. For instance, in terms of same-store growth, Tanishk reported 3% growth, but a regional brand like Kalyan reported 12% in the same period.

Even in terms of store count, Kalyan is very quickly catching up. This year, it plans to open 150 more stores, mainly in tier 2 and 3 non-south states. This is just shy of Tanish's plans to add 175 more stores this year. But more than the number of stores a brand is able to open, where it chooses to open the stores can be a complete game changer. It's sort of like with real estate. Location is everything. It can really make or break a brand.

That's because in a country like India, taste changes every 100 kilometres, especially when it comes to things like fine jewelry, big investments. Just take the case of 30-year-old engineer. Ayush Bhavsa from Indoor, for instance. One day, he visited a showroom of the Maharashtra-based jeweller, P.N. Gadgill jewelers at a mall

in Pune. He wanted to buy his fiancé some bangles. But all the designs he saw there were just too Maharashtra, not what he wanted. So he then went to another jewelry store at the same mall, Malabar gold. And that's where he spotted exactly what he was looking for. Bangles that he describes as timeless without being too traditional.

Now, the reason I share, that little story was because it tells you a lot about regional brands and regional brands with Pan India aspirations. Manoj Manoj Mennon, the head of research at brokerage ICICI securities, puts it pretty well. He explains how jewelry retailers work by putting them into three distinct buckets. First would be a national player like Tanishk. Now, this sort of brand is positioned very uniquely because roughly 70 to 80% of its designs would cater to a pan-India sensibility. Next up are large regional players like P&Gatigil or Tamil Nadu's GRT jewelers. Here, about 80 to 90% of their designs cater to the taste of their region specifically.

And finally, of course, you have large regional players that have pan-India aspirations. So a brand like Kalyan or Malabar, you'll find that 40% of their designs cater to local sensibilities and the rest cater to pan-India sensibilities. These brands have managed to find the sweet spot in that respect. They've also increased the proportion of diamond jewelry available in their stores. Because like I mentioned earlier, diamond jewelry is a jewelry retailer's best friend. The margins are always higher. All of this combined has meant Kalyan and Malabar's profit margins have improved considerably since moving beyond the south.

Most importantly, this means that these brands are now being able to line up the capital they need to do what every company dreams of doing one day. And by that, I mean going public. More on that in the next segment. Now, you're probably wondering what changed, right? Why is it that companies like Senko, Malabar, Kalyan are choosing to go national now? Well, that has to do with the fact that the jewelry sector is currently really having its moment. Before this, it was very capital-intensive,

which means most regional jewelers were constantly just re-infusing cash into inventory rather than expanding. growing their business. That's not a problem that Tanish Keva had to deal with because it had Tata to back it up, which meant there was no shortage of capital to expand its business. But now the playing field has been leveled. That's thanks to the jewellery retail sector

finally becoming more organized. And as a result, there is an increased availability of capital. In fact, there's no dearth of it. And if you follow this space closely, it would be quite apparent. Like, for instance, in July, the Birla Group announced infusion of 5,000 crore rupees for its Indria jewellery stores. And in the same month, New Delhi-based PC jewelers, despite insolvency issues, raised funds of

270 crores to pay off the debt. More and more players are also expected to go public. Malabar plans to be listed by 2026, Bluestone by 2025, and Chennai-based Lalita jewellery also very soon. Now, industry insiders say that this largely has to do with the success of newly listed jewelry retailers like Kalyan and Senko from West Bengal. Now, what does this mean for Tanish? Well, experts seem to think that it could lose market share in the short term.

It'll also have to work harder to win back some of its once loyal customers. But as they often say in the markets, a rising tide lifts all boats. But true strength will be tested when the tide reverses. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted by Rahil Filippo's produced by me, Snigda Sharma, and edited by Rajiv Sien.