Trent honcho jumps ship to MobileStore

This story first appeared in DNA Money edition on Wednesday, Apr 13, 2011.

Essar Group company The MobileStore Ltd (TMS) has appointed the Tata group veteran Himanshu Chakrawarti as its chief executive officer.

Chakrawarti joins the group from Landmark, the leisure retail format of Tata group company Trent Ltd, where he was the chief operating officer.

When contacted, Chakrawarti declined to comment on his appointment.

An Essar Group spokesperson, however, confirmed the development about him joining TMS. “Chakrawarti’s rich multi-category retail experience will provide vital strategic lead to take TMS to the next level of accelerated growth, which now includes consumer durables and information technology retail also,” the spokesperson said.

Chakrawarti replaces Srikant Gokhale, who is believed to be pursuing opportunities in the teaching space. Chakrawarti is likely to take charge within a week.

A graduate from IIT Kanpur, Chakrawarti joined Trent in November 2000. On Chakrawarti’s replacement, a senior Trent official said, “Ashutosh Pandey who deputy COO has been elevated and is now Landmark’s chief operating officer.”

Blue Coast to invest Rs1,500 crore in three hotels

This news story first appeared in DNA Money edition on Wednesday, Apr 13, 2011.

New Delhi-based Blue Coast Hotels that owns the Park Hyatt Goa is setting up three hotels in North India.

Senior company officials said like their flagship project in Goa, the new hotels will be landmark properties and managed by different international hotel chains.

“We have already tied up with international hotel management companies to brand and operate the upcoming properties. The 500-room Delhi hotel will be managed by the Las Vegas-based MGM Mirage Hospitality under its two brands MGM Grand and Skylofts, while those coming up in Chandigarh and Amritsar will be managed by Starwood Hotels & Resorts under Sheraton brand. The hotels will open in another two to three years,” said a senior company official.

The new developments will entail an investment of Rs 1,300-1,500 crore, which will be funded through a mix of internal accruals and debt. In all, the new hotels will add over 850 guest rooms taking the company’s total inventory to over 1,100. The projects will be owned under two subsidiary companies — Golden Joy Hotel Pvt Ltd and Silver Resort Hotel India Pvt Ltd. The companies were incorporated by Blue Coast in fiscal 2010 to execute its hospitality expansion plans.

Blue Coast had introduced of India’s first Park Hyatt branded resort and spa in 2002-03. The 250-key five-star deluxe Park Hyatt Goa Resort & Spa is located at Arossim beach, Goa.

Warburg Pincus invests $100 mn in NDR's logistics company Continental Warehousing

An edited version of this news story first appeared in DNA Money edition on Tuesday, April 12, 2011.

Warburg Pincus is acquiring minority stake in a leading logistics service provider NDR Group's flagship company Continental Warehousing Corporation (Nhava Seva) Ltd (CWCNSL). Indian affiliate of the global private equity major, Warburg Pincus India Pvt Ltd will invest up to $100 million in Continental Warehousing through a mix of primary and secondary placements. The new investment will be Warburg's fourth in the Indian market in the last 12 months.

Officials from both Warburg Pincus India and Continental Warehousing refrained from sharing details on secondary transactions related to this placement. Industry sources however, said, “One of its existing investors, IL&FS Investment Managers Ltd (IIML) will exit completely while a few others are likely to divest partially.”

Accordingly, IL&FS Investment Managers which had invested around $7 million in Continental Warehousing three years ago will be selling its entire stake to Warburg Pincus India. Other investors like Aureos India Fund and ePlanet Venture who came on board collectively investing $16 million in 2009 are understood to be in negotiations with Warburg's Indian affiliate on their mode of exit.

As for investing in Continental Warehousing is concerned, Vishal Mahadevia, managing director, Warburg Pincus India, said, the investment firm has been actively investing in the logistics space globally. “Within India, we have two investments not directly though in a third-party logistics service provider viz. Gangavaram Port Ltd (port infrastructure company) and IMC Ltd (logistics provider of bulk liquid storage). Continental Warehousing is our first investment in a third-party logistics, infrastructure company,” he said.

Pioneers in the logistics segment, the NDR Group has an integrated national network of logistics and related infrastructure facilities across 50 centres in the country and a large client base. This investment in CWCNSL, according to company management will largely be used to fund the expansion of its businesses and strengthen its position as an end-to-end logistics solutions provider by developing rail-linked inland container depots at various locations across the country.

According to N Amrutesh Reddy, executive director, Continental Warehousing, the size of the company is approximately Rs 1,000 crore and has been registering a year-on-year growth in the range of 70% to 100% in the last three years. “The investment from Warburg will be used for organic growth where we will be putting up rail-link inland container depots (ICDs), and container terminals and domestic hubs as they are all linked by rail and are very capital intensive in nature,” said Reddy.

The Indian logistics market is currently pegged at around $75 billion and growing rapidly. Industry experts are of the opinion that Indian corporates and customers are till early in their adoption cycle of the total supply chain solutions.

“If you look at some industry estimates, only 10% of logistics functions in India are estimated to be outsourced to the organised players. The figure is anywhere between 40% to 80% in more developed economy. However, the advent of GST and other improvements is a great opportunity for leading players like NDR to benefit and help reduce their customers' costs and also re-engineer the overall supply chain,” said Mahadevia.

Outlining the opportunities and challenges faced by the fraternity, Reddy feels introduction of GST will be a great boon for the existing players in the market. “While I don't see any other significant challenge, I think acquiring land parcels for the rail link ICDs at times proves to be difficult task. There is no government participation in this area and has to be done with private players only,” he said. On their listing plans, Reddy said that Continental Warehousing would ideally look to go public in another three years from now.

IHG, Marriott partner funds to invest in India

This story first appeared in DNA Money edition on Thursday April 7, 2011.

International hotel chains that have been mostly managing hotels in India are finally betting their own money on the Indian hospitality market.

They are taking equity positions in upcoming mid-market business hotels, if the recently concluded two deals are any indication.

InterContinental Hotels Group (IHG), the world’s largest hotel group by number of rooms, has signed a joint venture agreement with Duet India, a hotel investment fund, to set up 19 Holiday Inn
Express hotels across India.

Similarly, Marriott International, America’s largest hotel chain, has formed a joint venture with a newly formed hotel fund — Samhi Hotels Pvt Ltd — to build a chain of 15 Fairfield branded hotels in the country.

Interestingly, this is for the first time that international hotel companies are investing in hotels rather than doing pure-play management contracts.

“It’s a very positive development showcasing the confidence level in the Indian hospitality market and the willingness from international hotel chains to actually invest as against management and franchising. This certainly paves the way for more such arrangements,” said a top official from a leading hospitality consulting firm requesting anonymity.

Paul Logan, vice president - development, IHG Asia Australia, said, his company will hold a 24% stake by investing $30 million in the venture formed with Duet India.

“The decision to invest was motivated by the fact that Duet very well understood the hospitality space, the team has vast experience in developing hotels in the country and most importantly, it has demonstrated capability by opening two hotels,” said Logan. Navneet Bali, chief investment officer, Duet India, said a new JV entity - Duet Smart Hotels (India) Ltd - has been instituted with a corpus of $150 million. “We have already identified a few sites in cities like Ahmedabad, Hyderabad, and Chennai for developing the first few Holiday Inn Express hotels.

The Ahmedabad property is scheduled to open mid next year. We are already looking at a host of sites across Tier I, II and a select few Tier III markets and hope to close the transactions post the final due diligence. All 19 hotels with a total of approximately 3,300 guestrooms will be operational in three to five years from now,” he said.

Bali said his fund is open to more such partnerships with other hotel chains.

Marriott will take 30% stake in its joint venture with Samhi, according to a report in the Wall Street Journal, which will decrease to 10% over time. The venture is expected to operate around 15 mid-tier hotels in India by 2015.

Samhi Hotels, the investment fund, has been set up by Steve Rushmore, founder of hotel consulting group HVS, Ashish Jakhanwala, a former development director with Accor India / InterGlobe Hotels and Manav Thadani, a former HVS honcho. Samhi will raise around $150 million in a first round of financing from GTI Capital Group, an India-focused private investment and advisory firm and expected to raise up to $250 million by 2012 or 2013, the report said, quoting Jakhanwala.

Marriott to open 6 hotels this year

This story first appeared in DNA Money edition on Wednesday April 6, 2011.

Global hospitality major Marriott International will open six hotels in India this calendar year, adding 1500 guestrooms to its inventory in the country.

With the launches, the total guestrooms of the US-based company in India would rise to 5,000 rooms and the number of operational hotels to 18.

Rajeev Menon, area vice president, India, Pakistan, Maldives and Malaysia for Marriott International Inc, said growth is the big focus for his company in India. “We have 12 hotels in the India portfolio and are gearing up to open three more in the next 60 days. These will include a JW Marriott in Chandigarh (165 rooms), a Marriott in Jaipur (365 rooms) and a Courtyard by Marriott City Centre in Pune (178 rooms),” he said.

During October to December 2011 Marriott plans to open three more hotels — JW Marriott in Bangalore (300 rooms), Courtyard by Marriott in Bhopal (150 rooms) and a JW Marriott in Chennai (380 rooms). All the hotels in India so far are under management contracts with different asset owners.

“From growth perspective as one of the fastest growing international brands, we will be in the top league with 18 operational hotels across upscale, upper upscale and luxury brands in India,” said Menon.

While Rahejas own the Bangalore JW Marriott, Viceroy Hotels is the asset owner of JW Marriott in Chennai. Incidentally, Viceroy is in the process of hiving off the two developments to reduce its debt burden.

Marriott, however, is optimistic that JW Marriot Chennai will open this year.

“Delays are quite typical for any new hotel opening in India and may take three to six months more from the original schedule. We don’t foresee any delay but in case there is, the Chennai hotel will start receiving guests early 2012. Our Renaissance Hotel in Bangalore (also owned by Viceroy) is scheduled to open sometime mid-2012 and is not part of the 2011 plans,” said Menon.

Marriott will also introduce its Fairfield Inn & Suites brand of hotels in the mid-market business hotel segment.While management contracts would remain the key driver for Fairfield’s growth in the initial stage, Marriott may to take franchise route to expand its presence at a later stage.

'It will be very hard for new hotel management companies to compete in India in the long run'

Vasant Prabhu

Vasant Prabhu, vice-chairman and chief financial officer, Starwood Hotels & Resorts, in an earlier interaction delved upon the global hospitality major's business approach to the Indian market, competition from domestic and international players, introduction of new brands, investment thesis etc. Edited excerpts...

What are the challenges of developing and operating a hotel in India? Should people really invest in hotels or stay away from it?

Challenges in India are primarily in the form of cost of land and cost of capital. These are significant issues and partly linked to infrastructure. Owing to limited infrastructure land values go up significantly wherever there is related development. Once infrastructure gets more widespread I think land prices will become more reasonable.

In the hotel industry there are two ways to make money, one is through profits generated by the hotel and second is appreciation of the asset itself. In Asia, because of large and growing population land is scarce and very often asset appreciation has been enough to generate a good return on investment. So it's possible that in big cities where land is expensive, one may think the returns are insufficient purely on a RoI basis. However, what most owners have realised is that asset appreciation over the years can actually give good returns.

The mindset is not unique to India because people perceive this business similarly in many parts of the world. More so in places like Hong Kong, Singapore etc. a lot of hotel owners have made money not from profits but appreciation value. Hotels can create appreciation by creating infrastructure around thereby enhancing the asset value. From an operating performance stand point, I don't think RoI alone will determine whether people should invest in hotels or otherwise. But one has to be careful when playing the game, because if the site is completely commodity like and the hotel is not unique, one may not get the appreciation. In such a situation, RoI is the only deciding factor.

How does Starwood view the Indian hospitality, travel and tourism industries? Where do you think the sector is headed in the near and distant future?

We are very enthusiastic about the Indian market and we think the space will continue to remain very attractive for the next few decades and more. The primary reason, we think, is that India is still very under-served as far as supply of hotels is concerned. With the country's infrastructure viz. roads, airports, railways getting better we certainly foresee a lot of action in the inbound and domestic travel and tourism space going forward.

For Starwood, India is a very long term focus market which is evident from the fact that we have been operating in the country since 60s and 70s with the Sheraton brand. The year 2010 has proved to be a better year vis-a-vis 2009 and business scenario in 2011 is looking very good not just in the Indian market but globally. The sector has seen significant revenue growth in the western countries and Asia including India in the previous year and we see the momentum continuing in 2011.

But growth in India has largely come from the domestic market as compared to overseas business.

Travel patterns are changing everywhere and we see that happening in the Indian market as well. Twenty years ago, in a typical Chinese hotel, 80% of the guests would be non-domestic travellers and the scenario today is completely reverse. I think those patterns will change everywhere including in India. Domestic is a long-term story and I don't think hotels business in India can be built keeping only the foreign travellers in mind which used to be the case earlier. Indian business travel will largely dominate the hospitality sector in the country.

Hotel asset owners in India associate with foreign chains for their global network and value add-ons. Given the domestic focus you spoke of, will the scenario change in the coming years?

Not really. There are various benefits for a hotel asset owner when joining hands with a foreign chain and I think that will continue. In our case, Starwood Preffered Guest (SPG) is a very powerful loyalty programme that assures one out of every two rooms in a Starwood branded hotel globally, being occupied by a SPG members. So we certainly can fill hotel rooms with this unique offering.

Our reservation systems provide our partners with a much broader access than anything they could do on their own. Our sales offices call on corporations globally so a lot of business in India could be because we have a contract with IBM that was negotiated in the US on a global basis. The same would be true for a contract with a Korean company negotiated in Korea which has a big presence in India. So it may very well look like domestic business but it was really sourced through a global contract.

Has the influx of foreign hospitality brands posed any challenges for Starwood in terms of the development pipeline in India?

There is a lot of competition for sure and there is nothing wrong with it. In the end, I think, people who are going to do well are the ones who can make the most money for their owners and offer guests the best hotels. A good hotel is a combination of design and service from the brand's perspective. As for the asset owner, the deciding factor largely revolves around return on investment. Influx of foreign hotel companies in India is because there isn't much growth outside the developed world and many of them do not have a strong presence outside India. I think it will be very hard for them to compete in India in the long run.

While the new entrants might succeed in the short-term because asset owners may get tempted to go with people offering better deals, willing to do it for less, giving them money to put their brands on hotels. I think an owner should remember that they are handing over an asset that may be worth $50 mn or $100 mn to a company to run which is bit like giving your personal money to a wealth managers not because they gave you the lowest rate. It is always advisable to hire someone who can give you the best return which is true with our business as well. I think people have to be very careful when they make such decisions. What will happen over time is there will be a separation between companies that can actually deliver and vice versa.

Some of your brands are still to establish presence here. What are the possibilities of them showing up in the near future?

Brands like Sheraton and Meridien have been in the country the longest. In the recent past we have introduced Westin, The Luxury Collection, Aloft and Four Points brands. Going forward we would very much like to see our W and St Regis brands in India. They will take some time considering hotels take 2 to 3 years to come up but they will definitely come.

Will you be very selective expanding W and St Regis brands in India?

Yes. We would like to have more W hotels going forward in addition to establishing St Regis in two major Indian metros. St Regis is our highest rated brand and we are very selective with its development. Among various parameters include right location, right owner, very high quality product etc so that we don't make any mistakes because it will hurt the brand. The same approach applies to W Hotels as well which competes with the likes of Four Seasons globally.

With Four Points you got into the franchise model, something most leading foreign chains do not approve of in the Indian market. What was the rationale behind taking this route?

I agree. Franchising is certainly a tricky proposition and we prefer not to franchise outside of the US. We have chosen to franchise and will continue to do so in India only with players who have the management bandwidth / capability or a efficient partner to manage the hotels. We pursue franchising in the US because there are more companies that can manage hotels which is tougher when you look at markets outside (the US). Our plans going forward is to include Four Points and Aloft in the franchising bouquet (under the right circumstances) but we will not franchise brands like Sheraton, Meridien, Westin and if we do so, it will be very unique situations. There certainly will be no franchising for the St Regis and W Hotel brands.

But, you also have a marketing / franchising relation with ITC Hotels for The Luxury Collection brand.

The ITC relationship is a very different one and has been in existence for a very long time. The promoters (ITC) have very deep management capabilities and that's precisely what I mean when I said unique situations earlier.

ITC will be managing third-party luxury hotels going forward. Will you extend The Luxury Collection association for their management contracts as well?

We will have to wait and see.

You'd earlier expressed about managing over 100 hotels in India by 2015. Could you tell us which category of hotels will contribute significantly to this pipeline?

Our strongest brands are in the upper upscale and above segments. In fact, 90% of our existing hotels portfolio is in the upper upscale and luxury category. As a result, our India pipeline is also skewed that way wherein 80% of the developments will be upper upscale and luxury. We'd certainly like to do more Four Points and Aloft hotels in India and a lot of that will clearly depend on our ability to persuade owners to have faith in those brands. Asset owners will certainly watch how some of our new brands that have opened up are doing in terms of business and I am sure they will realise the potential of these new brands after speaking to our existing real estate partners and that will slowly build overtime.

Will Starwood ever look to invest in the Indian market?

We would consider investments if it made sense. To invest one has to make several things fall in to place, feel comfortable with the partner, return expectations should be roughly similar, and make sure that partnerships are set up in a way that issues and differences can be easily resolved. Joint ventures are never easy and if we can do a clean arrangement where we manage and they own, that's always best. If we own a piece and we manage then we are on both sides, that can get complicated at times. That doesn't really mean we won't do joint ventures but we will be very carefully doing it in India. We have done a lot of joint ventures globally and are part owners in 40 hotels around the world and they are all working fine for us.

We used to be big owner of 150 hotels and have so far sold about 90 of them and continue to own the balance. We have another 50 hotels in joint venture arrangement, so we are very comfortable investing and owning hotels while simultaneously pursuing management contracts. Over time we will sell the assets as our goal is not to be big owners of hotels but it certainly won't be zero. And if we need to own hotels or be joint venture partners in India we will do that. A lot of asset owners have not wanted our money because they have had a lot of faith in our brands. I think the hotel management company is asked to put money only when the owner is not exactly convinced about the brand and hence they want the management company to take some of the risks thereby bringing their skin in the game.

Is there a sum earmarked for investment in India?

No. We don't have numbers because for us it is strictly a function of what is the opportunity. If you say I am going to invest $100 mn in India, you'll invest that sum and end up loosing all of it. So one should have objectives, what is the return on investment, right partner etc. If we find the right partner we will be willing to invest $50 mn, $100 mn or for that matter even more.

Update from Starwood:

Starwood, Jaguar mark India debut of W Hotel

Over 350 room property will be part of iconic 55-storey Namaste Tower in Mumbai

Continuing with its global expansion plans, W Hotels Worldwide has set its foot in the Indian hospitality market. Part of Starwood Hotels & Resorts, the hotel company has signed a management contract with Indian firm Jaguar Buildcon Pvt Ltd to mark India debut of this iconic luxury brand in Mumbai. The asset owning company (Jaguar) has already identified a three acre land parcel for the W Mumbai hotel which is likely to start receiving guests sometime in 2015. This development was first reported by DNA on February 1, 2011.

Confirming the development Frits van Paasschen, president and chief executive officer, Starwood Hotels & Resorts Worldwide Inc, bringing the W lifestyle to Mumbai is another step in W's global expansion into the world's most exciting and vibrant destinations. “Introduction of W Mumbai will take the total number of Starwood's hotel brands to seven in India out of the nine brands globally. The hotel will offer a contemporary take on design, fashion and music in the heart of one of the city's most vibrant districts, bringing an innovative and distinctive experience to Mumbai,” Paasschen said.

Located in bustling south central Mumbai overlooking the Mahalaxmi racecourse, the W Mumbai hotel will form a part of the Namaste Tower, which will be an iconic 55-story mixed-use development designed by international design firm WS Atkins.

According to Gurinderjit Singh, managing director, Jaguar Buildcon, the hotel will feature over 350 guestrooms, including two signature suites christened WOW Suites and one Extreme WOW Suite (W's version of presidential suite. Among the food and beverage offerings will include two contemporary restaurants and one destination bar. “The hotel will also house stylish spaces for luxury designer retail stores and boast a full calendar of exclusive and exciting W Happenings events that showcase what's new and next in design, fashion and music for both guests and locals alike,” said Singh.

While India's first W hotel is still under construction, the hotel management company is optimistic about generating more owner interest in developing this brand in other key leisure and business destinations in the country. Dilip Puri, Managing Director, India and Regional Vice President South Asia, Starwood Asia Pacific Hotels and Resorts, said, "Locations such as the Delhi NCR region, Goa and Kerala are targets for developing W Hotels and Retreats."

Starwood is also enhancing its leadership position in India and will be opening seven new hotels in 2011 taking the total portfolio to 37 hotels by 2011 end. One of the leading hotel and leisure companies in the world with 1,025 properties in 100 countries, Starwood is on track to operate 50 hotels in India by the end of 2012, doubling its presence in the region in just two years. The hotel company expects to have 100 hotels (open or under development) in its India portfolio by 2015. Among Starwood's hotel brands in India include W Hotels, The Luxury Collection, Le Méridien, Westin, Sheraton, Four Points by Sheraton and Aloft.

Thailand expects 15% rise in Indian arrivals

This story first appeared in DNA Money edition on Monday April 4, 2011.

As more and more Indians take to international travel, especially to Far East destinations, the Tourism Authority of Thailand (TAT) is expecting a higher double-digit growth in arrivals for 2011. In 2010, Thailand received 791,185 visitors from India while the estimated figure for 2011 is upwards of 885,000 visitors — an increase of 15% from the previous year.

Suraphon Svetasreni, governor, TAT, said, last year Thailand registered an overall tourist arrival of 15.8 million, an increase of 12% from the previous year. “As far as India goes, we witnessed a healthy increase of 28% vis-a-vis 2009 arrivals. Thailand has seen continuous growth in Indian arrivals despite the global crisis, dollar depreciation, price hikes and internal disruptions. However, situations started improving in the last quarter of 2010 with an increase in arrival numbers. We expect the trend to continue in 2011 and are confident to cross the 1 million visitors’ mark by 2013,” he said.

Travel and tourism industry contributes anywhere between 8-10% to Thailand’s GDP. According to TAT officials, Indian market is very exceptional because Indians connect easily with Thailand and both nations understand each others’ cultures. Besides, what attracts Indian visitors to Thailand is the destination’s value-for-money attributes and diversity making it ideal for families, newly weds, business travel, meeting, incentive, conference and events (MICE) and free individual traveller (FIT).

Envisaging the business potential from the Indian market, TAT is aggressively working towards establishing a long-term presence in the country and has opened two full-fledged offices, in Mumbai and Delhi.

On TAT’s marketing plans in India, Svetasreni said, “We may not be among the high spenders in advertising and marketing but we are not low either. Given the strong emphasis on India we have earmarked approximately 50 million baht (about Rs7.35 crore) for the country.”

Indians visiting Thailand, according to TAT, are a good mix of leisure, MICE, top-end wealthy travellers with an average length of stay of six days and average spends in the region of 4,600 baht.

Given the close proximity (four hours flying time from Mumbai) Indians view Thailand as a good holiday destination which is why approximately 60% repeat their visit with family and friends, Svetasreni said.

“Thailand is very well connected by Indian carries like Jet Airways, Kingfisher and Air India. In all, there are 138 flights every week with most carries witnessing satisfactory occupancy levels. While October to March is the best time to visit Thailand Indian travellers visit the desination throughout the year,” the TAT governor said.

'Apple’s popularity wake-up call for Indian brands’

This interview first appeared in DNA Money edition on Saturday April 2, 2011.

Chitranjan Dar, chairman, Confederation of Indian Industry (CII) taskforce on FMCG and chief executive of ITC Foods, discusses strategies companies operating in the Indian market are adopting to connect and communicate with their target audience. He spoke on the sidelines of the Eleventh CII Marketing Summit concluded in Mumbai recently. Edited excerpts from the interview...

What are large firms doing in the current market scenario to reach out to their customers effectively?

Large corporations are currently grappling with what kind of insights they can gather about consumers for their offerings. These companies are also seeing how they can mine data from internet, social media and other networks and whether they can make some sense or derive some patterns from there. Irrespective of the size, companies today are looking at creating differentiation and the focus is much greater than earlier. It is for these reasons that the market will see a lot of new product launches and, a lot of niches getting created to address some special needs. Without that it will be very difficult to sell to the market profitably.

What is it that companies will have to do to sell profitably?

Firstly, getting a better understanding of the customer. Based on these understandings companies will have to innovate around the value proposition of their brands/products. If the companies change their product they also need to change the way they communicate it to the market/target audience.

Do all products need to undergo change? What should be the frequency like?
Not really, because there will be some products that will remain timeless. These are products that are authentic, offers great quality and most important the product / brand are operating in an industry where people do not stick to a particular offering for long.

For example, ‘Bukhara’ at ITC Maurya hotel in New Delhi has not changed its menu and decor for 25 years now. While there have been some cosmetic changes in terms of furniture etc, but the overall experience of the restaurant has remained intact over the years. Thus, companies should think carefully before incorporating a change and not change for the sake of it. If the product/brand remains relevant even today in terms of communication, offerings, value proposition etc, there is absolutely no reason to change. Change should only be made after having understood the key profitable segments, what is it that the market demands and whether that change will cater to it.

So are companies really pursuing this approach in the right manner?

It is too early a stage to even point out anything in that direction but there certainly will be churns. While there will be some companies doing it in the right manner, there would be others which may not. In fact, there would be some companies aggressively pursuing this approach and there would be others taking their own time with it. Fundamentally, companies which will do it fast and right will be the ones which will be selling profitably to their customers.

That’s precisely the reason why I don’t see the companies’ landscape remaining the same in a decade or so from now, not everybody can win all battles.

On the marketing / advertising medium side, is TV, print and radio still the focus area for companies or are we beginning to see some change in the overall composition?

It’s quite evident these days that television has taken over all the other mediums as far as advertising / marketing spends is concerned. However, internet seems to have picked up pace over the last few years and we are seeing a lot of stickiness with that medium especially with the younger Indian consumers which is a fairly huge market being addressed by one and all. Companies are taking a subtle approach to using this medium as they understand that an in the face approach may work otherwise. One must understand that internet users don’t want to be intruded all the time besides their attention span is very short and they get bored very quickly. The approach thus is to use that medium to build a fan-following, knowledge sharing, learning opportunities and activities revolving around building customer loyalty and so on.

You mentioned about a data mining by a market researcher through inputs from customers across age groups. Could you throw some more light on the same?

It was a recent example I came across about data being mined by research official who asked Indian consumers about things that excited them more in their daily life. The answers were really interesting because people were not really talking about products or for that matter brands. They spoke about activities like mountaineering, biking, meeting friends and relatives, etc. In their entire thing about excitement and other things that gave meaning to their lives, less than 2% of the respondents referred to brands like for instance Apple, Coco-Cola, Nike, Bingo, etc. Thus, despite all that companies are trying to do in terms of their marketing and advertising strategy its relevance with their target audience is very minuscule. That’s a shocking fact because all the efforts have not been able to create an emotional connect between the company’s brand / product and the customer. What was further shocking is the fact that over 50% of the respondents spoke about brand Apple which is not even a significant advertiser in India.

Does that mean Indian brands are becoming irrelevant?

It certainly is a wake-up call and there is still lot to be done to make brands / products more and more relevant to the Indian target audience. Why was Apple relevant because it was innovative, they communicated to their target audience in the right manner and adopted an integrated marketing approach that worked wonders in markets where they weren’t even advertising.

Preserve 4G for subscription-led growth, says Ronnie Screwvala

Ronnie Screwvala, CEO & Founding Chairman, UTV Group feels the Indian entertainment industry will fall woefully short of reaching a size of $100 billion by the end of this decade from $15 billion now, unless it moves from an advertising-led growth model to subscription-led growth, undertakes research into audience preferences, ensures enforcement of anti-piracy laws, and innovates to make the industry a truly creative business.

Stressing on the need to segregate gut feel from what the audience wanted, he urged the younger players in the media and entertainment business to regard research as a good guiding force, by which one could pre-empt what is going to be successful or otherwise.

He also lamented the fact that the consumers were still not paying for the content being consumed by them. "That explained the heavy dependence of the industry on advertising revenues - 80% - rather than on subscription," he said.

In this context, he said, introduction of 4G spectrum would be a game changer. A 4G system is expected to provide a comprehensive and secure all-IP based mobile broadband solution to laptop computer wireless modems, smart phones, and other mobile devices. Facilities such as ultra-broadband Internet access, IP telephony, gaming services, and streamed multimedia may be provided to users. “Let us therefore preserve 4G as a subscription-led growth tool,” he urged the industry players.

Referring to piracy, Screwvala said that the menace had to be controlled, for which, 'we will have to put up large sums of money upfront'. The proliferation of piracy, he said, was primarily due to lack of enforcement, not lack of regulation.

Optimism rises on Phase III rollout of FM radio services

This story first appeared in DNA Money edition on Tuesday March 29, 2011.

Eight hundred new frequencies across 300 towns. That’s what the rollout of Phase III of FM radio services in the country will mean. While the development has been eagerly awaited by stakeholders of the Rs1,000 crore sector for some time now, the refrain now is that a rollout should happen sooner than later this year.

Tarun Katial, CEO, Reliance Broadcast Network, said 2010 was a year of waiting for the industry at large. “While there has been some delay in the process, we feel 2011 will be a year of action and the exercise (Phase III) should happen sometime this year,” he said. Katial was speaking on the second day of the Ficci Frames 2011 conference in Mumbai recently.

Under the phase, private FM radio stations can come up in every town with a population of over 1 lakh, there will be multiple frequencies in bigger towns (which is expected to engender content plurality), the licensing will be for 15 years from 10 now, and news broadcasting will be allowed through feeds from Prasar Bharati.

“This will allow players to make considerable investments, afford a lot of networking which will make smaller radio stations viable,” said Prashant Panday, executive director & CEO, ENIL.

But beyond the optimism lurk concerns. For instance, strategic investors are yet to find the best exit routes. Salil Pitale, head of media and telecom at broking house Enam Securities said the policy today is still very restrictive in terms of exits for strategic investors. “Also, I don’t think there are too many cities that can absorb more than five or six radio stations which will eventually restrict the diversity of programming that is being spoken of,” Pitale said.

There are worries over the auction process to award new frequencies too. “There is talk of e-auctions similar to what the government did to award 3G licences. But this could lead to unusual rise in costs, which can test viability. We have already seen the outcome during Phase I. There could be new players wanting to foray which will skew the pitch for existing ones,” said Rahul Gupta, director, SPML, which runs Radio Mantra in Tier II and III markets.

While policy matters are being mulled over for long, its implementation is getting even longer thereby putting hurdles in the overall growth process. “I think it is very important for the government to identify ways and to make radio profitable. Speeding up of policy matters and implementing them can help the players grow and make their businesses profitable,” said Harrish Bhatia, CEO, 94.3 MY FM.

However, there are others in the radio media monitoring/ research sector who feel the industry is being too cautious. L V Krishnan, CEO, TAM India, said, “The sector is growing in the right direction. While there are issues, the fraternity seems more worried about them than working to overcome them,” he said.