Rural wedding spend slackened in Q1: Titan

Latha: Is there any pickup in the last few months that you have noticed in the first quarter?

The April month was better, May is not as good, it is a yo-yoing kind of demand pattern. It is different across categories for us. If you ask me quarter I which is April, May and June quarter the growths are better than quarter IV. Quarter IV was really a big decline. For us in the jewelry business there is where the particular impact of the golden harvest scheme having been withdrawn by us last year and so on. However, I would say that there is no significant change between quarter I and quarter IV although the growth is better in quarter I than quarter IV.

Reema: So did the Akshaya Tritiya sales in Q1, would that help you in this quarter. How are the sales been?

Akshaya Tritiya sale has been good but not extra ordinary.

Latha: Is the consumer who used to buy gold for investment purposes back?

It is weak as I said earlier because the price has remained flat or has dropped. In fact today I understand the reasons are not very clear that gold is selling at a discounts sometimes even at USD 10 per troy Ounce in India because when the 10 percent custom duty was introduced there was a fair amount of gold that was smuggled into the country. Now prices have declined and demand has declined.

Overall jewelry demand has not grown. So investment demand has got hit further because the price of gold has not risen. Those who have brought it in and can’t sell it want to encash. I believe that discount is because of the stock of gold that is there in the market, which of course is not an above board sale it is because the gold was in the first place brought in through the smuggled channel. In fact you must have read many reports about seizure at airport of people bringing in gold. The smuggled gold has brought the cost down for a guy could have sold but because he has not sold he is discounting and selling.

Latha: Titan is now focusing heavily on the wedding jewellery segment with recent activation geared towards that. How is the response there?

It is very early days for us we have not seriously pursued this segment in the past. The traction is good, as I said it is very early days we have a wider collection now. We have some specific scheme like bundling offer. The Titan or Tanishq and Goldplus our brands are preferred destination for a kind of customers. However, there is another impact; wedding purchases are pretty large in terms of size and Pan Card comes in the way some times because it is usually Rs 5 lakh plus for middle class families, if you are buying in one transaction so even that comes in the way. Having said that it holds great potential for us, but now this particular year the wedding season have itself been a little weak. All jewellers, the industry itself has faced a decline in sales.

Reema: How are you reading the rural trends in contrast with urban when it comes to discretionary spending?

We still see urban India stronger than rural although it is not very strong. If you take just the first quarter April, May and June it is famous for rural weddings. At least as far as watches and jewellery are concerned. You can take, let us say consumer durables as well, the rural weddings trigger a huge amount of flow on money in to market and this has happened traditionally. However, the peaking of rural demand in the last several years has been less. In the sense demand has been steady across the year but does peak a little but not peaking as in the past.

This year, rural particularly I believe has got affected more than urban because the wedding season purchases have been rather weak. Where weddings used to drive significant demand and we have seen this in watches in Uttar Pradesh (UP) and Bihar and the Northern belt –Madhya Pradesh (MP) and so on, in fact there has been a decline in sales. That is a clear indication that rural customer has not spent on discretionary items.

Another data point is sale of tractors. Sale of tractor is declined, I mean the rate of growth has come down I understand from the automobile sector. These all point to a certain weakness in the rural sector. Reasons I can not speculate on.

Latha: What is the traction for large ticket items in the industry? Can you tell us a little more about competitive pressures in this area?

The sale of diamond jewellery, the good news really is that people are now accepting diamond jewellery and the growth in diamond jewellery is above the industry average. I mean, I am talking about gold plus diamond. The view on gold the consumer is smarter than us and because of the price decline in gold and they don’t see in the near-term a rise in gold prices I think that investment demand which is for jewellery not coins and bars, it is just the investment demand has slackened a bit.

On the diamond jewellery side it is still quite robust however the competitive situation because of the transformation of the category let us say, led primarily by Titan through Tanishq and Goldplus and Zoya the other players have come in and they in their own ways are creating so called demand for branded jewellery.

We were expecting this kind of thing to happen because a mature will have at least 4 or 5 large players especially in a large market where Rs 2,50,000 crore is expected to be the turnover. You will expect at least half a dozen players to emerge. So competitive intensity has increased which is good for the consumer which is good for the industry especially because it is happening in a more organised manner rather than in the unabated unorganised manner in which the jewellery industry was 10 years back